Jeff Baskin   |   January 13, 2024

5 Challenges for Grocery Retail eCommerce Fulfillment & How to Solve Them

eCommerce is a battleground in food retail

The grocery retail industry is undergoing a significant transformation driven by the rapid growth of e-commerce. As more and more consumers embrace the convenience of online grocery shopping, retailers are facing the challenge of optimizing their fulfillment processes to meet the increasing demand. This blog post delves into the current state of grocery retail e-commerce fulfillment, exploring the latest statistics, trends, and key factors to ensure you can win in 2024.

First, let’s look at the numbers. Covid is over but the increase in online ordering is not going anywhere. Online grocery sales are expected to reach $155 billion by 2025, representing 12% of total grocery spending in the United States. Grocery e-commerce penetration is expected to reach 15.4% in December 2023, up from 13.5% in 2022. (Insider Intelligence)

**The top categories for online grocery shopping during the holidays are expected to be:

  • Fresh produce (42%)
  • Meat and seafood (38%)
  • Dairy and eggs (36%)
  • Beverages (34%)
  • Bakery and prepared foods (32%)** (Insider Intelligence)

5 key factors that you must solve when driving a successful omni-channel grocery retail program

  • Substitutions: Substitution rates for online grocery orders are typically higher than in-store purchases, with an average of 5-10% of items being substituted. This is the #1 cause of customer angst and in-store associate friction.
  • Shrink: Shrink, or the loss of inventory, is a significant challenge for grocery retailers, with e-commerce orders being particularly susceptible to theft and damage.
  • Order Accuracy and Speed: Fill rate and order accuracy may be #1 on the list for customers. If you can get your customers everything they want in their order, customer satisfaction will be very high. It sounds simple but it can be quite complex. I don’t believe that the 15-minute order to delivery is the key to success however, being able to fulfill orders promptly allows you to add more overall orders to your fulfillment window times, meaning you can take more orders in any given day therefore increasing sales. Again, fulfillment is the key.
  • Fresh: 40% of online grocery orders include fresh products. This means fresh food items like fruits, vegetables, meat, seafood, and dairy make up about 40% of the total items purchased in these orders. As you see from the stats above that number is even higher during the holidays. Managing the fresh forecast, shrink, and production is crucial to ensuring online order availability and managing those items that are most important to online shoppers.
  • Customer Satisfaction: Execute all of the above and you will have a high CSAT score and not one that is just using online services. The increasing popularity of omnichannel shopping: Consumers are increasingly shopping across multiple channels, including online, in-store, and mobile. Grocery retailers need to have a seamless omnichannel experience in place to meet the needs of these shoppers.

Now that we know the key challenges how do we solve them? Building out a great front-end website and mobile app is crucial to the success of your online program. Online coupons, accepting EBT, loyalty, searchable product, recipes, etc. However, you can have the easiest and most robust ordering platform but if your fulfillment of that order is not best-in-class then your entire program will fail. Below are things you must consider when fulfilling online orders. Hint: It is NOT just having or creating a picking app to shop orders.

Solving for the 5 factors in omnichannel food retail

Order Management

Effective order management is crucial for ensuring a seamless e-commerce grocery shopping experience. Orders are coming in via your website, your mobile app, catering order entry, 3rd Party Marketplaces. It’s important to manage all of these orders through one fulfillment engine.

  • Creating rules engines to automatically configure orders and create labor efficiencies.
  • Combine order fulfillment for grocery, catering, fresh, MTO, and increase sales on departments that most retailers don’t currently offer online.
  • Utilize a central system for labor. Retailers need to have robust systems in place to manage orders from the point of placement to delivery. This includes processing payments, tracking inventory levels, and communicating with customers throughout the fulfillment process.
Labor Augmentation Capabilities

The best retail fulfillment solutions are run utilizing your own retailer labor. There is trust that is built between the customer and the store associate. They see them when shopping in-store and build trust and in some cases, a relationship is built. However, 3rd party labor is not the enemy. If utilized properly it can help with your own store’s labor efficiency and help drive sales in stores where labor is an issue.

  • Take advantage of integrations with Instacart, DoorDash, Uber, and other gig labor.
  • Utilize a rules orchestration engine so you control who is fulfilling your stores orders. Ideally, it is your stores own labor but for stores with lower order volume or orders coming in after-hours 3PL can make sense.
  • If your fulfillment engine is simple enough utilize your own labor from other departments to offset the lack of labor in eComm fulfillment.
Inventory Optimization

This is one of the toughest things for omni-channel retailers. However, understanding your perpetual inventory will significantly improve your eCommerce solution.

  • Connect PI directly into your front-end eCommerce site and remove out of stock items in real time.
  • Inject PI directly into your fulfillment engine so when your shopper is picking and the item is not on the shelf they will automatically have the intelligence on their handheld that that those items are in the back room or on a truck that will be here in an hour.
  • Integrating PI can help solve one of the largest issues we mentioned above. Substitutions. This can help reduce or completely get rid of substitutions altogether which eliminates customer friction and significantly enhances labor efficiency as subs are the most time-consuming that an in-store associate has to deal with.
Picking Applications

Picking applications are software tools that help retailers optimize the picking process. In its simplest forms these applications provide an optimized pick path for a speedier process. Having a picking application is ‘table stakes’ for any fulfillment program but in order to maximize labor efficiency and pick with speed and accuracy you need the following:

  • Real-time information on inventory levels, product locations, and order specifications.
  • Multi-order, multi-zone picking & Shared order “gang” picking
  • Multiple Pick Modes (Pick to Pack, Bulk Collect, Container Order Pick
  • Smart substitutions & Support for pre-selected customer substitution selections
  • Real-time customer communications
  • Support for Unit, Weighted and Catch Weight Item Types
  • Support for variable price/weight embedded UPC and EAN barcodes
Advanced Staging and Checkout Technology

Staging of orders is crucial to the speed of delivery. Grocery is complex in that you have frozen, refrigerated and ambient sections that need to be staged. The speed and ease with which an associate can handle this last foot fulfillment are crucial to labor efficiency and customer satisfaction.

  • Hub and Spoke model for parallel order allocation between sites.
  • Customizable store-level, pick density-optimized order batching rules.
  • Loss Prevention Tool – Audit process for own and 3rd party shoppers.
  • Virtual Integrated Checkout and POS Settlement
Delivery, Pick up, and Last Mile

Last-mile delivery is the final leg of the fulfillment journey, where orders are delivered to customers’ homes or picked up curbside. Most of Upshop’s retail partners are currently on average seeing 70% pickup vs 30% delivery.

  • Support for corporate fleet and third-party delivery models
  • Integration with major commercial delivery providers and aggregation platforms
  • Order visibility and delivery status updates through to-door side handoff
  • 3rd-Party initiated order delivery window updates.
  • Directed workflows for accurate order handoff.
  • SMS and geolocation-based arrival notifications for quick pickups through companies like Flybuy.

Ready to make your eCommerce grocery operation more successful?

The grocery retail e-commerce fulfillment landscape is constantly evolving, driven by changing consumer preferences, technological advancements, and competitive pressures. Retailers that can effectively manage their fulfillment processes will be well-positioned to capitalize on the growing online grocery market. Whether you’ve just launched a program and doing 5 orders a day per store or have an established solution doing hundreds of orders a day you need a robust fulfillment solution as mentioned above in order to have a great customer experience all while making your associates in the store efficient and happy.

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Jeff Baskin