Grocery stores in Canada need to invest in robust e-commerce capabilities to prevent a repeat of stock-outs and long delivery delays that disappointed large numbers of customers who opted for virtual shopping at the onset of the coronavirus pandemic, according to a food industry expert at the FreightWaves Last Mile Logistics Summit.
Canadians are hungry to shop online for food and staples, but the grocery sector’s infrastructure significantly lags demand, said Gary Newbury, who spent 30 years reshaping distribution networks for Gordon Food Service in the U.K. and Canada.
“Retailers were underprepared. They didn’t understand what they needed to do and how to scale their proposition when the sheer volume of demand hit them,” he said in a virtual discussion.
Large supermarket chains spent a lot of time on data science and how to acquire customers, but they failed to realize the need for a fulfillment strategy to execute those orders, Newbury said.
Many people bought groceries online for the first time as the COVID-19 outbreak spread but often faced two- to three-week waits and then had their orders canceled on the day of delivery, only to be told to place another order.
Loblaws, the largest supermarket chain in Canada, only implemented “Click-and-Collect” pickups at a few outlets because leadership mistakenly believed consumers weren’t interested in that option, Newbury said.
“They need to embrace the online services customers are screaming for and how to integrate stores and e-commerce into a blended whole” in a way that’s profitable, he advised.
Online fulfillment can be very expensive if not done correctly, so figuring out the right processes is critical, according to experts.
“How to pick singles at scale and deliver to residential addresses” requires a completely different skill set than traditional distribution, Newbury noted.
Walmart, Costco, Sephora, Staples and other retailers partner with third-party delivery providers such as Instacart and DoorDash that provide gig workers who receive the digital orders on their devices, do the shopping and make the delivery. Consumers like the on-demand service and low delivery fees. Stores benefit because the programs are relatively cheap to implement.
The downside of the Instacart strategy, Newbury said, is that retailers have to transfer a lot of valuable data about what customers are buying.
“As a consumer, I think Instacart is brilliant. As a retailer I’d be very cautious about looking at it as some kind of permanent solution because you are handing over a hell of a lot of data that is very important to your business” and that can be compared to what consumers are buying across brands to gain market insights, the food logistics veteran said.
Sobeys, Canada’s second-largest grocery chain, is going a different direction. It uses centralized warehouses for singles picking and its own fleet of delivery vans for next-day delivery in the Toronto metropolitan area and next year in Quebec.
Newbury questioned that strategy when other stores are offering two-hour delivery windows from the time an order is placed.
Sobeys charges CA$7.99 ($6) for delivery, but as it scales up, delivery slots will be much more difficult to secure and shoppers will end up disappointed, he added.
Instacart could face challenges too, Newbury said, if it tries to increase efficiency by accumulating orders for two or three customers in the same neighborhood. Without temperature-controlled vehicles, any delay at one location could alter the temperature of products.