TopShelf Spotlight: Grocery eCommerce Can Be Profitable. Here’s How To Do It
Grocers can’t afford to overlook any opportunity that might lead to increased profitability.
In a grocery market where larger retailers like Walmart continue to capture an increasing share, it’s more critical than ever for regional grocers to find additional paths to profitability. This often means capitalizing on emerging opportunities like retail media networks, personalization technology, and omnichannel customer engagement.
These areas have garnered significant attention for their potential to drive revenue for grocery retailers—and rightfully so. But there’s another option that’s often overlooked: increasing the efficiency of eCommerce operations.
By fine-tuning how eGrocery orders are picked, packed, and fulfilled, grocers can find substantial cost savings that increase the return on their technology investment and boost their bottom line.
In the first installment of a special two-part episode of TopShelf Spotlight, Mark Fairhurst, Chief Growth Officer at Mercatus, is joined by Lee Lamberth, VP of Retail Operations at Mercatus, to explore practical strategies for optimizing eCommerce operations in the grocery industry.
With more than 30 years of experience in retail, Lee offers a wealth of knowledge on how to enhance efficiency, reduce costs, and ultimately boost profitability simply by making eCommerce operations more efficient.
Ready to make your eCommerce operations more profitable? Keep on reading below.
The Importance of Optimizing In-store Picking
It’s a common misconception that eCommerce in the grocery industry can’t be profitable.
Profitability is absolutely achievable. But it takes work. It requires a deep understanding of operations and a strategic approach to addressing inefficiencies.
One of the most critical, yet often overlooked, areas in achieving this is optimizing in-store picking.
Time Is Money
Every step a picker takes in the store, every time a product is handled, it translates into labor costs. If pickers are spending too much time navigating the store or handling products multiple times, those inefficiencies add up quickly.
For product touches, specifically, it’s estimated it takes approximately three seconds every time an item is handled.
That’s three seconds to remove a product from the shelf and place it into a cart. If that cart is then taken to a staging area, the product is touched again to move it onto a staging table—adding another three seconds. Finally, when the product is bagged, that’s another three seconds of handling.
This means each product is handled—at best—three times, consuming at least nine seconds in total. On an average order of 32 items, this process alone can take nearly five minutes just in handling time.
However, by minimizing these touches—we’ll identify tactics related to this below—two-thirds of that time can be eliminated. Over the course of fulfilling 20 orders, this simple adjustment can save around one hour of labor, directly reducing operational costs.
Now, apply this same way of thinking to a picker finding products in the store or handling orders one-at-a-time when there are multiple orders in the queue. Minimizing the time, steps, and touches required to pick orders can significantly improve efficiency and reduce labor costs.
In an industry where margins are razor-thin, these optimizations are essential for maintaining profitability.
Ensuring Order Accuracy at Scale
At no time is this high level of efficiency more important than when order volumes are high.
As order volumes increase, the challenge of maintaining accuracy in the picking process also becomes critical. It’s not enough to simply pick orders quickly; they need to be picked correctly.
Investing in the right tools and equipment, such as multi-picking carts and efficient bagging systems, is crucial for ensuring that orders are assembled with precision.
These investments not only increase the efficiency of operations, but also help prevent costly errors that can erode profitability and damage customer trust.
Accurate order fulfillment reduces the likelihood of returns and complaints, and also enhances the overall customer experience. An essential factor for long-term success in a highly competitive market.
Maintaining order accuracy at scale requires a focus on both efficiency and precision. By equipping your team with the right tools and training, you can achieve both, ensuring that your operations remain smooth and your customers remain satisfied, even as order volumes grow.
Three Strategic Recommendations
As grocery retailers seek to optimize their eCommerce operations, here are three specific strategies to consider:
1. Bag As You Go
As previously mentioned, unnecessary handling during the picking process can waste valuable seconds, adding up to unnecessary labor costs over time.
To combat this, implement a “bag as you go” strategy.
Instead of placing items in a cart and then moving them to a staging area for bagging, pickers should bag items directly as they select them from the shelves. This approach eliminates those extra handling touches, streamlining the process and reducing the time required to assemble each order.
By minimizing product touches, grocers can speed up order fulfillment and lower operational expenses, making the overall process more efficient.
2. Optimize In-store Routing
You can equate touches to steps when it comes to operational costs. Each step taken in the store represents time and money, so minimizing unnecessary movement is key.
That makes reducing the steps involved in the picking process crucial for lowering labor costs and improving efficiency. One of the most impactful ways to achieve this is by optimizing the in-store routing for pickers.
Just as someone would use a GPS to find the most direct route when driving, the same principle applies within the store. Training staff on the most efficient routes and implementing technology solutions, such as mapping software or optimized pick paths, can significantly reduce the time it takes to complete an order.
The impact of this optimization becomes especially clear when considering that 70% of a picker’s time is spent traversing the store.
By cutting down on the steps required to pick an order, retailers can reduce labor costs and improve the speed at which orders are fulfilled, ultimately contributing to greater profitability.
3. Implement Batch-picking
We’ve already discussed how picking efficiency is never more important than when order volumes are at their highest. To handle peak times efficiently, implement batch or multi-order picking.
This method allows pickers to fulfill multiple orders simultaneously, reducing the number of trips across the store and minimizing the time spent per order. Instead of picking one order at a time, a picker can handle several orders in a single pass through the store.
This approach not only increases efficiency but also increases capacity, allowing grocers to fulfill more orders within the same time frame. By optimizing labor in this way, retailers can open up more delivery or pickup slots, boosting revenue potential.
However, it’s crucial to maintain accuracy when batch-picking, as mistakes can lead to customer dissatisfaction and increased costs.
10 Action Steps to Improve Operational Efficiency:
- Evaluate and optimize your in-store picking process to minimize labor costs.
- Adopt the “bag as you go” method to reduce handling time.
- Train your staff on the importance of efficient picking routes.
- Consider mapping software to optimize pick paths.
- Implement batch picking to enhance efficiency and scale operations.
- Invest in multi-picking carts and other tools to ensure order accuracy when volume is high.
- Focus on maintaining a positive customer experience through accurate orders.
- Continuously monitor and refine your eCommerce processes for efficiency.
- Consider how technology can further streamline your operations.
- Look out for the next episode of TopShelf for more practical ways to reduce operational expenses and improve efficiency.
Final Thoughts
If there’s one key takeaway from the latest TopShelf Spotlight, it’s the importance of a practical approach to eCommerce that gets the little things right.
By focusing on the processes surrounding in-store picking, grocers not only improve efficiency and reduce labor costs, but also ensure a superior customer experience with improved speed and accuracy. That’s exactly how you boost a bottom line and get the most out of your tech investment.
For those interested in learning more about optimizing eCommerce for their grocery retail operations, be on the lookout for part two of Mark’s discussion with Lee—coming soon.
In the meantime, if you have any questions related to the tactics discussed in this episode, don’t hesitate to reach out to us.
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