Grocery ecommerce has become an essential part of the food and beverage industry. Consumers worldwide turned to ecommerce to get their groceries during COVID-19, and many will keep ordering online for years to come.
A study from Mercatus predicts that grocery ecommerce sales will surpass 20% of the total U.S. grocery market within the coming five years. In 2022, the online share of grocery ecommerce is projected to keep expanding by 11%, reaching an astounding 20.5%in 2026.
And it’s not only the United States that has seen a dramatic increase in online grocery sales during the pandemic. The online grocery business also saw a significant boost in the U.K., where for example, the U.K. grocer Ocado Group Plc reported a 27% increase in their ecommerce sales. And in just one month, France saw supermarket sales rise by 34%.
And online shopping, especially in the food and beverage industry, is here to stay. As a constantly increasing number of consumers discover the ease and convenience of having groceries delivered at their doors, grocery ecommerce will keep expanding and evolving.
We have put together a list of 10 things to keep in mind based on inside knowledge working with large companies across the food and beverage industry, such as Jack Daniel’s, Heineken, Royal Unibrew (leading beverage provider in Denmark, Germany, Italy, France, and 69 other markets), and Selver (one of the largest and most prestigious grocery store chains in Estonia). In this article, we’ll discuss critical challenges that grocery ecommerce merchants face and how to navigate them.
Related Reading: Trends Shaping the Supermarkets of the Future
Grocery Ecommerce Challenges to Keep in Mind
Grocery stores typically stock a wide and varied range of products, where food and perishable goods dominate. This brings a number of challenges and requirements that are very specific to this industry.
In addition to being sensitive to time and storing conditions, food products are often sold with many different options. Some products are sold by weight rather than by piece, and their condition also varies day by day. Just think about the ever-changing nature of an avocado or a banana, and many of the challenges of selling them online become apparent.
But the challenges don’t end there. As you’ll see when you keep reading, merchants need to navigate everything from optimal pick & pack processes and refunds to replacement products and deliveries. Each step in the buying journey carries its own set of challenges that must be overcome to create great customer experiences. Let’s take a closer look at each stage and what to keep in mind.
1. The Business Model
- Grocery retail companies often have a business model mixing corporate, franchise, and independent stores under the same retail banner. This adds complexity when launching a grocery ecommerce solution with in-store picking due to things like local variations in product assortments, sales prices, and promotions.
- Grocery retail has a long history of loyalty programs with bonus points, earn and burn, personal offers, and so on. These are essential sales drivers, and consumers expect the same loyalty features when shopping online. They also expect suggestions on their usual shopping habits, relevant recommendations, and recently purchased products based on historical online and in-store purchases.
- Low profitability is historically common for pure players and traditional grocery retailers that start with in-store picking. Research shows that home delivery and in-store picking are the main cost drivers and offer considerable potential for increased efficiency.
Related reading: Digital Commerce Business Models: The Current Landscape
2. The Products
- The perishable nature of groceries means that many products need to be stored under very specific conditions until delivered to the customer. For example, there may be regulations around storage temperatures, or the recipient can be required to be 18 or 21 years old, which then needs to be validated at delivery.
- Food and beverage retailers that sell fresh produced and food-to-go products manually packed in the store add further complexity with more product attributes, expiry dates, and minimum order quantities.
- Perishable groceries are often ordered by weight, and there are different ways of presenting, buying, and picking them. When ordering, for example, a watermelon, it’s not possible to choose the exact weight; there needs to be room for variation. And a variation in weight requires the card amount pre-authorization to reflect the allowed variation. The total price still needs to be recalculated based on the delivered weight, which can get complex with thousands of orders.
- A grocery store may only sell food and beverage products, but what if you add a range of non-food items? And what if we then include clothing, electronics, and DIY? As in many industries, there are a handful of products that generate the bulk of sales, and then there are long-tail products that are rarely sold but that make a significant contribution to profit. The ecommerce solution needs to accommodate a wide variety of product segments.
Related reading: Alcohol Ecommerce: 2021 Trends, Strategies, and Markets
3. The Stock
- Food products have a limited shelf life and a high turnover. At the same time, the warehouse and storage area are limited. This means that frequent replenishment is needed, but supplies are not always 100% guaranteed.
For example: for grocery ecommerce with in-store picking, customers will sometimes be walking around in the store with some of the stock in their shopping baskets. That is why the I.T. system stock level is never completely accurate, which adds another layer of complexity.
- In most ecommerce scenarios, you want to pick, pack, and ship items as soon as possible. But for grocery ecommerce, the order is picked as late as possible—just before store pick-up time or the time of departure for home delivery. The time between the order placed and then shipped could occur over several days. So when an order is received, it’s almost impossible to know the product stock at the time of picking.
4. The Storage Conditions
- In line with regulations, food products need to be kept in specific conditions until delivered to the customer. Food products must also be protected from contact with household chemicals. This means grocery stores must have complete control over the supply and delivery chain—from receiving a product at the warehouse or store to the final delivery at the customer’s residence.
- The key challenge with storage is that certain conditions must be met during each phase (picking, packing, delivery, transit) and across product types (frozen, cool, alcohol, chemicals). With self-service 24/7 grocery lockers with temperature zones, there are even stricter requirements to secure freshness until custom pick up.
- In high-volume in-store eGrocery, it’s important to manage storage efficiency in buffer storage areas before route departure or pick up.
5. The Service Area
- Ecommerce has no international boundaries. But for grocery ecommerce, the service area is usually limited to one country and often to an even smaller geographic area depending on the fulfillment center’s location and the product assortment sold. You can set up multiple service centers to extend your reach, but there will always be blind spots. In our experience, optimizing your service area is one of the keys to a successful online grocery business.
6. Time Slots and Delivery
- Unlike the delivery of, for example, a book, your shopping delivery can’t a) fit through a letterbox or b) be left alone for hours on end after delivery. Managing available order delivery times helps you organize your processes, balance the workload (order load) and provide the best service to your customers.
- Integration with best-of-breed software is crucial in optimizing delivery and courier administration. This integration boosts efficiency and profitability for grocery ecommerce when order volumes increase.
7. Picking And Packing
- Grocery orders typically consist of many products, requiring lots of time to pick and pack. The picking process is not only time-consuming but also time-critical. And during the picking process, teams must consider various factors: the weight of products, products requiring special treatment, replacement products, cancellation of products, and the need to communicate with the customer.
8. Which Product To Pick?
- Let’s take the case of bananas. A merchant may have available to them bananas at different stages of ripeness. Let’s assume they then receive a large order of bananas. Which ones should you pick? If for a family’s long-term consumption, then expectations might differ. But what if the same order is made for a conference, where attendees consume them at the same time? As a merchant, you need a way to anticipate their preferences to be able to create the best possible experience.
9. Price Recalculations, Replacements, And Refunds
- After ordering groceries online, you have most likely experienced receiving a substitute product. Perhaps you ordered juice from Brand A, but it was unavailable, so instead, you got juice from Brand B. When this happens, merchants have to consider the associated price difference—if the replacement product costs less, the merchant will need to refund. And if it’s more expensive, they’ll need to discount the product to match the price paid in the initial order.
10. The User Experience
- Customers want to find their favorite products quickly and efficiently when shopping online. This makes grocery ecommerce extra challenging for merchants to create high-quality user experiences. One way to meet and satisfy customer expectations is with more intuitive navigation and features like favorite products, suggested products, and saved shopping lists.
- Many shoppers want extensive product filtering functionality when shopping for groceries. For example, to avoid allergens, carbohydrates, fat, and sugar, or find vegan and eco-friendly products. The filtering list for product characteristics is long and keeps growing. With such a diverse list of preferences, it’s essential with intelligent and efficient filtering that simplifies the process of finding products.
Related reading: 5 Keys to Building an Exceptional Ecommerce Customer Experience
How Vaimo Can Help
There are plenty of things to keep in mind when selling groceries online. One critical challenge is choosing the right ecommerce software platform and partnering with the right project team.
As of today, few ecommerce solution platforms are optimized for the food and beverage industry to support ecommerce entailing fresh food items, rich product attributes, temperature-restricted products, age-restricted items, fragile items, weighted items, and replacement products. But with our help, our clients have defeated these challenges.
Here at Vaimo, we are leading experts in all things commerce and customer experience. Get in touch to talk to one of our experts, or take a look at our food and beverage client success stories.
Would you like more advice on this topic?