Enterprise
Online marketplaces and FMCG players join forces
Najihah S 
Yoon says 11Street conducted a survey prior to setting up its grocery section called Mart 11
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Fast-moving consumer goods (FMCG) companies are recognising the potential of online grocery shopping and are quick to partner online marketplaces to increase sales and product visibility. 

Such partnership will help to boost sales for both parties. As it is, the supermarket and hypermarket sub-sector reported a worse-than-expected performance of -4.8% during the first quarter of this year, according to the Malaysia Retail Industry Report for June.

There are already a number of players that provide online grocery shopping and delivery. They include Tesco, Honestbee, Happyfresh, Jaya Grocer, Sam Groceria and recently Giant Hypermarket.

More significantly with the collaboration of brands such as Nestle, F&N and Unilever with marketplaces such as 11Street and Shopee, the online grocery ecosystem is expected to help the players garner bigger margins.

South Korean-based 11Street has been receiving 15 million visits per month. The online marketplace, which is partly owned by Celcom Axiata Bhd locally, has seen a 158% surge in purchases in the first eight months of the year.

11Street, which already has a listing of grocery products on its website, saw the increase in grocery purchases and decided it could branch out to something bigger.

The platform, which has presence in Turkey as well, conducted a survey on its site last year and 3,507 customers said it should dedicate a section to grocery items. And so, Mart 11 came into being.

The five most purchased grocery products online in the country are chocolate malt powder, milk powder, diapers, soft drinks, and grains.

According to 11Street’s COO Chuljin Yoon, FMCG brands that came on board its platform are F&N and Nestle. “We are launching 10 brands per month and we carry more than 1,000 products,” he says.

“Products will be shipped through our partner’s inventory but for some high-value goods, we will carry them on consignment basis. The maximum wait time to receive orders would be 48 hours.”

Yoon says the grocery segment contributes 4-5% to 11street’s overall revenue.

 

Big names on board

Another marketplace that is making waves is Shopee, which is a growing online marketplace in Southeast Asia. It has more than 100 million active listings earning more than US$3 bil in gross merchandise value.

Its CEO Ian Ho recently announced that the platform has over four million downloads in Malaysia and has also attracted the main FMCG players for a business tie-up.

For the first time, Shopee will be spending on traditional advertising, says Ho

“When we discussed with Nestle earlier in the year, it came up with a target of making RM1 mil through Shopee. From there we went on to decide what kind of assortments we should include in the marketplace as it has plenty of products. The key items that are available on Shopee are Milo and Nescafe,” Ho reveals.

He adds that there are several other FMCG companies that are on board Shopee’s grocery feature. “Apart from Nestle, we also have Unilever, Coca-Cola and Reckitt Benckiser.”

“FMCG products are the ones you buy on a daily basis. So for consumers, it would be an advantage to not have to drive, look for parking and carry the products. They can just buy them and have them delivered,” Ho says.

As consumer goods have the highest price sensitivity, Shopee has worked out a strategy where its sellers and buyers will not have to incur huge costs.

“With the new mall makeover, we offer an authenticity guarantee, free delivery and free returns for the goods,” he says, adding that the company’s zero commission policy has enabled it to work with the brands for the lowest price possible.

 “We see that it will grow fast as there is a distinct shift. The target is to ensure all of the FMCG brands are on the platform. We would want to see the full assortment. The 2kg Milo pack was one of the best-selling items during a promotional campaign called ‘9.9 online shopping day’, Ho adds.

On how Shopee’s online grocery section is different, Ho says: “Brands will be featured on their own store page and customers can search using keyword associations.”

Shopee will be conducting an aggressive advertising campaign, both online and offline. “For the first time we are spending more on above-the-line advertising. You will see us a lot (of us) on television and billboards.”

Shopee aims for the grocery section to record significant growth within a year. “There are no definite targets for now, but as we go along, we wish to see the numbers increasing,” says Ho.

Nestle moving beyond traditional marketplace

A strong brand will constantly find ways to push forward its presence and for Nestle, it is placing its products in multiple channels and partnering with relevant businesses.

Nestle Malaysia head of e-commerce Joshua Zhu says: “Our products can be found almost anywhere and most of our customers still prefer to purchase the items from hypermarkets and convenience stores.

 “As a leading FMCG company, we acknowledge the shopping trend where more and more people are going online. We make e-commerce a strategy to boost sales.

“We have seen our e-commerce revenue grow 10-fold over the past year. We’re on track to achieve higher sales targets with these online marketplaces,” Zhu adds.

Nestle’s strategy on dealing with the purchasing shift among its customers is still through innovation, where nutritional recipes and healthy lifestyle tips are incorporated as part of its product placement. 

Last year, Nestle Malaysia’s sales grew 5%, beating the F&B industry’s overall growth of 2%.



This article first appeared in Focus Malaysia Issue 255.