What’s next for online grocery in the US?

Date : 13 April 2021

Stewart Samuel

Program Director - Canada

In our latest report, we look at the initiatives retailers are putting in place as they strive to improve online grocery profitability following a year of accelerated growth.

Five areas of focus for improved profitability 

Following rapid growth last year, which saw grocery ecommerce sales almost double in the US to just under $70bn, in 2021 retailers are laser-focused on improving channel profitability. In our report, Five ways US online grocery is transforming, we look at how retailers are:

  • Investing in building out marketplace models
  • Developing alternative profit streams
  • Maximising the offline opportunity
  • Optimising fulfilment
  • Innovating with the last mile

Focusing on the basics: improving service and adding capacity

In addition to improving profitability, retailers are also focusing on driving service improvements, to consolidate the gains of last year through operational efficiencies. These are centred on minimising substitutions and improving the pickup experience, both of which were challenged by the accelerated growth of 2020. In addition, despite the significant expansion over last 12 months, most retailers also have plans in place this year to further extend the reach of their pickup and delivery services, bringing more capacity on-stream.

Source: Urbx

Stepping-up channel innovation

We also expect to see the pace of innovation being maintained. Over the last 12 months, several new ideas have been developed or concepts imagined:

  • Urbx has developed a vision for an MFC-powered standalone market concept, with pickup or delivery options. The key difference with other MFC models is that it can go up to 150 ft high with a footprint of 1,800 sq ft, offering around 50,000 products. This model is particularly suited to dense urban locations
  • Robomart is an autonomous grocery store which consumers can summon to their home in less than ten minutes using a dedicated app. Described by the company as a ‘store-hailing’ concept, Robomart aims to provide consumers with their daily essentials. Last year, it started to beta test a mobile pharmacy model in West Hollywood on an invite-only basis
  • Walmart is partnering with HomeValet to pilot online grocery deliveries directly into smart boxes located outside customers’ homes. This features an IoT enabled platform with three temperature-controlled zones, enabling customers to receive their entire order in a contactless way. The smart box communicates directly with the delivery provider’s device, providing secure access

Suppliers developing new talent pipeline to plug skills gaps

Although the vaccine roll-out continues at pace in the US, a high degree of uncertainty is attached to the path of the virus as lockdown restrictions are eased. While most retailers will be focused on maintaining their online grocery market shares this year, suppliers should plan for multiple scenarios. However, with the accelerated growth taking online penetration beyond 10% for many global suppliers, there will likely be a need for additional resources and new capabilities in 2021. Longer-term this may require the development of new internal talent pipelines given the competitive environment for ecommerce talent.

Retail Analysis subscribers: see our latest report, Five ways US online grocery is transforming, for more details on the programmes retailers are putting in place to drive channel profitability and the implications for suppliers. 

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