How have grocery delivery services changed?
Grocery delivery covers the entire process of fulfilling orders purchased online or in store, and having these items delivered to them.
It’s a complicated process that takes into account a wide variety of factors from the checkout process (delivery vs. pickup, delivery windows, taking drivers and trucks into account to ensure accurate times, inventory in specific locations, etc.), to the order processing phase (who picks the orders off the shelves, where the packing and staging happens and when), to the actual delivery or pickup (having the proper fleet on hand, drivers, communication with customers regarding delays or changes, etc.).
Back in 2019, market penetration for grocery delivery was as low as 4.5% in the U.S., and still in single-digits in most countries. Many U.S. grocery companies provided these services solely through Instacart.
Until recently, most grocery chains did not have many options for grocery delivery, unless they wanted to invest significant time or resources into building or contracting other solutions. The investment in new technology to create a reliable delivery solution was simply too great for all but the largest grocery chains, especially as demand was relatively low. And since online sales were a relatively small percentage of overall sales, chains didn’t focus on developing a better solution that put their fulfillment services under their control.
COVID’s impact on grocery delivery services
COVID’s impact on grocery and online grocery delivery was immediate:
- eGrocery in the U.S. reached $9.3 billion in sales in January, according to one survey (Brick Meet Click / Mercatus).
- Approximately 35% of U.S. households now rely on eCommerce to purchase groceries. It is estimated that the pandemic accelerated the food sector’s reliance on eCommerce by 3-5 years in just a few months.
- Grocery delivery’s compound annual growth rate (CAGR) is now projected to grow by 29% from 2020 to 2024.
With online sales becoming an increasingly important revenue channel, chains that had limited grocery delivery services, or which relied on a single delivery provider, suddenly realized they needed to expand in quality and quantity: reach more customers, with more delivery services, with a greater number of fleets. As grocery delivery became a commodity overnight, focus grew on the quality of delivery: speed, convenience, product availability, safety, and costs.
With delivery volumes higher than ever, the challenges grow exponentially. Having to pick, stage and ship fresh produce and non perishables, refrigerated and frozen foods in all different shapes and volumes, while managing the exceptions that inevitably occur and maintaining, and doing all of this while meeting SLAs, is untenable using strategies and service standards from even a few years ago.
What do the best grocery delivery services offer?
Same-day vs. scheduled grocery delivery – Whereas the average grocery delivery service used to be next-day or later, a growing number of chains are looking to provide a same day delivery service, to better compete with the leading grocers. Convenience grocery in particular is cashing in on consumers’ interest in fast delivery for fresh goods. But without an automated delivery process, managing same-day and on-demand delivery can make it difficult to keep delivery costs down.
Visibility and Transparency – On top of the entire process is the issue of transparency: customers want to know where their order is, when it’s arriving, and even to see it making its way in the truck. This is especially important in the case of groceries because people are stressed to make sure that the order arrives on time so food doesn’t go bad or so they can make dinner as they planned.
A few main grocery platforms have taken control of a critical mass of the market, with Amazon, Walmart and Instacart leading the pack. Their success is due to their exceptional service and selection, together with the ability to provide attractive prices and competitive grocery delivery services. The challenge for grocers today will be to narrow the lead these companies have by expanding their use of independent external fleets, maintaining a direct relationship with shoppers, and enabling better speed, prices, and product availability.
Increasing accuracy, lowering dwell time and upping volume throughput are the key focuses for the majority of grocery retailers.
Nick Schurman, Senior Sales Director, Bringg