Suddenly At a glance, millennials, mothers and grandparents alike have abandoned the decades-long practice of wandering the dusty corridors of the grocery store for the convenient and new use of the online grocery store. While Instacart, Amazon Fresh and others have been offering an alternative to the grocery store for years, it is the pandemic that has classified them as essential businesses and that has more than ever offered them a clear competitive advantage.
But these past two months have seen not only drastic changes in consumer behavior, but also fundamental changes in the business models adopted by grocery stores around the world. These changes are not temporary - indeed, they are here to stay, crown-catalyzed and permanent.
Innovation in fulfillment can lead to efficiency and cost savings
For the consumer, online shopping generally starts and ends in the same way: they place their order on an app or website and after a few hours it shows up at their door. But the ways in which these orders are fulfilled manage the range.
The best known approach comes from Instacart, which is based on hundreds of thousands of human shoppers who fulfill customers' online grocery orders by shopping side by side with regular brick and mortar customers. The model clearly works for Instacart, valued at nearly $ 14 billion after its latest relaunch.
However, this model is far from ideal. Even before the COVID, buyers were known to exclude repeat customers, not to mention the introduction of high delivery costs and the element of human error in the fulfillment process.
An obvious solution has become the central logistics center, or CFC. CFCs are self-contained department stores, which often serve distinct geographic areas, capable of providing both physical stores and online grocery deliveries. As order volumes increase and consumers demand ever faster delivery times, innovation has already been infused into the CFC model.
Some foodstuffs, in particular Kroger, believe that the introduction of robotic automation in CFCs through solutions such as Ocado can create economies of scale for the realization. These CFCs implement fulfillment robots, controlled by air traffic control technology, that run along a grid system and move goods through classified crates. Kroger is continuing to invest in the model and recently announced three new Ocado automated CFCs in the western, northwestern Pacific and Great Lakes regions of the United States. The smallest location is over 150,000 square feet.
While Kroger it remains solely connected to the CFC, Albertsons / Safeway, Walmart model and many others prefer the microfulfillment center (MFC). MFCs, generally much smaller in size (think about 10,000 square feet), are automatic warehouses obtained from the back of existing stores that guide faster turnaround times in a smaller geographic area, allowing chain stores to use their many geographical areas to act as effective fulfillment / delivery centers for e-grocery coverage.