The COVID-19 pandemic inspired dramatic changes for grocery retailers and their suppliers. Social distancing measures have changed the way that brick-and-mortar retailers operate, while e-commerce has shifted the way that groceries are purchased. While grocery shopper preferences for curbside pickup and delivery have grown exponentially throughout the pandemic, many stakeholders in the food supply chain are now trying to figure how these changes will impact a post-pandemic grocery sector.
Will Consumers Keep Buying Groceries Online?
It’s highly unlikely that grocery retail will ever return to what the industry knew before the pandemic. A recent study showed that 62 percent of consumers have begun shopping for groceries online due to the pandemic, and 40 percent of those plan to continue doing so even after the pandemic subsides. However, that same survey also shows that even with the risks posed by COVID-19, only eight percent of shoppers moved all of their grocery purchases from brick-and-mortar to online.
Consumers’ unwillingness to move fully online suggests that e-commerce will undoubtedly lose some of the market share it has gained as vaccines become available in 2021 and shoppers begin to feel safer going back to the grocery store. With that said, however, consumers enjoy convenience and grocery delivery has brought it to their door. In a new normal, consumers will purchase groceries in some combination of in-person and online. Grocery sellers will need to incorporate their new digital capabilities with brick-and-mortar methodologies to create a more streamlined omnichannel solution that meets the needs of consumers both online and in the store.
Logistics Complexities of Grocery’s New Normal
As grocers develop and implement new omnichannel strategies, here are some of the logistics challenges they may need to overcome:
Grocers that offer local delivery and/or curbside pickup continue to face challenges. Retailers need to figure out how to handle higher volumes of goods moving through stores designed for in-person shopping. Many stores don’t have the extra space to store higher volumes of goods. In addition, using employees to pick items from the store shelf to fulfill online orders isn’t necessarily sustainable given that it can cost upwards of 20 cents per item to pick groceries in this manner.
There are also customer service issues to consider. Though consumers may be relatively forgiving during a global pandemic, shoppers may eventually begin to lose patience when forced to compete with in-store shoppers for goods on the shelf. Store fulfillment may still have some role to play in the long-term, but grocers will need to find ways to do it without harming the in-store shopping experience.
Many grocery sellers will dedicate fulfillment resources directly to e-commerce. Unfortunately, standalone stores or small chains can’t afford to lease and operate a full-sized distribution center (DC). Even if when they can, these facilities can take a year or more to set up.
Micro-fulfillment centers may provide an answer to this dilemma. A micro-fulfillment center only takes a few weeks or months to set up, especially with the assistance of a logistics partner. Many grocery retailers may even be able to find unused retail space in the same shopping complex, enabling them to fulfill orders placed online for curbside pickup from the nearby micro-fulfillment center or share inventory between the two locations in a pinch.
As is the case with much of the logistics realm, larger grocery sellers have turned their attention to automated solutions to address pandemic-related issues. Robots are cleaning Walmart stores, delivering groceries in Michigan, and taking inventory at Schnucks Markets in California. Walmart also started a small pilot program in North Carolina that delivers grocery items via drone.
These are only a sampling of the ways that the grocery sector has turned to robotics to meet growing demand for grocery delivery. While drone delivery has faced numerous regulatory hurdles, some of those obstacles have evaporated as a result of the coronavirus. As these pilot programs continue, it’s likely that delivery robots and drones will start to become more commonplace at grocery retailers of all sizes.
About Phoenix Investors
Founded by Frank P. Crivello in 1994, Phoenix Investors and its affiliates (collectively “Phoenix”) are a leader in the acquisition, development, renovation, and repositioning of industrial facilities throughout the United States. Utilizing a disciplined investment approach and successful partnerships with institutional capital sources, corporations and public stakeholders, Phoenix has developed a proven track record of generating superior risk adjusted returns, while providing cost-efficient lease rates for its growing portfolio of national tenants. Its efforts inspire and drive the transformation and reinvigoration of the economic engines in the communities it serves. Phoenix continues to be defined by thoughtful relationships, sophisticated investment tools, cost efficient solutions, and a reputation for success.
Mr. Frank P. Crivello began his real estate career in 1982, focusing his investments in multifamily, office, industrial, and shopping center developments across the United States. From 1994 to 2008, Mr. Crivello assisted Phoenix Investors in its execution of its then business model of acquiring net lease commercial real estate across the United States. Since 2009, Mr. Crivello has assisted Phoenix Investors in the shift of its core focus to the acquisition of industrial real estate throughout the country.
Given his extensive experience in all aspects of commercial real estate, Mr. Crivello provides strategic and operational input to Phoenix Investors and its affiliated companies.
Mr. Crivello received a B.A., Magna Cum Laude, from Brown University and the London School of Economics, while completing a double major in Economics and Political Science; he is a member of Phi Beta Kappa. Outside of his business interests, Mr. Crivello invests his time, energy, and financial support across a wide net of charitable projects and organizations.