Sales of online fast-moving consumer goods (FMCG) grew by 30% in the 12 months to March 2017, with Asia, led by China and South Korea, the most aggressive in embracing e-commerce, according to the latest report from an international research company on consumer behavior.
Stéphane Roger, global shopper and retail director at Kantar Worldpanel, said: “The fourth annual Future of E-commerce in FMCG study shows that e-commerce now accounts for 4.6% of all FMCG sales. Whilst the e-commerce channel is growing, the FMCG market as a whole is sluggish, increasing just 1.3% during the same period. Our projections show that in 2025, online FMCG will be a USD 170 billion-dollar business and hold a 10% market share.”
In absolute value growth, the top six contributors are all leading power economies, led by China and the U.S. The other top-performing countries are South Korea, the UK, Japan, and France. Last year, value increased by 52% in China, 41% in South Korea, 8% in the UK, 7% in France, and 5% in Japan and in the U.S.
However, the online grocery sector is also expanding into new markets. There has been significant value growth, for example, in Thailand (+104%), Malaysia (+88%), and Vietnam (+69%) where e-commerce is in the early stages.
“A continent of tech-savvy consumers and avant-garde retailers like Alibaba has made Asia a natural home for e-commerce growth,” said the report.
For the past decade, Asia has led the way in online grocery adoption; and this rise shows no signs of slowing, the report continued. “As a continent, Asia achieved the biggest increase in e-commerce globally in 2017, with 44% growth. In terms of value, China continues to lead the charge, with more online purchases being made in the country than anywhere else in the world,” it added.
“Unsurprisingly, South Korea also remains a hotbed for e-commerce, with 41% growth. The digital economy is embedded in Chinese and South Korean cultures like nowhere else on Earth; particularly among the young urban middle classes.”
As of June 2017, there are 1.36 billion mobile phone subscriptions registered in China, making it one of the most connected nations on the planet. In South Korea, almost 100% of consumers aged between 10 and 40 years old shop online, especially through mobile. The Chinese and South Korean e-commerce channels are both driving growth through penetration, reaching more than 60% of their population.
Conversely, Europe and the USA have adopted a more hybrid approach, reacting to Amazon’s development in the grocery market by fusing traditional retail with online enterprise.
Europe remains divided. With 5.6% value share in 2016, it is the second largest market in the world for e-commerce following Asia. However, while the UK and France remain on the front foot for e-commerce—with 7.5% and 5.6% market share respectively—Germany (1.7%) and the Netherlands (2.6%) are lagging behind.
Known for its attachment to large format hypermarkets, online grocery penetration has increased rapidly in the U.S. in recent months, reaching 30% of the total population. Annual spending on food and alcohol through e-commerce is this year predicted to reach $20 billion.
There has been a slight increase in online grocery spend in Latin America over the past 12 months. The lack of trust in payment methods coupled with the overwhelming popularity of discount formats makes Latin America one of the most difficult regions for brands to succeed in the online world.
Megacities have become natural breeding grounds for e-commerce. For example, in London, Beijing, and Shanghai, e-commerce accounts for 10% of the FMCG market.
“We know that e-commerce is still cannibalising offline purchases. However, there is growing evidence that online formats—in isolation—are no longer the best option for winning share. It´s about how online and offline work together to create a better shopper experience,” said Roger.
Personal care and baby care products continue to dominate the online basket. Around the world, young and time-strapped families are increasingly seeking convenience when it comes to repeat purchases of everyday household essentials. In China, for example, consumers bought five times more in value of baby diapers than other FMCG products. In Asia, the top categories for online purchases are generally individual products such as personal and baby care products.
Looking ahead, Kantar Worldpanel projects that South Korea and China will continue to lead the way, and Asia in general will remain at the cutting edge of online adoption. The big global uplift will come from the USA, predicted to rise from a 1.5% e-commerce share in 2017 to 8% in 2025. This can be attributed to the successful rollout of click-and-collect, delivery and subscription models, and the acceleration of disruptive models.
Photo: Jack Moreh
