Demand for online grocery shopping has skyrocketed across Southeast Asia, while local farmers and growers are picking up a lot of the slack in supply chains, says the man in charge of RedMart, the e-grocery unit of Singapore-based e-commerce platform Lazada.
Richard Ruddy, chief retail officer and head of grocery at Lazada Singapore, was speaking to AFN on the sidelines of the Food & Hotel Digital Week online event last week, where he was a keynote speaker.
RedMart launched in 2011, and raised a total of $55.1 million in funding from investors including SoftBank and Facebook co-founder Eduardo Saverin before being acquired by Lazada in late 2016 for an undisclosed sum.
Lazada, which runs a number of e-commerce platforms across Southeast Asia, was founded in 2012, later raising funds from investors including Chinese tech giant Alibaba, UK groceries chain Tesco, JPMorgan Chase, and Temasek. Alibaba acquired a controlling stake in the company in April 2016.
While RedMart is only available in Singapore, Lazada competes on a regional basis through its other channels with Shopee, which is owned by Singapore-based, New York-listed Sea Group. It also has a number of more localized rivals, such as Bukalapak and Tokopedia in Indonesia, and Sendo and Tiki in Vietnam.
Here’s my conversation with Ruddy:
What have been the biggest challenges facing RedMart due to the Covid-19 situation?
Assortment. There was a massive demand spike; we made a decision to change our assortment to focus on the essentials and daily necessities based on what consumers were buying during this Covid-19 period.
When the Singapore government announced the ‘circuit breaker’ measures and encouraged people to do their grocery shopping online, we had to think how to re-optimize our logistics operations to ensure we could serve as many customers as possible, as the existing model allowed us to serve only so many. We moved from time-based to area-based deliveries, dedicating our delivery fleet to serving different areas on different days to ensure that consumers could have their daily essentials delivered to them at a frequency of once every three days.
At the same time, we needed more hands for our warehouse and delivery operations. We hired more than 500 workers, some of which were displaced from harder-hit sectors like aviation and hospitality. We also started a pilot program with ComfortDelgro, Singapore’s largest taxi operator, to train and tap on their fleet of drivers and vehicles to support us in delivering groceries to consumers, as they were also heavily impacted by the shortage of customers.
Overall, would you say business has improved or deteriorated for RedMart since the pandemic began?
Covid-19 has accelerated the adoption of e-commerce, for both consumers and sellers. To meet the demand, we have increased our logistics capacity by 50%. That’s a result of all those measures I mentioned [in response to the previous question.]
Has RedMart had to seek out new suppliers as a result of restricted supply chains? If so, how did you go about this, and how was this process different given the circumstances?
We increased our supply chain sources by about 10% comparing to pre-DORSCON Orange days. For example, we are now sourcing eggs from Thailand as well, when previously we only got eggs from Singapore and Malaysia.
The situation also presented an opportunity for us to matchmake local farmers with customers. We partnered with the Singapore Agro-Food Enterprises Federation to provide a platform for local farmers to sell nationwide. This not only helps them to sell their fresh produce online, but also continue their revenue stream, as they have also been impacted by the circuit breaker measures in Singapore.
Which of these business and operational changes will be lasting or long term, and which will be dropped once the situation returns to something resembling ‘normality’?
The Covid-19 pandemic has shifted more consumers to online and accelerated the adoption of e-commerce into sellers’ business strategies. It has also forced us to push forward some of our plans to increase our capacity to meet the demands for online grocery shopping. As we expect more and more people will continue to shop online for their daily needs even after Covid-19, we will tweak our measures accordingly.
What trends have you observed in terms of product categories going up or down in demand during Covid-19? And how has RedMart tried to respond to this?
At the start, personal hygiene, daily essentials such as food staples and paper products, and cleaning supplies saw a spike as people were anxious to protect themselves. Now, with more people staying at home, frozen food, ready-to-eat meals, and fresh produce have all seen unprecedented uplifts compared to pre-Covid, with dry and packaged foods seeing the biggest spikes.
As I mentioned, we changed our assortment to focus on essentials and daily necessities based on what consumers were buying.
How has tech helped (or hindered) RedMart during this time?
Technology has played a key role in RedMart’s development to be a household online grocery name among Singaporeans. It has allowed us to make business decisions with the help of predictive modelling – such as identifying gaps in assortment, up-and-coming trends, and so on – and helped us scale over the past nine years.
The implementation of technology has also improved efficiency in warehouse and logistics operations, allowing us to fulfill demand during normal periods with service levels of 99%.
However, nobody was prepared for the kind of effect the Covid-19 outbreak would bring; we had to make snap decisions and learn on-the-go. We have now brought the situation back to under control and are able to competently and confidently meet the needs of customers in the ‘new normal’ of the Covid-19 period.
What trends or developments do you predict for the Southeast Asian e-grocery space in the near future?
Technology continues to be a magnifier in productivity, and automation will be the way forward to allow e-grocers to scale. In the Southeast Asia region, Lazada has seen 30% growth of grocery orders, while a recent Nielsen study found that 11% of respondents purchased fresh groceries online for the first time during Covid-19 and are 70% likely to buy again within 12 months.
