Cost-effectiveness in Online Grocery Business

05 March 2022
7 min read

The past couple of years have been transformative for many branches of businesses, but if there was one industry that had no choice but to revolutionise itself was the grocery industry. With the advancements in technology that lets businesses run different steps of a grocery operation in a streamlined way, traditional bricks-and-mortar grocery businesses have begun to explore the e-grocery market. Still, since the new operating models are fairly new for many businesses, there are many brick-and-mortar stores that are searching for new ways to enhance their cost-effectiveness.


As a SaaS and PaaS powerhouse that’s designing new ways for businesses to step into the future of e-grocery effortlessly, we listed some of the best working solutions for any kind of grocer that’ll help them improve cost-effectiveness on many steps of the e-grocery operation. 

 

The Current Online Grocery Market

Despite promising developments within the e-grocery business, there continue to be challenged with cost-effectiveness in the grocery supply chain. In many situations, these changes are centered around last-mile operations, when goods are being delivered to the customer. And frankly, there seems to be no future for grocers that don’t offer a last-mile delivery option.

share of delivery costs

Source: Mordor Intelligence, 2019

According to the 2019 report by Mordor Intelligence, last-mile delivery operations make up the largest share of delivery costs for grocers. OF course, many new express delivery solutions have emerged in the past two years, but still, last-mile delivery remains one of the biggest challenges for grocers.

To overcome these issues strong relationships are needed between suppliers and customers, as well as lower supply chain costs and a larger customer base.

Even before the e-grocery boom that came with the pandemic, customers prefered e-grocery shopping to save time. Today, we’re talking about a whole new scene for e-grocery, with last-mile delivery options and even AR shopping.  

 

Advantages of E-Grocery for Businesses

Offering an online grocery service comes with many advantages, such as limitless trading hours, increased marketing opportunities, improved customer service, shorter product cycles, and an increased customer base. From a customer perspective, convenience improves alongside the ability to access a wide variety of products, while also saving time. Despite these opportunities, two decades after many retailers rushed to embrace the dot-com boom, many are struggling with e-commerce penetration.

The exponential growth of e-commerce has made online retailing more competitive, however, it also means customers are more willing to shop for groceries online. While in some cases access to the required technology may hinder online sales, it is more likely that businesses are facing deeper complexities that are causing challenges.

The habit of shopping for groceries is deeply rooted, which can make it difficult to persuade customers to move to online shopping. In addition, many shoppers who trial an online service continue to split their shopping between online and offline orders, with some switching back to fully offline retail. However, these challenges are not impossible to overcome for omnichannel grocery businesses. In fact, there are opportunities to gain an increased market share by reshaping consuming behaviour.

 

Increase Picking Efficiency to Bridge the Convenience Gap

While some grocery stores choose to fulfil orders through existing stores, others opt for order picking through distribution centres. Both options have the ability to offer a friction-free online shopping experience, however, there is still a requirement to overcome the convenience gap.

Many customers prefer to visit physical stores to browse for groceries, however, they are willing to shop online for products in other categories. This issue can be partly attributed to the high expectations consumers feel towards online shopping, they expect the right product at the right price. When it comes to purchasing groceries online, customers expect convenience without compromising on product quality.

While it is possible to heavily automated order picking to improve efficiency, it is important to balance this improvement with customer satisfaction. For example, a distribution centre or physical store should be seen by order pickers as an assembly factory, rather than a warehouse. Waste and product handling should be minimised, with a focus on improving the efficiency of product flow.

Various production principles, such as lean manufacturing can be used to improve efficiency, without compromising on product quality. For example, slower-moving products can be positioned in a way where they are not blocking routes to faster-moving product lines. In addition, the physical attributes of each product should be considered, such as durability, size, and weight. By grouping products with similar characteristics together, heavier items can be picked first with more fragile items chosen last.

 

How to Overcome Inventory Challenges?

In a traditional store, customers have decades of experience navigating stores and retailers understand how their customers think. The physical process of navigating aisles creates a marketing opportunity and allows customers to compare products and prices. Online retail needs to replicate this process as closely as possible, through helpful product recommendations and easy-to-navigate websites. However, providing this level of service does create challenges when it comes to managing inventory.

There are specific challenges that retailers need to overcome, such as the availability of products, cost-effectiveness of substitute products, the freshness of groceries, and pricing efficiency. To overcome these challenges a high level of accuracy is needed when predicting customer volume. To improve cost-effectiveness, organisations tend to carry the minimum level of inventory required, however, if online order levels exceed stock levels, customers’ orders cannot be correctly fulfilled.

Another issue for cost-effectiveness is the need to substitute unavailable items with an item of a higher value. If a customer orders an item costing less which is then unavailable, the order may need to be fulfilled with a higher value item, with the retailer required to absorb this cost. This is a recurring challenge that needs to be tackled by coordinating store operations with online operations. It is an unavoidable challenge, however, omnichannel technology can reduce costs and improve customer satisfaction.

 

Our Solution for Online Grocers: An OmniChannel E-Commerce Platform

Innovations such as the ability to compare prices and expected use-by dates are continuously offering improvements for customers. It is this omnichannel retail technology that can provide customers and retailers with advantages to shopping online while improving the cost-effectiveness of the operations.

Considering the past couple of years, we redesigned our e-commerce platform to be able to solve many problems of retailers and grocers. Our omnichannel e-commerce platform is designed with large-scale enterprises in mind, with sophisticated features to allow retailers to effectively manage their omnichannel ecosystem from a single platform. With Ubimecs Instant Delivery Module, businesses can trach inventories, offer customers various online shopping channels such as conventional store pick-ups, scheduled home deliveries, or express deliveries, all on the same platform. 

The cloud-based platform works on both the front and back end, so you don’t have to worry about integrating tens of other tools to track the performance of your branches, couriers, and even the products. In short, our platform serves as a foundation for retailers and e-grocers to achieve a more cost-effective online grocery business. To find out more, please contact our team today.

Who are We?

Tmob | Thinks Mobility is a global technology powerhouse, specialized in digitalization and integration solutions, bringing growth and success to businesses and partners with its innovative SaaS, PaaS, and premium solutions since 2009 with Tmob Turkiye (TR) and Tmob United Kingdom (UK) headquarters.25

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