Consumer behavior has shifted since the days of the pandemic, and so has the look of online grocery shopping. As demand has normalized, consumers have evolved into omnichannel shoppers. That is, consumers are shopping across multiple channels (in-store, online, click and collect, meal deliveries, etc.) and at more frequently intervals with less items purchased.
Yesterday’s channel infrastructure was linear. If grocery consumers want to shop in-store, they go to the store. If they want to shop online, they engage with the online platform (but typically can only choose home or store delivery for the entire order). It’s a very channel-centric approach with siloed engagement. Today, consumers have channel choice, but they interact with each independently.
Today’s channel infrastructure is omnichannel. This is a more connected, customer-centric approach. It allows for seamless integration of all the consumer channels so consumers can shop in the way they want via any channel. Subsequently, grocery providers can collect shopping across the channels to inform a seamless, personalized, and channel-connected experience.
What’s driving this omnichannel network structure?
Put simply, consumers are demanding it. Today’s shoppers are omnichannel shoppers, buying groceries multiple times a week — for example, one main in-store trip to a large supermarket and then some top-ups, often from different retailers (this is where the loyalty challenge comes in).
These changing needs could be an opportunity to deliver benefits for grocery retailers, too.
Making the shopping experience seamless across channels is likely to attract a loyal customer base. Loyal customers are the pathway towards sustained profitability as well as several positive additional effects:
- Higher sales because omnichannel customers typically spend more than those who shop via one channel.
- The data captured through facilitating omnichannel can be used to personalize consumer experience but also lends itself towards process improvements.
- Such a data ecosystem can be used to create other revenue-generating value-adding services, for example, connecting better with suppliers and replenishing stock with customer-preferred items.
The omnichannel network also has an impact on the industry
An omnichannel network structure may require:
- Urban store presence: There might be a need for more physical stores in urban areas. You might have heard of 15-minute cities. If consumers want to go to a specific supermarket and that brand is not within 15 minutes, they will go to a competitor.
- Infrastructure repositioning: It’s important to review the entire infrastructure of stores and distribution centers and evaluate if what exists today serves the strategy for the future. The strategy and channel needs will determine what needs to be achieved.
- Competing on immediacy: This may be a channel need and a differentiator. For example, where there are, can online grocery deliveries be made on the same day, the next day, or in 48 hours in high-demand areas?
- Focus on efficiencies: The cost to support a omnichannel network structure can be high, so driving efficiencies is very important.
Agility, efficiency, and speed need an infrastructure beyond what a traditional distribution center can deliver. McKinsey suggests that three new fulfilment models are emerging.
- Within the store: Grocers are putting micro-fulfilment automation in-store to fill orders quickly.
- Around the store: This is a new distribution-as-a-service model where grocers form partnerships with third parties for order fulfillment, particularly for quick-commerce and last-mile delivery.
- In the neighborhood: This serves areas where demand is particularly high by using dark stores or customer fulfillment centers (CFCs) to service those consumers quickly.
Knowing which models to implement will be dependent on the customer volume base and the service offering strategy (same day delivery, next day delivery, etc.).
There is a lot to think about, so where should we focus?
It starts with the operation. This is where omnichannel efficiencies can be created, leading to service and experience differentiation while reducing costs. To achieve this, grocery retailers must develop an ecosystem that is fit for purpose, aim for best-in-class practices that will deliver high levels of service, and plan for investment in automation, software, store remodeling, and distribution changes.
There are five key areas for grocery retailers to consider.
- Define an omnichannel vision and strategy: If you commit to honoring a same-day or next-day delivery, your physical infrastructure needs will be different if you choose 48 hours. Your strategy will define your need and set direction.
- Data first mindset: This is about making the supply chain and the stock within visible not just within a store or distribution center but beyond the 4 walls. This will help responsiveness but also allow the development of a value-adding ecosystem where data can be shared with suppliers.
- Software centric: Data is powered by software. Indeed, all automation is powered by software, and it’s important that it achieves what you need it to and for managing and moving inventory.
- Form partnerships: We see partnerships with quick commerce providers because the infrastructure, resources, and expertise are in place. It means delivering change faster and reducing the risk.
- Learn from the market: Learning from others is powerful. Copying isn’t always the right thing to do but understanding what the intended outcome was can help guide thinking.
What is the industry doing in response to omnichannel?
Many things, actually, including:
- Elevating the experience: Supermarkets with click-and-collect areas, food service, or restaurant areas.
- Increasing the technology: Smart shopping carts or automated order picking in the store.
- Taking advantage of data: Loyalty programs that collect customer data, apps for recipes to encourage engagement by listing ingredients and making them easy to find.
But the largest response is embracing automation. As an example, Kesko, a Finnish grocery retailer, wanted to use automation to get closer to their consumers. They saw the need to fulfill online click-and-collect orders quickly but also process the order volumes.
With a Dematic solution that emphasizes software-driven automation, they are now able to fulfill the majority of their orders automatically. It features an AutoStore™ storage and retrieval system located under the store that provides high productivity rates.
Redmart, a grocery retailer in Singapore, meets its growing online orders with a Dematic goods-to-person picking solution that features a Dematic Multishuttle® for its storage and retrieval system, which has improved picking productivity by 500% over its previous manual operation.
Omnichannel grocery shopping is the new reality
The last decade has seen consumer behavior shifts, and new tends emerge. Some fueled by necessity, some by convenience. The pandemic taught us that trends are not permanent. They key to success is preparation. Ensuring your business can adapt to these trends provides the competitive edge it needs to thrive.
Find out more about trusted solutions for grocery warehouse and fulfillment center automation.