Online grocery sales across the world’s main markets are set to grow 163 per cent by 2023, presenting huge opportunities and challenges for retailers, particularly in Asia.
This is according to new research from IGD, which has produced a report in association with The Consumer Goods Forum, looking at how companies can make use of digital technologies to become more relevant.
The research explores three digital retail models of the future, making predictions for an increasingly digitalised food and consumer goods industry.
IGD forecasts that the world’s major grocery ecommerce markets will continue to expand rapidly, growing at almost four times the rate of any other channel.
The Asia Pacific market is set to grow fastest, expanding by 196 per cent by 2023 (+$198 billion). Meanwhile, the US market is forecast to expand by 152 per cent, adding $38bn; and Europe’s online grocery market is expected to grow by 66 per cent, adding $21bn.
Grocery ecommerce sales in Asia Pacific are set to triple over the next five years, with IGD forecasting that in 2023, the online share of grocery sales in Asia (7.5 per cent) will be twice that of the US (3.4 per cent), and close to three times larger than Europe’s (2.5 per cent).
IGD chief executive Susan Barratt said: “We are living in exceptional times, with an extraordinary burst of retail innovation, driven largely by digital developments.
“With this research we explore the global proliferation of retail innovation from three different directions: established players, online specialists and the new ecosystems.
“We believe that plenty of the new emerging models are set to grow and prosper, which means established retailers will need to work hard and swiftly, either to limit their impact or to emulate them
“The digitisation of the food and CPG industry has already disrupted and transformed the industry, yet the story has only just begun.”
To help businesses understand the opportunities and challenges they face, IGD has identified three retail models that have developed as the industry becomes increasingly digitalised. These are:
1) Rapid evolution
Businesses are transforming their established operations through digital technologies to enhance their stores, reduce costs and improve connection with customers. IGD’s predictions for ‘rapid evolution’ include:
- Technology-led strategic partnerships will accelerate rapidly. Technology companies will have a much stronger influence on retailing in consumer packaged goods (CPG).
- Advanced digital technology will help physical stores close the data gap on exclusively online operators.
- The commercial trading interface between established retailers and suppliers will be transformed by AI.
- The most advanced traditional retailers will diversify to become less reliant on selling products.
- Retailers with the best data capabilities will win in the long term by improving their operations every day.
2) Ecommerce 2.0
The first wave of ecommerce is now fragmenting in a variety of creative ways to boost sales and add value. IGD’s predictions for ‘ecommerce 2.0’ include:
- Successful online-only businesses will diversify offline, either by opening their own stores or forming alliances with traditional retailers.
- Manufacturer direct-to-consumer businesses will become a major force and could be consolidated through a single ordering platform.
- Specialist retailers and marketplaces will proliferate.
- Some logistics companies will evolve to become retailers.
- Social commerce will go global, with platforms integrating with ecommerce to offer more frictionless shopping.
A network of retail and consumer services is emerging, linked by logistics, financial services and technology. IGD’s predictions for ‘ecosystems’ include:
- Ecosystem evolution will vary considerably by market.
- More technology companies will evolve into ecosystems, with more major technology businesses broadening their capabilities and services.
- Ecosystems will recruit a growing number of established businesses to get even closer to shoppers and the wide range of products and services they need and want.
- New consumer services will be bolted onto ecosystems (e.g. healthcare, leisure, hotels etc), connecting as many consumer touchpoints on the path to purchase as possible.
- The centralisation of data and use of advanced technology means ecosystems will gain real-time insights, promoting rapid change, driving greater personalisation for shoppers, and raising profitability. This will provide a benchmark for all other retail models.