How to Grow Your Online Grocery Delivery Business

October 15, 2020
spud delivery

Grocery shopping is changing. As more consumers move their shopping habits online, it’s critical for grocery stores to nail the online experience to not only survive, but thrive.

The pandemic has taught —and continues to teach— grocers to be flexible and to adapt. And we’ve already seen the best grocery retailers do just that by moving their stores online and providing swift home delivery options. In this blog, we will be exploring the ins and outs of this world called e-commerce grocery and how you can profitably scale your operations.

You will learn:

Grab your cart, and let’s go!

What does e-commerce grocery look like in a post-pandemic world?

Let’s start at the beginning. 

The term 'e-commerce grocery’ refers to the idea of online retail that is dedicated to the sale of groceries and grocery delivery. Today, e-commerce grocery comes in different shapes and sizes: from third-party mobile apps with on-demand delivery, to in-house curb-side pickup, and home delivery. What works for one grocery store, may not work for another. 

How fast is e-commerce grocery growing?

Precipitated by the pandemic, e-commerce grocery has experienced a boom. But we were trending in this direction even before 2020. Online U.S. grocery sales were already expected to grow 129% by 2022, according to a report by IGD, a retail research firm specializing in food and consumer goods. Those numbers are sure to have expanded in recent months with ballooning online sales caused by COVID-19 lock down measures. That’s a significant increase worth paying attention to, and preparing for.

While COVID-19 helped consumers make the switch from in-person to online shopping, there is data to suggest that this new behavior is here to stay. Research from McKinsey supports the notion that new habits picked up during the COVID-19 pandemic will continue even after the pandemic is over. In fact, during the pandemic, many shoppers have been willing to try new retailers or brands during the crisis, and about half expect to continue their relationships with those retailers after the crisis.

 

covid-19 us grocery consumer pulse survey

McKinsey & Company COVID-19 US Consumer Pulse Survey.

In a recent podcast about the future of online grocery, business analysts at Business Insider and eMarketer discuss the current state of online shopping, and why there is a growing belief that consumer mindsets have shifted.

More consumers are realizing that online shopping is extremely convenient. This is an important shift because it makes online shopping a viable option for an even larger group of people. With the formation of new shopping habits and a mindset shift towards the convenience of online shopping, one could argue that e-commerce grocery and online grocery delivery are more than a trend. It’s something that will probably be thriving long after the pandemic — an essential part of the mix in the new normal.

How can I increase online grocery sales?

Increasing your online grocery sales often comes down to providing an amazing customer experience. As mentioned earlier, there are many virtual consumers who are either trying online shopping out for the first time or are giving it another shot because of the pandemic. For a lot of people, this is still very new. And let’s face it: trying out something new can be scary.

If you want to increase your online grocery sales, you have to understand the fears your consumers are facing and address them head on. It’s your job as a retailer to consistently show consumers that you can address those concerns. Specifically, your solution has to provide shoppers with accurate and timely order fulfillment and delivery. What does that mean? In essence, shoppers need to be able to enter your online store easily, find what they want within a short period of time, and check out quickly, with their goods arriving at their homes soon after they pay. 

Here are a few of the most common fears consumers have with online grocery shopping, and how to address those fears, ultimately helping you drive up online sales.

The fear of losing control

Consumers are very tactical about grocery shopping — they go into a grocery store with a mission. They have the opportunity to physically touch and examine the products before they buy them. That helps them feel in control most of the time. But that feeling might not be there in the online experience. Most of that autonomy is taken away online, and something that was once very routine, becomes stressful.

“Groceries are a very intimate purchase. Groceries are what you give to your children, your parents, your family. You’re eating it, you’re planning your week around it. The trust we create between us and our consumers is sacred,” said Reza Bafandeh, Senior VP of SPUD.ca and Food-X Technologies.

So how do we create this intimate shopping experience online?

SPUD provides a ton of information alongside their online offerings to hand control back into the hands of their shoppers. In fact, SPUD offers more information to their consumers than you’d normally get if you were in a retail store.

 

online grocery store

 

In the example above, SPUD is selling local apples. The ‘About the product’ section is carefully crafted to describe the taste and texture of the apple, and how it might perform in various dishes or with pairings:

Crisp, sweet, and aromatic, it has a combination of red stripes over a creamy yellow background. Ambrosias are slow to oxidize, or brown, making it a great choice for salads and fruit platters. They’re also great for use in pies and baking - in fact, you’ll need less sugar than usual because they’re so sweet.”

The page also includes storage and preparation tips, and even health benefits of the product. Crucially, there’s also information about where the apples came from. In this particular example, consumers are told these particular apples travelled 215 miles (347 km) from the farm to the SPUD warehouse.

SPUD’s advice on how to give control to online shoppers:

  • Provide as much information as you can to customers: Use the unique opportunity online to inform your customer about your product, and provide useful and educational information to reassure them about the product they’re about to buy. It’s also important to provide options and alternatives to your customer at every opportunity to let them know that they are still making all of their own choices. Messaging like this is also a great way to show your brand’s personality. In this case, SPUD’s message of local and sustainable produce truly shines.

ux tip to grow an online grocery business

At the bottom of every product page is a section suggesting other products – in this case, local produce – that the shopper might be interested in. 

  • Be proactive with communication. If there is an issue with meeting a preference, communicate that to your customer. It may not be the best news, but at least the customer knows what to expect. The last thing you want to do is surprise the customer with something they don’t want. In the example below, organic avocado prices are increasing and SPUD.ca takes the time to explain to the consumer why that’s the case: import delays at the US-Mexico border; reduced supply because at the time of publication (October 2020) we are in between harvest seasons; and because of increased demand throughout North America. The proactive communication style really wins the trust of consumers, who might now be willing to pay more for avocados because they have acquired an understanding of why the prices have increased.

online grocery business product page example

The fear of the unfamiliar

Consumers find comfort in the familiar. With a local grocery store, a shopper knows where to go — they know the layout of the store, they’ve memorized the aisles, they make routines and budget choices based on the specials of the day. That’s why a move to online shopping can be jarring and uncomfortable for some.

To increase your online grocery shopping, you have to make the transition as seamless as possible. As grocers look for ways to improve their online processes, they also should be developing ways to provide customers with as many aspects of the in-store experience as possible.

Local Foods is a retail market and wholesale distributor in the Midwest that sources everything within 400 miles – essentially a day’s drive– of Chicago. In April, they shuttered their retail market and quickly pivoted to offer curbside pickup and home delivery via their online store.

Going entirely digital meant Local Foods had to find a way to be constantly in touch with their customers.

“We engage with our customers as much as possible,” said Local Foods fleet manager Jesse Bradley. “We send out a weekly newsletter, letting shoppers know what produce is coming in, what our in-house butcher is preparing that week, and what specials are going on. We’re on social media every day with links to our online shop, teaching customers what’s the best way for them to place an order online. We’re making sure our inventory is up to date and synced with our website. We’re sharing recipes online. It’s the first week of October and we’ve already sent our first email out about what people can expect for Thanksgiving.”

Bradley said the online store has been hugely successful. “Our first-time online shoppers come back 70% of the time to order again.”

Local Food’s advice on how to give control to online shoppers:

  • Connect with your customers. Engage with your shoppers via email or social media to let them know how they can order groceries online, and how they can arrange for a home delivery or opt for curb-side pickup. Use the opportunity to share recipes, or tee up holiday specials early.
  • Move in-store promotions online. If you have weekly specials that your customers have gotten used to, find a way to bring those online as well. Local Foods features a spotlight on local farms, which links to the farm’s products in the online store. The promotion is two-fold: it reinforces the Local Foods mission – “Know the Source” – and allows them to connect consumers directly to the products for online purchase.

The fear that food will go bad or expire

Grocery shopping is also an exercise in timing. Your customers think about the items they will be buying, and how long it will take them to get home and store everything away. For example, if you have someone buy ice cream sandwiches at your store, it’s likely that they won’t be making too many more stops before they get home, or else their ice cream treats will melt.

Online consumers now have to put their trust in your delivery drivers or the processes you’ve built for curbside pick-up.

First, let’s talk about your delivery drivers.

When you’re transporting groceries from your store or warehouse to your customer’s homes, you want to make sure everything arrives as quickly as possible.

Adopting smart routing software will help you easily plan the quickest, most efficient delivery routes. Bondi Produce is a grocery wholesaler in Toronto that pivoted within two weeks to offer a new home delivery service when COVID-19 forced people into lockdown.

“I plug a list of delivery addresses into Routific, click one button, and it just does all the work for me. It’s incredibly user-friendly, and we’re just loving it,” said warehouse supervisor Claudio Bondi.

Bondi Produce has long been a pioneer in their adoption of technology to help streamline their internal processes, both inside and outside the walls of their grocery warehouse. In addition to integrating routing technology into their systems, they’ve also implemented warehouse management systems, RF scanning devices, and an ERP system in order to meticulously track the movement of goods in and out of their 28,000 square foot facility.

“In the past, the process to fulfill orders was completely done with pen and paper. People would call and leave their orders in a voicemail, and someone would write that order on a piece of paper. That paper was then handed to someone else who would then go and pick the produce and put little X’s beside what he was picking. Another piece of paper would be used to write where the truck should go to make the delivery,” Bondi said. “Many grocery companies are still stuck in the past. But we’ve learned that technology can really give your business an advantage over those who are still stuck in those old ways.”

grocery produce delivery trucks

Next, let’s talk about curbside pickup.

When customers arrive for curbside pickup, they just need to tell the Local Foods employees standing outside the store an order number and name. The employees – who are all wearing masks and gloves – will enter the store and within minutes, emerge with your groceries and place them in the customer’s trunk. 

“We cleared out a section in our wholesale warehouse cooler, which is attached to our retail store,” Bradley from Local Foods explained. “It’s 40 degrees Fahrenheit and everything gets placed in there. Any frozen items stay in the freezer. It’s all held in there until it’s ready to go out the door, whether it’s for delivery or for curbside pickup”

“All payment information is taken in advance,” Bradley continued. “So you literally just pull up, wait a few minutes, and you’re done. It’s so convenient, I don’t think curbside pickup is going away ever.”

grocery store offering curbside pick-up and delivery

Here’s advice from Bondi Produce and Local Foods on how to ensure quick and efficient grocery delivery:

  • Invest in route planning technology to have food delivered fast and fresh: Don’t try to plan complex delivery routes manually. Use software that allows you to plug in your delivery addresses and any other constraints you might have, and let a routing algorithm do the work for you. Groceries need to reach their final destination as quickly and efficiently as possible. Consider investing in a delivery management platform that has a robust routing system but also offers features like automated delivery notifications. This kind of communication allows your customers to know when they can expect their delivery in real-time.
  • Make your curbside pickup operation work like a drive thru: Develop a workflow that enables groceries to stay refrigerated for as long as possible before they are brought to the curb for pickup. Collect payment online or over the phone to allow for a quick and contact-less experience.

A consumer’s journey with your e-commerce grocery solution starts online, but comes full circle when the order arrives at their doorstep.

This “last mile” of delivery plays a huge role in whether or not a consumer will re-order and become an evangelist for your business. A good home delivery experience – fast, efficient delivery paired with stellar customer service – can travel quickly through social media or word of mouth, which will ultimately help you increase online grocery sales. 

The other side of the e-commerce grocery challenge is nailing the order fulfillment and delivery experience.

How to increase your online grocery business order fulfillment efficiency

As we’ve learned, swift and accurate order fulfillment is one of the levers to pull for building and scaling a grocery delivery business. Having a well-oiled machine on this end will play a major role in your success.

When it comes to the logistics of e-commerce delivery, there’s a bit of an interesting change to traditional thinking. Usually, you want to pick items and pack them as soon as possible, to get them out to the customer. But with e-commerce grocery, and the nature of what’s being shipped, you actually want to reverse this mentality. You want to pick and pack these items as late as possible, to preserve ripeness and minimize the time certain items will be out of refrigeration. 

This one point alone — deciding when the best time to start picking and packing items — is why the systems you put in place for order fulfillment are so important. 

Taking advantage of micro-fulfillment

Another way to increase your order fulfillment efficiency is to understand which type of fulfillment center is best for you. Grocery stores with an e-commerce component tend to choose one of three options:

  1. Dedicated fulfillment centers. These are large, off-site warehouses that tend to service multiple stores at once.
  2. Bolt-on logistics centers. These are smaller fulfillment centers that are built into the back-rooms of existing grocery stores, or adjacent buildings.
  3. Micro-fulfillment centers. As the name suggests, these are small-scale warehouse facilities in accessible urban locations, close to the end consumer who is making a purchase. 

According to the Wall Street Journal, grocers across the United States are actively looking to fill online orders more quickly. They’re testing micro-fulfillment systems that can spit out as many as 4,000 orders a week but can still be housed in the back of stores or in urban areas where space is at a premium. 

In the past, grocers had to choose between the massive undertaking of fulfilling all orders in-house with their own employees, or to go the route of a massive fulfillment center that handles all of that off-site. Micro-fulfillment gives grocers another option that has the potential to be a bit more cost effective. 

How will this increase my efficiency?

Micro-fulfilment centers are valuable due in large part to their location. They are very close to consumers. This opens up tons of options for you to increase your efficiency getting orders out the door.

A close proximity to your customers means that it takes less time to deliver each order. Some micro-fulfillment centers even have the option of grocery pick-up on site. This convenience leads to a positive customer experience, and eventually more online sales.

Last-mile logistics for online grocery businesses

 

last mile logistics for online grocery

Grocery shopping isn’t like most online experiences. Consumers might be okay waiting a couple days or weeks for a pair of socks. The same can’t be said about a carton of milk. 

Balancing a quick delivery turnaround without costing your grocery business an arm and a leg is a bit of a balancing act that requires some trial and error, but here are the major considerations you need to think about when you’re trying to figure out how to handle what’s called your “last-mile” logistics.

Last-mile delivery is the act of getting a product from the closest hub or warehouse to its final destination, which include both businesses and private homes. Some businesses choose to outsource the entire last-mile delivery operation to a third-party courier service, while others choose to bring their last-mile delivery operations in-house, hiring their own drivers and managing their own fleet of delivery vehicles. 

The Pros of using your own in-house fleet:

  • You control everything. You can build a system that is tailor-made for your business and your customer behavior.
  • You have complete visibility. You know where your drivers and their deliveries are at all times, with no blind spots. This means you can really commit to a stellar home delivery experience with unparalleled customer service.

The Cons of using your own in-house fleet:

  • It takes time and resources. Building your own solution can have quite the learning curve. Some people prefer to leave logistics to external ‘experts’. You may have to hire or train employees for new positions and roles. Some examples include delivery drivers, or staff members dedicated to picking and packing online orders.

Other grocery businesses choose to hire couriers or employ third party companies that specialize in delivery. An example of this would be the popular on-demand delivery service like DoorDash. DoorDash already has a robust online platform where merchants – mostly restaurants and some grocery stores – can sell their products, accept payment, and have a network of dedicated ‘Dashers’ deliver the orders to homes within the hour. It’s important to note that DoorDash and others like it charge a commission percentage out of each and every order delivered. Usually, the percentage of commission can be as high as 20%.

The Pros of relying on third-party logistics:

  • Less time spent on building your own solution. You can focus on the things that help grow your business, and less on the maintenance of the day-to-day.
  • You don’t have to scale up your fleet to meet demand. At least in the beginning, a third-party can pull off a large number of deliveries for much cheaper than an in-house fleet, and you avoid a large capital commitment upfront.

The Cons of relying on third-party logistics:

  • You are putting your company’s reputation into the hands of others. The customer will often associate the delivery experience – good or bad – with you instead of the third party you’ve hired to pull off the delivery. This means the home delivery experience is largely out of your hands, and you’re trusting the courier to represent you and your business accurately.
  • You lose sight of orders once they’ve left the store. Once the orders you’ve picked and packed have been picked up by a driver, you lose sight of that delivery, making it difficult to help your customers if things go wrong.
  • You have no way of increasing delivery efficiency. If your third-party courier isn’t working as efficiently as you’d like, taking longer to deliver your goods to customers, for example, there is very little you can do to make that experience better.

Keep careful watch over “last-mile” delivery costs

The final piece of the puzzle is one of the most important. If you have your own drivers and your own fleet, how do you make sure they’re working as efficiently as possible?

Managing the “last mile” can be costly, accounting for up to one-third of the total cost of a product, according to a report from Business Insider. It can account for more than half of overall shipping costs. It can also be the most inefficient part of the entire delivery process.

As a small delivery business, you have to compete with Amazon, Walmart, and other huge corporations that are pushing the bar every day in terms of how soon they get an item to the purchaser, promising windows as short as two hours.

Managing your business’s last-mile costs can mean the difference between making or losing a sale. The high cost of shipping can be what turns up to 38% of people away from finalizing a purchase from your business.

Route optimization can help grocery businesses turn a profit

On its own, delivery can be a bit of a complicated problem to solve manually. There are delivery constraints such as time windows, vehicle capacity, and driver schedules. And grocery delivery presents its own set of challenges to layer on top of this such as customer availability and refrigeration. Luckily delivery management software is purpose-built to handle all of these issues and more. 

While there are many different delivery management software out there, you want to make sure you’re picking one with strong route optimization capabilities. You also want to have visibility of your drivers as they’re on the road making those deliveries so that you can stay in control at all times. 

You also may want to consider giving your customers some level of visibility too. Automated SMS or email messages can inform them when they can expect a delivery, when the delivery is on its way, and when the delivery has been made. Consumers in this day and age have come to expect this kind of transparency in a home delivery experience.

With delivery management software, you can keep costs down while scaling your grocery e-commerce business.

Conclusion

E-commerce grocery will continue to grow in popularity, and it’s not going away any time soon. New shopping habits are being formed right now, and it’s your chance to get online and provide the best service you can, from the moment customers enter your online store to the instance their grocery arrives at their doorstep. 

An exceptional end-to-end customer experience will be key to your success. This includes everything from transitioning in-person experiences and promotions over to the digital space, as well as satisfying customer demands with accuracy and care.

The final (and possibly most important) piece of the puzzle is efficient delivery of groceries to consumers. Leveraging delivery management software will empower your team to work smarter, and help you run a profitable home delivery operation.

Routific is already helping hundreds of grocers manage local delivery routes, delighting their customers with fast deliveries and accurate ETAs. We combine powerful route optimization with a five-star delivery experience, enabling grocery retailers and online grocery businesses to thrive in the midst of a global pandemic, and beyond.

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