A key challenge with micro-fulfillment is selecting the right software
There’s certainly a lot to think about when entering the eGrocery market. A key challenge is in selecting the right software platform and the right project team. Very few eCommerce solution platforms are available for eGrocery stores with functionality to support fresh food items, rich product attributes, temperature restricted products, fragile items, age restricted items, replacement products and weighted items.
If you’ve been to a supermarket or have ordered from one over the last few weeks, you’ll have seen first-hand the impact coronavirus is having on the grocery industry.
In times of crisis, people typically turn to essential items and necessities, hence the surge in demand for food and groceries. Figures across the world tend to follow the same pattern of upward growth. Over the course of one month, France has seen supermarket sales rise 34%, Hungary’s total grocery turnover has increased from 39.4 billion forints to 56.9 billion forints, Brazil has seen a 96% rise in new online grocery shoppers and weekly year-over-year grocery sales growth in the US has risen dramatically in the last 2 weeks.
But while demand is high, there’s the added issue of self-isolation. Not everyone can or wants to go to a physical supermarket in the current crisis. And this has led to an explosion in online grocery sales with consumers staying home. In order to meet this demand, the pressure is most definitely on grocery merchants to either introduce a grocery eCommerce website, or scale up their existing grocery eCommerce infrastructure to deal with this massive increase in online orders.
In this article, we’ll be looking at some key challenges, lessons and grocery eCommerce trends that merchants need to keep in mind. With this knowledge, you’ll be equipped to overcome some key grocery eCommerce challenges for long-term business success.
GROCERY ECOMMERCE
Although grocery stores typically stock a wide range of products, food dominates—and this brings with it a specific set of requirements. Food products are sold via a range of different options. Some are sold by weight rather than by piece and their perishable nature dictates unique storage conditions across the supply chain. But the challenges don’t end there. As we’ll see, merchants need to navigate optimal pick & pack processes, refunds, replacement products and deliveries, to name but a few. Each one of these steps holds its own set of challenges which must be overcome if you’re able to offer your customer the experience they demand.
Let’s take a closer look at each:
BUSINESS MODEL
Grocery retail companies often have a business model with a mix of corporate, franchise and independent stores under same retail banner. This adds many facets of complexity when launching an eGrocery solution with in-store picking due to local variations in product assortments, sales prices and promotions.
Grocery retail has a long history of loyalty programmes with bonus points, earn & burn, personal offers etc. Consumers expect the same loyalty features when shopping online. Consumers also expect to get suggestions on “my usuals”, relevant recommendations and recently purchased products based on historical online and in-store purchases.
Low profitability is historically common for pure players and traditional grocery retailers that start with in-store picking. Research shows that home delivery and in-store picking are the main cost drivers but also offer the biggest potential for increased efficiency.
PRODUCTS
Certain products need to be stored under appropriate conditions until handed over to your customer. For example, there may be regulations around storage temperatures or the recipient must be 18 years or older, which needs to be validated at delivery.
Retailers that sell fresh, produced and food to go products that are manually packed in store adds further complexity with more product attributes, expiry dates and minimum order quantities.
Perishable groceries are often ordered by weight and there are a variety of methods to present, buy and pick them. It’s impossible to pick the exact weight of a watermelon for example. A variation in weight requires the card amount pre-authorisation to reflect the allowed variation and the total price still needs to be recalculated based on the delivered weight, which can get complex with thousands of orders.
A grocery store may just have food and beverage products, but what then if you add in a range of non-food items? And what if we then include clothing, electronics and DIY? As in many industries, there are a handful of products that generate the bulk of sales and then there are long-tail products which are rarely sold, but that make a significant contribution to profit.
STOCK
Food products don’t just have a limited shelf life, they have a high turnover. Plus warehouse and store area capacity is limited. Therefore, frequent replenishment is needed but supplies are not necessarily 100% guaranteed. For eGrocery with in-store picking there will be customers walking around in the store with some of the stock in their shopping baskets. That is why the IT system's given stock level is never completely accurate, which adds complexity.
In 'normal' eCommerce scenarios, you want your order to be picked, packed, and shipped as soon as possible. But for eGroceries, it’s the other way around—the order is picked as late as possible, just before store pick-up time or time of departure for home delivery. The time between the order placed and order shipped, might be days. So when an order is received, it’s practically impossible to know the product stock at the time of picking.
STORAGE CONDITIONS
In line with regulations, food products need to be kept in specific conditions until handed over to a customer. Food products must also have no contact with household chemicals. As such, grocery stores must have complete control over the supply chain—from receiving a product at the warehouse or store, to final delivery.
The key challenge with storage, then, is that certain conditions must be met during each phase (picking, packing, delivery, transit) and for different product types (frozen, cool, alcohol, chemicals).
In high volume in-store eGrocery, it's important to manage storage efficiency in buffer storage areas before route departure or pick up.
With self-service 24/7 grocery lockers with temperature zones, there are even stricter requirements to secure freshness until custom pick up.
SERVICE AREA
Ordered something online recently? Chances are that at least one of your purchases has come from another country. Ecommerce has no international boundaries. But eGroceries? Not only are eGroceries limited to one country, but the service area is likely to be geographically limited depending on the fulfilment centre’’s location and the product assortment sold. You can set up multiple service centres to extend your reach, but there will always be blind spots. In our experience, optimising your service area is one of the keys to a successful online grocery business.
TIME SLOTS & DELIVERY
Unlike the delivery of say, a book, your shopping delivery can’t a) fit through a letterbox or b) be left alone for hours on end after delivery. Managing available order delivery times helps you to organise your processes, balance the workload (order load) and provide the best service to your customers.
Integration with best-of-breed software for optimisation of delivery and courier administration is an important factor in increasing efficiency and profitability for eGrocery when order volumes go up.
PICK & PACK
Grocery orders typically have many products in them with products spread across large areas. The picking process is both time-consuming and time-critical. And during the picking process, various decisions need to be made: the weight of products, products requiring special treatment, replacement products, cancellation of products and the need to communicate with the customer in certain cases.
WHICH PRODUCT?
Let’s take the case of bananas. A merchant may have available to them bananas at different stages of ripeness. Let’s assume they then receive a large order of bananas. Which ones should be picked? If for a family of four’s longer-term consumption, then the expectation might be partly ripe yellow bananas and partly less ripe greener bananas. But what if the same order is made for a conference, where attendees will consume these all at the same time for breakfast? As a merchant, you need a way to anticipate these types of preferences.
PRICE RECALCULATIONS, REPLACEMENTS AND REFUNDS
If you’ve ever ordered groceries online, it’s likely that at some point, you received a substitute product. You ordered milk Brand A, but it wasn’t available, so you got milk Brand B instead. If this is the case, then merchants must consider the associated price difference—if the replacement product costs less, you’ll need to refund, but if it’s more expensive, you’ll need to discount the product to match the paid price.
USER EXPERIENCE
Another characteristic unique to eGroceries is the sheer variance in product type. And when shopping online, this means that merchants need to pay particular attention to the user experience to ensure that customers aren’t having to flick between categories and tabs over and over just to find their usual products. Customers expect the same seamless experience they receive from any other eCommerce store—the bar has been set high. So merchants must meet this expectation through more intuitive navigation and features such as ‘favourite products’, ‘suggested products’ or ‘saved shopping list.’’
Many consumers require further product filtering to avoid specific allergens, carbohydrate, fat, sugar, vegan, eco-friendly etc. The list of product characteristics filtering is long and it will continue to grow.
As we’ve shown, there’s certainly a lot to think about when entering the eGrocery market. A key challenge is in selecting the right software platform and the right project team. Very few eCommerce solution platforms are available for eGrocery stores with functionality to support fresh food items, rich product attributes, temperature restricted products, fragile items, age restricted items, replacement products and weighted items.
But with the help of our teams, our clients have been able to overcome these challenges. As an example, let’s check on our client, Selver, to see how it’s adjusted its business model and eCommerce capacity with Vaimo’s help to match the increase in demand:
Increased server performance to cope with the new online traffic, plus capacity to deal with the increase in average order volumes (3-4 times more goods are being purchased with every single order compared to before the crisis)
An extension in its delivery window from one week to 10 days
A new partnership with Bolt Food to increase delivery volume and reach more customers
Ongoing work with Vaimo to scale up existing infrastructure to handle the increase in orders and provide for its customers.
With so many changes taking place at the moment—not just in online groceries but for retail in general—the importance of a scalable eCommerce/UX solution is evident. Businesses are having to respond at speed to changing market conditions, but to do so they must have robust eCommerce solutions that can quickly facilitate new features and technology. it’s clear that flexible and scalable eCommerce solutions will be best placed to respond to their customers.
