HappyFresh Business Model And How it Works
HappyFresh Business Model And How it Works
Online delivery isn’t a novel concept now. When was the last time you ordered something online?
Today? Yesterday? Or maybe you’re waiting for your favorite deals!
We love convenience. Buying all sorts of items with just a tap and hitting the check out button instantly.
Feels so easy, right?
Technology advancements have made tremendous changes in the way we shop. This concept isn’t even surprising anymore. Technology has transformed the manner in which the Consumer Packaged Goods (CPG) industry works. This has been a gradual process. Evolutionary but revolutionary!
There is no doubt that automation is redefining what it means to go shopping; the boundaries between the physical and digital realms are blurring at a quick rate.
And since we’re pondering how the Consumer Packaged Goods (CPG) industry is booming, we must also check its growth rate across the globe. In this blog, we’ll cover HappyFresh’s journey in the Southeast Asian market and how it grew to be amongst the best.
Analyzing Southeast Asian Online Grocery Market
Southeast Asia has 330 million active internet users. As the number continues to grow, the market size is improving. The internet connectivity has helped in expanding the online industry throughout the region. People are quickly embracing the power of online delivery platforms, the convenience afforded by acquiring goods and services online.
As per the reports by MSN, the Southeast Asian grocery market will easily grow up to $309 billion by 2021. And according to the reports by Food Industry Asia, the online grocery business is set to triple its growth between 2017 and 2020 in Singapore alone. Amongst the top three ASEAN’s online grocery e-commerce platforms, RedMart, HappyFresh, and Honestbee continue to grow since the day of their inception. The market is inviting more players to jump on the region’s billion-dollar bandwagon.
What is HappyFresh?
Here are some quick facts-
|Founders||Founded on||Headquarter||Total Funding raised ($)||Valuation|
|Markus Bihler||Oct, 2014||Jakarta, Indonesia||$32.0 million||$80m-$120m|
Jakarta based online grocery platform, HappyFresh was launched in 2015. It was Southeast Asia’s first Instacart style one-hour grocery delivery service. We’ve discussed all about Instacart’s delivery and business model in our previous blogs.
HappyFresh raised a funding of $12 million in its first year to finance its growth efforts across Southeast Asia. The business received an undisclosed amount of capital in series B funding by the end of 2016. FoodTech Service, HappyFresh, decided to capitalize on this evolving new e-commerce online grocery platform as the first and fastest-growing online grocery network to deliver groceries across Southeast Asia. The rising competition made HappyFresh suspend its operations in the Philippines in an attempt to become financially sustainable and concentrate on its core markets. The company raised $20 million in series C funding in 2019 and is focusing its operations in three regions – Indonesia, Malaysia, and Thailand. Traffic is an issue here. Despite that, HappyFresh keeps up with its promise to deliver groceries in the shortest timeline possible.
HappyFresh Business Model
After its launch in 2015, the company has already partnered with around 278 supermarkets and stores that use HappyFresh’s online delivery services to provide their customers with quick, easy, and reliable grocery shopping. The company delivers over 100,000 items via its mobile app that has been downloaded more than 1.5 million times!
HappyFresh started its journey when the online marketplace was a novel concept. Partnerships include well-known names such as Ranch Market and Farmer’s Market that have added to the popularity of the platform. The company works on models similar to the famous Instacart and Honestbee. It employs personal shoppers who select products in-store. HappyFresh’s next-hour delivery is possible because of its on-demand logistics network. The founding team consists of Markus Bihler, Fajar Budiprasetyo, and Benjamin Koellmann.
The company partners with offline retail stores, sells their product online through its website and app, and delivers them to customers within an hour. It has a dedicated workforce of personal shoppers who go and shop whatever is listed by the customer from the registered local grocery shops. When the products are collected, the professional couriers deliver it at the customer’s doorstep in the next hour. The delivery is fast, safe, and reliable and that is one of the main factors that has added to the growth of HappyFresh’s success. The consumers have the option to adjust their orders whenever needed or call their personal shoppers to make switches.
Although HappyFresh raised significant funding, the journey hasn’t been smooth or seamless since the day of its inception. After a year and a half into the market, HappyFresh decided to take down its operations out of the Philippines and Taiwan to focus on its home market of Indonesia including two other overseas markets in Malaysia and Thailand.
HappyFresh was born on the Amazon Web Services (AWS) cloud. The Jakarta based startup charges customers a nominal delivery fee under its asset-light business and working model. HappyFresh has raised more than $25 million from two rounds of funding. The investors include Dubai private equity firm Samena Capital and Vertex Ventures, the venture capital arm of Singapore’s Temasek Holdings (Pte.) Ltd.
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How does it work?
- Select the local grocery stores in your area from the HappyFresh website or mobile app.
- Your groceries will get picked by a specially trained Personal Shopper.
- The groceries are then brought to your door by a professional Grocery Courier.
- If you are not happy with any of the products upon delivery, you will be able to return the items to the Grocery Courier and not be charged for them.
HappyFresh’s Marketing Analysis
The five-year-old startup is focused on building a personalized and customized user journey across its communication channels through a first-party data-driven in-house advertising model. The team is invested in its creative and media team to create customized campaigns that lead to conversions. According to David Lim, the ex-scoot performance marketing lead, “The challenge of such a model is to make sure they understand the fact that they now have access to first-party data more readily than when they were on the agency-side of the business. This, in turn, results in a benefit where all of us stick much closer to the business and have a sense of ownership.”
“We want to provide convenience in grocery shopping, which is an age-old activity that has been carried out by households all over the world and as cities started developing themselves, a few key social situations started surfacing, making this activity cumbersome and time-inefficient,” Lim explains.
HappyFresh has no intention to expand its market in the international markets. Singapore remains a possibility, though, because HappyFresh has a relationship with the Grab ride-sharing network, which is headquartered in the city-state.
Lim says, “For users who drop off from our mobile app without completing an order, we utilize data analytics to understand what the reason might be and approach them via our remarketing stream to show the most personalized messaging to bring them back onto the purchase journey.”
The regional team focuses on the expansion strategies while the headquarter manages the rest of the jobs. For any company or organization to grow, it is important for them to distribute and allocate specific job roles as per the industry. The division of labor is a vital component to achieve great milestones. So if you are planning to expand your services, you need to work on your expansion skills. HappyFresh applied the same methodology to gain a significant market share. They let their research and development teamwork in the headquarters to deal with technical and support issues. The regional teams, on the other hand, focused on marketing and churning out personalized and customized campaigns for their customers. This reduces labor costs as well. This way, the teams can easily work on their specializations rather than worrying about the operations.
The asset-light and highly localized model has worked wonders for the growth of the platform. It has not just facilitated the growth of users but has also helped in curating customer-centric campaigns. The asset-light model has allowed a loose cost structure and therefore highly scalable models. The regional team can easily invest most of its capital on deals, offers, and discounts to add value to customer’s shopping, attracting more users and building more marketing campaigns that lead to app downloads.
Supermarkets are around the corner
Providing customers with delivery within an hour, HappyFresh has gained a significant amount of appreciation. Keeping in mind the Jakarta traffic, HappyFresh came out as a time saver for the audience. Imagine carrying a huge bag of groceries while managing to not spill anything on the way. HappyFresh answered every struggle to instigate people to jump on-board.
The introduction to one-hour delivery from the local grocery stores and supermarkets have helped consumers rethink online deliveries. Shedding out a few dollars is a small price to be paid in exchange for the time that gets saved. As these distant supermarkets become easily accessible, customers may be encouraged to shop more frequently and spend more.
Target your niche market
When you target a niche market or a specific demographic to be precise, the result is high spending power. We are already well-versed with the brick and mortar concept of services. For some, the irreplaceable personal touch is crucial for buying products. Since HappyFresh plays the role of a middleman between the customer and the supermarket, it charges a delivery fee and other expenses from its customers. It can be higher than shopping from a physical store. The spending potential of high-end customers helps the company grow. It is undoubtedly true that the majority of the customers do not prefer this but people with high spending power may not even worry about it. This group of people must be just about 1% of the whole lot but the profit it brings to such companies is still huge and substantial.
There are multiple grocery players who are seeking to reap the first-mover advantages. Technically, they may be competitors, but they are also partners working together to reach consumers and markets. This strategy is based on the need to change ingrained shopping habits, requiring both intensive capital and great patience. Incoming entrants, however, ought to focus on these historic ventures which could drive improvements in consumer habits.
HappyFresh implements sharing economy-based business model and provides online grocery delivery services within a hyperlocal domain. HappyFresh doesn’t own a physical grocery store, it provides an online platform for the local grocery retail stores to sell their products. Consumers can download the app and browse from the list of a huge number of stores, choose products and easily place their orders. The personal shoppers are part-time employees or independent contractors who receive the order and shop for items as listed by the consumers. The items are then delivered with the help of professional couriers at the consumer’s doorstep.
This whole connectivity creates a technological structure within the local market management system. This business model not just benefits the consumers but the local grocery store owners as well. Out of the various segments, the app has helped people who wish to save time, the elderly, and people who surely don’t want to get stuck in the traffic. HappyFresh –
- Delivers 1000+ fresh grocery products in just an hour.
- HappyFresh lets you browse through all the deals and offers and helps you save a little money too.
- The app has more than 250+ stores including big names such as Ranch Market and Farmer’s Market, etc.
- Provides a personalized shopping experience to its consumers.
- The shoppers and couriers are trained and well-versed with their work.
The whole of HappyFresh’s model is built to let the consumers experience a personalized shopping spree. HappyFresh’s business model has turned out to be SoutheastAsia’s leading grocery delivery business. And the majority of its success includes the way it has transformed the online delivery services for the customers. With its unique and personalized approach, HappyFresh’s model has till now proven to be sustainable, full of potential, and promises growth.
This business model clearly benefits both, the consumers as well the supermarkets. HappyFresh is a capital-efficient model that allows future scalability and advancement. The company has successfully demonstrated strong execution abilities to lead the market.
On-demand Grocery delivery business has no doubt a promising future ahead as millions and millions of people want to order groceries without moving a leg. With a deeper understanding of HappyFresh’s business model, you can plan and prepare your Grocery business plan and hit the market with us.
If you have a similar idea in your mind and want to be a part of the growing and booming on-demand service industry? We think it’s time. Call us, mail us, chat with us, and share your idea with OyeLabs and witness your idea turn into reality, in no time.
What are you waiting for? Here’s insights into the cost to build a grocery delivery mobile app