How to Succeed in the Failure-Filled World of Grocery Delivery

The opportunities for disappointing customers while delivering their groceries are so widespread and numerous that service needs to be woven deep into the structure of the organizations providing it.

That was the message from Nimish Dixit, senior director of operations for New York-based FreshDirect, who has been focused on solving grocery delivery issues for 17 years. Speaking at the Home Delivery World conference in Philadelphia in April, Dixit said the nature of grocery shopping itself—both the volumes of items in a typical order and the frequency of those orders made—provides near mathematical certainty that more problems will arise from e-grocery than other forms of e-commerce. Those same aspects tend to knit the grocery seller to the delivery experience tighter than most other online sellers associated with their respective fulfillment experiences.

Photograph by WGB Staff

“My hypothesis is if you’re [a retailer selling an item for delivery] one or two times a year, or someone is buying something from you from you because it’s an opportunistic purchase, when something goes wrong, they’ll blame the shipper, and the brand has every opportunity to deflect that experience back to the shipper,” Dixit said. “But when you’ve got weekly, biweekly or super-weekly customers—and that’s what the grocery business is, a repeat, frequent interaction with your brand—no matter what goes wrong, you as a brand will get the blame.”

For these reasons, he said, FreshDirect has come to view delivery through the customer lens, seeing it as an extension of the brand that encompasses considerably more than being on time, accurate and courteous—although those are also important elements of the overall experience.

“One of things that we learned is that when our customers rate our delivery, they’re not really rating delivery,” Dixit said. “They are including everything inside that order, and how it was packed, and the interaction they had.”

Those perceptions pressure organizations to be responsive. “For the customer, there is no distinction between the warehouse fulfillment, the delivery and the customer service,” he said. “That creates organizational challenges because we create structures that are supposed to operate efficiently. Then all of a sudden, customers cut across it left and right.”

FreshDirect, a “pure play” online grocery pioneer, feels this especially acutely because the company has few other ways to fulfill orders than to deliver them. Its customers, however, can always go to a local store. “We’re competing with the customer, because the customer is making a single decision every time they receive food from us: Could they have done it better themselves? If the answer to that question is yes, you’re not going to get another purchase from them,” Dixit said. “And for us as a pure play, that’s something embedded into how we have to think about it because we don’t have other options. We spend a lot of time trying to understand this.”

When 98.5% Means 33% 

Dixit estimated that a typical 20-item online grocery order provided 40 opportunities for the retailer to fail—“and probably 60, to be honest,” he said. But other numbers he shared were every bit as daunting. Fulfilling a 20-item order 12 times a year at a near-perfect accuracy rate of 98.5% sounds good, he said, but that rate indicates there were four errors with the 240 total items ordered. That means up to one-third of all deliveries had at least one problem.

And at a 33% failure rate, retailers will find it impossible to hold onto shoppers long enough for them to become profitable.

“That, to me, is really impactful,” Dixit said. “It’s a hard concept to get your head around.”

Given the challenging calculus, he said FreshDirect is using data to identify and resolve issues before customers experience them, and orienting the organization in all departments and at all levels to be responsive when problems inevitably arise.

At FreshDirect, part of that was establishing an internal call center positioned between workers, customer service and shoppers used to inform those parties when FreshDirect’s data detects issues ahead. “We want to strive for perfection, but when we aren’t perfect, we want to be respectful from a customer standpoint,” Dixit said.

“Underpinning all that is to make the right decisions for customers using our drivers,” he said. “So we’re investing in technology that’s going to enable the driver to make a better decision more often.”

Can’t Phone It In 

Keeping up with e-commerce demands has also challenged the culture of brick-and-mortar retailers. In a separate presentation at the Home Delivery World event, Lee Lambeth, director of e-commerce operations for Lowes Foods, discussed how the Winston-Salem, N.C.-based food retailer needed its workers to understand the importance of e-commerce to properly meet the demand for it.

Photograph by WGB Staff

Though Lowes has plenty of experience prepping orders on behalf of shoppers—its e-commerce business grew out of a phone-order service—the volume of electronic orders put a strain on stores and challenged profitability, Lambeth said. Solving the issue required the organization to come to terms with the growing importance of providing e-commerce and the need to approach fulfillment more efficiently than it had in the phone-in days.

“When operators began to see that more and more of our business was not going to the traditional register, and they were seeing less and less foot traffic in stores, they began to get concerned. Support wasn’t really where it needed to be,” he said. “Although e-commerce revenue continued to grow, there was resistance from our store teams. I had to spend a lot of time educating those folks about the important of e-commerce and what it was going to mean to the business in the future.

“It’s the fastest-growing channel out there,” Lambeth said. “If we didn’t embrace it [and] continued to resist it, [it would be a] struggle as we moved forward.”

On top of cultural change, Lowes applied practical improvements to the picking process—such as designing a proprietary cart to multiple orders at once, expanding in-store staging areas and investing in larger displays for in-store pickers and improved in-store Wi-Fi—that vastly improved pick speed and is allowing Lowes to grow with the pace of demand.

Lowes’ efforts today, Lambeth said, are focused on building delivery, which because of larger order sizes represents a potentially more profitable shop than curbside pickup. Lowes partners with Door Dash to provide delivery. “If 3% of curbside shoppers transition into delivery, that’s a $2 million opportunity for us,” he said.

What Shoppers Want 

“People who buy groceries online are outbuying everyone else,” said Sylvain Perrier, CEO of Toronto-based Mercatus Technologies, in another presentation. Mercatus provides digital shopping and engagement software and support to companies such as Weis Markets and Save Mart.

Research conducted with digital customers of Mercatus indicates that consumer interest in technology in shopping goes beyond transactions. For example, 42% of all shoppers polled by Mercatus said they want self-checkout options at their stores. Another 21% said they want the ability to comparison-shop on a mobile phone while in stores. Other popular digital demands include mobile shopping lists, in-store product finders, online shopping and click-and-collect options, personalized flyers and easy reordering, the research showed.

“Shoppers expect to access to technology all the way through the in-store journey, as well as the online journey,” Perrier said. “At the store level, you need to focus on maximizing innovation through technology. We're not talking about expensive implementations. These are things that can easily create those technological conveniences.”

Perrier also cautioned that retailers be sure their technology solutions support their brand:

“Make sure your customers feel like they are the center of the experience and are being served by your brand. It’s very critical to maintain that relationship.”