E-commerce grocery sales were modest and rising slowly as 2020 started. Once the pandemic forced lockdowns and restaurant closures across the United States, the story changed significantly. Consumers flocked online for essential purchases, adding $102.08 billion in revenue in 2020, and another $116.45 billion in 2021, according to Digital Commerce 360. Overall in 2021, consumers spent $870.78 billion online with U.S. merchants, up 14.2% from $762.68 billion in 2020, according to Digital Commerce 360. This was a 32.4% increase over 2019 — representing the highest annual online sales growth ever, the Commerce Department reported.
As we have all experienced, this growth has subsided from its peak numbers, but by no means has it returned to normal levels — i.e., pre-COVID levels. Grocery e-commerce sales are still over 230% higher on average, according to eGrowcery data, than they were when the pandemic began, clearly indicating that shopper behavior has changed — permanently.
Over the past two years, retailers have been introduced to a vast array of tools and services to help support this volume — ranging from marketplaces to quick-add software packages, to new but often disparate systems — the options can seem overwhelming.
To keep up with the still-hearty e-commerce growth and sort through the maze of solutions out there, grocery retailers must start with one simple question — where do you want your e-commerce business to be in the long run?
To help answer that question and keep up with this growth between now and then, grocers need to upgrade their e-commerce platforms — and functionality — with scalable and integrated solutions.
To prepare for the evolution and establish a path to where a retailer wants to be in the next decade, there are three natural questions supermarkets need to ask themselves:
• How well can existing e-commerce platforms handle any future surge in business?
• How can I ensure operational efficiency as order volume multiplies?
• How well can I prepare now to take on yet unknown technology developments and demand in the future?
These questions are critical. Traditional retailers’ e-commerce operations currently are not profitable due to the labor costs of selecting orders from store shelves and delivering orders, a situation that is clearly not sustainable without the right technology to reduce these burdens.
Handling Future Growth
Leading retailers started their e-commerce odyssey more than 20 years ago with a catalog approach — now they have slowly moved to emulate Amazon. They almost exclusively use their existing stores as fulfillment outlets to enhance convenience and get the product to the consumer as economically as possible. While automation is being deployed for prescription fulfillment in a limited number of markets by the biggest retailers, add-on merchandise is still selected at the stores.
However, this model doesn’t make financial sense and isn’t sustainable even in the midterm. Why? Consumers, both online and in-store — for delivery and pickup — want to get through their shopping lists ASAP. Retailers want to accommodate that wish while simultaneously creating an opportunity for curated upselling and cross-selling. The increase in online orders of fresh products, which is an example of the ever-changing consumer and their increasing expectations, can lead to shrink issues. And perhaps most importantly, retailers are far from consistently delivering “a perfect order.” In fact, substitution rates hover at 15%, according to several analysts.
Implementing technology and business solutions that scale with shopper demand and product supply is fundamental. Introducing new and readily available products, while serving the needs of preferred pantry products, is paramount. Any e-commerce experience must balance this for its shoppers, dramatically reduce out-of-stocks and scale efficiently to do so.
Ensuring Operational Efficiency
Amazon’s success in delivering exactly what the customer wants when they want it has raised the substitution accuracy bar for grocers. Walmart is also working aggressively to capture this share of wallet. And combined, both competitors are putting grocers on the hot seat to sharpen their in-stock inventory levels. Those that don’t will face a diminished share of wallet.
Retailers need to reduce the cost of online order fulfillment compared to manually picking click-and-collect or delivery orders from their own store shelves. This is even more crucial as online volume continues its growth.
Grocery retailers need a solution that’s not capital intensive and offers flexible options going forward. They need the ability to quickly grow capacity for online order volume, to meet consumer demand, and to move manual pickers off the store floor so they don’t interfere with the profitable self-service channel.
The solution must also enable retailers to fulfill from store shelves, warerooms, dark stores and central fulfillment centers. It must also support home delivery (route based or point to point); click-and-collect at stores and dark stores. And all functionality needs to be accomplished without causing any disruption to current operations. There is a lot here, to say the least!
A fully integrated e-commerce platform — one that is cloud based, scalable and cost effective — is required for this effort. This technology provides the tools needed to engage the shopper, take an order, fulfill that order for pickup or delivery, replenish stock, confirm receipt and interact with point of sale.
Implementing technology that passes data seamlessly and efficiently is important, but the mobile personal shopping technology must address shopper communication and integrate fully with a retailer’s register system as well. If a manual process is required to record even a small amount of information through a register, this must be addressed. Affordable technology exists today to eliminate these inefficiencies and must be explored and implemented as soon as possible.
Preparing for the Unknown
In-store shoppers can more easily create “a perfect order” since they typically select a similar product that meets their needs — and they do so personally. However, from an online perspective, supermarket retailers have their work cut out for them.
Shoppers want their orders exactly when and where it’s most convenient for them. Deploying an e-commerce platform that meets the changing behaviors of all customers starts with that notion. In addition, shoppers want as close to a perfect order as possible — without unauthorized substitutions.
Convenience also means mobile. Smartphones have trained shoppers to buy online, and retailers need to comply. A bad interface will lead to defections, and this will only be exacerbated by future technology developments.
The intended goal is to help all customers buy all desired products at all times while improving engagement during the shopping experience. This will help level the playing field with competitors, which aren’t slowing their innovations and are working diligently to capture market share.
The primary benefits for retailers deploying a comprehensive e-commerce platform include an immediate reduction in labor costs, rapid improvement in store operating efficiency, enhancements of loyalty and customer services, better allocation of shopper marketing resources, speed and velocity improvements, higher financial performance, and higher return on capital.
It is also critical for e-commerce platforms to be sustainable and flexible. This means being cloud based so updates and upgrades from vendors are instantly deployed.
The reality is that markets shift, new products are introduced and business models are changing continuously — remaining scalable with your technology and ensuring you have the ability to make changes quickly is paramount as you grow your e-commerce presence.
There is substantial competition from both traditional and digital-only retailers, and that isn’t expected to ease off anytime soon. As a result, it has never been more important to adopt a comprehensive, scalable e-commerce platform that will evolve now and for the years to come.
Patrick Hughes is chief executive officer of eGrowcery, a digital commerce platform designed for retailers of fast-moving consumer goods.
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