As Chief Product Officer at Orckestra, powered by mdf commerce, Frank Kouretas leads product strategy and product management, driving the next wave of commerce innovation and shopping experiences. Frank is passionate about building and marketing innovative technology products, and brings over 15 years of leadership experience in product development, product management and marketing. The views expressed here are those of the author.
At the height of the pandemic in 2020, e-commerce grocery sales rocketed, up 63.9% according to a report released by eMarketer. By 2025, eMarketer predicts that online sales will make up about 17% of all grocery sales. If you follow the trend line, we can expect the percentage of grocery customers relying exclusively on online ordering to increase significantly with more and more consumers inclined to try online purchasing at least once.
Grocery retailers already invest significant capital into building and operating their stores and in purchasing inventory to stock the shelves. This shift toward online grocery shopping has the potential to drastically impact their brick-and-mortar profitability. That trend, coupled with the impact of COVID-19 on supply chains, is providing the impetus for retailers to invest in emerging technologies that boost industry resilience and offer consumers more choice and flexibility.
In light of recent supply chain disruptions and labor shortages, grocery retailers are searching for more efficient ways of order fulfillment and delivery. The choice of new technologies and solutions depends on multiple factors including store surface areas, location, population density, order volume, maturity of tech stack, and staff proficiency. These are some of the most successful technology solutions.
Micro-fulfillment centers (MFCs)
MFCs are automated fulfillment centers placed within stores or warehouses to get closer to customers, reduce transportation costs, and shorten delivery times. They are a great way for businesses to reduce overhead while increasing the long-term profitability of stores.
Fulfillment, shipping and delivery are key battlegrounds for grocers looking to protect their customer base. Not long ago, 2-day shipping was considered a premium service in North America. Now it’s the industry standard. Grocers can leverage a micro-fulfillment strategy to make the process more efficient — from receiving the online order to packing it and in some cases offering last-mile delivery. This approach combines the speed of localized, in-store pick-up with the efficiency of large, automated warehouses.
MFCs placed within populated cities significantly reduce the distance between an order and a customer, which makes last-mile delivery faster and cheaper. Setting up micro-fulfillment centers involves using small, highly automated storage facilities located near the end customer to bring down the cost and time of delivering goods. MFCs can be standalone facilities or built into existing stores to service a cluster of locations. These centers have a relatively small footprint which saves on expensive real-estate space. Their compact and flexible designs make them perfect for the backs of existing supermarkets, or parking lots. Whereas, the conventional warehouse centers are bigger, and they tend to be located in the outskirts of populated areas to save real-estate costs. This makes transporting orders from the warehouse center to the customer more expensive and time-consuming.
Key benefits of MFCs include:
• Lower overhead costs
• Enhanced customer experience facilitated by speedy order fulfillment
• Faster last-mile delivery
• Easier expansion
• The ability to leverage localized data to stock more of what’s needed
• Highly compact designs, allowing retailers to hold more product volume per-square-foot than would likely be possible in a traditional warehouse or store
As with all new technology and solutions, there will be initial setup costs to factor in alongside time taken to train the associates. That said, if one wants to integrate MFCs into their existing setup, the best way would be to opt for a headless, API-based commerce platform that is capable of integrating with different MFC providers and is flexible, composable and can fit into the current tech stack. This allows a progressive evolution versus forcing one to re-platform.
Mobile Store Fulfillment and other Tech-Forward Solutions
A different approach is recommended for grocery stores with a sizable staff that have larger real estate footprints in less densely populated areas. The focus for these grocery businesses should be empowering store associates with technologies that help them pick and pack orders more efficiently to reduce costs, retain customers and boost profitability.
Available technology is able to prioritize new orders added in real-time, ranked by pickup and delivery times, time and date of pickup or delivery. It can also flag orders that are running late by sending automated emails to store managers. Other features include identifying optimal in-store picking routes listing every item in the precise picking order thanks to the planogram.
New digital solutions can support multiple-order wave picking so that associates can complete several smaller orders in just one pass through aisles. These solutions also cut down on picking errors, sounding alerts when the wrong product or quantity is scanned. This technology confirms successful scans, completed items and can notify the associate whenever a scanned item requires multiple quantities or there’s a special instruction from the customer.
Mobile store fulfillment solutions also make identifying substitution items a breeze. The technology integrates seamlessly with the point of sale as only items to be weighed or with special requirements are manually checked out, making sure customer preferences are transmitted to the store associates to avoid any inconvenience. It simplifies price reconciliation by sending the final order amount from the POS to the solutions provider’s cloud to finalize the order and charge the customer the correct amount. Most importantly, all of these solutions can run on ubiquitous devices such as smartphones and tablets, allowing retailers to meet their customers wherever they are.
Using any of these solutions presents businesses with a wide range of benefits such as a more compelling customer experience, improved employee performance, significant cost savings, and more efficient order fulfillment. However, labor shortages can become an issue if not properly managed given the associates or staff will have to be trained right. A commerce platform with strong expertise in grocery, consistent overall XP including website, delivery options, timeslot reservations, modern Product Information Management, Marketing Campaign etc. is the optimal solution.
In order for grocers to serve their customers best and maintain long-term profitability, they should look at a commerce tech stack that can support these technologies while ensuring scalability and various other needs as the market evolves.