The acceleration in grocery e-commerce has been evident over the past two years. In 2020 alone, a 64% increase in e-grocery sales took place in the US, reaching $109.01 billion. The projected growth for 2025 is approximately $243.67 billion.
Walmart led the marketplace with 25.4% of all click-and-collect orders (shoppers buying online and picking up at stores) in 2021, the largest market share per retailer in the US. It is also the most sophisticated leader in the e-commerce category for its early adoption of an omnichannel retail strategy, coupled with the everyday need for grocery shopping.
Rapid-delivery companies have instigated this online movement, getting consumers into the habit of pulling out their phones when in need of groceries. Led by Germany-based company Gorillas, which launched in May 2020 with a delivery promise of 15 minutes enabled by its “dark store” concept, quick commerce players have invested heavily but time will tell whether rapid delivery alone will be enough to build a thriving business.
As for other traditional supermarket retailers (of all sizes) that quickly turned to digital as a response to the pandemic, turning a profit in their e-grocery business has proved tricky due to a number of factors. Here, we’ll highlight three main challenges that are impacting profitability in e-grocery operations for traditional retailers and how to overcome them going forward.
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3 Factors Impacting Your e-Grocery Bottom Line
1. Operational Efficiency
The most important factor affecting e-grocery profitability is your operational efficiency. From picking to packing, to every step associated with last-mile logistics, how a supermarket is set up to fulfill and deliver its online orders will impact its bottom line. Sounds obvious, right? Well, many supermarkets are still operating under static capacity models (as opposed to real-time), which is significantly hindering their ability to optimize efficiencies in the first place.
To start, consider automating your picking and delivery tasks under a dynamic system. Understanding the concept of dynamic capacity (in other words – being flexible in your delivery promise based on the capacity you have at your disposal, in real-time) may be daunting and is highly associated with slotting times. As mentioned previously, many supermarkets today still use a static capacity model. This means relying on excel spreadsheets to base fulfillment and delivery outputs on the number of orders they’ve received and the human resources at their disposal at a given time.
With a static capacity model, what retailers fail to predict in an assertive and efficient manner are the accurate picking and delivery times, since they are basing their fulfillment and delivery times on the average it has taken them in the past against their store format. For example, a smaller retailer will have reduced picking times versus a large format supermarket with numerous and spacious isles. In either case, their predictions will be erroneous if they can’t optimize operations against demand in real-time.
How Instaleap Can Help:
Instaleap’s technology can help orchestrate tasks through a dynamic capacity functionality that works in real-time. By implementing our last-mile logistics solution you can:
- Synchronize processes from the time an order is created until it’s dispatched through a centralized flow. Offer customers accurate slotting times to ensure you’re fulfilling and delivering at capacity.
- Use our automated resource allocation algorithms that are integrated into your entire logistics network for both in-house and 3rd party logistics or 3PL (partners) and allocate orders in the most logical and optimal way to save time and costs.
- Implement picking methodologies that adjust to your operational needs through our picking functionality to reduce delivery times. This includes enabling picking routes based on your floor and product layout so picking tasks are completed in the most optimal time. Use multi-order picking and zone picking to further increase efficiency.
- Provide customers with real-time data on order status to avoid customer support tickets, phone calls, or other disruptions to your extended personnel.
Instaleap’s technology will allow you to orchestrate your operation so there’s no dead time between picking and delivery flows. It ensures tasks are automated and synchronized in such a way that every resource at your disposal is used in an efficient and timely manner—as soon as your pickers collect items, drivers are ready to dispatch without affecting transfer times. This automation will increase your productivity and profit by allowing you to receive more orders per hour or day.
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2. Expert Support and Accompaniment
When supermarket chains pivoted to digital channels for e-grocery fulfillment and logistics, some counted on their in-house technical team for advice and ongoing support. This, unfortunately, has not been the case for many. While the food business is still at the core, an e-grocery operation brings on entirely new challenges that grocers have been facing, oftentimes alone. Why not rely on technology partners that are experts in last-mile logistics? Grocers can and should rely on new technology and an expert team to drive efficiencies and save costs.
How Instaleap Can Help:
Aside from providing the technology to drive efficiencies in e-grocery fulfillment and delivery, one important factor that differentiates us is the level of accompaniment and ongoing support we provide our clients throughout their journey. Learning what works in the e-grocery business takes time and resources, and we’ve learned firsthand how to drive operational efficiencies from our grassroots.
When partnering with us, clients don’t have to go through the learning curve process alone, but rather with and through our expert team that can provide valuable knowledge from the start.
By bypassing beginner mistakes, redundancies, or mere lack of knowledge, supermarket retailers can hit the ground running without spending resources and time learning. In fact, by adopting the right technology and working with a seasoned team, retailers can optimize and increase their online operations in weeks—a process that would take much longer and be more cost-intensive than working with an industry expert to generate efficiencies right off the bat.
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3. Access to Data in Real-Time
It’s common to hear that supermarket retailers still lack real-time data and centralized dashboards to have a 360 view of their operation. There are several factors that have made it difficult for grocers to visualize their operation in numbers; sometimes due to lack of data if they’re giving it away to third-party providers, other times because they’re operating in silos and lack a centralized place that holds all the data, and in some cases, due to a complete lack of infrastructure.
e-Grocery profitability is highly dependent on facts, and these can only be arrived at through data. Hence, getting a hold of your own data should be your first priority, and second, being able to visualize it, in an accurate and real-time manner, should be your second.
How Instaleap Can Help:
When clients adopt Instaleap they can access all of their operational data in real-time. In terms of delivery and last-mile logistics, data consolidated through our platform can provide strategic insights into where your operation can be optimized in terms of profitability. For instance, you’ll be able to easily understand:
- The time each picker takes to fulfill an order against the overall average. If you can identify why a picker is taking longer than expected, you can begin to solve the issue at hand by, say, providing more training.
- Identify deficiencies within your delivery fleet by comparing time spent on the road versus kilometers covered per driver. Why is a particular driver taking longer than others?
- Understand order and delivery volume, as well as delivery times to better plan, forecast, and respond during peak times.
- Facilitate expansion plans through hard data facts.
All of the above factors may be impacting your profitability and can be solved through centralized technology. Don’t rely on your in-house team to get you where you want to go! Rely on experts to get you going in the right direction and guide you along the way.