According to an industry survey, in August 2022, 68 million households placed a grocery order online. While the base of monthly active users is 1% lower than the previous year,, the survey revealed that e-grocery shopping is 116% higher than in 2019 levels and is likely here to stay. What’s more, the number of monthly users this year is 23% higher than in August 2020, at the height of the pandemic, showing a trend from habit to permanent new behavior.
Consumers developed a taste for the convenience of online grocery shopping two years ago, and their appetite for it hasn’t let up yet. As we’ll show in this article, the numbers suggest that e-grocery isn’t going anywhere anytime soon.
Now, the online grocery world has new issues to contend with, such as sustainability, rapid growth of online orders, and managing consumer expectations for ever faster delivery. There are strategies that grocers can utilize, and technology they can employ to overcome these recent challenges. The right combination of technology, operational strategy, and personnel will help grocers of all sizes capitalize on the momentum of e-grocery shopping.
The State of Grocery Delivery Logistics
One of the biggest pandemic-related shifts in e-commerce purchasing behavior was in the grocery category. In 2021, the MasterCard Economics Institute found that 10% of all grocery purchases were online, up from 7% from the year prior. What’s more, MasterCard expects online shopping orders to keep growing.
Other statistics corroborate these findings. According to eMarketer, digital grocery saw a 42.6% increase in shoppers in 2020. eMarketer predicted a 4.1% increase in e-grocery shopping in 2022, a 2.8% increase in 2023, and finally, 2.5% growth in 2024. Although most online buyers are millennials or Gen Z, other demographics are becoming comfortable with the grocery delivery trend as well. Instacart, for example, found a 9% jump in senior citizens using online shopping platforms in 2020.
Long term, Deloitte estimates that online grocery revenue will maintain a compounded annual growth rate of 29% per year through the year 2024. And another financial consultant Morris Anderson predicted that the online grocery market will increase from $27 billion in 2020 to $35 billion in 2025. As the firm explains, consumers will become more comfortable relying on third parties to choose items on their behalf, and large companies like Amazon and Walmart will probably bring more customers into the fold as they build out their online grocery business.
Of course, with rapid growth of any industry comes certain challenges. Deloitte notes that the growth of last mile grocery logistics will depend on geography, infrastructure, and the technology that’s available. The final mile is a notoriously difficult and expensive part of transportation, but as e-grocery demand rises, that leg will need to overcome those challenges.
Trends in Grocery Delivery Logistics
Sustainability
Grocery delivery must be convenient, easy, and sustainable. A USDA study found that, in 88% of U.S. households, people drive at least 4 miles to go to a grocery store. The report found that if each household drove once per week to the store, that would add up to 42 billion miles driven, and 17 million metric tons of CO2 getting dumped into the environment. Therefore, grocery companies have an incentive of providing logistics service as part of their efforts to help mitigate the effects of climate change.
Grocery logistics can help reduce the number of cars on the road and cut into emissions numbers. Other measures to reduce carbon imprints are possible, too. For example, a University of Washington study shows that, if trucks are filled to capacity and dropped off at locations that are clustered together, these factors can reduce carbon dioxide output by 20-75%.
Increased Online Activity
Online sales could represent more than 15% of grocery purchases by the end of this year. As the market share continues to rise, it’s bringing in niche retailers, such as Misfits Market which allow consumers to “rescue” rejected produce that otherwise would have gone to waste. Thrive Market expanded into new verticals too, and began delivering to more regions last year. Niche companies like PlantBelly, allows customers to subscribe to weekly vegan deliveries. This suggests that the online grocery market is thriving and will continue to expand in the foreseeable future.
Higher Demand With Higher Expectations
As demand for last mile grocery delivery grows, so will expectations for faster delivery. Over the past decade, wait times for online orders have shrunk from several days, to 24 hours, to under an hour in some major cities.
Grocery logistics companies are ready to respond to the surge in online orders. Last year, Instacart introduced its Convenience Hub, a virtual convenience store that offers 30 minute delivery every day of the year. Meanwhile DoorDash launched a grocery delivery service of its own, offering shoppers in the Southeastern United States delivery in 45 minutes. And the legacy grocer Kroger launched a drone delivery program for customers in Centerville, Ohio in 2021.
Challenges in Grocery Delivery
Sustainability
Although grocery delivery can boost a grocer’s sustainability, that isn’t a given. At present, the food supply chain is responsible for 26% of the world’s carbon emissions, and most of those emissions come from transportation. Last mile grocery delivery can also potentially increase food waste. If groceries are not delivered within a specified delivery window, or if consumers are not home for a delivery, it could lead to greater food spoilage.
More Online Orders, Necessitating Streamlined Technology
In order to manage the uptick in online sales, grocers have had to pick orders more efficiently, in a way that is not disruptive to in-store shoppers. In order to manage the surge in demand for online orders, some grocers are experimenting with dark stores or split stores, in which part of a large location is converted to an e-commerce fulfillment center.
Delivery Expectations Increasing
As online revenues grow in proportion to in-store sales, grocery chains with limited delivery services are having to make rapid changes. Grocers must pick and ship non-perishables, fresh produce, and refrigerated and frozen items within increasingly smaller delivery windows, all while providing visibility to their customers and managing exceptions.
Best Practices for Last Mile Grocery Delivery & Logistics
Focus on Ease of Use
There are a few actions that customers will take when they order groceries online. Consumerswant to search for particular items, add them to the cart, review and edit an order, and pay. Grocery companies need to make that process as easy as possible by enabling filtering, and displaying brand name, price, ingredients and allergens clearly. Once an order is finished, they should include an “order completed” page with a summary, payment confirmation, and delivery information.
Provide Shipping Information First
Certain information, such as zip codes served, shipping costs and speed, and delivery restrictions need to be stated up front, even before a consumer begins shopping. Otherwise, a customer could spend time and effort filling a cart, only to find that a shipment wouldn’t arrive on time.
Customers expect accurate orders, fast service, and narrow delivery windows when they order groceries online. Ideally, distributors should offer same-day delivery service with half hour delivery windows.
Next, grocers have to decide how to transport deliveries to their customers. There are home delivery, curbside pickup, and third party delivery options.
Provide BOPIS Options
Buy-online-pick-up-in-store, (or BOPIS) lets customers place grocery orders online, and then come to the store to pick them up. It eliminates many of the usual last mile challenges, like temperature control, and affords customers an opportunity to make an unplanned purchase or add forgotten items to their grocery list. Additionally, customers pre-order their weekly grocery haul but also show up to consume ready-made food to meet the daily demand of “what’s for dinner?”
Find a Tech Platform to Manage Online Orders
Online shopping was not a new concept before the global pandemic, but the pandemic did force grocers to build out their online capabilities quickly. Fortunately, a variety of technology platforms are available to integrate products into one sales channel, and ensure that all products can be purchased online.
Cultivate Customer Loyalty
Companies that collect customer data can use it to generate happy patrons and increased sales. Here’s how: once a customer’s shopping history is known, companies can anticipate what the buyer wants, and send them offers on products they might be interested in. In other words, businesses can customize the shopping experience, which can boost loyalty and increase repeat business.
Lean on Partners to Manage By Exception
As we’ve discussed before, the last mile is rife with opportunities for freight exceptions. The stakes are higher for grocery delivery logistics because of their perishable nature. Unlike apparel or exercise equipment, there’s no second chance to deliver melted ice cream or spoiled meat. Therefore, it’s especially important that grocers have a tech solution to manage freight exceptions as they occur.
The Benefits of Using a Platform for Last-Mile Delivery Orchestration
If you are a grocery provider, or run a small or medium sized operation, you probably are not looking to build an entire last mile fulfillment department. Luckily, other options are available, like using a platform to orchestrate last mile delivery. Here are a few ways that using technology can help navigate the last mile:
Optimize Routes
Route optimization must account for a lot of factors, such as weather, traffic patterns, construction, and appropriate mode, for starters. A platform will plan a route, assign a carrier, and notify all parties if a route changes.
Price Shop
Last mile fulfillment technology gives you automatically negotiated rates, saving you the hassle of having to negotiate with different carriers. As an added benefit, you’ll get to comparison shop across multiple modes and lock in price on extras, like refrigeration.
Cut Down on Fulfillment Time
When it comes to order fulfillment, you could comb through an excel file, call couriers, compare prices, and process the order manually. Or you could use a last mile delivery solution that will automatically handle carrier selection and last mile tracking for you. Manual processing can take up to 16 minutes per order, but the right technology can cut it down to seconds.
Get Last Mile Visibility
Gaining visibility on last mile deliveries is crucial for grocers, especially for companies that use multiple carriers. it will be difficult or impossible to keep track of every shipment. Visibility solutions let you know the status of all your shipments automatically, keeping you ahead of delays and exceptions, and enabling you to communicate with customers.
Improve Metrics
When you use an orchestration platform like OneRail, the numbers speak for themselves. Our On-Time Delivery Rate is 98.6%, brand control is 100% in the hands of the shipper, and our smart automation lowers operating costs by 40-70%.
Grocery Delivery in an Instant
Last mile grocery delivery trends have grown exponentially in the past three years, and it has staying power. Consumers have fallen in love with the ease and convenience of online grocery delivery, and they continue to want more items, more quickly.
This is a great opportunity for grocers – as long as they are positioned to take advantage of the increase in demand. In 2022, it’s not enough to manage online orders with Excel or another manual process. Instead, distributors who use a technology solution, like OneRail’s last mile orchestration platform, will be the ones who pull ahead of the competition. Reach out today to learn how OneRail can streamline your last mile deliveries.
