My great-aunt Catherine (or “Dillie” as she was known) was forever entering contests. Probably the biggest one she ever won was a triumphant grocery-shopping spree. My parents recently came across some photographs that captured the event.
It took place more than half century ago in Shillington, Pennsylvania, but it really could have been anywhere in America. Like other state-of-the-art grocery stores at the time, the Food Fair was running a promotional contest to attract new customers (and engage existing ones).
And whether it was due to luck or persistence, Dillie won! The prize — a solo run of the store to collect all the free groceries she could manage! The catch — she had only a few minutes, and all items had to be on the checkout lane conveyor when time was up.
Dillie planned ahead, strategizing with her sister, great-aunt Josephine (Joie). They scouted the store and developed a pick plan. A nephew helped her change out of her high heels and into more sensible shoes.
She was prepped, she was ready. 3…2…1… and Dillie was off! She moved quickly to the high-value section, embraced an armload of frozen meat and seafood, and scooted back to the checkout lane. Joie shouted out instructions to keep Dillie on task.
Dumping each load quickly, she wheeled and motored toward to the next location. A helpful store assistant with quick reflexes made sure no items got away.
Several more runs, and when time was up (and breath was caught), Dillie had made quite a haul. Shrimp! Hams! Steaks! Soda! Orangetta! (Orangetta?!) It was magnificent to behold. And apparently difficult to measure.
Difficult, but not impossible. The checkout clerk rang up the order by punching prices into the cash register — it was all free but the store manager had to know just how many trading stamps to give Dillie.
Things Sure Have Changed
It’s pretty amazing to consider how different grocery shopping was decades ago. First of all, everything was in black and white. (Well, okay, just most of the photos.) But certainly the brands. I recognize Pepsi and maybe Stouffer’s (isn’t that a frozen dinner thing?) but nothing else. And the size of the store seems so quaint. Can you imagine having the same contest in a modern, suburban supercenter? It would be over by the time poor Dillie got halfway to the back of the store.
The grocery store company itself, Food Fair, is long gone. Wikipedia tells us the chain peaked out at 500 stores, evolved, acquired, and declined before going defunct around the year 2000. A familiar story for many regional and national grocers.
Mostly though, maybe the technology is the biggest difference. From managing the inventory with paper and pencil to pricing items with stampers to hitting the keys of the mechanical cash register, it was all so manual.
Things Sure Have Stayed the Same
But then it’s even more amazing to think about how much hasn’t changed.
- Innovation is still the name of the game. Whether it’s squeezing out costs on the back end or providing customers the latest time-saving features on the front end, grocery retail is always looking for an edge.
- Freshest and fastest still wins. Years ago, the modern marvel of a supermarket brought customers meats and produce and dry goods all in one place! We take that for granted now, but we will soon take for granted those same groceries being delivered to our homes an hour after ordering.
- Customers still have the same priorities: Look at the signage in some of those pictures: low prices, new products, best selection. Maybe adjust the font and add some color, and they are pretty much what you would see in a grocery store today.
Perhaps the biggest similarity is that we all now seem to be part of a timed contest. Whether we are doing the shopping at the store or online, grocery shopping feels very much like a race to beat the clock to win, not free groceries, but time. We get to keep more of our precious time.
Perhaps the biggest similarity is that we all now seem to be part of a timed contest.
What About the Future?
Well that was then. And this is now. But what’s next? Sure, the emerging grocery retail landscape has its challenges, but there are huge opportunities for competitive advantages. Retailers who make sensible, considered decisions stand to gain greater control of costs and improve what they can offer customers.
But first, let’s talk about those challenges.
Making a Profit at Online Shopping
The online segment of food and grocery shopping is growing rapidly — according to Forbes, easily five-fold over the next decade, with American consumers spending upwards of $100 billion on food-at-home items by 2025. This is only a small proportion of the overall market, but critical for attracting and retaining new customers — especially in terms of delivery.
Delivery options range from customer homes to their workplaces to “dropbox” facilities such as ride-share lots. Or customers can pick up online orders inside a store or have it brought to them outside.
The business model flaw here is obvious. In a big weekly shop, customers self-service the picking and final delivery. But with online orders, retailers take on those costs. That may work as a loss-leader for now, but over the long term, it’s, well, a big ol’ loss.
Is there a way of picking, assembling, and delivering orders at a profit? Some early adopters chose to fulfill online orders from the shelves of their larger stores. This allowed for a quick and relatively cheap implementation, but only for low volumes. As volumes grow, obvious conflicts between regular customers and order pickers for online purchases grow, making picking less efficient and shopping less enjoyable.
Others have tried to meet the pick/assemble/deliver challenge with designated distribution centers or picking in stores overnight. This eliminates in-store conflict, but doesn’t quite meet the promise of swift delivery times. The best these methods can offer is next-day delivery, and a significant part of the online market has come to expect better than this.
Meeting the Customers Where They Are
A half century ago, the big population trend was definitely people moving from urban cores to suburbs to exurbs and beyond. Today, that has somewhat reversed. So a store the location and size of Dillie’s old Food Fair is becoming somewhat ideal, serving defined localities without easy access to a big supermarket and located at hot spots such as town centers, commuter rail stations, and the like. A limited range of fast-moving goods is carried, often emphasizing fresh “food to go” as well as staple items.
But local stores have constraints. Prime locations in urban stores are unlikely to have much space for loading bay or back rooms to accommodate full pallets of product or have much chilled or freezer capacity. Replenishment — especially for fresh food — must be in small but frequent shipments.
Local stores are also unlikely to offer a solution to the online shopping. They aren’t able to carry a full range of items, they have limited space for assembled orders awaiting shipping, and they are unlikely to have adequate parking for “click and collect,” even if the order has been picked elsewhere. And in many cities, regulation of truck sizes and times of operation further limit timely deliver.
Reducing the Cost of Service
Still, let’s not fool ourselves into a false nostalgia with these black-and-white photos — the grocery game has never been easy, and it’s always been played with the thinnest of margins. Each era has had its own unique challenges for controlling and (if possible) reducing the cost of service.
Today’s model of gigantic supermarkets allows a significant portion of business to be performed at the pallet or case level — goods in, racked, goods out, with little intervention.
But soon the same distribution network will have to cope with local stores that neither need nor can accept full pallets — for slower-moving goods not even in full cases. So breaking bulk and reconsolidating becomes critical, and stores may be looking for replenishment several times a day rather than perhaps once every other day. Here’s where preparing deliveries in a store-friendly way (items sequenced by aisle) will be a key part of the store-replenishment cycle.
Then there is fulfillment for online customers that involves order picking at the individual item level. But pause a moment to consider the implications of a properly executed order for, say, $100 worth of groceries.
Clearly, there will be goods coming from, and to some extent needing to be maintained at, ambient, chilled, and frozen environments. In each of these it’s important to separate products such as uncooked meats. For flavor reasons it’s ill advised to co-pack meat with, say, fish. Delicate products — whether bottles of rare Italian olive oils or handfuls of soft fruits — may need different treatment. In addition, it’s essential to separate out non-grocery items such as pharmacy or cleaning products. That’s a lot of bags or totes per order (many picked separately) that must be combined into a single delivery group.
Some retailers, in response to local and state legislation, may require customers to pay for plastic bags or offer bag-free shopping. That could mean delivery drivers having to wait while the consumer empties the delivery totes, or if the consumer is not at home, a new system must be devised to collect the totes on the next order.
So, left alone, cost of service overall is set to rise, and there is little chance of passing this on to the consumer. What’s more, shoppers expect the online offer to be cheaper than a store, even though the retailer is doing more of the work. In addition, some retailers have reflected costs in differential pricing for local stores, but this has not been received well by customers who expect supermarket pricing at convenient locations.
Finding Solutions Through Automation
If grocery retailers are to accommodate and capitalize on the changing demands of the market, they’ll need to think carefully about how supply chain processes can be tuned more closely to the needs of the grocery market. They will need to account for the subtle shifts occurring in consumer-buying behavior, the pressures of rising labor costs, and the constraints of rigid property portfolios.
What’s clear is that increased complexity (omni-channel fulfillment, flexible store replenishment, advanced sequencing techniques) will require the greater use of automated technology for order-picking and order-assembly. Intelligent automated systems applied in innovative ways can provide solutions and create new opportunities.
How to respond depends very much on the retailer.
One solution is to convert all or part of an existing big outlet into a “dark store” to serve local and online channels.
A dark store looks very much like a large supermarket with the aisles laid out with similar logic, but usually with wider spacing to improve traffic flows. With no ordinary customers in the way, there is opportunity for some considerable use of automation.
Dark stores can be new builds, but with high property prices and overcapacity, there can be advantages to adapting an existing store — the building itself, lighting and other services, staff amenities and car parking are already present, and existing consumer parking can accommodate the delivery van fleet.
Another enticing possibility is micro-fulfillment, a rapid-response order assembly system that supports same-day delivery (even within hours). The idea is to provide distribution as close to the customer as possible with a compact, highly automated warehouse that fits inside the back room of a store or in a small urban distribution center.
A wide range of inventory is stored in a relatively small space, and automation allows orders to be assembled quickly. Then it’s out the door or ready for pick up.
Voice-Directed Picking, AGVs and More!
Automation of the human element also has possibilities. Voice-directed picking is now quite common; vision-direction (via “smart glasses”) is rapidly becoming affordable. Both of these methods have been shown to improve pick accuracy. Combining voice direction with automated guided vehicles (AGVs) is also a possible future direction.
Right. So I hope that provides you all some, um, food for thought on the grocery biz. Quite a bit has changed, and quite a bit is very much the same. But the future holds some interesting possibilities.
Let me know if you have any thoughts. Or if you have any questions. Other than “what the world was ‘Orangetta’?” I don’t know the answer to that one.