Whether it’s panic buying, stockpiling or simply a general surge in demand for groceries, the last fortnight has seen supermarkets struggling to keep the shelves stocked in stores and running out of delivery slots for online grocery shoppers.
Home delivery in particular seems to be completely maxed out, with grocers from Ocado to Sainsbury’s acknowledging that demand simply outstrips the volume of delivery slots they can provide. This means that whether grocers opt for something like Ocado’s centralised, highly-automated model or the pick-from-store model that currently operates in Sainbury’s, Tesco and Asda, there is only so much flexibility in the home delivery model.
In the short term, grocers are going to have to do their best to add more drivers, vans and general capacity whilst prioritising the elderly and vulnerable who are particularly reliant upon home deliveries. This will happen despite the fact that most home deliveries end up being unprofitable as already low margins on everyday grocery items are eroded by the additional cost of fulfilling orders.
The Click & Collect Plan
However, the big four grocers are now eager to drive more of their ecommerce volume towards Click & Collect fulfilment, because it has massive benefits in both the factors we just mentioned: capacity and profitability. Take Morrisons, which is now aiming to rapidly expand Click & Collect to 100 stores, having previously not offered Click & Collect at all. Today, it is live in 11 locations.
First and foremost, the cost of bringing a store-picked order to the car park is minimal compared to the cost of driving orders to doors. Interestingly, one of the big four grocers we spoke to say that customers using click & collect are actually their highest-value shoppers, thanks to the aforementioned lower fulfilment costs, higher average basket value and the range of products chosen. Click & Collect appears to have a combination of cost reduction and revenue growth benefits.
From a capacity perspective, the volume of customers who can drive to stores and collect orders is massively greater than the number of doors that delivery drivers can knock on in any given time period. If 50% of online grocery demand were routed through click & collect, home delivery slots would not be under anywhere near as much pressure. Of course, there may be other capacity bottlenecks around the pick from store operation and the general availability of stock, but right now supermarkets report their supply chains are in good shape to deal with the demand – however they will admit that their home delivery operations simply cannot keep up.
Click & Collect can also be offered as a self-served experience using autonomous locker banks. Staff load up orders into lockers and customers collect them from the car park. The main reason this hasn’t had more widespread adoption before is that grocery lockers need to be quite technologically advanced – with ambient, chilled and frozen sections. However, combine the above-mentioned benefits of click & collect with the fact that lockers maximise efficiency for store staff and provide an additional layer of protection to reduce the chances of infection, and you can see the potential.
Tesco boss Dave Lewis positioned shopping in-store or collections as a responsible move for young and healthy shoppers, saying Tesco is “at full capacity for the next few weeks and we ask those who are able to safely come to stores to do so… so that we can start to free up more slots for the more vulnerable”. Lockers may have a role to play in a world where we need to think about our shopping and delivery choices in terms of our wider social responsibilities.
Moving up the adoption curve
In the decade from 2009 to 2019, the percentage of us who shopped online for groceries increased from 15% to 30%. Doubling the user base in a decade certainly is nothing to be sniffed at but with just 7% of grocery sales happening online in 2018, the online grocery market remains in its infancy compared to the ~20% share ecommerce has in non-food sectors.
What happened in the last few weeks has probably pushed that percentage of ecommerce users significantly higher. As with general ecommerce adoption, once a customer starts buying groceries online they are likely to do so again in future. In essence, the pandemic has changed the long-term curve of adoption in a way that the industry simply has not experienced before. That means it is all the more essential for supermarkets and other grocers to find a way to serve this demand profitably and sustainably.
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