As customers, we all know that feeling of wondering how you’ll fit in the weekly food shop around work and family commitments. Fortunately, in the UK, we are becoming increasingly accustomed to turning to online grocery shopping instead. In fact, this year, online grocery sales are expected to total £11.1 billion, a 15% increase on 2016. Interestingly though, it’s news from the US which is making the latest headline for change in the grocery market.
The Online Grocery Trend
More and more shoppers are choosing not to go to the supermarket. In fairness, why would they when the shopping can be delivered to their door? It’s easier, and for the consumer at least, a pretty cost-effective solution to the weekly grocery shopping nightmare. It’s also interesting to know that the value of these online shopping trolleys is also growing considerably faster than those of the physical trolley with the wonky wheel travelling around the store. Sales in the online grocery market grew by around 15% last year, whilst total food retail sales only grew by a paltry 1.5%.
Walmart’s Latest Plans
Walmart, the American retail giant who also owns Asda in the UK, is trialling a method of partnering with Uber, Lyft and Deliv to achieve same-day grocery deliveries in the USA. Unlike the UK supermarkets who keep the logistics of their online grocery shopping process in-house, Walmart is trying a different approach by using third-parties for delivering.
There are some caveats. You need to have a minimum order value (the same as UK shoppers will be familiar with) and, at present, this is only available in certain urban areas. It’s also not a case of a customer paying Walmart for the groceries and then the driver for the delivery, but the customer’s complete transaction is with Walmart themselves.
At the moment, the partnership is with a new delivery company called Deliv and is being trialled in areas such as San Jose, California. There are also four other urban areas being served through Uber. However, this is being rolled out fairly quickly and it is thought that Walmart will continue to scale their same-day grocery delivery options across the United States – all using the same model of using third party logistics companies.
Why Same-Day Grocery Delivery Makes Sense
Companies can gain an immense competitive advantage over a staggering 85% of their competition if they are able to offer same-day delivery. In fact, a notable 23% of global online shoppers have indicated that they would abandon their online grocery shop if same-day delivery isn’t available.
The maths shows that grocery retailers must come up with a solution to the customer expectations, and it seems Walmart’s approach may just be an answer. When you compare this with other online grocery options, it’s a distinctive selling point. For example, Amazon Pantry in the UK hasn’t really managed to compete with traditional supermarkets because it still has a long delivery time of several days. However, in the US they offer same-day delivery for Prime members in some cities. Indeed, in Boston, Prime Now is offering delivery within just a few hours.
The CEO of Walmart, Greg Foran has stated: “Online grocery is probably one of the things that is helping us most in the stores. That’s probably giving us customers who previously wouldn’t have shopped with us.” He believes that the online grocery option is helping to bring in customers who typically haven’t used Walmart – most notably the higher-income and urban customers who have traditionally shopped elsewhere.
The Future of Online Grocery Shopping in the UK
Almost one third of online shoppers have done more of their grocery shopping online in the past 12 months. In fact, a sizeable 14% of us now do all our grocery shopping online, which has doubled in the last 3 years. 48% of us do at least some of our grocery shopping online and online grocery shopping is the fastest growing grocery retail channel.
However, despite these figures, and despite the upward trend, online grocery shopping is still in the minority. Only 6% of all grocery retail sales were made online in 2016. The supermarket itself is still king, rather than the delivery lorry. But perhaps if same-day delivery was available, like Walmart are pioneering, this would change.
This is particularly likely as younger generations are increasingly making up the market share. As these younger tech-savvy and connected consumers become the highest value grocery shoppers, it stands to reason that there will be further increases in online sales. Demand will push for more flexible and same-day delivery solutions. When we look at the data in these age sets, then it certainly looks as if things will continue to boom for online groceries. These are the consumers who will do their grocery shopping on their smart phone on their commute and want the shopping there on their return. This will drive customer expectations and retailers need to be ready to meet those expectations.
However, groceries have some unique supply chain complexities, most especially where fresh goods are concerned. At the moment, it is these complexities which is keeping the current UK online grocery model as it is, without the ability for same-day delivery. If these problems can be overcome then maybe the UK can adopt similar logistics methods for online grocery deliveries as Walmart is using.
If you’re keen to know if offering same-day deliveries will give you the competitive advantage that you are looking for, or want to know how you can create efficiency in your delivery services, then our supply chain consultants can help. We have global and UK specialists in logistics and warehousing who can advise. Call us on +44 (0) 121 517 0008 or email [email protected].