Is online fulfillment from stores too complex for e-grocery?


Through a special arrangement, presented here for discussion is a summary of a current article from Frozen & Refrigerated Buyer magazine.
Supermarkets without a firm handle on on-shelf availability and store-level perpetual inventory had better think hard before committing to an online ordering/in-store fulfillment business model. Double-digit rates of out-of-stocks and item substitutions are the current norm in online orders picked in stores. For some, this could be a customer experience disaster in the making.
The same issue could also prove to be an Achilles heel for the announced Amazon/Whole Foods combination, if they fail to match the customer expectations on delivery accuracy that Amazon has established in other categories of merchandise.
The know-how to get this right does exist. On Walmart.com, click & collect shoppers can view and order items by store and see the counts of quantities available. Similar in-stock visibility or confirmation is built into the Home Depot, Lowe’s and Office Depot sites.
Real-time, store inventory visibility is essential for online grocery ordering systems, yet it seems to be the exception so far. For supermarket operators who have made a decision to compete in order & deliver or click & collect, a similar service standard represents a significant competitive opportunity.
Adopting a store-level, real-time, inventory management system with automated ordering and perpetual inventory is a high-ROI investment on its own. For any retailer who contemplates fulfilling online orders in the stores, superior inventory accuracy and visibility are even more essential. Your customer relationships depend upon it.
DISCUSSION QUESTIONS: Does in-store fulfillment of online grocery face the same or greater challenges than in other retailing channels? Do you believe that the systems able to capture real-time, store inventory visibility in the food category are advanced enough to assure a high level of order accuracy?
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28 Comments on "Is online fulfillment from stores too complex for e-grocery?"
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Co-founder, RSR Research
Funny you should ask this question. Because of a knee injury, I had to use Instacart for a couple of months. At first it seemed addictive, but it got really tiresome … Publix in particular was always missing several items I requested (Whole Foods actually did a far better job). It got to where I had to say no substitutes but I still kept getting them. I’ve given up on Instacart, and my knee is better … but this is a real problem and I don’t see it going away any time soon.
Product just turns too quickly for inventory records to stay accurate.
Cofounder and President, StorePower
Strategy Architect – Digital Place-based Media
Does anyone really doubt that food retailing will be increasingly better served by technologies and some low-cost workers? Especially given that a return on time is increasingly valued by consumers.
Principal, Retailing In Focus LLC
I think Amazon has the chance to bring a level of execution to online grocery shopping that doesn’t appear to be in place yet. I don’t want to judge an entire industry from my experience with Safeway last week, but it may be typical. While on vacation, I ordered groceries to stock up our rental house for a week. The order did not show up in the scheduled delivery window (in fact, Safeway was running three hours behind and I canceled the order) and would have been one-third short-shipped. What I thought would be a convenience turned out to be a customer service nightmare, after spending nearly an hour on hold to fix the problem.
Again, it’s a small sample size but the combination of stock-outs and late delivery does not exactly inspire confidence in the process. I believe Amazon has the capacity to make this work, and they won’t roll it out aggressively until they are ready.
Co-founder, CART
Supermarkets simply iterating with processes and technologies to “improve” inventory management and fulfillment won’t work. It takes entirely new thinking and a different approach that Amazon has set their sights on in a major way. I’m 100% with you here that Amazon will figure out how to make this work. Other retailers will be forced to catch up.
SVP, Strategy & Insight, Profitero
As Paula’s experience underscores, the status quo is definitely not optimal. Customer-friendly substitution policies can help in the short-term, but retailers will need to continue to invest in better inventory management systems as demand for online grocery builds.
There is also the challenge of serving two masters with a single physical asset. Online grocers like FreshDirect and Amazon fulfill orders from fulfillment centers optimized for non-store operations, enabling better demand forecasting, more efficient order-picking and, ultimately, fresher perishables.
When online volume accounts for more than 10 percent of a store’s volume, it starts to have serious impacts on the in-store shopper’s customer experience and the overall store’s economics. Staying in-stock at the physical shelf is harder, labor management is harder and shoppers don’t like competing in the aisles with eager uniformed order-pickers.
Co-founder, RSR Research
I’m not sure the problem is solvable. I think I wasn’t clear about that. You certainly don’t want to turn product any slower … and by definition, the faster it turns, the more out of whack the perpetual gets. Home delivery has to be a profitable enterprise, and I’m having a hard time visualizing that.
Chief Executive Officer, The TSi Company
The article brings up good points. There is a definite need for supermarkets to offer online ordering and delivery services. Customers want it and grocers’ competitors are providing it. However, as a user of this service with two supermarket chains, there are some problems. Items out-of-stock are one, receiving the wrong item is another and sometimes items such as fruit, vegetables or meat wind up in the garbage because of poor quality.
There is a huge cost to providing this service with added staff, delivery drivers, delivery trucks and insurance. I feel today that some businesses are reacting too quickly to competition without thinking it through. The technology will improve and that will help control out-of-stock items, but grocers will also have to reduce errors like giving customers the wrong item as well as delivering poor quality items. Not only is this service costly for the supermarkets to provide, they lose out on impulse buying when customers do not come into their stores.
Professor of Food Marketing, Haub School of Business, Saint Joseph's University
As noted in the article, this potentially real differentiating factor for brick-and-mortar retailers over pure-play online grocery retailers does represent an Achilles’ heel. I am a strong proponent of BOPIS (Buy Online, Pickup in Store) primarily because research shows that the total market basket of BOPIS is larger than in-store only or online-only grocery shopping. Customers enter the store with empty baskets (collecting their groceries at the end of the visit). Empty baskets translate into the perception of more money to spend, particularly in those non-center store categories (think perimeter) that command high margins.
However, if the grocery retailer cannot execute the concept properly, it should probably not offer the service until it is flawless. This is not an area where the retailer can “roll and fix.” They need to get it right from the start.
Content Marketing Manager, Surefront
E-grocery is reliable for dry and frozen foods, but produce is too ephemeral to be easily trackable via inventory management systems. After all, produce is a living thing and it’s tough to bag and tag a lifespan. Perhaps we need to change our expectations of online produce — making room to account for variables such as bruising and turning — instead of expecting it to function like dry goods.
Retail-Tech Specialist Advisor
Click and collect fulfillment in-store is extremely complicated in terms if on-shelf availability and stock management. If items ordered by shoppers aren’t available to collect in-store it creates issues like wasting the time of store employees and making the shopper less satisfied.
Grocery stores’ stock management and shelf availability are well known problems that most retailers haven’t been able to solve, and that some haven’t even been able to reduce. The average out-of-stock item level remains at 4 percent to 8 percent levels at most grocery retailers. This is also an issue for in-store shoppers but when we talk about click and collect these rates can kill it altogether.
Retailers have to improve these KPIs by using new technologies such as smart shelves in order to succeed with click and collect.
CEO and Founder, Cahoot
Currently, consumers using in-store fulfillment may be accustomed to something being out-of-stock. The current expectations seem a little lower than in other retail channels. That expectation is going to change quickly. The need for real-time inventory visibility is growing with all online retailers.
Systems are becoming more advanced to meet these needs, maybe not as quickly as we would like. Having a 360 view of your inventory is extremely important. Even more important is having your inventory be accurate. This will be a challenge for online grocery retailers, but technology will start to catch up.
Managing Director, StoreStream Metrics, LLC
Time from order to fulfillment and accuracy are directly proportional to inventory availability. Add to that the fact that a human fulfills these orders and you can expect errors and dissatisfied customers. It’s amazing to me how many issues we’ve discussed here over the years have lead back to inventory monitoring, availability, etc., and the number of problems and challenges that would go away if retailers and brands just knew where their stuff was at any point in time! It’s time for all products to become “connected.”
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
Why should we even expect in-store fulfillment to be successful? Fulfilling an online order out of a warehouse versus in a store are two different operations. Operationally they don’t match up. The focus of the jobs are different. The KPIs are different. The labor skills are different. In-store fulfillment only complicates inventory control in an area where stores aren’t terrific controlling it as it is.
Senior Vice President, Dechert-Hampe (retired)
It is probably a very good thing for all grocery retailers that Amazon decided to jump into this space fairly early on. Otherwise, the lousy experience traditional supermarket inventory availability and delivery/customer service are dishing out would have very likely killed the online order grocery baby before it ever reached adolescence.
Amazon will reassure online shopping junkies that the same level of service they have come to expect in other categories can be had in grocery shopping. Then other retailers will have to step up their inventory management and order accuracy or die. Fortunately for those traditional grocery retailers, the combination of affordable AI and IoT technologies can save them — if they take advantage soon enough. And “soon enough” is now.
SVP Marketing, Theatro
Founder and CEO, project44
Scientific Advisor Kantar Retail; Adjunct Ehrenberg-Bass; Shopper Scientist LLC
The fulfillment problem is just the ignored tip of the iceberg. The entire brick-and-mortar system is built on PALLET logistics, delivering pallets of merchandise assembled in warehouses to stores where paid stockers put the stuff on shelves. Amazon’s entire logistics is built on ITEM delivery to individual shoppers, not to stores.
The brick-and-mortar retailer’s entire model is heavily dependent on UNPAID STOCKPICKERS, aka shoppers, to do that final “picking” and taking it to checkout for purchase. This is why I refer to brick-and-mortar retailers as merchant warehousemen. They do not SELL anything to anyone. They simply keep the WAREHOUSE, aka store, stocked, and other than stocking and COUNTING the money and sales, they are fairly ignorant of the actual mental/physical PROCESS by which shoppers sell to themselves.
It’s too complicated! 😉
This is the best summary of the reality of store inventory visibility and accuracy, or, rather absence thereof I have read, and the perfect description of the current situation in most grocery stores worldwide.
sales management consultant
Global Retail & CPG Sales Strategist, IBM
I have to smirk just a bit when I get to thinking about this topic. There are certainly some great, innovative leaders in the grocery biz that are making this in-store fulfillment challenge a reality. However, the vast majority of retailers still have very basic out-of-stock conditions in their stores without the added pressure of fulfilling online orders. The same issues I had as a store manager in the 1980s are today still haunting the industry.
Bottom line, before you set out to disappoint even more shoppers with stock-outs, investigate order optimization technologies to take the “gut feel” out of your business and get your store in-stock for the in-store shopper. THEN you can begin to think about online order fulfillment.
Retail Tech Marketing Strategist | B2B Expert Storytelling™ Guru | President, VSN Media LLC
Independent Board Member, Investor and Startup Advisor
Thanks Jamie for triggering this lively thread. We get so far down the potential path that we step over core building blocks. There are some basic activities that have to happen with great efficiency due to the large volumes moved in grocery and the high ratio of fixed to variable costs in the brick and mortar business. In-store PI goes from good to have to must have once the chain moves to a hybrid physical and online operational environment. No amount of scaffolding can keep a rickety foundation from collapsing under the sheer weight of layering the latest set of brilliant new ideas.
Founder and CEO at Orkiv.com
To Paula Rosenblum’s point, the problem I faced with my online order from Stop & Shop’s Peapod is that the groceries I was used to, like a full bunch of bananas, seemed like baby sized. The bag of Brussels sprouts I had normally gotten was half the size for just as much money. It did come in time, and I wasn’t ordering insane ingredients, but the expectation and reality were still distorted.
It shouldn’t be too hard to do in reality. There have been systems doing this forever. Now, with advanced systems like Epic Commerce, A.I. can utilize the in-store availability to suggest new products or even auto-reorder. The retailers/grocers not using this type of technology, at least at the omnichannel level, are set for a downward spiral. Consumers expectations are only growing and these grocers have to invest in their technology stack equal to anything else they are doing.
Chief Amazement Officer, Shepard Presentations, LLC
The concept of in-store fulfillment of online retailing is going to become, if it is not already, “table stakes.” If you choose not to be proficient in this area you may be at a competitive disadvantage. Accept it or not, a grocer — or any retailer — is competing with Amazon, who sets the bar for fulfillment.
Retail and Customer Experience Expert
I wonder if the best way to do in-store fulfillment is to maintain separate stock count for online in the store for high velocity items, kinda like airlines increasing flight time estimates to increase ontime departure. The nature of shelf inventory in stores means you can’t be 100% accurate all the time in the system. With online orders being critical for completeness, raiding store shelves ahead of in-store customers doesn’t help with store experiences either. Analytics should be able to ID the fastest turning items that are most often missing from e-commerce orders, and retailers need to hold stock accordingly.
Director of Marketing, OceanX
Online grocery of certain items like fresh fruit and veggies and even specific cuts of meat that people will want to select will have greater challenges than other grocery items like toothpaste and of course things like apparel. There are systems in place and they will improve over time to assure accuracy, but the question is, will the companies invest in them when they don’t see ROI?
A bigger question and something that the eco-conscious side of me hopes is that these advancements and consumer shifts will lead to less fresh food being displayed and going to waste. I know the stats of American shoppers choosing over and over again to prefer a fruit selection that looks full but that “marketing” tactic leads to huge waste that sadly is not allowed to be donated in many cases. We still have people who don’t have access to fresh foods and we still overproduce and then throw away. Maybe online orders and pickup will help over time.