As we all grapple with the shift in behavior demanded of us by the COVID-19 crisis, we can already perceive new realities emerging in many areas of our economy and our culture. Masks are becoming ubiquitous or even mandatory. Hand sanitizer is becoming a leaving-the-house checklist item (Phone, Wallet, Keys, Mask?, Hand Sanitizer?). This is just the tip of the iceberg.
Countless industries will be negatively affected by a shift in consumer behavior. For example, is the age of business travel over? Will we be able to stay at a Ritz Carlton for the price of a Holiday Inn Express? When can we safely go to a baseball game again? Certainly sobering speculations, and only time will tell how the economy will evolve, for better and for worse, in the aftermath of the pandemic. However, there appears to be one industry already demonstrating its value, stability, and growth potential more than any other.
That’s the grocery industry.
The need for groceries has exploded as people stock up out of fear of exposure, shortages, and the elimination of the “night-out” at a restaurant.
Walmart is hiring 200,000 new workers. Giant is increasing its workforce by another 3,000 workers after already hiring 4,000. Instacart recently made plans to more than triple its shopper network from 200,000 shoppers to 750,000. Amazon and CVS are hiring tens of thousands as well.
Much of this is to support the unprecedented and rapid rise in demand for one service in particular – grocery delivery.
This is likely to have several effects on the market. I predict the following:
1. Online grocery delivery will be a permanent and expanding fixture in the grocery industry.
This is likely to be the case for several reasons:
It is apparent that this crisis isn’t going away anytime soon. Grocery delivery makes it easy for people to avoid crowded public spaces like the grocery store.
Folks who had not yet tried grocery delivery were suddenly forced out of their normal routine and were likely pleasantly surprised that it was convenient, easy, and less time-consuming. And now, everyone knows how to do it. (This would be an interesting case-study in rapid, mass consumer education.)
Technology will enable unattended delivery of perishable goods without fear of spoilage, theft, or missed delivery.
2. Cold-chain compliance will now extend to the home.
Supermarkets put a lot of effort into ensuring that perishables are kept at safe temperatures through the distribution process. This effort is called “cold-chain compliance”. For example, cold-chain compliance rules may dictate that certain food is only outside a controlled cold-chain for 30 minutes. The expansion of grocery delivery poses unique challenges to this process.
Delivery drive time. The groceries have to travel from store to door. Depending on the cold-chain control in the vehicle, this time is likely considered outside of the cold-chain, so the clock starts running.
Unattended delivery. This is particularly important now that “contactless delivery” is a thing. Unless the delivery person can leave the order with the consumer at their home, the supermarket has a choice to make. Do they leave the groceries at the door and risk spoilage or do they limit their liability and protect the consumer (and their reputation) and chalk it up to a failed delivery? If it’s the latter, then the perishables in the order likely go in the trash bin at the supermarket and the store just eats the loss. Not a great system for cost-efficient grocery delivery.
3. Consumable replenishment offerings will become standard and expected.
As consumer adoption of delivery options grows, so will their dependence on the regular replenishment of consumable goods. Milk, eggs, cheese, toilet paper, etc. Whatever staples your household consumes on a regular basis, there will be a program to replenish that item at a regular interval. Brands will also start to learn your patterns and intelligently replenish these items, so you don’t end up with 3 gallons of milk. There’s a lot of innovation going on in this space already and even more that’s about to happen.
4. Expect deliveries in the middle of the night.
At HomeValet we use the term “Delivery Compression” to describe a challenge that faces the grocery and prepared food delivery industry. Due to the lack of unattended, cold-chain compliant delivery solutions on the market, everyone needs their perishables delivered around the same time. This causes issues with logistics scheduling, staff resourcing, and routing inefficiencies. With the addition of innovative technology to solve this problem, grocers are relieved of this burden and can now deliver perishables 24/7, enabling cost-saving efficiencies in the supply chain that didn’t exist before. The concept of the delivery window goes out the, well, window. Shoppers will no longer tell grocers they need their food between 5pm – 6pm. Instead, they’ll tell the grocer they need their food by 5pm, and the grocer can deliver it whenever it’s convenient and at the lowest cost.
5. Investment in innovation in the delivery space will increase dramatically.
Expansion of home delivery means the expansion of investment and innovation. There are still huge inefficiencies and risks in logistics and the front-porch delivery dynamic. Required signatures, weather/temperature, and package theft are threats to delivered goods. In addition, the environmental impact of home delivery will be felt more strongly and solutions to reduce packaging waste and inefficient delivery routing will expand.
Product brands are going to further increase their reliance on DTC (direct-to-consumer) sales and reduce their reliance on resellers. As this happens, large retailers are going to search for differentiators that they can offer, not only to consumers but also to their product brands.
Advances in delivery innovation are undeniably one way that can be achieved.
As the full impact of this pandemic continues to reveal itself, we know that e-commerce sales of groceries, pharmaceuticals, and other replenishment items will continue to soar. Contactless, safe, reliable delivery of these critical items will be essential for the American consumer and will help protect dedicated grocery store employees from dangerous overcrowding in an age of increased demand and safety hazards.
Novel solutions to severe, ongoing challenges in the home delivery market will drive critical home delivery expansion into the future, particularly in the grocery industry. Ultimately, these innovations will pave the way for the rapid expansion of other market verticals hampered by different delivery logistics challenges, beyond grocery. Cold-chain compliance, automatic age verification, and digital signatures will enable safe and secure delivery of restricted items like alcohol and pharmaceuticals. Secure package delivery will reduce or eliminate the threat of package theft and dramatically reduce the need for wasteful packaging.
The future of grocery was already getting interesting. This crisis, however, has dramatically accelerated the need and demand for immediate “last-yard” solutions. Ultimately, it’s the grocer who is poised to emerge from this pandemic more dynamic than ever, but it is the consumer who will benefit the most.
Jack Simms is the co-founder and COO of HomeValet, a contactless home delivery tech solution for packages, groceries, and other perishable items.
HomeValet’s SaaS solution connects online retailers and couriers with a temperature-controlled Smart Box outside of consumers’ homes. Enables completely contactless and unattended delivery 24/7 of frozen, refrigerated, and pantry items. Opens new channels in grocery, alcohol, and pharmaceutical home delivery. www.homevalet.co