Technology

Inside the Race to Catch Online Grocery’s ‘Unlimited Demand’

Pandemic drives shoppers online in record numbers—and merchants to the drawing board
ShopRite
Image: Shoprite.com

Retailers and their e-commerce providers are racing to address points of congestion in online order fulfillment that have come along with coronavirus quarantines—and are likely kneecapping a tremendous boom in sales.

While customers have flocked to do their grocery shopping online in record numbers since last month, many are routinely finding little or no available windows for delivery, seeing scheduled deliveries delayed or canceled, as well as frustrations in finding just what they want online. The issue in many ways parallels the throttling that physical stores saw as panic buying set in at the outset of the pandemic—in both cases, demand is badly outstripping the available supply.

According to a recent study by Brick Meets Click and ShopperKit, online grocers saw $4 billion in sales in March, a 233% increase from August 2019. Orders were up by 192%, and average spend per basket was up by $10 to $82, a 14% increase. Overall customers increased by 146% to 39.5 million, and they were ordering 19% more frequently—placing 1.2 orders per month vs. one order per month in August 2019.

While there’s no telling how much larger those figures could be were grocers and e-commerce providers able to meet demand, it’s clear that despite the massive sales, much has been left on the table. David Bishop of Brick Meets Click, Barrington, Ill., told WGB in an interview this week that in many cases, shoppers are trying multiple options, favoring those with the greatest capacity.

Or as Scott DeGraeve, a co-founder of retail software Locai and a former longtime Peapod executive, put it, the amount of online sales growth during the crisis is only a function of the capacity. “It’s almost as though there is unlimited demand. And so the limit is whatever you can satisfy at this point for right now. It’s just a question of how much you can take on.”

Another indication that some sales are falling short of their potential came from Bloomreach, which indicated that online grocery search traffic last week increased by 13.95%, while sales grew by 8.16%.

“The current demand for online grocery is unprecedented, but data shows that sales are lagging behind,” said Brian Walker, chief strategy officer of Bloomreach, a digital experience platform based in Mountain View, Calif. “Customers are looking to leverage online channels for grocery as they see them as safer. However, issues with fulfillment and availability present challenges for the online grocery experience, and the discrepancies in our search and sales data show that.”

These millions of new users are likely to accelerate the overall penetration of online as a part of the total industry—a phenomenon that itself will have big implications in terms of how grocers position themselves to meet that demand. Nascent strategies that were once considered appropriate only when demand gradually increased—robotic microfulfillment centers and conversions of operating or closed stores to local fulfillment hubs, for example—will almost certainly develop sooner than once anticipated.

In the meantime, millions of quarantined shoppers are still refreshing their browsers and pulling their hair out seeking available delivery windows. Many more are frustrated having locked in a slot only to see delivery delays and cancellations, or are surprised when having built a basket first, discover only afterward that delivery isn’t available. That’s set stores and their e-commerce partners working harder than ever to find ways to expand availability.

'On Demand' Becomes 'As Soon As We Can'

Instacart, the San Francisco shopping and delivery concierge looked at as one of the biggest beneficiaries of the exploding online demand, this week rolled out new features in its app and online shopping portals that it said will address some of that congestion. A new “Fast & Flexible” mode will allow shoppers to select deliveries not by time they would necessarily prefer but by driver availability.

When a customer chooses the Fast & Flexible option, they will see an estimated delivery range—the company says for example, Tuesday through Thursday—and will be notified when their order is picked up by a shopper and scheduled for delivery.

Another option Instacart is introducing this week, known as “Order Ahead,” extends available delivery beyond the customary seven-day availability for scheduled deliveries. This will allow customers to build their digital cart well in advance of when they need their groceries or goods.

Though these new options would tend to interfere with the “on-demand” and “same-day” experiences typically available, Instacart says it will better allow it to meet the demand surge and joins previous introductions since the COVID-19 onset, including “contactless” transfers, default-tip options, incident reporting features, “ratings forgiveness” for drivers whose orders had been disrupted, easier ways to cancel orders, new safety measures, thousands of new workers and mobile checkout for shoppers.

These rapid-fire introductions have come as Instacart saw customer order volume soar by 300% last week vs. the same period a year ago, with 25% larger baskets.

“We’re proud to be serving as a lifeline for families across North America during this critical time,” said Apoorva Mehta, founder and CEO of Instacart. “The customer demand we expected over the next two to four years has happened on the Instacart platform in the last two to four weeks. To address this immediate surge, our teams have moved quickly and reprioritized our entire consumer and shopper product experience to better serve our community in the wake of COVID-19.”

Racing Stores Online

The unfilled demand for online ordering is also presenting new opportunities for stores that might not have previously offered online shopping.

Mercato, a San Diego-based online platform serving independent retailers, said this week that it was adding about 50 new stores per day and saw a 5,000% spike in consumer orders over the past month. Bobby Brannigan, Mercato’s founder and CEO, told WGB it worked with one company chain that was working to convert stores from physical to digital in as little as 24 hours. That’s helping to promote safer shopping options and addressing capacity limits in stores that have swept the industry since the pandemic, Brannigan said.

“As you can imagine, there’s this tremendous demand because people are coming in the store, [but] you can only have so many [customers] at a time. And on the other end, it’s safer to not have people come into the store, right? And not just for the customer, but also for the employees, because a lot of customers unfortunately come into the store and they don’t wear masks. So online ordering is a great way to not to only protect the customer but also the workers," he said. 

Adams Hometown Markets, which operates 11 stores in Connecticut and Massachusetts, is among Mercato’s newest online merchants. “Even with everything going on right now, the Mercato team was a huge help in getting our 50,000-plus products online in just 24 hours. We are fortunate to be able to help our customers get the essential foods that they need during this hectic time,” Russ Greenlaw, Adams’ VP of operations, said in a release.

Mercato said it was waiving fees through April 30 for merchants who join.

Brannigan further described processing and rolling out innovations in its software as fast as Mercato can absorb them during the crisis. In conferences with its partner merchants, for example, retailers have suggested a picking process that would allow department workers to oversee orders from their areas of the store with the goal of improving both efficiency and customer experience. That option is now available. Another store suggested to add the ability to print multiple orders at once and that’s now a feature.

Virtual Queues and Dark Stores

While shoppers flee lines to get into stores with restricted capacity, similar experiences now await virtual shoppers. Wakefern Food Corp.’s popular ShopRite From Home e-commerce platform has introduced a virtual waiting line. In response to demand, its website automatically puts visitors into a waiting line with approximate countdown to shop availability. When their turn arrives, shoppers have 10 minutes to begin an online shopping trip and 30 minutes to complete it.

ShopRite’s mobile shopping app in the meantime has been disabled.

It’s interesting to see how people are trying to manage the demand as best they can on the front end,” DeGraeve told WGB. “Everybody that I’ve talked to says that at a minimum, they are seeing two to three times their average volumes. And if it’s a smaller retailer [or] a retailer that hasn’t been doing it as long, they’re seeing five to seven times volume increase vs. pre-virus.”

In another signal of adjustments retailers have made on the fly, The Kroger Co. last month closed an existing store in the Cincinnati area in order to convert it to a pickup-only location. Orders can be staged for pickup there, helping to take heat off surrounding units. It was not clear whether Kroger had additional plans in the works, but it’s another indication of demand-fueled ingenuity and rapid deployment of a solution that until the virus came along, seemed destined for a tipping point much further into the future.

This arrangement can both absorb demand from surrounding units and pick order more efficiently, DeGraeve said. “It helps because you’re not worrying out having to be set up for selling the products and display and all that. So you can set it up as more of a fulfillment operation versus having it set up a store, you know, and that's always one of the challenges.”

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