Why do retailers need grocery delivery? My 3 conclusions
Today, delivery ads are everywhere and it seems that there are getting more and more of them.
In this mini-article I am going to consider why retail chains may need grocery delivery in general.
After some research I found that most of the delivery services are free even if the order is not so big. What is the benefit then? Of course, there are companies that only offer delivery service as a way to please their shareholders or just want to properly master their marketing budget.
But let’s look at those companies that do it for real, why would they need it? I have written about the Russian market, but in general it will be relevant for any country with some adjustments.
My TOP 3 reasons where there are opportunities for growth and savings in retail.
1. Increasing the number of products (SKU)
a) Product testing
It is possible to conduct complex AB testing with any product, because delivery allows you to add to sales those items that are not in stores or cannot be represented everywhere.
b) Launch of new manufacturers and private label
You can test everything from marketing to packaging features without loading the retail network. This will allow you to involve more different providers and they will not have to fight for a shelf.
c) Product quality
By shipping a specific order to a specific customer, we can trace the entire way where we missed, for example, broken packaging or expired sell-by dates.
After all, on the general layout it is more difficult to understand when a mistake was made. Especially with the current policy when the stuff is accused in all of the flaws and thus tries to hide them.
2. Dark stores
Specialized warehouses can be used for delivery. The economy of which can be much more interesting than that of ordinary stores.
a) location
You can take a non-passable location and get a low rental rate.
b) equipment
No expensive equipment is required for the sales area, just racks and refrigerators with basic lighting.
c) staff
Requirements to the staff is significantly lower, anyone who can assemble a basket with a terminal (PDT) will do. You can also offer an ultra-flexible schedule to employees which ordinary retail simply cannot afford.
d) Robots (in the near future)
You can use automated lines to assemble orders.
3. Increased sales
Online sales have the same advantages that are used by traditional Internet sales leaders and which also have a positive effect on the economics of the entire process.
a) It is possible to serve more customers + B2B
You can expand your customer base and sell to those who live far from the store. And organize sales for B2B customers.
b) Personalization of sales
It is possible to give highly personalized offers considering individual preferences which helps to increase the average check. For example: All gluten-free food.
c) It’s easy to quickly turn on/off positions.
If we realize that we are running out of something, we can simply remove it from the output for some users until the stocks are replenished.
d) Loans for buyers and suppliers
Seeing all the dynamics of demand, you can lend to both buyers and suppliers.
My conclusion:
Regular retail will not disappear, but will become only part of the process.
But it is also short-sighted to say that shipping is just a bubble without profit. There are many opportunities for growth, both for direct profit growth and for qualitative improvement of other metrics. And the online presence will gradually grow. Along with the growth of robotization of all processes.
