Online grocers risk losses with new experimental offerings

Riding on global trends, honestbee is launching a mixed grocery and dining space with cashless payment and robotic item collection features.

honestbee is launching what it claims is the world's first mixed dining and retail space concept in Mapletree Business City on 18 October with habitat by honestbee. It will be a 60,000 sqft space that will merge a supermarket, speciality fresh grocer, fulfillment centre, dining area with 15 food concepts and retail technology innovation lab.

It will also provide an event space for corporate and private functions. The fun does not end there, however, as honestbee also plans to launch its very own cashless checkout and an item pickup that is automated with the help of robots.

Amongst retailers, honestbee might not be the first to try out such a mixed concept. It could be recalled that retail giants such as Amazon Prime have tried to set up physical stores where users could pick up the items that they have shopped for online.

However, as previously discussed, e-commerce firms and online grocers are struggling to gain a significant market share as brick-and-mortar stores are still dominant and are able to get a firm hold after customers. Online ordering of groceries accounts for just under 2% of the retail pie in the city, and that Amazon only has a measly share of that.

Moreover, Chu Junhong, an associate professor at the National University of Singapore (NUS), commented that online grocers are just supplementary to traditional grocers, especially in Singapore. This is “simply because offline grocery places are very close to home, the weather is nice, and the country is safe.”

Notably, however, is that there are more adoptions of online groceries. Chu added, ”People use online grocery platforms selectively, to buy some heavy, bulky items, or when they are really too busy to visit offline stores. But the majority of consumers still buy most of their groceries offline.”

To adjust to this increased adoption, honestbee rival Deliveroo launched its $10.90 subscription earlier this month. This enables customers to get unlimited free delivery and discounts. Subscribers will also have access to exclusive monthly promotions from some restaurants.

These launches are joining the trend of many European and American online grocers that have been experimenting with new shopping methods, including “shop online and pick up offline,” Chu commented. “The offline pickup has three different formats: (1) pick up in a physical grocery store, (2) pick up in a partner’s premise such as gas stations, and (3) pick up in a stand-alone location that is set up especially for pickups.”

“Of these three, the costs for (3) are the highest for the online grocer. These options do offer consumers with more flexibility and choices. Since consumers in Western countries are used to paying by credit cards, these grocers often do not try to offer their own cashless payment,” she added.

Online grocers might not see the consequences of this experimenting yet, however, as Chu warned that for offerings like that of honestbee, it is hard to predict its profitability.

“First, the initial setup costs can be very high. Second, many Singaporeans do not own a car. If they take cabs back and forth, it will be more expensive than having the purchases home delivered. Third, one major part of the online shopping’s benefits is the elimination of going to store and carrying things home, at the cost of deliver fees,” she explained.

Consumers will only take these options if the benefits exceed delivery fees, the professor added. “I am not so positive about the adoption of these options by consumers.”

For her, honestbee should be more aggressive in pushing for the expansion of space across Singapore. “Since honestbee is a pure online grocer. To offer this service, it has to either partner with other entities, or set up its own pickup locations. To make it really convenient, such locations should be widely scattered island wide,” she said.