How Grocers Can Achieve Profit on Online Orders

Future looks bright, thanks to smart containerization
Steve Hornyak
Chief Commercial Officer, BrightDrop
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A multimodal approach that includes electric vehicles and smaller micro-mobility transportation modes can provide temperature management only for the products that need it while bringing groceries closer to the end consumer.

The rise of online shopping brought on by the Amazon effect and exacerbated by the pandemic has dramatically shifted consumer purchase behavior and expectations, leaving businesses scrambling. 

From toothpaste to tomatoes, consumers now rely on the at-your-fingertips convenience of ordering online more than ever before. By 2026, the e-commerce market expects to total more than $8 trillion, and 24% of all retail purchases are expected to take place online. On top of that, consumers want – and expect – same-day or next-day home delivery or curbside pickup of their orders, sometimes within hours, and without paying a premium for it.

[Read more: "Younger Shoppers Opening Up Omnichannel Experimentation"]

How are grocery stores managing this chaos? The short answer: in-store picking processes with a focus on timely customer order fulfillment. The problem? It’s labor- and time-intensive. 

What Works Today Isn’t the Solve for Tomorrow

Walk into any brick-and-mortar supermarket or grocery store, and it’s a similar scenario: a temporary staging area near the entrance full of storage bins, each with handwritten labels taped to the outside and spilling over with goods. Not only is it an eyesore for customers, but these painstaking inefficiencies can lead to massive profit loss and high employee turnover for the grocer. 

There’s no denying the consequences that the pandemic had on industries all over the world. In many cases, those impacts are still felt more than three years later. But there’s a silver lining: The pandemic forced companies large and small to pivot from outdated operations and rethink cumbersome processes altogether. In the grocery industry, it was the catalyst of a much-needed reinvention of the way shoppers can buy from and engage with grocers – and according to analysts, many of those changes are here to stay. 

Take curbside pickup or third-party delivery services, for example. The pandemic normalized these trends in an effort to minimize face-to-face interactions and enhance social distancing while still getting people the goods they needed when they needed them. Sixty-nine percent of grocery store operators expect to continue offering curbside pickup, while 59% anticipate third-party delivery to be permanent. 

While last-mile grocery delivery to your doorstep will always exist, however, today’s approach – add-on solutions to provide temperature control to half the vehicle, regardless of whether there are groceries in it – is an antiquated solution. 

Today, as groceries are delivered from door to door, the vehicle continues actively cooling even though the amount of product that needs to be chilled decreases with each drop-off. This inefficient use of temperature control is unnecessarily draining power from the vehicle. In the case of diesel vehicles, it’s increasing fuel consumption. In the case of EVs, it’s diminishing the range. It’s a lose-lose situation. 

The bottom line: Grocers are losing money from online orders in part due to the operational inefficiencies of these temporary bolt-on solutions. Some are struggling to keep up with demand or keep enough labor on staff, and the cost of order fulfillment is high. There are smarter ways to do it while meeting that customer demand, however. 

Reimagining the Future of Grocery Fulfillment

The future of grocery delivery isn’t simply a 1:1 conversion from an internal combustion engine (ICE) vehicle fleet to an all-electric fleet. However, as companies are already looking to retire their ICE vehicles and transition to EVs in support of their corporate sustainability goals, now is the perfect time to rethink the entire approach to temperature-controlled last-mile delivery.

As an industry, we have to find ways to reduce touchpoints and create efficiencies in the movement and pickup of goods, or it’ll never be a profitable business model. One solution is smart containerization. 

Consider this: Just because a fleet may have 100 vehicles today doesn’t mean it needs 100 vehicles in the future. Instead, a multimodal approach that includes electric vehicles and smaller micro-mobility transportation modes like e-bikes/trikes, e-scooters and e-carts can provide temperature management only for the products that need it while bringing groceries closer to the end consumer. Ultimately, it can eliminate the need to use fuel or range from a vehicle for unnecessary active cooling and enable quicker and more efficient deliveries. 

Smart containerization can also be applied to the “buy online, pick up in-store” shopping scenario as well, with its own unique set of nuances. New temperature-managed solutions can enable grocers to streamline the massive uptick in online orders they must process while giving shoppers the autonomy and convenience of online grocery order self-pickup. 

Fortunately, grocers know something more must be done. According to a recent study, more than half of supermarket operators expect that implementing new technology in their operations will be a top priority in the next six to 12 months.

The future of online grocery fulfillment and delivery/pickup will look vastly different from how it does today. There’s a perfect storm brewing – skyrocketing demand, labor constraints and the high cost of fulfillment – and it’s paving the way for grocers to rethink their operations and deploy a holistic approach, one that’s smarter, more sustainable and better for the bottom line. 

About the Author

Steve Hornyak

Steve Hornyak

Steve Hornyak is chief commercial officer for Palo Alto, Calif.-based BrightDrop, responsible for developing the company’s sales, marketing, business development, customer, success and professional services strategy and execution globally. Hornyak has been involved in the software/SAAS, retail/CPG, micro fulfillment/robotics and last-mile e-commerce technology business sectors for the past 30 years.

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