Making grocery delivery work

Despite growth in grocery deliveries due to the pandemic, grocers are not necessarily making higher profits. Answer? Operational efficiencies.

Oliver Guy Oliver Guy

Despite dramatic growth in grocery deliveries due to the pandemic, grocers are not necessarily making higher profits.

Thus, the current situation has brought a much stronger focus on operational efficiencies.

Covid-19 upended the way consumers shop for everything – especially groceries. Last year, delivery represented 3% of US grocery sales but, in the last months, statistics show that 9% of US grocery sales are now via delivery. Growth looks set to continue strengthening, as many people hesitate to return to shopping in crowded stores.

The rapid acceleration of grocery delivery demand has caused major delays, sold-out items, and operational glitches – mostly stemming from siloed technology. An actual store visit fails to offer much of a solution, with sold-out inventory and cashier-less checkout make it almost impossible to find anything (remaining a safe distance from other shoppers is also a concern!).

You might think that sales increases would mean higher profits, but while demand and top line sales have risen for grocery retailers, low-margin products and additional costs associated with hiring more delivery staff have eaten into profits.

A need for operational efficiency improvement in grocers isn’t new, but the pandemic has certainly brought a much stronger focus. In fact, there’s the possibility that – by applying the latest technology in-store – grocers could double store profitability. When it comes to delivery, reducing costs can make it just as profitable as in-store operations.

Addressing these challenges to drive operational efficiency requires becoming a truly connected retailer. Below are three ways to move forward to a more connected, efficient and safe grocery experience:

    • Liberate data. It is widely acknowledged that attaining value from data will be the winning strategy for all businesses during this decade. Retailers, like other businesses, have multiple silos of data from customers, products, and inventories. Multiple perspectives are confusing and limit efficiency; they must be connected, aligned and made available in real-time regardless of the data’s location. Aligning and connecting across silos in this way liberates the data and allows for improved process flow and decision-making.
    • Operationalize. Liberating your data enables you to drive operational efficiency. Real-time access to data can paint a picture of what is happening right now, giving actionable insight and the ability to automate decision-making – responding to issues and opportunities. Combining real-time data from stores and supply chain operations, along with predictive models and emerging technologies like AI and IoT, can enable a truly connected store. Store associates can be proactively directed to where they are needed. Time-consuming tasks – such as inventory management or price and promotion execution – can be automated, saving many hours of store labor each week. Operationalizing data in this way can also improve visibility or shelf-level demand in the upstream supply chain thus improving in-store availability.
    • Align Processes. Leading grocers are becoming more process-centric, seeking improvements in operational efficiency by undertaking time and motion studies of store operational tasks. This is a great start, but there’s so much more that can be done, like enabling task-centric data collection that can be used for process mining to drive continuous improvement.

Becoming truly connected in this way is not easy but the potential benefits are huge. Data silo elimination is key as it becomes the foundation to unlock the potential of emerging technologies like IoT and AI.

Together these will drive insight, automation and improve decision-making that can redefine operational efficiency for retailers.

This article originally appeared in Total Retail.