It’s hard to believe that shopping – particularly for groceries – will ever return to the way it was pre-COVID-19. It seems almost nostalgic to think about grabbing a shopping cart and spending an hour or so walking the aisles of your favorite store, perhaps tasting samples as you go and piling items into your cart in a leisurely fashion.
In just a year’s time, even people who never considered shopping online before the pandemic have become very adept at the process – opting for delivery, buy online pick up curbside (BOPAC) or picking up in the store (BOPIS) to minimize potential exposure to the virus. And lo and behold, many are discovering they like it…a lot!
When trips are made into essential stores, those trips are now brief and purpose driven – leaving retailers little opportunity to tempt shoppers with impulse purchases. In fact, many people wonder why they ever lugged home 20 packs of paper towels or large bags of dog food in the first place. Surely, it’s easier to have those delivered or simply placed in the back of their SUVs at the curb.
And, as shoppers have become more proficient navigating retailers’ websites and, in many cases, manufacturers’ sites, they have realized they don’t actually need to pick produce or meat themselves. There are others just as competent (and particular) as them. Of course, product shortages in the early days of the pandemic prompted consumers to switch brands and, in many cases, some ugly truths emerged. For example, one brand of ketchup tastes very much like another brand. (So much for brand loyalty!)
So, if 2020 was all about retailers installing plexiglass shields and tape on the floors to help keep staff and shoppers safe, 2021 will be all about dealing with the new realities around e-commerce. At the top of the list? E-commerce fulfillment.
Before the pandemic, e-commerce accounted for 2-3% of overall sales within the grocery sector – even less in rural areas. Coming out of Q4 2020, many retailers are seeing numbers in the high 20% range – some over 30%. And those numbers show no sign of declining, as the length of the pandemic has created a lot of “stickiness” in terms of behavior. What is declining is foot traffic, with the speed and level of change varying by geography. As retailers take a deep breath after closing out 2020, they’re also noticing certain categories of in-store sales showing signs of decline due to the number of shoppers who have moved to subscription and/or direct to consumer (DTC) purchase models.
What does this mean for the future of retail?
At the most fundamental level, the need for fixed point of sale (POS) lanes is dwindling. Though this isn’t necessarily a new revelation – e-commerce has been slowly chipping away at stores’ foot traffic for years – COVID-19 has placed it under the microscope. Why take up valuable real estate with 15 clunky fixed lanes when only four are open most of the time? Why not use that space for a better e-commerce fulfillment approach?
Enter the concept of micro fulfillment centers (MFC) – a technology-driven fulfillment approach that’s rapidly gaining steam globally, but even faster in North America. (We have been laggards in adopting e-commerce when compared to some other geographies, so we’re rushing to catch up with consumer demand.)
The MFC concept is relatively simple: wall off an area of an existing store or create space adjacent to the store and install what is essentially a vending machine for grocery fulfillment. The technology is relatively easy to deploy, and there are a number of technology providers already under contract with leading retailers. The advantages are multifold:
There’s another industry dynamic at play here that weighs in favor of a move to the MFC model. As I mentioned at the outset, when e-commerce was less than 2% of a retailer’s business, it was tempting to simply farm the support of fulfillment activities out to a third party. Given all the priorities on retailers’ plates at the time, it simply made sense to outsource to a supply chain partner. Even as online shopping activity exploded in the early months of the pandemic and it began to make more financial sense to bring picking activities in house, retailers were forced to continue their reliance on third parties. The pace was simply accelerating too quickly.
However, as we get deeper into 2021 and further away from that surge demand, retailers who outsourced e-commerce activities are realizing they no longer have direct relationships with their customers. Given the pandemic stretched customer loyalty to its limit, this is not a tenable situation for retailers who want to remain relevant in their communities. Plus, many retailers are eager to bring the fulfillment function inhouse and lessen the reliance on third parties as soon as possible considering these “partners” might become their competition at some point.
In other words, it’s somewhat of a “perfect storm” causing investments in this technology to climb sharply.
In the coming weeks, I’ll take a deeper dive into the technologies powering MFCs and the groundwork retailers should be laying now if this is a fulfillment model they hope to implement in the next year or two. I’ll also talk more about the solution design proving most effective with our customers in both relieving the labor burden and increasing e-commerce capacity in stores to help regain customer loyalty.
In the meantime, if you’d like help assessing the viability of an MFC in your store or want to learn more about the role Zebra’s automation, mobility and scanning solutions are playing in MFCs around the world, don’t hesitate to contact me or other retail team members.
Mark Delaney is currently Vice President Global Retail Strategy at FourKites. In this role, he works with the FourKites leadership team and recently vertically aligned business development and product teams to provide industry leading supply chain visibility to retailers regardless of the mode of transport. That visibility, along with world class analytics, provides FourKites' customers with the insights they need to better manage their businesses and deliver better customer service.
Mark previously served as a retail industry consultant at Zebra Technologies, working with retailers’ C-level leaders to determine which strategic technology solutions can best address their current challenges.
Mark has more than 20 years of experience in the retail industry and has worked with most large retailers globally. Before joining Zebra, Mark held leadership roles at Nielsen and General Mills and owned his own retail technology and analytics consulting firm.
He has always kept a strong pulse on industry trends and frequently solicits retailers’ feedback on the technology investments that his employer is making to help inform and advance innovation with a customer-first mindset.
Mark holds a BS in Marketing from SUNY Oswego and serves on several boards in his community. He is also the mayor of a village on the north shore of Long Island where he and his family live.