For many, the world as we knew it has changed forever. Although we can’t be sure of this, what we do know is that the reality for supermarkets in Latin America for the next few months looks very different to what many of us had predicted. Changes in consumer behavior are generating a reprioritization in the industry, which needs to leverage technology to break down physical distance barriers, biosecurity concerns, inventory problems and last mile logistics coordination.
E-commerce as the First Big Challenge
“After deconfinement, ecommerce has not lost market share in any country in the world.”
These words from Alberto Moriana, Procter & Gamble’s VP Sales LATAM, clearly illustrate one of the changes that’s here to stay. In countries such as Italy, four weeks after the end of the crisis, while the market in general is growing at 5%, the online market is growing at 70%, and this, taking into account that, similar to the Latin American consumer, Italians see the trip to the supermarket as a leisure activity. Therefore, the message is clear: ending confinement measures does not diminish the importance of the digital channel.
Just a few months ago, the online grovery shopping channel in LATAM was very underdeveloped and was seen as an exclusive medium for young people with considerable purchasing power. Today, it is not only a channel used by the masses, but it has practically become a requisite of an increasingly educated and demanding client.
“What the user of the platform expects is to receive the product ordered just as if he were going to the physical store in price and time as promised.”
Add to this the need to assure the consumer that their products will be handled in compliance with all sanitary protocols and you have “a great challenge, because many brands are not meeting the expectation,” says Christian Cieplik, President of the Latin American Association of Supermarkets.
These new customer expectations are pushing us beyond developing an optimal digital channel at the first point of contact, towards a 360° approach, such as Instaleap’s, which provides the necessary logistics machinery to meet the growing demand.
Breaking the Last-Mile Barrier
The last mile, also known as the last meter or that “small” distance we have to travel to fulfill our commitment to our clients, has become a headache for executives in most industries. Although the growth of e-commerce should be seen as something quite positive, from the logistics perspective, the use of technology to efficiently respond to the current demand explosion must be prioritized.
In Colombia, for example, we observe metrics that are still far from the level of efficiency expected by both supermarkets and end customers: 60% average utilization rate of owned fleet and an average delivery time of 3 days, with peaks of up to 30 days for special events. This shows that on the one hand we have a saturated last mile with demand at unprecedented levels, and some supermarkets are struggling to figure out how to grow faster, while optimizing their logistics operation, and on the other hand, an impatient and scared consumer, looking for convenience, speed and safety, without making concessions on price or quality. Consequently, unifying these two worlds in a single operation will be the key to success.
César Becerra, Director of Research at Logyca and GS1, accurately summarizes the key role of logistics in the online shopping process, “part of the answer lies in the battlefront where we want to seduce our consumers, but it also lies a little earlier, in the logistics process that precedes that, and all the satisfaction that this will or will not bring our consumers”.
To Transform or To Suffer Trying
The digital transformation process, very advanced in other parts of the world, has finally gone from being a luxury for companies in LATAM to becoming an absolute necessity. Technology, from an operational e-commerce and logistics point of view has the potential to successfully solve three key problems in today’s reality:
- Demands of social distancing: memorable experiences without the need for exposure, not only with the home delivery model, but with other options such as store pickup, contactless delivery, among others.
- Agility: moving faster than the competition and constantly iterating in the customer offer is very important to become a more competitive company.
- Efficiency: thinking about the coming economic crisis, the focus of many companies will be on finding ways to reduce costs and improve the productivity of their resources.
In addition, and certainly not less important, the technology will allow retailers to maintain proximity to customers and build those relationships that will greatly define the preferences of future buyers, despite the decrease in the frequency of physical purchases.