From Profitless to Profitable: The State of Online Ordering in Grocery
In the race to keep up with the big boys like Walmart and Kroger, grocery chains are making major moves to adopt online ordering and other digital capabilities.
In a study conducted this summer by Incisiv and AT&T, we uncovered that although grocers that have offered online delivery for at least 12 months report an increase of 15.8 percent in incremental revenue, it has contributed virtually nothing to the bottom line. In fact, in most cases, online grocery and digital capabilities such as click-and-collect or curbside pickup have a negative effect on the bottom line by as much as 2 percent.
This doesn’t mean the digital train is going to slow down. Online sales will double in the next two years to $50 billion, and will grow to $150 billion by 2025.
So with online sales accounting for close to 15 percent of total retail sales in a few years, how can grocery chains develop their digital business into positive margin contributors? Consider these four tips:
- Get a handle on your inventory visibility: While most grocers have an accurate view of their overall store inventory, their visibility into on-shelf availability remains low. With 81 percent of grocers lacking a real-time view of inventory, how can they offer accurate or efficient fulfillment of online orders? Investments in systems, training and processes are required to meet the promise of online ordering.
- Understand the new role of your workforce: A surprising 92 percent of grocers are dissatisfied with their labor utilization for online order picking. This likely is due to the speed by which many grocers have implemented in-store fulfillment options without considering labor implications. Grocers must look to implement training programs not only to enhance efficiency around order picking, but also add associates dedicated to these new responsibilities in-store.
- Know where partners can help: The online revolution has created an entirely new ecosystem of potential partners that can drive margin, including third-party delivery to shopper location tracking, voice assistants to automated replenishment through connected devices and robotics. Grocers must go beyond their four walls and integrate with a large ecosystem of third parties to be able to deliver a great online ordering customer experience.
- Invest where you can better your chances for success: The study uncovered that grocers will be investing in technologies where they can increase share of wallet and where they can become more efficient in their online fulfillment. For share-of-wallet improvements, investments in analytics will play a key part in personalizing content and offers on display. For fulfillment, robotics holds longer term promise, but in the short term, grocers should look to forms of mobile picking solutions to drive incremental improvement in pick efficiency.
David Weinand is the co-founder and chief customer officer at Incisiv, an invite-only community for executives driving digital transformation.