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Harder is Better: Four Ways HappyFresh Is Different From RedMart

How one online grocer is turning challenges into solutions

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BY Ling Low - 17 Feb 2016

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PHOTO CREDIT: Getty Images

In Southeast Asia, the market for online grocery shopping is heating up. With a war chest of $59 million, Singapore-based RedMart is the giant in the arena. It’s also the most established, having launched in 2011. HappyFresh, which was founded just over a year ago, is running on a much leaner budget of $12 million from Series A funding.

That doesn’t overly bother HappyFresh CEO and co-founder Markus Bihler, a German entrepreneur who previously headed up online retailer Tirendo in Europe. Along with partners Benjamin Koellmann and Fajar Budiprasetyo, Bihler has already launched HappyFresh in Kuala Lumpur, Jakarta, Bangkok, and Taipei, with plans to roll out in Manila next.

HappyFresh chose to launch in less developed Southeast Asian cities, rather than starting out in Singapore like its rival RedMart and newcomer Honestbee. The HappyFresh team knew they would face more challenges by setting up their headquarters in Jakarta, but they saw this as an opportunity.

“I remember the first time I was in Jakarta 10 years ago and it took me two and half hours in traffic from the airport to the city center,” says Bihler. “I thought, you must be able to provide a service that leverages on that fact and offers convenience to those who don’t want to be stuck in a jam.”

HappyFresh’s Bihler is trying to be different from his far larger rival by taking advantage of a leaner model. Here are four lessons entrepreneurs can learn:

Don’t get bogged down by inventory

Unlike RedMart, which keeps its own stock of groceries in a 100,000-square-foot warehouse, HappyFresh partners with local supermarkets, sending in its own personal shoppers to handpick the groceries according to each online order. These groceries are then passed to their fleet of drivers on motorbikes, who can move faster in traffic than cars or vans.

As a middleman, HappyFresh brings in additional sales for supermarkets, along with canvassing new customers. Meanwhile, its customers enjoy the convenience of getting their groceries without having to leave home or work, and enjoy a wider choice of supermarkets beyond their neighborhood.

By localizing rather than centralizing its operations, HappyFresh doesn’t have to spend huge overhead on managing an inventory. That also means more choice of groceries for customers.

Turn an obstacle into an opportunity

RedMart chose Singapore as its first base of operations. It’s not hard to see why. The prosperous city-state is one of the most wired countries on earth. And thanks in large measure to its long-serving prime minister Lee Kuan Yew, who famously loathed bureaucratic red tape, Singapore is one of the easiest places in the world to set up and run a business.

Not so Jakarta, where setting up HappyFresh’s headquarters in 2015 immediately posed several regulatory and operational challenges. It was important to the team that they worked through these issues right off the bat: “We felt that if we can train our people in a city like Jakarta, if we can provide a world-class service, it would be easier with the rest of the region,” says Bihler. “Start where it’s hard.”

Because of the notoriously bad traffic in Bangkok, Jakarta, and Kuala Lumpur, HappyFresh also knew that they could make a huge impact. Online delivery becomes a lot more appealing when you’re faced with fighting through a traffic jam just to get to the supermarket. 

Don’t just think big – think small

Unlike RedMart, which seeks to bypass supermarkets by offering an alternative, HappyFresh bets on existing neighborhood loyalties. So in each Southeast Asian city, HappyFresh customers can select their groceries from a variety of local supermarkets, excluding the retail giants that already offer online delivery.

Most interestingly, in some cities, HappyFresh also includes wet markets as shopping options. This is smart, because a lot of Southeast Asians will often pick up certain goods at wet markets, knowing that the freshest and cheapest local fruit and vegetables can be found there.

According to Bihler, Chow Kit market in Kuala Lumpur was added to the HappyFresh roster after a customer told HappyFresh that his wife shops there.

“The challenges are always the same – how can we ensure quality and how can we ensure availability? In a wet market, we still use the same approach – we train the personal shoppers and do quality control with the vendors,” says Bihler.

This attention to detail also goes down to the personal shoppers who handpick the products for each basket. HappyFresh’s personal shoppers are trained to look for the best fresh produce, so that the customer doesn’t end up with, say, overripe bananas or bruised papayas. 

Be part of the ecosystem

RedMart acts similarly to a supermarket that purely operates online. But HappyFresh is the link between the customer and existing supermarkets. It needs to have a great relationship with supermarkets in order to run successfully. “We see supermarkets as long-term partners,” says Bihler. “We are not a substitute.”

For supermarkets – especially smaller chains or independent shops – partnering with HappyFresh offers access to a wider base of customers, online shoppers who typically spend more than they would in a store. Moreover, HappyFresh offers something to supermarkets even more valuable than revenue: data.

“We have programmed our own data analytics product – HappyData – for our partners,” says Bihler. This helps supermarkets to manage their inventory and cut down on wastage. For example, if HappyFresh sees a surge of orders for, say, soya milk, it can pass this information onto the supermarkets, who will be able to plan their future stock accordingly.

Be part of the change 

Both HappyFresh and RedMart target young families and millennials who value the ease and speed of shopping online. But in order to grow, both services need more people to cook at home. In Southeast Asian cities, it’s all too easy to grab a cheap, hot bowl of noodles at a hawker stall or food court.

HappyFresh’s solution? Encourage more home cooking by giving its customers ideas for recipes. “We run our own platform, HappyRecipe (www.happyrecipe.com), to provide tips and inspiration for home cooking,” says Bilher. The website focuses on Southeast Asian cooking, with mouthwatering photos as well as practical recipes.

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