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Retailers face delivery disconnect

As food and grocery retailers grapple with unsustainable last-mile delivery models, a rising percentage of consumers seek free shipping for online orders, new research shows. According to the Capgemini Research Institute, retailers are absorbing a sizable chunk of last-mile delivery costs for online grocery orders. The average cost incurred per online order is $10.10, yet the average cost recovered from customers per online order is $8.08, the researcher reported in its “Last-Mile Delivery Challenge” study, released last week. Consumers are only willing to pay an average of $1.40 per online order for delivery.

How Curbside Pickup Drives Grocery Traffic

According to JDA Software, adoption of in-store and curbside pickup is growing exponentially, with a nearly 43 percent increase from 2015 to 2017 and 50 percent of shoppers having used a buy-online-pickup-in-store service model during 2018. It’s no wonder that the grocery industry is responding by adopting curbside pickup as a way to cater to today’s time-starved consumer. Major retailers like Target are beta testing the concept, with the superstore recently rolling out its Drive Up curbside pickup service. Customers order what they want from the company’s app, drive to the store and employees bring their purchases out to the car. A hybrid between online order fulfillment and traditional brick-and-mortar shopping, curbside pickup is gaining traction as a way to stay competitive with online retail. It may prove effective as a method of boosting sales and retaining customers, as Target reported a 10 percent increase in orders after its beta test. However, there are a few factors that can influence whether curbside pickup will be feasible for your business and embraced by your customer base.

4 Ways to Be a Customer-Obsessed Food Retailer

The Great Recession impacted consumers’ tastes and preferences over the past 10 years. If a retailer isn't carefully monitoring the changing needs of customers, gaps can quickly emerge, which open the door to competitors. The biggest driver of changes in consumer behavior is income, and for much of the post-WWII period, real incomes (adjusted for inflation) have been rising. The chart below illustrates these income changes over the past 40 years.

Good News for Grocers: Brick-and-Mortar Still Reigns Supreme

The grocery industry has been inundated with fears about online shopping overtaking the traditional brick-and-mortar store model, and for good reason. With major companies like Walmart, Amazon, ShopRite and Albertsons investing in what industry players have hailed as “the future of grocery shopping,” it makes sense that established grocers are wary of losing their customers to the convenience of online grocery shopping.

How Regional Grocers Are Competing with Big Boxes

Consolidation, fanned by a wave of technology, has produced mega-players that have largely set the tone in the grocery industry. Amazon and Peapod are encroaching online, European players are cornering the private label product market, and Walmart, which owes half its sales to grocery, has created unprecedented competition. This has benefited consumers but decimated regional and local grocers. However, there’s still a place for regionals – if they take the right steps to be competitive. While large grocers have created replicable store experiences that appeal to the masses, local chains can offer hyper-customized experiences in a way that big grocers haven’t been able to.
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