Food fight: New challengers spice up Singapore’s online grocery war


At a cramped office in Singapore’s Little India, journalists awaited the unveiling of honestbee, a new grocery shopping site. The space was already sardined with the startup’s fast expanding team, which ballooned from a handful to 55 in just a few months. Some staff vacated the room to accommodate the curious outsiders.

The live demo was unpolished but charming. Jonathan Low, the tall and bespectacled co-founder of honestbee, received a staged phone call from a delivery guy confirming his order.

He explained what honestbee is: an Instacart-like service which assigns a freelance runner to buy groceries on your behalf from the nearest supermarket. The items are then sent straight to you. Everyone guessed that a delivery man would show up at the door.

“Delivery takes time, so let’s wait a little bit,” he said, breaking the awkward silence. The knock finally came.

“Now, I wonder who that is?” He asked, relieved. The runner entered with two full bags.

Honestbee is the latest entrant in Singapore’s online grocery battle, and it’s eager to prove it can deliver the goods. Casual observers probably won’t spot many differences between the service and its competitors, which now include RedMart, PurelyFresh, and GoFresh. Even supermarkets like Cold Storage are upping the ante with a revamped online shopping site.

Indeed, they all seem to work the same way, as I found out after trying honestbee one weekend. After entering your postal code, the site tells you what merchants are available in the area. You then select one of its partners – from supermarkets like Cold Storage and Sheng Siong to smaller setups like Pet Lovers Centre and Gastronomia.

Next comes putting items in your shopping cart, picking a time slot, and checking out. The service waives delivery fees for basket sizes above a certain amount. And, if all goes well – and it usually does – the delivery guy rings your doorbell at the appointed time.

So far so good. But where honestbee really shines is its promise of delivering groceries to you within an hour. Well, more like two hours, as the case was for me. I made my purchase at 11.30am, and the earliest time slot I could choose was 1pm to 2pm. One-hour ranges are the best anyone can do in Singapore now, though honestbee wants to eventually introduce 30-minute slots.

honestbee screenshot

The startup is part of a rising class of “on-demand” services that aims to give you what you want, as soon as you want it. Uber pioneered the idea of using existing resources (idle private vehicles) and summoning them to anyone through an app. Instacart takes the same concept to groceries, and honestbee applies the same model to Singapore.

Joel Sng, the enigmatic backer and CEO of honestbee, has committed to funding the company through to the end of 2016. When a journalist prodded him on how he amassed enough cash to invest, Sng didn’t say. But the Harvard graduate was notably an investor in startups like Facebook, Uber, Palantir, and Airbnb. Sng, a great grandson of Chinese revolutionary Sun Yat-sen, then returned to Singapore initially to run his family office. He didn’t divulge how much he’s investing in the company, except to say that “you can’t do this business with six figures.”

His pensiveness contrasts with the eclectic, splashy decor of the office, which includes rows of cinema seats, a charming cafe, and a huge pop art piece originally commissioned for a bank by an artist called Steve Lawler. Lifeopp, a LinkedIn for service workers, was honestbee’s previous reincarnation. While Lifeopp didn’t work out, it shares one common trait with the online groceries site – a social mission of providing employment to blue collar workers.

“We could’ve chosen to sell flowers or durians. Or car tires. As long as we’re able to build a highly retentive audience, as long as we’re able to grow our customer base and get them to come back frequently, we can provide the masses with quite a lot of income opportunities. And that’s the reason we started this,” said Sng.

These workers are the lifeblood of honestbee. Unlike RedMart, which has built out an entire supply chain from picking and packing to last-mile delivery, honestbee has none of that. Instead, it uses a network of 500 freelance shoppers who fan out all over Singapore.

Runners are paid about S$10 (US$7.30) an hour plus incentives if they perform well. They get an app which has mapped out the retail space in advance. It tells them which aisle they should go to pick up the item, as well as how to walk there. Honestbee worked out revenue sharing agreements with its partner merchants, and that is how it keeps costs low and pays its contract workers.

The partnerships also allow honestbee runners to be recognized as such, which means they can sometimes bypass the queue. With a thin margin of error afforded by instant deliveries, every extra second helps.

redmart marketplace

The fact that the market is getting crowded is not lost on ex-investment banker Roger Egan, co-founder and CEO of RedMart, a startup founded in 2011. It is credited with pushing the boundaries of online groceries and ecommerce in Singapore.

Hot on the heels of honestbee’s launch, RedMart held its own presser, which also had a bazaar-in-a-bar where organic food, fruit jam, and wine sellers displayed their wares. The event signified a shift for RedMart – from merely a retailer of groceries to a marketplace for merchants. In essence, you can now buy craft beer from a specialty store alongside a bottle opener sitting in RedMart’s warehouse.

With on-demand being the flavor of the month, it’s easy to see RedMart as a has-been. But Egan rubbished that notion.

“We think [the on-demand marketplace] works for certain product categories but I don’t think it scales for groceries,” he told me. “In groceries, you have many more items per order than other ecommerce. So, the efficiency of picking and packing those orders becomes really important at scale.”

He continued: “Picking and packing from a physical store can never be as efficient as a fully automated fulfilment center. It’ll always cost more per pick. It’s good for lowering delivery time and for convenience. But once you have to scale up, it’s not as efficient because physical retail space is more expensive and has less throughput.”

Describing RedMart as an online supermarket is a misnomer. It’s partially a logistics operation which rents its own warehouses and delivery fleet. Much of its innovation doesn’t happen on its much-lauded website, but in the hidden gears that ship the groceries.

Egan of course prefered to keep his technology under wraps. But he did say RedMart has created its own Android software for picking items at a warehouse and for goods delivery.

Automation is critical if RedMart wants to survive. After all, the cost of robotics trend downwards, while labor costs tend to rise, said Egan. According to financial documents I obtained, the startup suffered a loss before taxes of S$40.3 million (US$29.4 million) on a revenue of S$12.9 million (US$9.43 million) for the financial year ending 2014. Granted, the loss may stem from investments in infrastructure and research, which might pay off in the future. So actual operating expenses might be lower than the stated loss.

In any case, Egan says that their financial situation has changed a lot since. RedMart’s delivery density has increased – which meant it was able to deliver more goods to a single area. “In some of our most dense buildings, our cost per delivery has decreased significantly. That’s because the marginal cost of delivering an additional order per building at the same time slot is much, much less,” he said.

The company can also nudge shoppers towards picking time slots that save RedMart the most money. For example, if five of my neighbors have requested for groceries to be sent to their doorsteps between 4 and 5 pm, I will get a few extra dollars discounted if I pick the same time period. “We can influence you to pick a slot when we’re already going to be there. So that cuts our cost down by increasing delivery density,” he said.

RedMart’s transition into a marketplace – it already has over 100 independent sellers offering 8,000 items – is aimed at reducing cost while offering shoppers more variety. RedMart doesn’t store these items in their warehouse.

Instead, sellers can use its logistics network and website to reach out to more customers. They get an online store, inventory, and analytics management system all rolled into one. With help and funding from government agency SPRING Singapore, it’ll train these merchants to use these services and be ready for RedMart’s vans when they do their pickups. In anticipation of the rise in demand, RedMart will order 60 more vehicles, which would more than double its current fleet.

Redmart marketplace

While RedMart and honestbee are similar on the surface, their philosophies differ. RedMart is betting heavily on owning the entire process with the hope it’ll pay off as the number of orders rise. Getting there requires burning a hefty amount of cash, and it’s banking on optimism from investors to sail through.

Honestbee, on the other hand, hopes it can scale its network of crowdsourced runners. It wants to conquer the brave new frontier of on-demand logistics, a field that’s still small and unproven – even Uber isn’t close to cracking it yet. Nonetheless, Sng believes consumers will change behavior rapidly: “While people can plan their lives, and some do, most people [do things] last minute. In general, I’m quite impatient. I’d like to know exactly when I can get things.”

So, once people taste the milk and honey in the promised land of instant deliveries, honestbee hopes they won’t turn back.

Though the startups are fundamentally different, both value customer loyalty. After all, having a hundred customers who shop on your site repeatedly beats a thousand who visit once and never return. So it’s a race to impress as many first-time users as possible – the heavily pregnant wife who’s finding a trip to the supermarket impossible, or the newly-weds who moved into a new housing estate but face a lack of nearby retailers.

Egan found that steadfast customers not only order more frequently, their baskets get bigger with each purchase. “As our customers age, their average order value goes way up. So if you look at our earlier customer cohorts, they’re profitable,” he said.

Sng noticed this too. “We do see a trend of people buying the minimum as a test and increase over time. If we do a good job they come back and they buy a bit more. They start with perishables and move to fresh and frozen items. We gain their trust. They become more adventurous, and give you more challenging tasks.”

Unlike honestbee though, RedMart, is taking a more measured approach towards the so-called Uber-ization of logistics. Sure, it began offering limited same-day deliveries and will introduce an “express” option soon. But the company believes its underlying business is sound – doing ecommerce is still cheaper than starting a supermarket, given the soaring rental costs in Singapore.

Besides, the concept of getting runners to do your shopping is not new. Egan pointed out the example of Tesco – one of the largest retailers in the world.

“They’ve already went through the cycle where they used to pick from the store. They ran into a few problems. Once the penetration increased – and it’s the highest in the UK – the replenishment of the shelves was an hourly problem. They weren’t able to keep things in stock. The online pickers in the store were also disrupting the experience for the regular store shoppers,” said Egan.

To tackle this, Tesco launched dark stores, which are simply stores devoid of shoppers except for the online pickers. Egan contended that these are still not as efficient as warehouses.

Speaking of Instacart, he added: “The fulfilment cost is higher when you take the Instacart model plus the store. You have to think of all that as one full platform.” Sure, the model might attract supermarkets who fear the impact of ecommerce on their bottom line. But as long as they’re not willing to give up their stores, they’ll still lose out long-term.

Egan believes that even Instacart is now struggling to control customer experience at scale. In fact, they now have to move from contract workers to part-time employees, as that improves quality and efficiency.

“Obviously, I’ve thought about this a lot,” he smiled.


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