Online grocery delivery challenges as the grocery delivery industry continues to grow


By Komal Puri | October 13, 2022

Gone are the days when consumers would frequently visit a supermarket or a farmer’s market to pick up their weekly stock of grocery items. With convenience and great offers kicking in, online grocery shopping is fast catching up with global consumers. As per Orian Research’s latest findings, the online grocery market is expected to grow with 23.7% CAGR in the next five years. The pandemic has further fueled the preference of online grocery shopping over traditional means. Customers are finding it safer and easier to browse through the offerings of e-commerce grocery items and placing their orders to get it home delivered, completely contactless.

The future of e-commerce grocery will largely depend on how best the players are able to handle surge demands without compromising on quality, price and delivery promises. Because once the pandemic subsides, consumers should be able to rely on these parameters and stick to their online grocery purchase.

The Rapid Growth of Online Grocery Delivery Markets Across the Globe

Every dark cloud has a silver lining, as the pandemic has been a boon to the online grocery market worldwide. According to Kantar, by the end of April 2020, the e-commerce share of the grocery market was cumulatively 12.4% across China, France, Spain and the UK, up from 8.8% at the end of 2019. As per the survey conducted by online grocery consultant Brick Meets Click (BMC), U.S.’s online grocery sales for delivery and pickup reached a record USD 7.2 billion in June 2020, a 9% increase over May, which surpassed the previous set record of USD 6.6 billion.

The online grocery market in Nordic countries too witnessed a quantum leap recently, with customers relying on online grocery delivery services. According to the Ken Research report, Denmark’s food and grocery segment is expected to grow to USD 742 million by 2022 with an estimated penetration of 15.6%. Deloitte also reported a 10% surge in online grocery sales in Denmark during March 2020.

Norway’s high internet usage, however, is driving e-commerce groceries. About 3.2 out of 4.95 million Norwegians prefer shopping online and this number is on a rise contributing to a bright future for the online groceries. Even Sweden with an internet penetration of 87.8% has witnessed rapid growth in the online grocery business. As per the report published by Strategy, almost 29% of Swedish consumers shopped groceries online for the first time after the pandemic outbreak.

Meanwhile, Choueiri Group’s research report states that 55% of Saudi Arabian consumers purchased groceries online during April 2020 as compared to only 6% pre-pandemic period, indicating a clear shift of consumer preference towards e-commerce groceries. Carrefour UAE saw a 59% spike in their new online customers during the COVID19 period.

The pandemic outbreak also has accelerated China’s online grocery sector. During January – February 2020, Alibaba’s Freshippo witnessed a surge in demand along with an increased number of new users. It is estimated that China’s online grocery market will be a whopping USD 219 billion by the end of 2026. Bain & Company along with Facebook conducted a survey among Southeast Asian countries that reveals huge accelerated growth in the online grocery shopping trend. Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam, are expected to reach 310 million digital consumers by 2025.

As per Netscribes, Indian online grocery market is valued to be USD 14.46 billion by 2023. More and more investments into the sector, high smartphone and internet penetration, and continuous innovations are the main factors contributing to this surge in India. The outbreak of COVID19 and lockdown phases in India further shifted consumers’ shopping habits, thereby boosting online sales.

Though far behind the European and Asian counterparts, a significant change is noticed among Latin American countries too. MercadoLibre observed 1.7 million new customers sign up on their platform during the lockdowns. As per Statista data, during the month of the pandemic outbreak, there was a weekly increase of nearly 15% of unique visitors of online grocery stores in Mexico.

How does grocery delivery work in a world dominated by online buying?

Online grocery shopping has been gaining ground for quite some time now and COVID19 just propelled its pace among all age groups and geographies, and there is no reason to believe that this popularity will fade soon. Which means there is no better time than now to invest in improving your e-commerce capabilities.

Gauging the resource availability and choosing an apt business model defines the success of online grocery delivery. The major ones are as below.

Online grocery store business: 

In this model, a businessman starts his online grocery store either through web portal or app, and delivers groceries to the customers from a warehouse or offline store where the items are stocked.

Online grocery marketplace business: 

In this particular model, an online grocery marketplace is created by joining hands with few local grocery producers/retailers who would eventually use the platform to sell their products on the marketplace.

Once the business model is decided, online grocery can get started focusing a few important features that are integral to this form of business.

  1. Admin features – Need for multiple levels of administrative access should be provided in the system followed by a method of vendor selection, approval and management. Systems that approves product should also feature in the system. Package management, tax and currency management should also be there to better the system. Proper reporting of every aspect should be made possible.

  2. Important seller features – Seller features should be flawless in order to enable them to sell their products on your platform without any glitch. Vendor dashboard featuring order cancellation and refund monitoring helps them manage things efficiently. Sales report should easily be generated without any hassle. Wallet management along with delivery slots management also facilitates the seller to plan things properly.

  3. Key buyer features – Dynamic features in the system should provide buyers with a great shopping experience. Basic features like automatic location detection, multi-cart function, delivery scheduling, single item cancellation, order tracking, order return/cancellation request etc. should be incorporated.

  4. Delivery staff features – Proper profile management of delivery personnel along with delivery area definition helps in better functioning. Route navigation systems further aid them in accurate delivery and proper time management. Delivery order management and push notification also help.

  5. Other essential features – To attract more buyers on your platform, offer discount coupons for seasonal sales or festive sales. A robust search tool should be able to find the exact product which a customer is looking for. The website should also be SEO/SEM ready for better performance, it should also be mobile compatible as many would access the URL through mobile.

Significance of Logistics in Online Grocery Delivery

2020 saw a paradigm shift in the way consumers shop grocery globally. With countrywide lockdown in place and social distancing norms in force, there has been a change in how buyers shop and companies sell. Online grocery has gained momentum ever since the pandemic began. According to the Food Industry Association’s annual US Grocery Shopper Trends study, almost 40% of essential items are now being bought online, as a result, supply chains need to evolve their operations in order to accommodate higher volumes in direct-to-consumer shipping.

In terms of delivery fulfillment, 18% of online grocery shoppers are opting for same or next-day delivery, as compared to 16% for curbside pickup and 14% for in-store pickup. 17% choose home delivery with standard shipping, and 8% subscribe for ongoing deliveries. With the existence of several pain points, the online grocery supply chain has to be more agile to meet the growing demands. Retail brands, online grocery sellers, and supermarkets are now turning to logistics tech to improve last-mile deliveries and stand out in the dynamic and competitive marketplace.

Accurate geocoding and route optimization are helping businesses overcome the long prevalent problem of imprecise address systems in various parts of the globe. Smart geocodes use Machine Learning to decode addresses accurately and can spot even the fuzziest addresses precisely. That’s how complicated addresses written in Arabic are decoded in interior parts of MENA. Route optimization software can help to plan delivery routes for multiple locations, suggesting the shortest and most optimal route in order to avoid traffic and other on-ground restrictions.

Automated dispatch is also helping to reduce lead time. Manual planning is often a time consuming and complicated process, which might take hours to complete yet end up with some errors. With the help of advanced solutions, e-grocery deliveries can plan on-demand daily dispatches within minutes, thereby saving time and improving logistics efficiency.

Faster allocation in the right direction is essential to ensure timely delivery of grocery and customer satisfaction. Supermarkets often have their in-house agents to deliver ordered items. However, for 3PL delivery platforms, who have hundreds of businesses enlisted with them, rider allocation software comes handy and takes into account rider locality preferences and area knowledge to assign tasks to the right delivery agents.

Visibility of real-time status is now essential for grocery businesses and their customers. With the help of real-time tracking tools, logistics managers can monitor on-ground delivery operations and take immediate action if a deviation from the planned schedule occurs. This helps in faster deliveries and improves the productivity of delivery executives. At the same time, consumers can also track their order status, and know when it is expected to arrive. Greater visibility improves trust and loyalty of customers.

Key Grocery Delivery Challenges

Though e-groceries are growing at a stellar pace lately, there seem to be a few online grocery challenges that need to be addressed in order to have long term sustainability. As more and more customers are looking up at e-groceries as a time saving, cost-effective alternatives to do shopping from the comfort of their home or office, eliminating those delivery challenges becomes essential. Some of the key grocery delivery challenges are as follows.

  1. Storage and delivery cost – This is one of the biggest capital investments for any online grocery business. The increasing cost of storage and delivery, every year, burns a bigger hole in the pockets of investors. Also distributing and delivering fresh items also becomes a matter of concern. To a larger extent, inventory management facility integrated with grocery delivery software can address the issue.

  2. Competitive market – Online grocery business today is a highly competitive one as it deals with many items and brands that need to be distributed across varied groups of customers. For startups, this becomes more challenging as they have to face competition with well-established grocery business, who are known to be luring their customers with discounts and offers. In this case, grocery software can efficiently meet high customer expectations and provide accurate information about low selling items and fast-selling items and plan accordingly.

  3. Delivery inefficiency – Delivery aspect of any e-grocery business is a bit tricky as it relies on delivery executives and isn't robust always. To deliver the product fresh within the delivery timeline needs an efficient delivery system. And providing the right training and education is the key to motivate the executives. Good performances should be duly recognized and rewarded.

  4. Changing consumer behavior – Online grocery like any other business is all about serving end consumers. And in this fast-changing world, consumer behavior is unpredictable as it tends to change with time. Right from ordering through an app to product delivery, a small error can be a major cause of dissatisfaction among consumers. Getting hold of loyal customers and retaining them needs top-notch service and a robust loyalty program.

  5. Infrastructure – Infrastructure is another important aspect of the online grocery store which often goes wrong. Online retail startups adopt different business models. Depending on the business model and its requirements, an apt infrastructure should be formed that gives success to the grocery stores, right from accepting order till last-mile delivery.

  6. Mounting Losses – Aspects of higher operating losses, low margins, disgruntled customers, unsuccessful deliveries etc. can cause losses which need to be managed efficiently. Proper strategies and technologies can control these losses.

  7. Price Volatility – Fluctuation of prices is one of the main challenges faced by both traditional as well as online grocery stores. This affects the bottom line profit. Thus, the use of proper technology in the business can provide real-time information about prices and sustainable management.

  8. Technologically Challenged Customers – Not all customers are tech-savvy, as a result, they stick to their traditional way of grocery shopping through brick and mortar stores. You have to persuade them to use an app or web-portal through marketing and advertising campaigns that would lead them to shop online.

Benefits of a Grocery Delivery Platform

In a highly demanding marketplace with hundreds of players trying to impress their customers, only some efficient delivery software can make a mark and be the savior. Grocery delivery platform can offer the following advantages that can be utilized by business owners.

Seamless integration of grocery delivery platform 

Instead of having multiple platforms or apps running in silos, it is beneficial to have an integrated system of existing WMS, OMS, ERPs, TMS and 3PL. This integration brings in proper visibility of delivery processes and provides critical insights into a service provider’s KPIs. This also enables data-driven decision making.

Enhanced productivity 

Delivery operations are key to any online grocery’s success and this can be achieved through an enterprise-grade grocery delivery management software. Such software ensures the highest standard of excellence based on KPI benchmarks that are best in the industry. Route optimization software with simple UI & UX further can empower drivers to efficiently deliver grocery items. It takes care of delivery allocation, routing, and sequencing along with real-time communication with customers.

Scalable delivery operations  

Scaling up delivery operations due to spikes in demand are necessary for today’s competitive market. And this can be efficiently done by leveraging intelligent crowdsourcing capabilities to seamlessly onboard delivery agents across multiple markets. It promptly outsources several delivery tasks based on cost, proximity, past performance, and delivery urgency.

Improves margins 

A robust software helps to scale up operations, improves visibility, allocates task intelligently, reduces miles per delivery and thereby empowers grocery business through improved margins.

Highly efficient route planning 

By leveraging a route optimizer and planning software deliveries are made seamlessly across multiple points. This improves efficiency and delivery TAT, thereby making the entire operation profitable. This also saves on fuel consumption and reduces miles per delivery and betters last-mile delivery.

Automatic scheduling and task allocation 

Instead of manual allocation of tasks to delivery agents, profiles are fed into the system and software does auto-scheduling and allocation based on an agent’s experience and locality knowledge. This helps delivery TAT along with efficient last-mile delivery.

Self-service type delivery model 

Advanced software enables the customer to opt for preferred delivery windows, alter the location, change time, and prioritize delivery. This ensures efficient last-mile delivery and churns out happy customers.

Contactless grocery delivery 

Integrated software with features of contactless photo capture as a proof of delivery, contactless delivery through OTP are helping online grocery business to maintain social distancing yet efficiently delivering products. QSR deliveries are also in place post-lockdown at various locations.

FarEye Can Help You to Deliver the Best Online Grocery Delivery Experience

With FarEye as your partner, you can scale up your profitability and get happy customers in your kitty. We can provide a customizable contactless food and grocery delivery platform with driver crowdsourcing app, interactive dashboard for dynamic planning and strategizing, and performance management tool. Through our platform, your customers are empowered with maximum flexibility.

Through our software suite, you can achieve cost-controlled superior delivery experience. Handle demand fluidity with ease by FarEye’s efficient tools that utilize crowdsourcing and boosts productivity by using gamification. Our integrated dynamic system will make delivery operations flawlessly easy and would give you a competitive edge in the market.

Komal puri

Komal Puri is a seasoned professional in the logistics and supply chain industry. As the Senior Director of Marketing and a subject matter expert at FarEye, she has been instrumental in shaping the industry narrative for the past decade. Her expertise and insights have earned her numerous awards and recognition. Komal’s writings reflect her deep understanding of the industry, offering valuable insights and thought leadership.

Komal Puri
Sr. Director of Marketing | FarEye

Share this article

Open Twitter Share on Linkedin

Related resources

Case Study Leading Electronics manufacturer Preview Image
Big & Bulky
Case study
Leading Household Appliances Manufacturer Improves its OTIF Score by 56%
Case study deliveries for smart home gyms
Big & Bulky
Case study
Redefining Deliveries for Smart-Home Gyms
Case study largest grocer of indonesia
Case study
Indonesia's largest grocer saves 10,000 hours with FarEye's auto-routing solution