RedMart saw 3x income growth and better margins since Lazada buyout

Online grocery is having a moment in Southeast Asia. Pure-play grocers across the board are seeing a windfall in sales in 2021, even as countries in the region exit from lockdowns.

Lazada’s grocery arm RedMart is one of the first online supermarkets in the region. Although the company has yet to achieve profitability, its business has been growing at an astounding pace, especially after it was acquired by Lazada in 2016.

Photo credit: RedMart’s Facebook page

Now that the online grocery space has emerged as the new battleground for Southeast Asia’s major ecommerce players, RedMart’s numbers will be more closely watched than ever.

A growth story

Founded in August 2011, RedMart is Singapore’s leading online supermarket and has become increasingly important to Lazada’s online grocery play in Southeast Asia.

At the beginning of 2019, Lazada merged its ecommerce app with the RedMart app.

Although the integration was met with some backlash, it didn’t stop RedMart from growing. The company’s revenue jumped by 44% while its gross margin improved slightly to 23% that same year.

When the Covid-19 struck in 2020, RedMart’s pure-play model appeared to make more sense than the traditional brick-and-mortar model. Physical supermarkets need to manage and stock up their stores, and that’s difficult to do in times fraught with uncertainty.

RedMart’s approach is relatively more asset-light. It has only one fulfillment center in Singapore, so the company finds it easier to maintain and manage its inventory. Moreover, RedMart says it has one of the lowest food waste levels among its peers.

The integration with Lazada’s platform has made some headway amid the unexpected windfall this year. Consumers have shown cross-buying behavior in both the Lazada and RedMart online marketplaces.

Covid-19’s impact on RedMart’s business was immediate and is expected to reverberate in the long run. The company saw a 50% increase in sales at its peak last year compared to pre-pandemic levels. The baseline in daily sales has also been higher.

Richard Ruddy, chief retail officer and head of the grocery business at Lazada Singapore, tells Tech in Asia that the higher adoption can be partly attributed to “customers who ordered fresh food for the first time” during the city-state’s circuit breaker period.

Profitability has to wait

While the sector is experiencing a windfall now, many online grocers in Southeast Asia are struggling with profitability. RedMart is not an exception.