Technology

Will 2022 Be the Year of Ultrafast Grocery Delivery?

Not so fast, says Stor.ai EVP of Business Development Mendel Gniwisch
Stor.ai
Photograph: Shutterstock

The way consumers shop has changed permanently over the past year and a half, with technological advancements powering unprecedented growth in the popularity of e-commerce, says Mendel Gniwisch, EVP of business development for Stor.ai, an end-to-end digital commerce solution for grocers. Gniwisch predicts a few big shifts in the grocery industry in 2022, including the emergence of a “clear winner” in ultra-rapid delivery; retailers taking control of their own delivery services; and increased in-store automation. To explore these topics and more, WGB recently connected with Gniwisch to get his take on what’s next for the grocery industry.

Jennifer Strailey:How important will ultrafast delivery be to grocers who wish to remain competitive in online ordering and delivery? Where does this leave same-day delivery?  ​ 

Mendel Gniwisch: Ultrafast delivery is a growing trend and delivery providers seem to be competing with each other to determine who can bring to market the fastest possible delivery service. Ultrafast delivery has grown to become sufficiently established—especially in cities—[and] certain customers will feel that they can no longer do without it, so it definitely addresses a consumer need that’s here to stay. However, in order to be profitable, ultrafast delivery services need to increase their basket size, which is unlikely to be possible in all situations. So while ultrafast delivery won’t replace other same-day offerings, its growing popularity means that if same-day delivery providers want to compete then they’ll have to lower prices in order to offer additional value for customers because they’re at a disadvantage in terms of speed and convenience.

Last-mile delivery and the cost of last-mile delivery has been a major challenge for grocers. You’ve said that grocery providers will break even from a financial standpoint in 2022—even on ultrafast delivery. How will they achieve this? ​

Grocers have to do three things to achieve profitability on ultrafast delivery: increase their customer base so that picking and delivery can break even, which can be done by using the latest technology to optimize performance and efficiency; increase the average basket size; and attract advertising dollars from large consumer goods companies. However, no single provider of ultrafast delivery can meet the first of these criteria, so many rival companies are jostling for supremacy in the space. That’s why a raft of unprofitable companies are set to fade away, leaving one company in each country free to break away from its rivals and significantly increase its customer base. These market-leading ultrafast delivery providers should begin to see profitability within the next 12 to 18 months.

There are many third-party options for grocers looking to partner on at least some of their e-commerce/delivery business. Why do you see retailers moving away from this model and embracing their own online presence? How will they achieve this internally if they’ve been outsourcing all along?

The third-party model was embraced by grocers as a stopgap. They needed to start selling online—especially in the wake of COVID-19—and needed the tools to help them do so quickly. Third-party solutions were able to fill that gap immediately and, in the short term, effectively. However, retailers now increasingly understand that they cannot be the Toys Us to Instacart’s Amazon. In 2000 Toys R Us signed a partnership with Amazon, allowing Amazon to do their online business and paying Amazon $50 million a year for the service. They used a third-party strategy thinking it would be the right way to sell online. 

Why do we know all these details? Everything came to light in 2017 when Toys R Us filed for bankruptcy—showing how that strategy worked. And so now that retailers have had a chance to reflect and plan for their future, they are looking for independent solutions like Stor.ai to help them build their own online presenceown their customer interactions and data, and offer shoppers a digital experience that reflects the unique characteristics of individual brands.

You’ve said you see a “hybrid” shopping experience moving to the fore in 2022. Can you speak to the top trends in this arena? What do you see as the ultimate goal of combining tech with the in-store shopping experience?

Most customers now shop in a hybrid manner, meaning that they do some of their shopping through digital methods and some of their shopping using traditional, pre-digital methods. The key for retailers is combining the most impactful features of both online and offline shopping to offer the best of both worlds—bringing the efficiency and seamlessness of online shopping to the brick-and-mortar store, and bringing the experiential highs and unique in-store experience to the online realm. 

I see the optimal model for the store of the future as having an MFC (microfulfillment center) in the back fulfilling orders for pickup and for delivery, while customers shop in a kind of market with the best butchers, fishmongers and bakers, including digital and AR-based add-ons, in order to experience the smells, sights and sounds that have to be experienced in person. Think Eataly alongside an ultra-high-tech warehouse. Clearly technology like [Amazon’s] Just Walk Out is a part of this but figuring how to make this a part of customer-first commerce and how it can be implemented profitably and at scale is still a year or two away.

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