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The Covid-19 pandemic has driven five years of growth in online grocery in five months. This increased online penetration has transformed the profitability of omnichannel grocery fulfilment. With in-store and online profit margins now at near parity, omnichannel stores provide operators the benefit of achieving a seamless integration of customer experience across all channels.

We believe this underpins the importance of having the right stores in the right location to be successful in the future model of grocery.

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KEY FINDINGS

  • Omnichannel supermarkets have emerged as the last mile grocery winners with locations adjacent to large catchments and minimal delivery drive times.

  • Delivery cost is the dominant factor in online grocery fulfilment cost. Picking and packing productivity results in marginal gains.

  • The near doubling in online grocery penetration has halved delivery costs from omnichannel stores.   

  • Grocery home delivery fulfilled from omnichannel supermarkets achieves materially better delivery density metrics when compared to centralised fulfilment centres (“CFCs”). 

  • Online grocery is now profitable for supermarkets with total fulfilment costs reduced to levels recoverable from customer charges.

  • Store pick fulfilment productivity per labour hour is approaching equivalence to CFCs, but with a much lower capital cost.

  • Adding online fulfilment operations to a supermarket creates a much better in-store experience with greater numbers of staff on the shop floor, increased product turnover leading to a fresher product on the shelves and availability of click and collect.

  • Two of the major operators have abandoned their CFCs in favour of increased omnichannel store pick. CFCs will persist, but we believe only for operators with capacity constraints or in the premium price segment.