Staying fresh: How UK grocery retailers are innovating with delivery

In today’s on-demand economy, every minute counts when it comes to getting goods – and especially fresh produce – to consumers.

06 de agosto de 2018

From one-hour delivery slots to robot couriers, supermarkets across the UK are experimenting with new ways to get groceries to their customers as efficiently as possible.

Customers of Tesco and Sainsbury’s in London can order groceries by app for deliveries within the hour, while in Milton Keynes, The Co-op is trialling robots which can carry up to 10 kilograms of shopping within a three mile radius of the store.

“The online grocery offering has accelerated in the past five years as the larger grocers have responded to consumer demand for the same convenience of delivery that they experience in other retail sub-sectors. Many, but not all, grocery retailers are aiming to capture some of this market,” says Tim Vallance, Director, Head of UK Retail and Leisure, JLL.

Indeed, not every type of grocery retailer needs to offer a robust online service – discounters Lidl and Aldi, for example, don’t supplant their low-cost product range with home delivery or internet sales.

Convenience is king

As consumers get a taste for on-demand delivery, more grocery retailers are launching partnerships with established food delivery firms.

Guinness owner Diageo partnered with UberEats to deliver alcohol from several convenience stores, while in Manchester, a central Co-op branch curates a selection of drinks and snacks through Deliveroo.

New names are also finding their niche in the grocery delivery market. Surrey-based startup Grocemania offers deliveries from local stores within an hour, and will soon roll out to London and Reading.

“Convenience is an increasingly critical factor for consumers and grocery retailers are focused on meeting their customers’ expectations,” says Vallance. Yet getting orders over the ‘last mile’ to homes and offices is a constant – and evolving – challenge. The growth of e-commerce has led to a glut of delivery vans contributing to congestion in city centres, while the cost of home deliveries can cut into revenue.

“Anecdotally, retailers are struggling to work out how to profit from home delivery without charging customers more and driving them away. There is also a bottleneck for how much online grocery market can expand because the logistics network has nearly reached capacity,” says Vallance.

Attracting in-store shopping

The answer may lie in innovation that attracts more customers in-store while offering a robust delivery service.

For example, Waitrose operates an incubator scheme for startups to develop new in-store shopping concepts, while its Ocado online service has long invested in robotics and machine learning to improve the efficiency of packaging up orders.

At China’s Hema Supermarkets, the chain owned by e-commerce giant Alibaba, QR codes on each product allow shoppers to view origin and nutritional information, as well as pay by their smartphones, then have their orders delivered within half an hour. Online shoppers can purchase any in-store items, which are then packed in-store and sent off on the same delivery network.

“Blending the online and offline experience, especially with in-store innovations, helps drive sales while catering to customer expectations for fresh produce and fast delivery,” notes Vallance.

Other chains are looking to their customers to do more of the leg work through options such as click and collect – a growing channel across all retail sectors which is set to account for almost 14 percent of all online shopping in the UK by 2022, according to GlobalData. Last year Sainsbury’s trialled a free service to allow customers to order and pay through an app and pick up their goods from its Pimlico store 30 minutes later.

“Grocery has been a unique market for retail innovation because of the need for products to stay fresh; they can’t sit in a warehouse for several days beforehand,” Vallance says. “Click-and-collect is becoming a favoured option among grocers as a way for the problematic ‘last mile’ to be fulfilled by the customers, reducing pressure on the logistics network.”

Changing consumer tastes

With two-thirds of Britons now forgoing a weekly large shop for spontaneous store visits based on their next meal, grocery retailers are adapting to people buying less but shopping more frequently. These smaller basket sizes – along with sustainability concerns – could see the rise of city-friendly delivery vehicles, such as the electric cargo bikes being trialled by Sainsbury’s.

Technology also has a role to play – especially if it can keep food fresh or cold through delivery, Vallance predicts, while autonomous deliveries such as the cargo drones trialled in Japan could allow for faster deliveries – though regulatory hurdles make this a more distant solution.

“Britain is becoming more food-savvy, with more home chefs. People are expecting more from their grocers wherever they live and wherever they shop,” says Vallance. These grocers, in turn, will be expected to deliver the goods.