Since e-commerce grew by 30% in 2020, consumer expectation for rapid delivery has also increased — and fresh produce groceries are the type of products they want quickly.
Companies seeking to fulfill the last mile of delivery, such as DoorDash, Gopuff and Gorillas, are gaining traction either as standalone entities or as part of larger delivery networks, such as the Target/Shipt acquisition, according to a U.S. Chamber of Commerce news release.
For the most widespread retailers such as Walmart, Target, discount retailers and food-and-drug chains, same-day delivery often involves simply using their stores as distribution hubs and partnering with third-party delivery providers such as DoorDash, Instacart or Uber.
But new players are also offering same-day delivery, or delivery within 10 to 15 minutes in some urban areas. Also some grocery retailers and direct-to-consumer food businesses are partnering with established delivery specialists and opening micro-fulfillment centers, as well as dark stores, that place their goods closer to consumers to achieve speedier service.
Gopuff operates its own micro-fulfillment centers and buys groceries and other essential products directly from distributors. It employs its own pickers and works with independent delivery drivers, according to the release. Other service companies in the ultra-fast space include Buyk, which offers 15-minute delivery via bicycle from its own network of dark stores, and Gorillas, a Berlin, Germany-based delivery company offering 10-minute delivery.
“E-commerce had already been growing … and then we saw what happened last year,” Dave Glick, chief technology officer at Flexe, a provider of omnichannel logistics solutions, said in the release. “This was bound to happen. It just happened a few years earlier than people expected.”
All of these trends are contributing to extraordinary pressure on the supply chain.
And of course, fulfilling orders at this rapid pace comes with a lot of logistics challenges. Inventory management becomes more complex when it is spread out across multiple warehouses, and manufacturers need to consider the capabilities of local delivery services, which may rely on a pool of gig workers who may or may not be able to fulfill orders in a desired time frame, according to the release.
In 2017, Target acquired its own last-mile delivery partner, Shipt, which had already established itself offering grocery delivery for supermarkets in several markets, and followed with the acquisition in 2020 of certain technology from Deliv, a provider of delivery-management solutions.
“Retailers are trying to scale up their ship-from-store, because I think there's a consensus that fast shipping is important,” Glick said in the release.
That business model has drawbacks, though. There are inefficiencies from the delivery of mostly very small parcels, and unlike warehouses and distribution centers, most stores were not designed for efficient picking, but instead were designed to encourage shoppers to buy more products.
You have to pass through the fresh produce department's tomatoes and bananas in order to get to the cereal and beer, for instance.
Retailers will need to make picking as efficient as possible if they are going to deliver from their stores, and that could require either rethinking their layouts or making more use of dark stores — either stand-alone facilities or attached to existing stores, Glick said.
He suggests that retailers build dedicated fulfillment centers in all of the National Football League cities to do same or next-day deliver to 50% of their customers. But most retailers want to use their existing inventory pool and physical structures.
“There are new attempts to get into last-mile delivery, but attempting is a far cry from disrupting someone,” Satish Jindel of SJ Consulting Group said in the release. “They may get a few things here and there with their model, but UPS and FedEx aren’t worrying about them.
“Amazon is a different beast,” Jindel continued. “Amazon has [traditional carriers] shaking in their boots, but it’s not because they are disrupting, it’s because they are a retailer and a provider of service. They have captive business.”