Great ecommerce has become synonymous with super-fast and stress-free delivery, designed to flex and fit perfectly with the consumer’s hectic lifestyle. In an often crowded and commoditised retail space, unique customer experiences like these can be the key to increased sales conversions.
As you’d expect online pureplays led by Amazon have been pioneering this approach in retail segments ranging from consumer electricals to fashion. But now leading grocers are getting in on the act, opening up a new front in the ongoing supermarket store wars by focusing on innovative final-mile delivery solutions and leveraging unique customer experiences.
This trend is being driven by changing market conditions (smaller families, urban living, and demand for fresh produce) which is putting pressure on retailers with large outlets on the city outskirts. In addition, the grocery market is dominated by the discount model, with discounters driving growth mainly by opening new outlets.
The challenge for grocery retailers is to configure their back-office systems and processes so that they can best serve consumers’ delivery expectations for fast, frictionless, high convenience delivery. Here are four innovative delivery experiences already being used by grocers.
Blurring the boundaries between supermarkets, restaurants and takeaways
China is a hotbed of grocery retail innovation, and Alibaba’s bricks-and-mortar Hema store is a great example of how far the envelope is being pushed. At Hema you can eat food cooked in front of you (delivered by robots to your table), pick up a click-and-collect order in-store, or do a regular grocery shop while staff pick online orders to be delivered along with takeaway dinners, in 30 minutes to postcodes nearby.
While Hema may be in pole position when it comes to blurring the lines between supermarket, restaurant and takeaway, British supermarkets have also spotted the trend and are adapting it in a bid to innovate around delivery, and achieve sales-boosting customer experiences.
Sainsbury’s is currently in early-stage talks with Uber-Eats to sell and deliver essential lines, such as bread and milk via the takeaway firm’s app. It is also teaming up with Deliveroo to sell hot pizza in a bid to win a slice of the fast-growing food delivery market, which is expected to be worth £9.8bn by 2022.
Walmart-owned Asda is also attempting to differentiate its brand in a crowded market by offering a 30-minute delivery on a range of 100 essential products. The new service at two Asda stores is an expansion of an existing partnership with food delivery firm Just Eat, delivering freshly cooked pizza.
The Co-op is piloting a similar service with Just Eat’s rival, Deliveroo, delivering party packs, beers, wines and spirits as well as snacks and confectionary from selected Manchester stores. In mainland Europe, supermarket chain Ahold Delhaize has also raised its game by building its own central kitchen in Amsterdam to cook and distribute its own food.
Delivery to fridge
Home delivery is a routine service for big supermarket chains, but now a select few pioneering retailers, including Walmart in the US and Waitrose in the UK, are taking this service to its logical conclusion – delivery to fridge.
Walmart customers will soon be able to buy their grocery shopping online and a store employee will access their home using a smart lock and place their groceries in their fridge. The entire process will be livestreamed to the customer thanks to a camera worn by the delivery person.
The benefits for the customer are clear; no more hunting for a suitable delivery time slot, no need to be home when the delivery arrives and no fuss of unpacking groceries and putting them away.
More than 1 million customers will be able to use Walmart’s service when it is rolled out in three locations: Kansas City, Pittsburgh; and Vero Beach in Florida.
Robot grocery delivery
Tesco and Co-op are among a growing number of grocers globally trialling delivery by autonomous vehicle, with the aim of reducing costs and increasing customer choice, ease, speed and convenience.
Tesco and Co-op Customers place their order using the Starship Technologies app and their purchase is delivered by a six-wheeled robot which measures 70cms long and 55cm high.
Co-op has been trialling the service since 2018, in partnership with the US-based Starship Technologies which runs a fleet of the six-wheeled robots in Milton Keynes. The grocer says that eight-in-ten households in the town have downloaded the app, with milk the most popular product. Tesco recently joined the programme.
Starship Technologies has also deployed robots in the US, Germany and Switzerland and its robots have covered 100,000kms and completed 30,000 deliveries. The robots deliver within a three-mile radius and can drive autonomously while being monitored by humans in control centres.
Investors clearly see a bright future for robot delivery with Amazon investing $1.2bn in autonomous vehicles and Softbank investing $1bn in Nuro, a Californian start-up that builds robot delivery systems.
Meanwhile KPMG has predicted that autonomous grocery delivery vehicles will cover 78bn miles globally by 2040.
Delivery by drone
Perhaps the most futuristic delivery innovation, and the most problematic, is delivery by drone. Amazon first touted its Prime Air service back in 2014, but safety considerations and air traffic regulations have meant the service has yet to take off.
Amazon claims this is about to change, however, after recently announcing its development of fully electric drones that can fly 15 miles and deliver packages under five pounds to customers less than 30 minutes.
This may sound like a small payload but Amazon says up to 90% of its purchased items are under that weight limit. The new drone uses a combination of thermal cameras, depth cameras, and sonar to detect hazards.
With the help of machine learning models, onboard computers can automatically identify obstacles and navigate around them.
Amazon says its drones can avoid ‘paragliders, power lines, to the corgi in your backyard’, but it has yet to announce when or where the service will be launched.
Where Amazon has struggled to get its service off the ground, Iceland’s biggest online marketplace, Aha, has succeeded. It has been using drones to deliver products in Reykjavik since 2017.
Aha is permitted to fly 13 routes around Reykjavik, and its drones can make detours of up to 700m in order to reach customers. This gives them effective coverage of around half the city. The maximum weight the Aha drones will carry above Reykjavik is 3kg (6lb 9oz).
This rapid growth in delivery innovation isn’t proving to be cheap for grocers. They are having to either pay fees to delivery companies, parting with a slice of their profits, or they are investing their own money in delivery solutions of their own. This comes on top of already wafer-thin profit margins.
The answer is achieving profitable delivery at scale, which arguably suits larger grocers who have a shorter drive time between drop offs.
These pilot delivery programmes also show how retailers are attempting to better understand their customers’ requirements and how they fit into and compliment a broader mix of grocery fulfilment options.
In many ways, the method of final mile delivery is just the tip of the logistics iceberg. The real investment is in the stock, customer and order systems that optimise delivery and ultimately make it profitable.
When retailers can better understand their customers and have the right processes in place which are based on latest technology needed to fulfil grocery orders in a profitable way then they will be able to deliver the winning customer experiences needed to seal loyalty and increase market share.