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The Next Evolution of E-Commerce

These are the capabilities that savvy grocers will need to harness in 2023 to keep their operations relevant and profitable
"Ultrafast" delivery platform Getir recently acquired fellow q-commerce player Gorillas, signaling greater consolidation in the instant-needs sector.

It’s no surprise that use of grocery e-commerce boomed during the pandemic years, when shoppers ventured out only on an as-needed basis, but now that COVID-inspired restrictions have eased, many consumers still expect the greater choice and flexibility that purchasing groceries online can offer them — even if they do most of their shopping in brick-and-mortar stores.

That being the case, grocers are under pressure to provide e-commerce programs, but the profitability of such initiatives continues to be a concern. How, then, can food retailers maintain and grow their online businesses in accordance with consumer needs while managing costs?

“To reach profitability, a certain level of scale is necessary,” replies Langston Dugger, U.S. director of operations at Getir, the Istanbul-based “ultrafast” delivery platform that made headlines late last year when it acquired fellow q-commerce player Gorillas. “In the near future, you are likely to see more product selection, more fine-tuning of delivery modes and more innovation when it comes to technology.”

Technological Advancements

Indeed, emerging tech solutions have the potential to streamline e-commerce operations like never before.

“Innovation will continue to drive new efficiencies, enabling retailers to offer faster and cheaper propositions with more competitive unit economics,” notes Jonathan Morav, head of product strategy at Tel Aviv-based scalable commerce software company Fabric. “The U.S. is expected to see [a] 19.5% [compound annual growth rate] in same-day delivery between 2020 and 2027. In order to do this efficiently with cost-effective unit economics, brands, retailers and logistics service providers need to get closer to their customers with smaller-footprint warehouses that use micro-fulfillment center automation ensuring high throughput per square foot.”

According to Rina Hurst, chief business officer at Birmingham, Ala.-based grocery delivery company Shipt: “First and foremost, e-commerce will continue to mature and advance technologically, which will offer more growth opportunities for grocers. We’re already seen this taking shape in the way that third-party delivery services leverage scale across a market to keep costs for partners low, and how these services flex their business models to prepare for peaks in retail demand.”

Ariella Azogui, co-founder of New York-based delivery solutions provider Dutch-X, cites investments in such areas as micro-fulfillment centers, autonomous vehicles with precise delivery slots, tech-enabled logistics optimization, and data, analytics and IT infrastructure as key to profitable e-commerce growth, as well as teaming up with third parties and deploying different delivery models to stand apart from the competition.

“Retailers that take decisive action and make strategic investments today will be well positioned to carve out a profitable position for the future,” counsels Azogui. “Efficiency, speed, demand aggregation and possible collaboration of players in the industry will drive volume, which will drive profitability.”

Shipt Teaser
Shipt is a third-party delivery service that leverages scale across a market to keep costs low for its retail partners.

This Time, It’s Personalized

For Carl Turner, CEO and founder of Winston-Salem, N.C.-based Swipeby, a turnkey platform offering online ordering, pickup, delivery and customizable geofenced arrival notifications, “the move to own the branded shopping and fulfillment experience” is nothing less than “the next step in the grocery evolution.”

Explains Turner: “Delivering standout experience depends on collecting the right data and using it to build strategies to better serve customers. The solution involves ownership of the data and ownership of the experience so that grocers can develop marketing and fulfillment strategies that involve personalized messaging and rewards to build loyalty that are based upon the insights and opportunities that this ownership provides.”

Indeed, the opportunities offered by personalization are uppermost in the minds of many e-commerce players.

“Customers want grocers to provide the same convenience and personalization they’ve come to know from shopping online,” points out Camille van Horne, director of fulfillment product at San Francisco-based online grocery provider Instacart. “Grocers who are the most successful will be the ones bridging their in-store and online experience, creating a holistic omnichannel approach.”

“Hearing retailers talk a lot … beyond the bread and butter of driving sales, increasing profits and streamlining operations,” Christian Freese, head of U.S and Canada, grocery and new verticals at San Francisco-based transportation company Uber, notes that at the top of their lists “are the personalization and curation of the online shopping experience for groceries.”

Freese adds that the retailers he’s spoken to are also interested in “unlocking new retail categories within ‘grocery’ — for example, you’ve got a local florist, a local baker and a local pharmacy within every major grocery store — as well as bundling together items from multiple stores into a single order for delivery. These are tech challenges and real-world retail challenges, and we’re looking into digging into them with our partners.”

Ultimately, however, retailers must bring their unique identities to their e-grocery operations.

“Grocers need to bring the expected in-person brand experience to consumers in the digital world,” urges Turner. “At Publix, shopping needs to be ‘a pleasure’ online, and Kroger needs to deliver ‘fresh’ click-and-collect orders to continue fostering the same customer relationship and loyalty they have at the person-to-person level.”

Scalable commerce software company Fabric believes that brands, retailers and service providers need to get closer to their customers with smaller-footprint warehouses using micro-fulfillment center automation.

What’s In Stock?

Grocers must also make sure that they have enough of the products that customers want.

“Given that supply chain challenges and item shortages look set to continue well into the future, I believe that one the surest steps any retailer can make towards achieving e-commerce profitability is by focusing on a problem that is fundamental to profitability across all channels — ensuring accurate, forward-looking perpetual inventory visibility and on-hand availability by implementing smart computer automated replenishment-ordering solutions across all categories in the store,” advises Steve Paro, chief product officer at Tampa, Fla.-based Upshop, which offers a “total store operations platform” encompassing fresh, center, e-commerce and direct store delivery solutions. “Ensuring appropriate levels on on-hand quantity has a direct line towards sales and waste numbers.”

Greg Wilson, VP field strategy at Helsinki-based Relex Solutions, a provider of supply chain and retail planning solutions, agrees, stressing that it’s “important for retailers to collaborate with growers and suppliers to protect and maintain availability.

Communicating needs far enough in advance can influence the production and growth of a product in demand. It all comes back to the trust between retailers and suppliers.” According to Wilson, solutions using artificial intelligence and machine learning can “give us a better view of what’s likely to happen and to better track things such as waste reduction,” but he cautions against “applying the [technologies] to areas where they won’t drive actual benefit.”

All of the above items are important for food retailers to bear in mind as they navigate the ever-changing world of e-commerce, which companies must leverage if they don’t want to be left behind.

“Despite the substantial growth of online grocery and the increased number of players, the market truly is on the verge of its next transformation,” observes Dutch-X’s Azogui. “The leaders of today are not guaranteed to be winners tomorrow.” 

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