In the past year, the U.S. has seen a significant acceleration in e-commerce activity.  This is particularly true for the grocery retail industry where online sales have grown from 1.2 billion U.S. dollars in August 2019 to 7.2 billion U.S. in June 2020.^*  This acceleration of growth, which is a direct result of COVID-19, has created huge opportunities for grocery retailers to significantly change the way they conduct business.

There are three ways consumers receive orders from their online grocery purchases – ship-to-home, delivery, and buy-online, pickup-in-store (BOPIS) – that need to be considered when designing an optimal fulfillment center.  The fastest growing method is BOPIS, which has seen a 259% year-over-year order surge in August, according to Adobe Analytics’ Digital Economy Index.

Despite the major shift to online, most grocery shopping today still takes place in traditional brick-and-mortar grocery stores.  According to a study by the Nielsen Company and Food Marketing Institute (FMI), online grocery shopping is expected to account for twenty percent of total grocery sales by 2025.

These shifts in consumer purchasing behavior and growing customer expectations have led to an increase in complexity of successful (i.e., seamless) order fulfillment, underscoring the need for grocery retailers to expand their omnichannel fulfillment capabilities and in time, better satisfy customers. 

Figuring out how to best respond to these disruptions is arguably the biggest challenge facing grocery retailers today.  There are several factors, such as competition, customer needs, location, installation cost, orders, inventory management, etc., that require consideration and a deep understanding of when determining the right strategy for your business.  One approach that we are excited about here at AHS, LLC is micro-fulfillment. Micro-fulfillment leverages dense storage and goods-to-person (G2P) technology solutions in existing footprints close to the consumer. The advantages of this approach largely revolve around faster delivery and order reactivity.

The R&D Team at AHS, LLC has recently taken a deep dive into this strategic approach in their white paper on Micro-fulfillment, which highlights the importance of conducting thorough research and analysis before making any major micro-fulfillment technology investments.

Whether it is bottlenecks in the supply chain and shifts in supply and demand or shortages in skilled labor and changes in consumer preferences and needs, there will always be unexpected challenges that retailers face.  Thus, one of the most important competitive advantages that a grocery retailer can adopt is flexibility.  The experts at AHS are fully committed to partnering with retailers to help them become more agile and ultimately better prepared for the future landscape of grocery and omnichannel retail fulfillment.

^* Source: Brick Meets Click/Mercatus Grocery Shopping Survey, Aug 2020.