Earlier in April this year, Singapore-based e-commerce giant Shopee made its foray into the food delivery arena with the launch of its new vertical, ShopeeFood.
Shopee had first uploaded a recruitment post on social media, before officially launching with a 30-second introduction video.
According to Kompas, Shopee is the first e-commerce platform to have its own food delivery service in Indonesia, taking on local players GrabFood and Gojek’s GoFood.
Most recently in June, ShopeeFood Indonesia also announced that it was expanding to cover more cities in an Instagram post. The service is now also available in Bandung, Jogja, Surabaya, and surrounding areas.
That same month, Shopee adopted the same strategy for its Malaysia market. It uploaded on its Facebook page a post looking for “ShopeeFood delivery partners in Kuala Lumpur and Selangor”, along with a list of requirements.
This move signals its expansion to Malaysia. With this new venture, ShopeeFood joins the food delivery scene with established local competitors such as GrabFood, Lalamove, foodpanda and even airasia.
As ShopeeFood makes its way in Indonesia and now Malaysia, it’s only natural to question if it’s going to launch in its home country too — will Singapore be ShopeeFood’s next expansion move?
Not a newbie in food delivery
Food delivery is actually not a new space for Sea Group, Shopee’s parent company which acquired an 82 per cent stake in Vietnam’s Foody Corporation, which runs Now.vn, for US$64 million in 2017.
According to a 2020 report by advisory firm Momentum Works, Sea-owned food delivery service Now is quietly dominating the market in Vietnam.
Now generates 42 per cent of the food delivery Gross Merchandise Value (GMV) in Vietnam, while Grab follows closely at 40 per cent.
Momentum Works also reported that food delivery grew 183 per cent in 2020, and consumption will continue to grow in the years to come.
In July last year, ShopeePay teamed up with short-distance food delivery service AtozGo, which is only available in selected office buildings, residential areas and malls in Jakarta. This marked ShopeePay’s entry into the last-mile grocery and food delivery space.
It’s also possible that Shopee’s entry into food delivery is an attempt to boost its payment service. Simply said, more orders on the delivery platform translates into more ShopeePay transactions.
Nearly all large tech players in Southeast Asia are pushing towards financial services because of the market opportunity and margins. Payments are typically the entry-point as companies build their financial products and services.
How is ShopeeFood performing in Indonesia?
According to the earlier report by Momentum Works, Indonesia had the largest food delivery service market in terms of GMV across Southeast Asia in 2020.
Jakarta has a high consumption power, concentrated population, and high Internet penetration rate — these are all favourable factors that make it a hotspot for food delivery and ride-hailing services.
According to a recent CLSA research report, 69 per cent of Indonesians order food delivery at least once a week, with 11 per cent doing so almost every day.
A separate survey conducted by Rakuten Insight revealed that approximately 26 per cent of the respondents who are aged 55 years old and older ordered food from food delivery apps once or twice a week in Indonesia.
Additionally, eight per cent of respondents aged between 16 and 24 years old ordered several times a day.
Coupled with the fact that Shopee has over 40 million monthly active users in the country, the odds could very well be in the e-commerce platform’s favour.
Although the Indonesian food delivery market has been dominated by GrabFood and GoFood, the country is definitely big enough to offer Shopee a good opportunity to snag a sizeable slice of the food delivery pie.
In Indonesia, ShopeeFood is wooing vendors by touting its 80 million-strong user base and promising to subsidise steep discounting.
As of October 2020, ShopeeFood has onboarded more than 500 F&B merchants in Indonesia, according to local publication Katadata.co.id.
Meanwhile, the ShopeeFood driver app has been installed over 500,000 times since it was made available on the Google Play Store. It is currently unclear whether Shopee plans to launch a separate app for its food delivery service.
From grocery to food delivery
Food delivery giants like GrabFood, Deliveroo and foodpanda all have one thing in common: they offer food delivery first, before eventually venturing into grocery delivery.
Grab offers GrabMart, while foodpanda offers PandaMart.
In October last year, Deliveroo also launched its first ever on-demand grocery delivery service amid the ongoing COVID-19 pandemic. It onboarded specialty stores like Kuriya Japanese Market and Ryan’s Grocery, in addition to its tie-up with British retailer Marks & Spencer.
Shopee is looking to do quite the opposite. It already has an existing grocery delivery service, and is now looking to expand into food delivery.
Earlier in March, Shopee Malaysia had launched a fresh food grocery delivery service in the Klang Valley area of Greater Kuala Lumpur. Months later, it is looking to launch ShopeeFood in Malaysia.
Similarly, Shopee has S-Mart and Shopee Supermarket in Singapore. S-Mart aims at being a “one-stop shop for all your household needs”, and carries a wide range of household essentials from fresh groceries to home cleaning products.
All items on S-Mart are eligible for 10 per cent cashback at checkout so shoppers can enjoy more savings. Shopee also promises to deliver the items within three days of placing the order. If the delivery arrives later, a S$4 voucher will be automatically credited into the shopper’s account.
On the other hand, Shopee Supermarket offers over 20,000 household items, daily 50 per cent cashback voucher, and free shipping with a minimum spend of S$40.
As Shopee already offers online grocery delivery services — be it in Singapore or regionally — moving into food delivery services is only a natural progression.
Tapping on its existing user base and infrastructure
Shopee has already established itself as the leading e-commerce player in Singapore.
As of the first quarter of 2021, Shopee was the most visited e-commerce website with approximately 12 million monthly web visits.
As it seeks to extend its lead in e-commerce, it is not surprising if Shopee is looking at new markets or lines of business to generate more revenue.
According to a report from The Asean Post, the food delivery market in Southeast Asia is set to grow from US$2 billion in 2018, to an estimated US$8 billion by 2025.
Even if ShopeeFood captures only 10 per cent of that 2025 market, it would bring an additional US$800 million annually for Sea.
Shopee’s chances of succeeding in the food delivery space is undoubtedly better when high volumes are involved. It can easily compete with other players by capitalising on its existing large customer base and convert them into ShopeeFood users, which helps to lower customer acquisition costs.
Moreover, adding a new service like food delivery is akin to inserting a new feature.
In many ways, the technology and operational footprint needed for e-commerce are not entirely different from food delivery, so most of the infrastructure would already be there and probably just needs to be tweaked.
Shopee’s core business is e-commerce, and food delivery is not materially different. The end goal for both verticals is to deliver goods to the customers’ doorsteps.
Lacking in the logistics front
One thing that big three — GrabFood, Deliveroo and foodpanda — have an advantage over the e-commerce giant is logistics.
Shopee’s in-house fleet, ShopeeXpress, is not as strong but Shopee’s strong financial capacity could eventually help it in staying ahead of the competition.
Since the food delivery landscape is incredibly competitive at the moment, ShopeeFood would need to invest heavily with subsidies for both merchants and users. Given Sea’s stock performance, the required capital shouldn’t be a challenge.
Its huge financial warchest is its biggest advantage over its competitors and it can easily spend money on recruiting a pool of dedicated riders to conduct food deliveries.
In all, the delivery aspect is something Shopee needs to scale up on. It already has most of the required existing touchpoints with customers, so it simply needs to build on that.
There’s a high chance ShopeeFood is expanding to S’pore
One conclusive hint that signals ShopeeFood might expand to Singapore is that it’s currently hiring for a product management role that is based in Singapore.
According to its job description, Shopee said that the new hire will have the opportunity to “drive conceptual and technical development of ShopeeFood product ideas, improve data accuracy, and better position ShopeeFood as the preferred food delivery platform in the region.”
One of its key roles is to lead and design the roadmap for ShopeeFood products, effectively review input and stakeholders’ evolving needs to enhance current product features, as well as propose new products, and ensure alignment with all stakeholders.
It seems there’s only one ShopeeFood role in Singapore so far, though it is likely the company will gradually ramp up hiring in time to come.
If and when ShopeeFood launches in Singapore, it would mean increased competition for the players. It’s a win for consumers however, as companies compete to win over our wallets.
Moreover, it’s good timing to enter the market now. Food delivery services are especially crucial during this pandemic as dining in at restaurants are still restricted.
Additionally, moving into the food delivery segment will give Sea the opportunity to target a new set of customers and most importantly, capture all of the data on the backend.
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Featured Image Credit: ShopeeFood Indonesia
