Product fulfillment is No. 1 tech priority for grocers—especially in produce

Improving the availability of items ordered online from the produce and center store sections are the top two priorities for grocers aiming to improve their e-commerce sales, according to a report released Wednesday by data analytics firm Incisiv. 

The study, which included a survey of 116 director-level or above grocers, revealed that almost every survey respondent (97%) identified the produce section as an area that could be improved in terms of strategic fulfillment. That's followed by center store at 87%, frozen at 68%, meat and seafood at 35% and prepared meals at 11%. 

Over the next 12 to 18 months, grocers said improving the availability of products in these areas of the store will be their top tech priority (97%). Balancing workload and orders was the second most important tech priority for grocers at 89%, while 86% said they plan to also focus on forecasting and projecting customer orders. 

“Digital offers immense potential for growth. However, for that growth to be profitable, grocers must improve their fulfillment operations considerably. Grocers can unlock the opportunities presented by optimizing availability, enacting more strategic fulfillment methods and harnessing the power of AI to improve their margins,” said Gaurav Pant, chief insights officer for Incisiv, in a statement. “Digital offers immense potential for growth, but for that growth to be profitable grocers must improve their fulfillment operations. Grocers can unlock the opportunities presented by optimizing product availability, strategic fulfillment and harnessing the power of AI to improve their margins.” 

The report comes at a time when grocers are struggling to maintain profitability in online sales, which have dipped since the end of the coronavirus pandemic. Incisiv cited Grocery Doppio survey results on omnichannel trends for Q2 2023, which shows that online sales have already reached $48 billion this year and make up 13% of the $362 billion in total grocery sales.  

Despite capturing a small portion of the overall market, grocery sales that were “digitally influenced” accounted for 69% of all sales or about $249 billion. That includes “situations where shoppers utilize digital platforms, devices or tools to assist them during various stages of the purchasing process,” such as “product discovery, price comparison, reading online reviews, seeking recommendations, checking in-stock status, wayfinding, accessing digital coupons or promotions and more.” 

Citing Grocery Doppio, grocers lost $23 billion in digital sales in 2022, due to unavailable items that could not be substituted with a similar product for online orders. That report also noted that more than three out of every four grocers said their digital platforms were unprepared for the 2022 holiday shopping season. 

Grocers surveyed in the Incisiv report said they believe by a margin of 89% that optimizing their omnichannel order fulfillment process is a big opportunity to improve profitability. “The impact is both on the operations and in creating seamless and efficient customer experiences across various channels, including online, in-store and curbside pickup,” the report explained.  

Strategic placement of inventory throughout the supply chain was the second priority (83%) for grocers aiming to improve their online sales performance. Reducing waste and shrink in the supply chain was the third priority at 61%, followed by better understanding customers’ path to purchase at 44% and better understanding unplanned events that drive dramatic change in the industry at 27%. 

Grocers are eager to improve their e-commerce strategic solutions but face substantial hurdles in improving their systems. Fifty-nine percent of respondents are dissatisfied with their fulfillment platforms, but nearly four out of every five (78%) survey respondents find it difficult to quantify the cost of ownership of existing technologies. Almost as many (77%) said their legacy technology is a challenge to integrate into new systems, while 68% said they have inadequate access to meaningful and accurate data.  

“Two notable challenges that complete the top five are the lack of coordination between different functional areas (43%) and a focus on operational metrics (21%),” the report explained. “As grocers strive to transition into an omnichannel model, they recognize the crucial role of coordination across business departments in driving change. However, the absence of appropriate incentives or key performance indicators (KPIs) makes it increasingly difficult to achieve progress.” 

Most are hopeful that adoption of strategies utilizing artificial intelligence will help their efforts to improve fulfillment, but they are cautious, according to the report. Eighty-two percent say the new tech will become a necessity to compete in the future, but 38% are taking a wait-and-see approach before investing.  

Nearly a third of respondents (30%) are currently discussing implementing AI technology into their stores, and 18% said they’ve already purchased software that incorporates AI and machine learning. Only 9% have a committed budget for developing in-house AI, while 4% of respondents have hired at least one data scientist with capabilities in mathematical data analysis and modeling.