Boost in Japan's online grocery sales

TOKYO • The coronavirus has forced Japan's fussy food shoppers to abandon doubts about online grocery stores, sending retailers such as Aeon Co scrambling to meet a surge in delivery demand.

Although Japanese shoppers are not alone in going online during the outbreak, the shift is remarkable for a country that had been expected to take years to embrace online food shopping because of a zeal for fresh and perfectly presented produce.

"This pandemic has triggered an inflection point in the adoption of grocery e-commerce," said Mr Luke Jensen, executive director of Ocado Group, hired to build a grocery e-commerce business for Japanese retail giant Aeon.

Retail executives and analysts estimate Internet sales now account for about 5 per cent or more of Japan's total grocery sales, compared with 2.5 per cent before the pandemic.

Graphic designer Yuri Ohtaka, who lives in Tokyo's western suburbs, began ordering from multiple online supermarkets in March after seeing shoppers emptying shelves at a nearby store. Although fears of shortages have subsided, online deliveries have made it easier as she works from home, making three meals a day for her family.

She is also happy to avoid stores amid fears of infection. "There's no need for face-to-face, dealing with registers or standing in line."

Such changes are closely watched as Japan is one of the world's most valuable grocery markets, worth over 50 trillion yen (S$647 billion) a year.

Major Japanese supermarkets, despite talking about online services for years, have only recently begun large-scale spending on e-commerce infrastructure and many have struggled to meet the spike in demand.

Aeon hired British online grocery pioneer Ocado in November to build state-of-the-art robotic warehouses, aiming to fend off rivals such as Amazon and Seven & i Holdings' Ito-Yokado. But the warehouses will not start operating until 2023.

In the meantime, Aeon is hiring more staff to help pack online grocery orders, although it is having difficulty hiring more delivery drivers.

Despite such constraints, it expects online grocery sales to grow 50 per cent and account for about 10 per cent of sales by the end of its financial year ending next February, said company executives.

Analysts say the shift to online grocery shopping is also likely to favour bigger retailers, which can invest in high-tech warehouses capable of handling large volumes.

That could put smaller supermarkets and mom-and-pop stores, already struggling to match the likes of Aeon and Ito-Yokado in pricing, at a further disadvantage.

But Ms Violetta Volovich, who has researched global grocery industry trends for e-commerce consultancy Edge by Ascential, said remote and costly high-tech fulfilment centres are not the answer for all retailers.

She envisions retailers automating more jobs in brick-and-mortar stores and embracing features such as "click and collect" - shoppers pick up online purchases at the stores.

She adds that the rise in food e-commerce does not mean an end to traditional grocery shopping. "Just because people get pizza delivery doesn't mean they will stop going to pizza restaurants."

REUTERS

A version of this article appeared in the print edition of The Straits Times on July 01, 2020, with the headline 'Boost in Japan's online grocery sales'. Print Edition | Subscribe