The Alphabot System dramatically improves e-Grocery order fulfillment and provides significantly enhanced capability versus other goods-to-picker technologies. An Alphabot-powered micro-fulfillment center can:
– Reduce human error and maximize labor utilization with robot powered system
– Induct store-picked order totes and automatically consolidate each order for dispensing to customer
– Store items and completed orders in three temperature zones: ambient, refrigerated, and frozen for reliably and safely storing food
A Walmart employee loads up a robotic warehouse tool with an empty cart to be filled with a customer’s online order at a Walmart micro-fulfillment center in Salem, NH. on Jan. 8, 2020.
Boston Globe | Boston Globe | Getty Images
When the economy slows down, the classic response for consumer businesses is to cut back: slow hiring, maybe lay off workers, slash marketing, or even slow the pace of technology investment, delaying projects until after business has picked up again.
But that’s not at all what America’s troubled retail sector is doing this year.
With the S&P Retail Index down nearly 30% this year, most of the industry is boosting investment in capital spending by double digits, including industry leaders Walmart and Amazon.com. Among the top tier, only struggling clothier Gap and home-improvement chain Lowe’s are cutting back significantly. At electronics retailer Best Buy, first-half profits fell by more than half – but investment rose 37 percent.
“There is definitely concern and awareness about costs, but there is a prioritization happening,” said Thomas O’Connor, vice president of supply chain-consumer retail research at consulting firm Gartner. “A lesson has been taken from the aftermath of the financial crisis,” O’Connor said.
That lesson? Investments made by big-spending leaders like Walmart, Amazon and Home Depot are likely to result in taking customers from weaker rivals next year, when consumer discretionary cash flow is forecast to rebound from a year-long 2022 drought and revive shopping after spending on goods actually shrank early this year.
After the 2007-2009 downturn, 60 companies Gartner classified as “efficient growth companies” that invested through the crisis saw earnings double between 2009 and 2015, while other companies’ profits barely changed, according to a 2019 report on 1,200 U.S. and European firms.
Companies have taken that data to heart, with a recent Gartner survey of finance executives across industries showing that investments in technology and workforce development are the last expenses companies plan to cut as the economy struggles to keep recent inflation from causing a new recession. Budgets for mergers, environmental sustainability plans and even product innovation are taking a back seat, the Gartner data shows.
Investing in the right configuration of picking and handling as well as delivery capabilities holds the key to upending the current economics in online grocery.
The explosive growth in North American online grocery presents a vexing challenge for retailers. While the need to serve this channel is obvious, achieving profitability continues to be a challenge. In the meantime, consumers have gotten used to the convenience of delivery—the faster, the better. Grocers are under rising pressure to meet these ever-increasing expectations and mitigate online grocery’s dramatic impact on order economics.
To serve online demand without significantly cutting into margins, executives must focus their investments on the two major drivers of online fulfillment cost: handling and delivery. Grocers can manage these drivers by selecting from a range of fulfillment and delivery models. The right solution varies depending on a region’s demographics and population density and is also shaped by the target customer value proposition. Organizations that navigate these options wisely will be better positioned to grow profitably.
Online is here to stay, and consumers are more demanding than ever
Online grocery penetration has grown steadily over the past several years but was greatly accelerated by COVID-19. According to a recent McKinsey consumer survey, some trends that took hold during the pandemic will likely endure and even deepen:1
The online channel continues to show strong growth. Online and delivery orders rose by about 50 percent during the pandemic and are expected to increase two to five percentage points in 2022, depending on the delivery option.
Consumers increasingly want delivery rather than click and collect. For online grocery shoppers, click-and-collect offerings have been supplanted by home delivery. According to our survey, 63 percent of online grocery shoppers in December 2021 preferred home delivery to click and collect, up from 48 percent a year earlier. Consumers are particularly gravitating toward same-day and instant delivery. The latter increased 41 percent over the course of the pandemic and is expected to rise further in 2022, with a net two percentage points of survey respondents expecting to increase their use of instant delivery.
Personal contact continues to decrease in importance. Before the pandemic, 46 percent of consumers preferred personal contact in stores. The past two years have muted its importance: now just 31 percent value this type of engagement.
Convenience trumps all. Consumers were drawn to online shopping for its convenience and relative safety during the pandemic, and our survey suggests shoppers have embraced these benefits and aren’t interested in returning to the prepandemic normal.
As these insights reinforce, even grocers that rapidly adapted their operations early in the pandemic have no time to rest; they must continue to keep pace with evolving consumer preferences.