The pitfalls of outsourcing eGrocery services

Retailers could lose more than just profits when outsourcing eGrocery services, and instead experience the pitfalls.

Analysts were predicting that global online retail sales across all sectors would reach $4.2 trillion and make up 16 percent of total retail sales by the end of 2020. Such estimates, however, were made before anyone was aware of the impact that COVID-19 would have on shopping behaviours.

While Amazon’s revenues have grown by a reported 28 per cent for the first quarter as a result of increased demand from housebound shoppers, all bets are off as to where online sales will actually finish by year-end, except to say that coronavirus will have played a significant role in reshaping the landscape.

Longer-range forecasts will also need to be re-evaluated. Greater dependence on e-commerce due to the restrictions imposed by lockdown has led to growing familiarity and preference among shoppers for making purchases online and receiving deliveries to their door. It is not surprising that investors and entrepreneurs have been quick to jump on this market disruption and are now putting huge sums of money into making the link between technology and grocery delivery.

North American grocery delivery app, Instacart, recently secured $225 million in its latest round of funding, bringing the start-ups’ valuation to $13.7 billion. Meanwhile, more established players have also been trying to find a new formula to quickly adapt their business models. Aldi has extended its pilot with Deliveroo, while Morrisons has joined forces with Amazon to leverage its tech platforms and delivery services.

In one respect, this spells good news for the eGrocery market. Following the money, all signs point towards the fast-tracking of eGrocery services as a hot sector primed for growth. Launching an online retail offering should now be a priority for all grocery traders.

With headless commerce among the solutions now enabling retailers to easily integrate a digital channel into their sales operation, there is no reason why they too cannot ride the wave. Unfortunately, however, many retailers are losing out, instead outsourcing eGrocery services.

Losing control when outsourcing

Opting to outsource to a full-service provider like Instacart may seem like a quick and easy fix.

The retailer will not have to do anything to get online sales up and running. All is taken care of by the service provider: They provide the app; they maintain the product catalogue; they hire freelance shoppers; they sort the payment at the checkout; and then they deliver to the end customer.

The service provider now also:

• Decides which products to offer
• Sets the prices for products, which can conflict with the instore price and add pressure to reduce margins
• Run its own marketing campaigns
• Take ownership of customer data for greater selling opportunities
• Take ownership of digital customer engagement

Meanwhile, the retailer has given away control and lost a golden opportunity to increase its own revenues.

Reap the benefits of control

By creating your own online platform, none of this is necessary. Achieving a new online sales channel is easy with the assistance of Emporix’s 10 years of experience in the online grocery business. Our innovative and easy-to-use software solutions mean that the retailer does not need to lose any control over pricing, product catalogues, the brand, or have to hand over the valuable customer data.

An important benefit is that online services can then be integrated much more closely with instore operations to create far greater efficiencies.

For example, a service provider will often use freelance shoppers to pick its orders and do so on an order-by-order basis. This will be in the same way that a Deliveroo rider will collect a food order from a restaurant, followed by another rider for a different order. They will complete the shop among the other customers too. When specific requests from the deli counter are included in the order, the hired shopper will need to queue. Then, they will queue at the checkout and pay for the order, adding further unnecessary disruption to instore customers.  

By managing online orders rather than outsourcing it to a third-party provider, the retailer can provide a much more efficient operation.

Emporix’s wave-picking solution will combine all picked items into an order cycle to streamline the process. Orders will be fulfilled in a dedicated packing area and our system will tell the packer in which bags and in which order the items need to go. The deli counter will receive online orders to prepare in bulk and at convenient times, without the disturbance of freelance pickers adding to the store traffic. Checkout queues will also be reserved for instore customers only with an online system that is directly integrated with the POS / ERP system of the retailer.

At the final stage of the cycle, route planning will optimise delivery routes. This will not only ensure that delivery vehicles are kitted with the correct, chilled storage facility for groceries during transit, but also that the trained delivery staff will act as an appropriate representation of the brand and its customer service when making the deliveries.

Outsourcing eGrocery services is not necessary. Instead, managing the service with the support of our innovative software tools means that retailers will have control of their own opportunity. The gains from owning their digital retail channel, together with the increased efficiencies of managing it internally, will all be realised at the bottom line as the market continues in its exponential growth.

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