Online grocery sales growth slows in Asia

A significant decline in basket sizes were seen in Malaysia and India.

The growth rate of online grocery sales in Asia slowed down in 2023 as consumers prefer to buy more in physical stores due to the convenience of locations, according to a report by McKinsey.

In the Philippines, online channels accounted for 0.4% of the grocery sales in 2023 growing by 53.6% year-on-year, slower than the 55.6% growth in 2022-2021.

The sector contributed 1.2% to the total sales but the slowed growth is much evident at 34.4%, compared to the 100.4% in the previous year.

Malaysia, saw online channel sales decline by 17.8% in 2023, compared to the 52.8% growth in 2022-2021.

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Overall, Malaysia and India saw a significant decrease in basket sizes. Minor declines were reported in Indonesia, the Philippines, and rural areas of Vietnam.

“Shrinking basket size has increased margin pressure for the e-tailers and omnichannel players. To date, online platforms continue to be unprofitable for most players, in part due to the persistently high costs of customer acquisition and promotion. The consumers primarily shop online to find deals and discounts, which also creates challenges for retailers,” McKinsey said.

It said that online retailers should take significant initiatives to become profitable. For example, in China and Vietnam, online channels were deploying shoppertainment.

The quick commerce sector in India is also competing with offline stores, whilst Thai retailers are experimenting with omnichannel offers, it said.