The following is a Supply Chain Matters guest commentary contributed by Arun Kumar P., a Principal Consultant at Infosys Limited, who is also a contributor to the Infosys Supply Chain Management Blog and consulting team.
The past few years have seen the increasing adoption of buy-online-pick-up-from-store initiatives at several grocery retailers in the United States. What began as a value-differentiating concept in a commoditized industry is more than just an idea today. However, if online grocery is to evolve into a broad-based business model with an alignment of capabilities, maturity of processes, and adoption of technologies, much more needs to be done. The consumer-facing front-end must borrow from leading e-commerce practices while the back-end fulfillment model must evolve by adapting warehousing best practices.
Cheerleaders of the online grocery business model point to its success in Europe and argue for its expansion by delivering orders to homes. Critics contend that this model cannot be effective in the US. Both miss the broader picture.
While it is true that Europe has taken the lead in enabling online grocery shopping where population density also allows home delivery, the keys to the successful adoption of online grocery are located elsewhere. Lost in these debates is the comprehensive understanding of linkages across the true view of consumer desires, alignment of retail grocers, and perspective of solution providers. Therein, I believe, lies the true platform for success.
True View of Consumer Desires
The first step in the journey towards online grocery commerce is to understand the consumer view. Why does she/he prefer online grocery shopping, and what are overall consumerexpectations? The answer, simply put, is that online grocery shopping translates into a time-saving method of fulfilling a domestic requirement that is not only repetitive but is also driven by set buying patterns. The consumer desires that the shopping experience mimics real-life. For instance:
- Retain the ability to search and compare items before adding them to the cart
- Expecting that the retailer to be sensitive to the varied storage, packing and handling requirements (e.g., maintaining chilled, frozen and ambient conditions; separating seafood from cleaning liquids, etc.)
- Access to the latest pricing and promotion campaigns
- With some items, the consumer may prefer flexibility to order in one unit and pay in another (order bananas by dozen or lobsters by item, but pay by pound for both)
- Support for customization and enhancement (icing for birthday cakes and suggestions of themed cutlery)
- Convenience of picking items from the store at the time of choosing
Alignment of Retail Grocers
Retail grocers must move away from a ‘figure as we go’ approach when it comes to defining a comprehensive online strategy. A common refrain from retail grocers that I have heard is ‘we embarked on an online journey because our competition was doing the same’ or ‘my competitor has a pilot project going and so will I’.
A better approach is to first acknowledge and align with the consumer view listed above and then articulate the strategy. An execution plan across the elements of people, process and technology can follow.
Successful order fulfillment can be enabled through better workforce management and enabling existing store associates to pick customer orders during low traffic (morning) hours. Over time, these associates gain an insight into consumer preferences, enabling them to make ‘smart’ substitutions and offer suitable choices to store shoppers when asked for help. This is a vivid example of online grocery enablement facilitating cross-sell and upsell transactions with store shoppers.
Detailing of process elements is beyond the scope of this blog. However, it must be highlighted that all business processes must be geared towards creating a unique online buying experience for the consumer. And the order fulfillment process within a store must combine the best practices of order orchestration, pick planning, item picking, item substitution, catch weight handling, order staging, and payment processing activities.
The right approach to technology requires an assessment of the current landscape within the enterprise and an analysis of solution options. Retailers are flexible on the former, but are skeptical of the latter – and rightly so – as we will see next.
Perspective of Solution Providers
Retailers desire innovative solutions that articulate business value. Surprisingly, product vendors still seem to lack the required perspective while extending their solutions to online grocers. Classifying solutions as ‘web capture’, ‘OMS’ and ‘WMS’ during customer interactions is the first mistake. It forces vendors to charge license fees for functionalities that will not be used. After all, when was the last time a grocer wanted a real-time count of lettuce on the store front? Product vendors must realize that standard definitions cease to apply when a process flow encompasses activities as diverse as order capture, order orchestration, and order fulfillment. A modular solution with powerful integration capabilities may just be the answer.
For now, it may be in the retailers’ best interest to consider a hybrid approach – the use of the package solution to meet a significant portion of needs, complemented by custom offerings from third party-integrators. WMS-lite anyone? Or SaaS?
To conclude, there is no doubt that online grocery is here to stay. It offers convenience, enhances loyalty, and deepens consumer connect. For retail grocers, deriving an online strategy from the consumer’s view and aligning the operational and technology dimensions is not only a viable differentiator, but the right platform for sustained success.
Please Note: Infosys Limited is one of other named sponsors for the Supply Chain Matters blog.