Instacanceled: How Grocers Are Cutting the Cord

If you were like most grocers before COVID-19, your e-grocery volume wasn’t much to speak of. Like so many of your industry colleagues, you let Instacart handle your online offering while you focused on more urgent priorities. That worked great, for a while. But then online grocery shopping became the adventitious star of the pandemic shopping stage and suddenly, your online store became a major consideration.

Along with that shuffling of priorities, however, came a rude awakening. Outsourcing your online grocery operation came with worrisome sacrifices—chief amongst them, profitability. Instacart charges grocers up to 10% per transaction—something that few, if any, grocers can afford now that online is on the mainline. Outsourcing this aspect of your business just isn’t sustainable.

The problem is—how do you cut the cord?
After all, it took Instacart a decade of time and billions of venture dollars to get to where it is. To set up your own online grocery solution would require bucketloads of cash, an enormous amount of executive energy, and an army of staff to manage the platform. Ultimately, that’s even less practical than losing money with Instacart, right?

The answer is simply—no.

Where so many grocery executives I have spoken to get this wrong is in thinking that the only alternative to Instacart is building everything from scratch themselves. Although establishing your own online solution does demand a greater commitment than end-to-end outsourcing, it is not nearly as scary as you might think. Based on my firsthand experience working with dozens of national grocery chains, here’s my advice on how you can get started:

1. Commit to a digital strategy: The very first step in building a future-proofed online offering is for the CEO to put digital at the heart of the company strategy. The culture of a conventional grocery business can be quite at odds with that of a successful digital business. Friction is to be expected. CEOs must clearly define the prize for the entire organization and build a narrative that brings all staff and store managers in on the journey. They must educate all departments about the vital role of online in the organization’s future, and establish an executive online champion who everyone knows has the support of the top leadership team. Finally, they must identify the talent and tools that are needed within the business to ensure excellence.

2. Choose partners for compatibility and scalability: The needs of grocery are specific. Generic solutions won’t do. Choose a digital e-commerce solution that is purpose-built for the SKU volume, shopper behavior, and inventory dynamics of grocery. You don’t have time to get bogged down in extensive coding, so also make sure that it will plug into your existing infrastructure without elaborate re-invention. Consider not just where your business is today, but where it will be in ten years. Choose cloud-native solutions that allow for cost control, scale, and ease of upgrade. Choose headless, API-first technology in a microservice architecture that supports collaboration with vendors and low-friction addition of modular features in the future. Finally, make sure that your principal e-commerce partner is truly capable of guiding you through the migration process as an expert consultant— there is too much at stake now to “fail forward.”

3. Define multi-channel business metrics: Online customer propositions and shopping missions require new metrics on basket size, picking capacity, product availability, service standards, and operating costs. Quickly establishing such KPIs is fundamentally important. But the real benefits come when you share metrics across channels so that there is a single view of the customer, regardless of where they buy. A shopper who rarely buys online may not seem significant in a silo, but when she shuns competitors and shops more with you in aggregate because of your online offering, you see how incremental revenue is driven by multiple channels. Likewise, while your online offering may be run by dedicated e-commerce staff, it also involves merchandise, finance, operations, and customer support from across the organization. Giving those staff consistent, multi-channel KPIs shines a spotlight on supply chain, logistics, and store operations, which ultimately drives customer satisfaction and profitability across channels.

4. Crawl...Walk...Then Run: Fully leveraging the potential of your online channel takes time. That’s why I advocate a “crawl, walk, run” philosophy. Grocers cannot solve for all propositions right out of the gate. Start with the weekly, habitual purchases of your best customers—they will be your early adopters and loyal advocates. Identify the initial stores that will become your model of excellence. Implement the physical layout, equipment, and staff training needed to scale up. Gather valuable consumer insights and fine- tune shopper experience, system reliability, and media monetization first before you deploy additional channels and features like mobile and deep personalization. Regarding fulfillment, I recommend that you satisfy curbside demand in-house before deploying your own fleet of delivery vehicles and drivers. Orchestrating orders based on basket size, contents, and distance to customers is critical to scaling fast and managing costs as you grow. In short—don’t try to change everything at once. Assess your digital maturity and add more sophisticated capabilities as your organization matures.

Online is the fastest-growing part of virtually every grocery organization today. It generates excitement, drives change, upskills the entire organization, and delivers satisfaction to customers and staff alike. But online grocery shopping is a long game, and we are just at the beginning. Market share grew from about 3% to more than 10%, and is forecast to surpass 20% by 2025. Instacart was a handy life-jacket during the COVID-19 storm. Now it’s time to learn how to swim. You don’t have to cut the cord overnight, but investment in the tools and capabilities of online grocery today will pay dividends in the years to come.

To learn more about the ThryveAI grocery digital commerce platform, contact us.