Fulfillment Prophecy
Progressive Grocer|December 2020
AS RETAILERS RING IN THE NEW YEAR, THEY’RE LASER-FOCUSED ON E-COMMERCE LOGISTICS.
Jenny McTaggart

Key Takeaways

Amid a global pandemic that led many shoppers to order groceries online, many leading grocery operators are ramping up e-commerce fulfillment strategies that were already underway but now seem more urgent than ever.

Expect to see more grocers tapping into the intelligence of technology companies, specifically regarding automation and artificial intelligence, while also rolling out more micro-fulfillment centers to get products to shoppers more quickly and efficiently.

Technologies such as robots and autonomous delivery via car or even drone are still being tweaked as e-commerce solutions, but should eventually be adopted more broadly by the grocery industry.

As the world ushers in 2021, hoping for brighter days ahead, many grocery retailers will be testing and rolling out new supplychain strategies and technologies to enhance their e-commerce fulfillment and logistics.

In 2020, the COVID-19 pandemic resulted in an unprecedented use of online ordering in the United States, and the trend is expected to continue into the new year — especially as the virus continues spreading throughout the country, making online ordering preferable to many shoppers. The e-commerce adoption numbers are astounding: The percentage of online sales skyrocketed from a humble 2%-3% of total grocery sales pre-pandemic to an eye-opening 10%-15% in the past year. A number of publicly traded companies have wowed investors with the double-digit growth in online sales that they’ve reported recently in quarterly earnings.

Not surprisingly, many leading grocery operators are ramping up e-commerce fulfillment strategies that were already underway but now seem more urgent than ever. Automated micro-fulfillment centers are one of the hottest trends, but a few grocers are also experimenting with robotics and drones in their warehouses, as well as automated delivery methods.

The Kroger Co., based in Cincinnati, may have gotten a head start in 2018, when it inked an exclusive partnership with U.K.-based online grocery powerhouse Ocado to enhance its e-commerce program, including online ordering, automated fulfillment and home delivery. Kroger plans to build up to 20 automated fulfillment centers over the next several years, and just last month, the retailer said that it will use Ocado’s software and other tech to boost in-store fulfillment of pickup orders, starting in 2021.

Meanwhile, Ocado is expanding its automation prowess with the recent acquisition of two robotics companies, Kindred Systems and Haddington Dynamics, which will enable Ocado to accelerate its picking and packing of groceries, since these futuristic robots can handle more fragile items.

Bentonville, Ark.-based Walmart, for its part, is moving along with its test of Alphabot, a technology exclusively designed by startup Alert Innovation, in North Billerica, Mass., to enable quicker, more efficient picking at store level for the retailer. Walmart said that it will assess a broader rollout as it learns more from testing at its Salem, N.H., Supercenter.

Ahold Delhaize, Albertsons and Wakefern, as well as several independent retailers, are working with Takeoff Technologies, based in Waltham, Mass., to automate e-commerce fulfillment.

Further, Ahold Delhaize revealed plans last month to acquire FreshDirect, the Bronx, N.Y.-based e-commerce operator that recently called micro fulfillment “central to its expansion strategy.” The deal supplements Ahold Delhaize’s Peapod e-commerce business, which now serves as an operational arm for the Zaandam, Netherlands-based multinational grocer.

In 2021 and beyond, expect to see more grocers tapping into the intelligence of technology companies, specifically regarding automation and artificial intelligence, while also rolling out more micro-fulfillment centers in an effort to get products to shoppers more quickly and efficiently — whether those shoppers want their groceries delivered at home or can pick them up at their local store.

According to Jordan K. Speer, research manager, global supply chain at IDC, a global market intelligence firm based in Framingham, Mass., new research from her firm suggests that increases in curbside pickup and BOPIS (buy online, pick up in-store) will persist, and that on-site or nearby microfulfillment centers will proliferate to alleviate pressure from stores and to make sure that inventory is available.

“In our 2021 FutureScape, we predict that by 2023, 75% of grocery e-commerce orders — which will represent 15% of sales — will be picked curbside or in-store, driving a 35% increase in investment in on-site or micro-fulfillment centers,” notes Speer.

Contactless Pickup Gaining Ground

In September, IDC conducted consumer research showing that shoppers are warming up to in-store or curbside pickup, observes Speer. “Almost 45% of shoppers say they have started ordering groceries online since the pandemic, and more than 26% are picking up in the store,” she says. “Furthermore, almost 32% expect to continue their new COVID-induced habits even after the pandemic is long gone.”

The findings indicate that these low- or no-contact offerings make some consumers feel safer during the pandemic, she notes, adding, “This research really says a lot about customer expectations and fulfillment demands, and what retailers are going to need to do to respond to that.”

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