Is Hy-Vee onto something as it moves online fulfillment from warehouses to stores?
In an abrupt switch in strategy, Hy-Vee is closing four fulfillment centers and will now handle all online orders from store locations.
“We are listening to our customers and they are wanting a full assortment of products, personalized shoppers and same-day pickup at the store, which we are unable to fully provide when we process orders at a fulfillment center,” Hy-Vee said in a media statement.
Three of the distribution centers — Kansas City, MO; Eagan, MN; and Omaha, NE — only opened last year. The center set to close at Urbandale, IA opened in 2016. More than 1,500 jobs will be affected, although some will be transferred as fulfillment shifts to stores.
Aisles Online, Hy-Vee’s online delivery service first introduced in 2015, was initially fulfilled from stores. The retailer then opened dedicated e-commerce fulfillment centers to support high-volume orders near major metropolitan areas.
Stores may be able to more easily support perishables and niche items, although the Des Moines Register said fewer substitution options should be expected from in-store fulfillment. Bakery and deli items remain unavailable for ordering.
The change may be related to the popularity of in-store pickup, which Hy-Vee offers for free with a minimum purchase of $30.
Aisles Online has been finetuned over the years. Same-day delivery now costs $9.95 with a minimum $30 purchase. Under a $99 annual membership, deliveries are free with a minimum $30 purchase. Hy-Vee also partnered with Instacart and Shipt in July 2018 to complement Aisles Online by expanding delivery areas and further supporting more same-day delivery.
Other grocers are likewise retooling operations to support omnichannel behaviors from shoppers.
According to a January article from The Wall Street Journal, some grocers are testing micro-fulfillment systems as small as 10,000 square feet that can be located next to stores or in urban areas where rents are excessive for a full-scale warehouse. Closer inventory promises quicker delivery times. Author Jennifer Smith wrote, “The store owners are evaluating whether automation can help tamp down costs while speeding up deliveries and they are turning to a new set of startups aiming to make e-commerce fulfillment more efficient in a small footprint.”
- Hy-Vee shifting operation of Aisles Online from fulfillment centers to stores – Des Moines Register
- Grocer Hy-Vee Moving Online Order Fulfillment to Stores – Multichannelmerchant
- Hy-Vee lays off hundreds at south Kansas City facility – Kansas City Business Journal
- Hy-Vee To Close Fulfillment Centers In 4 Midwest States – The Associated Press/WCC)
- Hy-Vee Announces Partnerships with National Online Grocery Delivery Services – Hy-Vee
- Grocery Delivery Goes Small With Micro-Fulfillment Centers – The Wall Street Journal
DISCUSSION QUESTIONS: Why do you think Hy-Vee shifted to in-store fulfillment of online orders? What mix between in-store, micro-fulfillment centers and regional centers makes the most sense to support grocery delivery and pick-up? Have the pain points changed?