Food Logistics serves the entire Printing Industry with targeted content for the large commercial print segment.
Issue link: https://foodlogistics.epubxp.com/i/295107
O nline grocery shopping is big business in the UK, and is expected to get bigger: according to analysts at IGD, the UK online home grocery market is expected to double in value over the next five years, far exceeding the 18 percent growth expected for the total grocery market over this period. More and more UK consumers are turning their backs on shopping in stores, opting to do their grocery shopping online in the comfort of their home and office. And why should they go to the grocery store when they can get the same products – fresh produce, meat, dry goods, paper goods, etc. – delivered to their home within a one-hour time window for a small delivery charge of only a few pounds or free at certain order levels? Four of the five big grocery chains in the UK offer home delivery, with the fifth chain entering the market in January 2014. The IGD reports that in 2013 the UK grocery market was worth £169.7 billion, an increase of 3.7 percent on 2012 with online grocery shopping accounting for £6.5 billion (3.8 percent) of the total. According to Fitch Ratings, online grocery sales currently account for just 1 percent of the $631 billion U.S. grocery market. The good news for the U.S. grocery business (and for consumers) is that this market is set for a period of rapid expansion with Super Market News forecasting a 4 percent growth in online grocery sales in 2014. But, there are some hard lessons that need to be learned along the way – after all the UK operators' paths to online grocery success have not always been easy. The 'home shopping' model has been refined and reviewed over the years with some of the UK's biggest named supermarkets struggling to get the right model in place. So before U.S. grocery operators dip their toe into this lucrative revenue stream it's well worth taking a look at how this model has evolved in the UK to become as successful as it has, and why differ- ent retailers have approached the challenge in different ways. Lessons Learned from the UK The top UK Grocers offer home delivery of fresh produce, meats, dairy, dry goods and more to consumers. Customers can order by a certain time for delivery the next day or any subsequent day, subject to an available delivery slot. Consumers select a one to two-hour time slot for their delivery and pay only a few dollars for this luxury. Certain grocers offer free deliv- ery for amounts over a certain level, typically £50 or more. Deliveries are made between early morning and late evening. As we have established the UK home grocery market is a must- have part of the top retailers businesses accounting for 3.8 percent of all sales; a figure that is predicted to increase further in 2014. So how do the UK operators do it? Much of the UK grocery home delivery market uses the store- delivery model. In other words, home delivery goods are picked in the same store as used by the public, and a small fleet of delivery vans at each store then completes the home deliveries. The advantages of this approach are that crucially, this model 'piggy-backs' almost the whole existing supply chain infrastructure (all but the last mile delivery) that means that the amount of planning and effort to set up a home delivery operation is minimal. This is how UK home delivery operations traditionally began, and some continue to operate in this way. But there are two drawbacks to this model. Not all grocery stores stock the full product range so deliveries that make it to the customer doorstep are likely to include some product substitutions (i.e. where the in store grocery picker selects an alterna- tive item based on their own judgments of what the customer wants). This can lead to customer dissatisfaction. The other problem is the impact on the in-store shopper who will now have to share the store with the in-store pickers, many of whom will be pushing large, specially-designed home shopping carts around in store. For these two reasons many of the UK's grocery retailers have opted for a 'dark store' option. A dark store is a dedicated location, set up to fulfil online grocery orders. Dark stores are actually laid out like a big warehouse with different areas holding different products. For example, there are chilled areas in the warehouse for produce and frozen goods, and other areas for dry goods and ambient products. Shelves are erected in each area to hold containers of cardboard boxes. Pickers receive orders and travel the aisles to pick products from the containers, filling bags with items or carts of items, which are later put into delivery bags. Some of the grocers color-coordinate the delivery bags to denote products that must be refrigerated immediately upon delivery, and those that can wait to be put up at the buyer's convenience. The main point of difference is that the dark store has no customers and no checkouts. They vary in design with some featuring more conveyor belt automation than others. S P E C I A L E D I T I O N 32 A P R I L 2014 ❯❯ FO O D LO G I S T I C S W W W . F O O D L O G I S T I C S . C O M Grocery Home Delivery in the UK: Big and Getting Bigger. Why Not the U.S.? By William Salter, President & CEO, Paragon Software Systems, Inc. ....Smart Labels A report in The Economist states that smart labels are getting closer to widespread use as companies figure out how better ways of printing memory circuits just like standard barcode labels. Norway-based ThinFilm is leading innovations in this area. The company is incorporating Near Field Communication with its smart labels so that consumers can communicate with them wirelessly. One application for smart labels is for perishable goods like food. Smart labels can record storage times and temperature data on food labels, and automatically discount the price of the item in response to marketing campaigns. Or, they can be used to verify a product's identity—a real help in combatting the mislabeling of certain fish and seafood. FLOG_32-34_0414 CS Grocery Home Delivery.indd 32 4/3/14 5:24 PM