Grocery shopping is a routine task; it is generated from
need, and not desire, or luxury for that matter. We are not talking about
planning a vacation or dining in a fancy, posh restaurant; we are taking about
something that needs to be done on routine basis. And yet, online penetration
of grocery shopping lags far behind other sectors.
That definitely makes one wonder, when majority of other
ecommerce sectors are doing great, what’s the reason behind e-Grocery segment
not booming enough? It is due to the following challenges, which also represent
the growth opportunities in the sector.
Challenge 1: Storage
& Delivery Cost
Perishable items require more investment on storage &
delivery infrastructure (refrigeration). Special ware houses, delivery
containers and specialized delivery vans must be there to ensure perishables
are delivered fresh. All this requires lots of capital.
Solution:
Just-in-time supply system integrated with state of the art inventory
management API can minimize inventory costs. Apart from that, teaming up with
an efficient delivery service provider that has the right vehicles to ensure
customer satisfaction is a good idea from economic and operational
perspectives.
Challenge 2: Low
Profit Margins
Customers are reluctant to pay for convenience charges and
want to get faster delivery & quality assurance. Catering to this
particular need can actually turn out as a financial nightmare for online
grocers.
Solution:
Implement asset light business model. Instead of acquiring your own fleet of
vehicles and staff to carry out the deliveries for you, hire a logistics
company. That will cost you less than the cost of vehicles and salaries
combined. While signing the contract agreement with the delivery service
provider, make sure you mention that between your office gate and customer’s
doorstep, the goods to be delivered are the service providers’ responsibility.
Consult Expert
Challenge 3:
Inefficient Delivery
It’s hard to break the threshold called hyper-local segments
with one delivery system, especially when the customers expect same-hour
delivery. Product quality, time, and delivery cost – all these critical factors
impose a huge challenge for an efficient delivery system.
Solution: Logical
decision would be to team up with reliable hyper local delivery service
providers. Although, not directly related to grocery delivery, Amazon India
presents a good example of this, as they partnered with Indian post to improve
their reach in rural areas of India.
And then there’s a futuristic solution – delivery through
drones. It may seem a viable solution only in near future, but it would soon
become an essential one. Amazon has begun it in US. Various Chinese ecommerce
retailers are also using it extensively. It is true that drone delivery will
incur you huge infrastructure/equipment expenditure, but once done, things will
be just gliding seamlessly.
Challenge 4: Consumer
Habit
Regardless of the number of online grocery stores opening
up, and the convenience of shopping online, people still prefer buying grocery
items from a physical store. The graph below clearly reflects that consumer
behavior.
Solutions:
Merging your online & offline grocery shopping experience is a good idea in
this regard. Here are some ways how you can improve customer experience while
keeping your expenses low are:
1>Customer gets to verify items availability online
&then visits the store, confirms the quality and buys them
2>Customer places the order through online portal &
picks up order at the store
The above two models save the delivery cost. Now, let’s talk
about two alternates that reduce operational cost while improving customer
experience.
3>Customer visits offline store, orders the desired items
online (through in-store setup) and the goods are delivered to their home
4>Self-checkout at stores through technologies like i-Beacon
to let customers avoid the long cash-counter queues. A new trendsetter is in
making, do check what Amazon Go is doing. Your customers will definitely love
this type of shopping.
Pre-orders & curb-side pickups are other interesting
techniques to enhance customer experience. In fact, they are already a hit
among customers in many parts of the world. To implement, simply offer a
feature to pre-order groceries and schedule a delivery time or select a
pre-decided pick-up spot. It saves time for the customer and saves you last
mile delivery expenses.
Conclusion
The online grocery industry is still in the nascent stage
and has just started to pick up some pace. It is certain that the sector will
become more efficient & profitable with time as the new technological
advancements will come along.
No doubt that the market will remain challenging for the
current generation of online grocers. But businesses that will stick to their
guns, will also garner the advantage of being the early bird, since they
already have captured the market as the sector continues to become mainstream
with new technology.
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