There is a shift in how consumers are approaching grocery shopping, using more channels than ever before. Grocery is an $800 billion market – online grocery sales are expected to grow, becoming a $24 billion industry in 2017.
“Retailers are grappling to not only understand consumers varied shopping patterns, but also capture shares of their increasingly fragmented shopping trips,” says Susan Viaman of IRI.
Although the food supply chain infrastructure is efficient, consumers are seeking home delivery and click-and-collect options, and grocery stores have to adjust, overhauling their fulfillment system to serve the omnichannel market.
According to Food Logistics, demand for food retail will be amplified by disruptive supply chain innovations designed to offer fast, exact fulfillment of customized orders. The ability to deliver original transportation solutions in on-time delivery, scheduling, and visibility and utilize technologies in the warehouse will become a strategic differentiator for companies that want to remain competitive and gain market share.
“The conventional supermarket is a dinosaur,” says Phil Lempert, in an NRF article. “It doesn’t serve the needs of today’s shopper who is looking for more exciting offerings.”
The food industry has invested less than other sectors in understanding the consumer through e-commerce interactions. Consumers don’t cling to any one channel for buying; we know that they want to buy the product they want, when they want it, from whatever channel is most convenient. And, today’s consumers are demanding local, fresh, organic, and sustainable products and expect food companies to follow these demands, so the omnichannel landscape can’t be dismissed by grocers any longer.
96% of Americans have made an online purchase at some point in their lives, and four in five have done so in the last month alone, according to BigCommerce. Online shopping is extremely popular; Americans cite it as their preferred way to shop. One-third of US consumers are online grocery shopping. In 2016, grocery e-retail sales will hit double digits (17%), where only 8% of consumers bought groceries online in 2015.
“The reinvention happening in this space is being driven by the consumer. They’ve pushed the traditional supermarket operators to ask themselves, “How can I be different?’” says Farla Efros, HRC Advisory. “Consumers are time-starved, they like online ordering.”
Many grocers feel pressure from e-commerce, but the ability to interact with customers through multiple channels promises benefits, says Kevin Reader, KNAPP Logistics Automation, Inc. “An omnichannel customer is worth more than a single channel customer.”
Food Logistics cites 7 elements for a successful omnichannel retail supply chain:
- Real-time visibility into inventory to reduce safety stock and inventory carrying costs.
- Active control over access and allocation of inventory in real-time.
- Processing and shipping of individual orders at the lowest cost, either direct-to-consumer or direct-to-store or for click and collect.
- Fully automated distribution processes that will increase productivity and fulfillment rates using material handling equipment.
- Flexible fulfillment paths to meet demand, regardless of which channel it comes from.
- Maximized efficiency in every part of the supply chain to meet customer expectations.
- Minimum cost to serve.
Leading the Way: Amazon Fresh
Amazon is notorious for reinventing itself and finding new ways to create value for its consumers and now it’s challenging grocery stores by breaking into the online food order and delivery business. By 2018, Amazon Fresh will have 20 locations. It grabs 84% of online grocery visits and 59% of online grocery spending. It’s developing new technology like license plate scanners and in-store kiosks to meet consumer demand. Amazon is constantly working on making shopping and buying easier, and grocery stores need to respond. Besides Amazon, Kroger and Wal-Mart are threats to supermarkets, based on their national footprints and the investments they have made in omnichannel fulfillment.
Logistics and Omnichannel
- Distribution: The direct-to-consumer fulfillment method is creating a need for specifically built distribution centers. Direct-to-consumer forces more outbound, direct, fulfillment responsibilities.
- Transportation: The expansion of e-commerce in the food industry has increased the volume of orders, which means utilizing more carriers to fulfill orders for shippers.
- Technology, Visibility and Analytics: A transportation management system can handle the outbound and inbound operations, route modeling, dock scheduling, invoicing, and mode selection. When you’re monitoring your TMS, it’s simple to track your KPIs and determine new solutions to benefit your business. When you’re shipping from one DC to another, or from a brick-and-mortar location to the end user, it helps to know where the truck is and when it’s expected to arrive, which a TMS can help configure. Customers want visibility, too – they should be made aware of any disruptions during the product’s journey.
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