Strategic Fulfillment: Paving the Path to Online Profitability

The grocery industry is experiencing a transformative shift as 69% of all grocery sales were digitally influenced in 2023, amounting to $249 billion. Despite this digital boom, achieving profitability for grocers remains a significant challenge. Incisiv’s recently released report, "Increasing Online Profitability Through Strategic Fulfillment," sheds light on the key factors driving this trend.

From the grocers' perspective, strategic fulfillment is crucial in setting themselves apart in the ever-changing and competitive grocery industry. Ninety-seven percent of grocers recognize that improving product availability is paramount. This ensures customers can find the necessary items, increasing satisfaction and loyalty.

Another critical area of focus for 89% of grocers is finding the right balance in workload and orders to optimize labor and space utilization. This is essential to maximize efficiency in fulfillment processes, reducing operational costs, and improving overall productivity.

Moreover, 86% of grocers prioritize enhancing their forecasting and projection of customer orders. By gaining a deep understanding of customer behavior and preferences, grocers can optimize their inventory management, ensuring the right products are available at the right time, minimizing stockouts, and avoiding overstock situations.

The strategic focus of grocers in response to changing customer preferences, especially post-pandemic, is evident in their prioritization of different categories. With 97% focusing on produce, grocers ensure a reliable supply chain for fresh fruits and vegetables to cater to consumers' increasing demand for healthier choices. Following closely at 87% is the center store, where grocers optimize offerings of non-perishable items and pantry staples to meet consumer needs. Additionally, 68% on frozen, 35% on meat and seafood, and 11% on prepared meals reflect grocers' efforts to adapt to shifting preferences and provide convenient, diverse options to fulfill the demands of their customers.

Despite the focus on digital sales, 59% of grocers express dissatisfaction with their e-commerce strategic fulfillment solutions, indicating challenges in optimizing their fulfillment platforms. This is further compounded by the complexities brought about by the rise in omnichannel retailing, necessitating the seamless integration of online and in-store operations, efficient last-mile delivery logistics, and consistent customer experiences across all channels.

To address these challenges and drive profitability, grocers must upgrade and integrate their current technology platforms. Approximately 77% of grocers still rely on legacy systems, and 78% need help quantifying the cost of ownership in relation to return on investment.

Our research findings strongly indicate that strategic and effective fulfillment is the primary driver of change within the grocery industry. However, it is surprising that 38% of grocers remain cautious, hesitating to invest substantially until practical AI-enabled data analytics technologies and use cases become more evident. Despite this cautious approach, 82% of grocers acknowledge the transformative potential of AI and recognize its necessity for the future.

Despite recognizing AI's power, only 9% of grocers have allocated dedicated budgets for in-house data science capabilities, indicating a lack of proactive investment in this area. Additionally, just 18% of grocers have purchased software packages embedding AI capabilities, and a meager 4% boast competent data scientists in their teams. This lack of clarity on how to proceed with AI implementation highlights the need for further education and understanding of its benefits.

In conclusion, strategic fulfillment remains a pivotal aspect in unlocking online profitability for grocers. By adopting digital transformation, leveraging effective technologies, and embracing data-driven insights, grocers can strategically position themselves to thrive in the evolving grocery landscape and effectively meet the demands of digitally influenced shoppers.

The collaborative research report titled "Increasing Online Profitability Through Strategic Fulfillment" was jointly conducted by Incisiv, FMI, and Relex Solutions. This comprehensive report is now accessible for free download, providing valuable insights to enhance online profitability through effective fulfillment methods.