Delivery Wars: How the Last Mile is Affecting eGrocery
In case you've missed it, this Spring has seen a neck-and-neck race between the giants of eCommerce as they offer faster and faster deliveries on your online orders – which leaves the small and mid-sized grocers wondering, is same-day delivery the future of eGrocery?
Here's a quick recap of the Digital Delivery Wars: in April, Amazon announced plans to offer free same-day shipping to Prime members. In May, Walmart launched its next-day delivery service of about 200,000 items in four U.S. cities. In June, Amazon expanded its same-day delivery services in the U.K.; meanwhile, Walmart unveiled Delivery Unlimited, their version of Amazon Prime, offering free next-day shipping on all products for a yearly fee of $98. They then opened up to a wider audience by accepting SNAP benefits for all online orders at about 2,500 locations.
Not to be outdone, Kroger also launched its own version: Kroger Ship, which claims it will deliver in as little as one hour in some locations. Around the same time, Target opened its digital doors to same-day delivery via their partner Shipt (though, notably, it's not free).
Such frenzied progress may cause alarm to smaller scale and independent grocers. How can businesses who lack the capital to undertake such an investment – like the $800 million Amazon spent to offer free one-day shipping – hope to compete?
Let's take a look at the impact the delivery race is having on the grocery world, and what grocers can do to keep – and yes, grow – their market share.
The Impact on Grocery
Digital grocery is slowly, but steadily, changing consumer habits. What was once new and unusual is now common: ordering groceries and meals online, click-and-collect (buying online and picking up in-store), and contactless payment, for example. Fast, efficient home delivery is no exception. According to a recent study from Capgemini Research Institute, about 75% of shoppers will choose retailers who deliver the fastest and most reliable last-mile service; 40% believe delivery is a necessary feature from grocers.
But as most grocers know, the last mile is the most expensive and challenging link in the supply chain, and shrinking the delivery window only compounds the difficulty. On top of that, shoppers don't want to cover the cost of grocery delivery, which means that burden falls on the grocer.
Unfortunately, because of the barriers that stand in the way of the last mile, many grocers are rushing the process. In an attempt to compete, they're not making strategic decisions or investments. They're outsourcing their brand to the wrong eCommerce partner, which might provide a quick short-term fix but causes grave problems long-term. According to DigitalCommerce 360, 97% of industry executives believe current models for grocery last-mile services are unsustainable because of the high cost.
What all that means is this: there's a right way and a wrong way to offer grocery home delivery. Here are some recommendations for how your business can make the right call:
Find an eCommerce partner who will support and guide your business, not eclipse it with their own. Yes, this means outsource, but not to just anyone. Make sure your provider focuses on promoting your brand while providing top-of-the-line, end-to-end software services. A strong partner will also help you navigate the path toward a seamless omnichannel business, offering features designed to work with your business instead of just taking a cookie-cutter approach. (For more on how to find the right provider for your business, click here.)
Automate as much of the supply chain as possible. This includes warehouse operations, processing and fulfillment of online orders for click-and-collect and delivery, and in some cases, autonomous delivery vehicles. While robotic fulfillment is still in the distant future for most grocers, emerging technology is making it easier and more affordable to integrate some degree of automation, which saves you money while allowing your business to scale.
Consider what's right for your specific brand and target audience – even if it's bucking a trend. If you're feeling caught up in the race to deliver, consider this: Trader Joe's, named 2019's "America's favorite grocery store" by Retailer Preference Index, isn't trying to beat Walmart to anyone's doorstep. In fact, they've pulled out entirely. After offering grocery delivery in New York City for a decade, the small-format grocer ended the service in March 2019, citing high costs. Trader Joe's gained massive popularity for its quality private-label brands, low prices, and unique store experience – and now, they're banking on those things to keep their customers loyal, proving that home delivery isn't the only feature shoppers want.
Consumers today are intelligent and picky, and they want more than just convenience. They want local, fresh food from transparent, trustworthy brands. They want a personal experience that gives them a choice of how, what, and where they buy. In these areas, your business has an advantage over the giants of retail. Your brick-and-mortar store offers customers an experience they can't get at big box stores – so use that to your advantage. For example, you might increase your community involvement and local product selection, and then market that accordingly – thus ensuring your brand will stand out against Walmart and Amazon.
Before you join the race to same-day delivery, consider what your business and your customers need.
When you provide an intuitive, user-friendly experience tailored to your audience, you can grow your customer base, increase loyalty, and raise your bottom line. To do this, look for an intelligent third-party partner who can offer both the technology and expertise to help you avoid the pitfalls of the last mile, and create an omnichannel experience for your shoppers that will keep them coming back for more. To learn how locai can help your business do that, visit us here.