Grocers are far from consistently delivering “a perfect order,” as substitution rates of 15% or more are very common.
We all know the e-commerce growth stats from the pandemic. Consumers went online for extra purchases to the tune of an additional $105 billion revenue last year, resulting in $790 billion total sales, according to DigitalCommerce360. This was a 32.4% increase over 2019 and the highest annual online sales growth ever, the U.S. Commerce Department revealed.
Results from the first half of 2021 show a continuation of the trend across retail verticals. The U.S. Commerce Department reported online sales were up by more than one-third over last year.
With all this growth, there is a critical question to ask: “What’s next with e-commerce?
This important because it has been widely reported that traditional retailers’ e-commerce operations are breaking even or losing money due to labor costs— particularly when these activities are conducted by a third party.
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Major retailers started their e-commerce odyssey more than 20 years ago with a catalog approach — now they have slowly moved to emulate Amazon. They have most often used their existing stores as fulfillment outlets to enhance convenience and get the product to the consumer as economically possible.
Unfortunately, this model isn’t sustainable even in the mid-term because shoppers, both online and in-store— want to get through their lists ASAP. Retailers want to accommodate that wish while simultaneously creating an opportunity for curated upselling and cross-selling. They are also far from consistently delivering “a perfect order,” as substitution rates of 15% or more are very common.
In-store shoppers can more easily create “a perfect order” since they typically select a like product that meets their needs. However, Amazon’s success in delivering exactly what the customer wants when she wants it has raised the “perfect order” bar for all other retailers.
To gain profitability, retailers need to reduce the cost to fulfill online orders compared to manually picking click-and-collect or delivery orders from their own store shelves. They need a solution that’s not capital intensive and gives them as many options as possible 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 that meets the unique needs of the retailer includes fulfilling from store shelves, warerooms, dark stores and central fulfillment centers; home delivery (route based or point to point); click-and-collect at stores and dark stores. And this needs to be accomplished without causing any disruption to current operations.
A cloud-based, scalable and cost effective solutions provides all necessary tools needed to engage the shopper, take an order, fulfill that order for pickup or delivery from a retail location or dark store, replenish stock, confirm receipt, interact with payment systems and accommodate automated or manual processes along the way.
Overall, the system supports a performance-driven journey from retailers’ current situation to where they want to be in five years. This includes being a foundation as the company transitions from in-store manual picking to more productive alternatives like dark stores and using automation.
Deploying an e-commerce platform that meets the diverse and changing needs of all customers starts with convenience. Shoppers want to get their orders delivered — or pick them up — when and where they want them. In both cases, shoppers are demanding as close to a perfect order as possible — without unapproved substitutions.
Convenience also means mobile. Retailers need to base their offerings on the understanding that consumers are mobile-enabled — smartphones have trained shoppers to buy online. A bad interface leads to defections.
The intended goal is to help all customers buy all wanted products at all times while improving engagement during the shopping experience. It will help level the playing field with competitors, especially Amazon and Walmart.
[Related: Retaining the New Consumer Through the Power of Technology]
Retailers implementing a comprehensive e-commerce platform see immediate 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 also helps reduce labor costs.
Most importantly, a comprehensive e-commerce platform creates a sustainable business model for online fulfillment. It can manage all product ranges and scale to replicate the in-store experience online, which also reduces shrink levels. In fact, shrink in integrated environments is often less than 0.5%, making them 10 times more sustainable (and less costly) than most retail locations.
Deploying the most practical and cost-effective technology is always a goal for retailers. For retailers, the market’s tremendous competition and more digital-only competition expected in the future, it has never been more important to adopt a comprehensive e-commerce platform. A retailer that wants to be in business in 2030 needs to make decisions now to enable that.
Peter van Stolk is CEO of FoodX Technologies, an end-to-end e-grocery management solutions provider. He is also CEO of Freshlocal Solutions, Inc., which operates the SPUD.CA, Blush Lane and Be Fresh banners.