MHI SOLUTIONS COMMUNITY: Automation Can Alleviate Growing Pains in E-Grocery Segment

By Christian Dow

For high-end grocery chains seeking to provide a premium customer experience, it’s always a bad thing when customers are outnumbered in the aisles by fast-moving order pickers who often outcompete them for the same product inventory.

Whether those order pickers are representing third parties such as Instacart or Shipt or are store employees hired during the pandemic to handle a surge in online orders, they leave in-store customers with less to choose from, and they can get in customers’ way. That presents a major challenge for grocers, which typically operate on razor-thin profit margins and rely on repeat business to stay in the black.

“Customers who go into the store and shop are the most profitable customers for grocers because, essentially, they are filling their own orders, and those customers don’t like having to encounter lots of grocery employees or Instacart employees blocking their way to get to the products they need,” said Colman Roche, vice president of e-commerce and retail sales at MHI member Swisslog Logistics Automation. “There’s a natural tension there, and grocers are very aware of that.”

Prior to the pandemic, grocers were seeing a slow but steady increase in online ordering for pickup or delivery, especially in urban areas. But it still amounted to only a small percentage of total revenue, Roche said.

“With COVID-19, there has been a rapid adoption of e-grocery services by consumers, which has quickly changed the landscape,” he said. “Several major grocery retailers have said they hit their five-year growth plan within a two-month period last March and April. It’s caused grocers to have to do two things at the same time: fulfill customers’ needs in a rapidly changing environment and re-strategize for the future.”

For some grocers, that shift in strategy involves opening micro-fulfillment centers (MFCs) that are as small as 8,000 to 10,000 square feet and feature goods-to-person automated technology, according to Andrew Benzinger, business development manager for MHI member AutoStore.

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