How startups beat the supermarkets in online grocery surge

How startups beat the supermarkets in online grocery surge

The 24-hour lockdowns that have become commonplace in several cities across the Middle East and North Africa (Mena) has resulted in such a drastic rise for online grocery shopping, that traditional supermarkets are struggling to fulfil orders in time.  The demand has pushed food delivery platforms like Deliveroo, Otlob in Egypt and Careem NOW in Saudi Arabia to start offering groceries on their platforms alongside their roster of meals from restaurants. Even Dubai’s Road and Transport Authority (RTA) has redirected its taxi drivers to carry out deliveries for groceries and other online orders across the city in a bid to meet customer demand.

According to research firm Euromonitor International, “the number of individuals working from home or unable to leave their homes placed a tremendous burden on the infrastructure of e-commerce retailers, as consumers look to purchase necessary goods from their home and remain dependent on their country’s delivery infrastructure and supply chains.”

Complaints against supermarkets that have missed delivery times have increased on social media. Carrefour, one of the region’s largest supermarket chains, was targeted heavily on social media by irritated customers.  

One post on the company’s Facebook page said: “this just shows that you are not prepared for times like this. Just stop taking orders online if you can’t keep up.”

The supermarket responded by sending an apology to all its customers via email saying, “despite our best efforts, we have been unable to process all orders within the committed delivery time”. As a solution Carrefour, like other outlets, has reduced the amount of delivery slots available and encouraged customers to shop in store. Majid Al Futtaim, the company which operates the Carrefour chain in the UAE also tried to reinforce the supermarket’s capacity by redeploying 1,000 workers from its other entertainment attractions that were shut down due to the Coronavirus outbreak, including Vox Cinemas, Magic Planet and Ski Dubai, to work in Carrefour’s warehouses, distribution centres and complete online orders. Still, the earliest delivery time that Carrefour currently offers in the UAE is two weeks from the date of order and other supermarkets are struggling to deliver in under a week.

Startups Leading the Way

But while the traditional operators have struggled to meet demand, the e-grocery startups responded better and are managing to tackle the surge more effectively.  

“There was a huge rush in terms of meeting this extra demand. As a startup we have the luxury of deciding and acting fast, so we have been quick to add more people on the ground, who got fully absorbed and utilised,” says Nader Amiri, founder of UAE-based el Grocer.

According to Amiri, customer shopping habits prior to the Coronavirus outbreak already signalled an inevitable growth in e-grocery.

“Whenever there was rain in Dubai or it was flu season, we saw a spike in orders,” he says. “There have been signals of this, not to the current level though. This is giving the opportunity for the whole e-grocery segment to break the convention of early adopters stage. People are now proactively looking for solutions.”

E-grocery startups that operate the marketplace model have proven to be in a better position to meet customer demand and maintain shorter delivery times as the last mile tends to be fulfilled by the supermarket themselves.

“The beauty of being a marketplace is that we are already prepared for higher volumes of orders, compared to other platforms offering only their own stores. We cover 500 supermarkets in UAE, they are able to cope with the increasing percentage using their capacity,” says Cosmin Manea, founding partner and general manager of UAE-based InstaShop, which recorded a spike of 70 per cent in app downloads. The company’s daily rate of orders has increased by 53 per cent and is still on the rise while basket value has seen a 71 per cent increase.

And it is not just in the UAE where e-grocery startups have witnessed a boom, it is a trend reflected across the region as people avoid leaving their homes. Saudi Arabia-based Nana, which recently secured an $18 million series B investment round with participation from Wamda, is witnessing a substantial increase in consumer demand, increasing its capacity three-fold.  

“This is a gamechanger. There is a trigger in certain periods that makes businesses big. We are closing contracts with new partners and onboarding a huge number of customers every day,” says Sami Alhelwa, founder and CEO at Nana. “This is a chance for us not just to increase orders, but to create habits, and convert customers from offline to online. We also help partners to survive and even sell more in this hard period.”

Changing Habits

Founders are confident that once the pandemic subsides and restrictions on movement will be lifted, people will continue to buy their groceries online.

“People shifted to online purchasing because of indicators from the World Health Organisation to try to stay at home. I think a big amount of these new users who are trying e-grocery will stick to the convenience of it moving on,” says Manea.

Prior to the outbreak, e-groceries accounted for just 1 per cent of the e-commerce sector in Mena. Moreover, the vast majority of these online grocery purchases were completed through cash on delivery (COD), but this has already shifted as companies try to maintain “contactless” deliveries. Some e-grocery companies like Nana and UAE-based Kibsons have stopped offering COD as an option altogether, while others have seen a reduction in the number of customers opting to pay by cash.

“COD used to be around 30-35 per cent of transactions, but it is now around 20-25 per cent,” says Amiri. “We have customers who still request COD especially with groceries, they are conscious to see and receive them, then pay.”

Whether this pandemic will spell the end of COD however, remains to be seen.

“Nowadays customers are shifting more towards card or wallet payments, Corona will not end cash on delivery but it will reduce it drastically,” says Mohammad Nassar Al Refaee, founder of UAE-based NRTC Fresh, which claims to have seen a 200 per cent growth in sales on its platform.

Challenges of Fast Growth

Amid this boom, the entire e-grocery sector has been put under pressure and in many cases overpowering their capacity to meet demand.

“It’s not easy to double or triple staff and train them on the right procedures [so quickly] especially with some curfew constraints and the extra precautions needed,” says Amiri. “We are trying to iron out issues that pop up, add more people, launch new stores that have been approaching us more and we want to accelerate.”

Some have resorted to limiting the amount customers can order in a bid to keep up. Egyptian household shopping app GoodsMart is allowing customers to order a maximum of 10 items per product to ensure sufficient stock. Lulu Group, which operates hypermarkets across Bahrain, Egypt, Kuwait, Oman, Qatar, Saudi Arabia and the UAE arranged for charter flights to be flown into the region from India to stock up its outlets in response to the dramatic rise in demand.

“We increase our supply every day by 10 -15 per cent and it is still not enough. Another challenge lies in new regulations that come up every day by the government to control people’s movement, affecting deliveries,” says Nana’s Alhelwa.

While no one can be certain of when this pandemic and the restrictions on movement will end, one thing is clear - online grocery shopping in Mena will continue to thrive.



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