By Michael Schedlbauer, Industry Manager Grocery TGW: The growth in online grocery orders – whether for delivery or pick-up – is undeniable. The COVID-19 crisis prompted many consumers to make this switch. In the meantime, they appreciate the gains in convenience and timesaving, and they will be continuing to shop that way.
Grocery retailers are challenged with building flexibility into their supply chains to meet these new demands. More and more retailers are therefore adopting omnichannel solutions. The combination of the strengths of bricks-and-mortar retailing with the advantages of e-commerce to create a seamless omnichannel offering will ensure a retailer is successful in the long term.
We will see a growing amount of automation, both in remote fulfilment centres and at hybrid facilities where consumers can both shop in person and have their orders picked and packed.
Combining In-store and online
It is possible that in the future, all or most grocery shopping could be done online, with customers served from remote fulfilment centres. But even if it were possible, it is not desirable. Grocery shopping has a uniquely high rate of spontaneous buying. Research shows that up to 20% of the average household’s grocery bill comes from items that were purchased on impulse. Although impulse purchases do also happen online, they are far more likely to happen in-store.
So why not separate the grocery items that can be picked by robots and the ones that consumers like to browse and choose? TGW’s solution is a smart combination of online shopping and in-store browsing, powered by automation — called “OmniStore.” It is a hybrid retail location with a convenience store where customers can pick fresh produce and items that tend to attract impulse buying while the rest of their cart is being picked in a backroom by robots. The groceries gathered via automation are married with the consumer’s in-store purchases at checkout to be taken home or delivered.
On the retailer side, the costs of order fulfilment go down, without the loss of those additional revenues from spontaneous purchases in-store. It’s the perfect combination of efficient online grocery fulfilment and rich in-store experience.
Standalone distribution centres
In this new universe of omnichannel grocery fulfilment, we see a strong demand for standalone fulfilment centres, often intelligently located near dense areas of population and perfect for next-day deliveries. There’s no “one-size-fits-all answer” when choosing the right solution. That’s why retailers need to carefully determine what fits best, based on population density, order lead times and, perhaps most importantly, customer expectations about the length of time before an order gets to them. The determining factors are different for each and every retailer. Some need to focus on keeping costs down in order to address the value-focused customer, while others are serving highly convenience-focused customers. Micro fulfilment centres can be standalone or can be big enough to supply orders for other stores, in a hub-and-spoke model. This offers the advantage of a larger micro fulfilment centre, which increases the efficiency in picking.
Making Omnichannel possible
In today’s grocery supply chain, automation is inevitable. Automated grocery systems are estimated to pick and pack orders as much as ten times faster than a human, and with fewer errors.
Automation requires substantial capital investments that pay off only after a longer period of time — typically five years or more. Retailers tend to look for ROI between two and three years, and habitually focus on results over the next few quarters. What’s needed is a shift in mentality at management levels to accept longer ROIs, in order to make operations future proof.
As the frequency of online shopping continues to grow, retailers need to think about how to ensure that customers who are now buying online, stay online, while keeping fulfilment costs down. To enable success, it’s time to use the benefits of automation to offer consumers more choice.
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