Grocers are upping their digital game, and the trends in play now promise to become even bigger in the new year.
Not all that many generations ago, grocery shopping was an all-day, logistics-heavy affair that involved visits to several specialty merchants all over town. Consumers who needed meat went to a butcher; fish was sold by the fishmonger and bread by the baker.
The modern supermarket changed all of that. The combination of consumer packaged goods and a single place to buy all the food that went on a consumer’s table from one big store ushered in a huge innovation in consumer convenience, as well as expanding the selection of food that went on those tables.
“What drives grocery shopping today is what has been driving it for the last several decades. The idea of a supermarket was a convenience revolution when it first came out. They made it possible for groceries to be a single stop event — instead of a multiple shop pile-up,” Independent Grocers Alliance (IGA) President and CEO John Ross told Karen Webster for this week’s edition of the Monday Conversation.
But evolution didn’t stop with the opening of the first grocery store. Consumers are an ever-evolving group, and the emergence of the digital commerce age has undeniably changed the grocery landscape. A lot is going on in the space today, Ross noted. The number and types of merchants looking to get into the game have exploded — as of the end of 2019 eCommerce giants like Amazon, big-box players like Target and Walmart, the mainline grocery chains and dollar and discount merchants alike have all made moves big and small when it comes to grocery.
Delivery stands as a big area of innovation. And in this case, smaller can be better, it seems.
As grocers test out different approaches to get products to shoppers in a more efficient manner, food retailers are betting big on small warehouses to shore up their growing delivery operations. Walmart, Albertsons Cos. and other companies are creating small fulfillment centers close to locations already in existence and shoppers to fulfill eCommerce orders fast, The Wall Street Journal reported.
More supermarket companies are opting for this strategy over the bigger and remote distribution centers that the Peapod division of Koninklijke Ahold Delhaize NV and Kroger Co. are building to make deliveries over broader areas. The Jewel-Osco and Safeway chains owner is bringing on small fulfillment facilities at two stores in San Jose, Calif. and South San Francisco, Calif. with the help of Takeoff Technologies Inc. that creates automated warehouses.
Facilities that are called micro-fulfillment centers are often between 10,000 and 20,000 square feet and can fill roughly 4,000 orders weekly. The warehouses can be constructed in three months to half a year and attain profitability in a year.
Kroger, which is reportedly the country’s largest supermarket operator, is making larger distribution centers for delivery. It is reportedly betting that economies of scale will make the more significant investment valuable. Yael Cosset, chief digital officer, said per the report, “You control and you know exactly what’s in the facility.”
According to WSJ, food sellers were slower to embrace online shopping than other merchants since many of their shoppers still want to inspect items such as steaks and fruit before they make a purchase. However, online grocery shares jumped 15 percent in 2019 per a Brick Meets Click survey.
You can bet that more innovation will happen in this space in the coming year.