HOW TO SELL GROCERIES ONLINE

This article deals with success factors in the online grocery business. As we have been working in this field for over a decade, we have identified a number of important aspects. Both in terms of software technology and business processes. Many people consider e-commerce to be synonymous with an online shop. But to be truly successful in selling groceries online, you need more than that. In fact, an online store is only the tip of the iceberg. The actual benefits (and challenges) arise from the backend and its processes.

A software to sell groceries online typically consists of the customer-oriented online shop, a Back-Office (management console) and an underlying e-commerce platform. There may also be additional systems for managing product data, known as Product Information Management (PIM) systems, for managing order fulfilment, known as Order Management System (OMS), and for adding and changing content for marketing websites, known as Content Management System (CMS). 

The online grocery business is growing rapidly. But it is still at a manageable level. Therefore it is better to organise the pick-pack-ship in-store rather than build local warehouses across the country. As a result, usually no inventory management systems are needed, the so-called WMS (Warehouse Management System). The existing core IT of a supermarket chain, the so-called ERP system (Enterprise Resource Planning), takes care of replenishing the stores. The cash registers, which are often controlled by POS systems (Point of Sales), register the turnover of local customers and thus know the quantity of goods that are actually on the shelves. 

The pick-pack process in the store is therefore crucial for success and must be specific to the online grocery business. Opposite to that the actual route planning can be done with standard systems from third parties that are well integrated into the entire e-commerce landscape.

End customers usually only see the online shop. But this is often only one touchpoint of software solutions for online grocery retailers. Even if modern shops in e-commerce are built in the so-called ‘responsive design’, it can make sense to have an additional native mobile app. Responsive storefronts are correctly scaled on practically any device such as desktop, tablet or mobile. Nonetheless, a native mobile app can offer added value for location-based services and the integration of online and local retail chains.

The existing IT for the grocery retail trade is optimised for the replenishment of local stores. ERP and POS systems are not built for hundreds or thousands of online orders from end customers. As online grocery is a local business, every retailer needs a system that manages its customers, products and orders. And there are not only regional differences in product catalogs and prices. Also think of independent retailers of large chains, they must not see the data of their colleagues. When selling groceries online at a reasonable volume, such a local Back-Office should be integrated with existing ERP or POS systems. This is important to exchange inventory or sales data, or to manage prices only in one leading system. And of course to avoid the need to go through the checkout line with the goods picked in the store.

It may sound attractive to simply use an out-of-the-box online solution. Some of them even include the most popular grocery products. But what if you want to add another customer experience? Or what if you need integrations with existing or new backend systems or third-party services? Selling groceries online is a young discipline and not all process details are carved in stone. As a result, agility is an important success factor, as it is in so many emerging businesses. Agility is defined as the ability to move quickly and easily. And to make agility possible, online retailing in particular needs a technological basis that enables swift changes, defined and open interfaces, portability and scalability.

In the ideal world, IT solutions can do just about anything. But let’s be honest: Which company in the world has only one software provider? Wouldn’t it be great to have at least all core components in one software? Certainly, yes, especially if it is an e-commerce solution for online grocery retailing that is equipped with fully integrated PIM, OMS and CMS.

We have learned that the online grocery business requires picking from stores – as long as you don’t live in a few very densely populated urban area. But picking in-store brings two big challenges. One is that you must not disturb your local customers when you are actually picking. The other one is efficiency. As long as there are no robots whizzing through the shelves, you need a highly efficient process for the pick-pack. Good software to sell groceries online guides the grocer’s staff through the shelves in the shortest and fastest way possible.

Unless a grocer has just a handful of online orders per day, wave picking is the most efficient picking method. The order picker processes all orders in an order cycle at once in a defined route through the aisles. If multiple picking zones are defined, pickers can pick in parallel, But only one person per picking zone at a time, ensuring minimal impact on local customers.

Picking and packing in the online grocery business are two separate processes. While the picking algorithm is optimised for short one-way routes, the packing algorithm takes care of the correct packing groups and packing positions. Refrigerated products should be separated from uncooled packaged goods, and detergents and beverages should also be separated again. Within the packing groups, heavy and robust items should be placed in a bag at the bottom, light and fragile items at the top. 

All this requires a very sophisticated IT software system that is able to define order cycles, and picking zones. And in combination with wave picking, the order splitting at the beginning of each pick-pack-ship cycle is one of the most critical aspects. Especially when grocers are also selling cooking sets, vegetable boxes and fresh cuts from the delicatessen. Remember that as an online retailer you want to be out of price comparison?

There are full-service providers in the market who not only operate the online shop, but also take care of product data management, picking and delivery. This sounds good for retailers because they don’t have to worry about anything. So what will be the role of grocers in the future when online grocery retailing is fully established and more and more consumers buy their groceries online?

How will grocers be able to control product catalogues and prices if they give away control to third party service providers? Or how can they promote their own brand – instead of the service provider’s brand? And how will grocers be able to position the higher margin products that are outside the price comparison?

Selling groceries online is not just a simple channel or a complement to existing grocery retailing. Digital transformation will fundamentally change the way consumers buy products in all retail segments. Grocers who want to be successful in the future must sit in the driver’s seat and take control of their online experience. And they must take advantage of the benefits coming from online solutions both for their local stores and delivery services, as well as curb-side- and pick-up programs.