The Centers for Disease Control (CDC) estimates that 48 million Americans contract a food borne illness every year with 128,000 people hospitalized and 3,000 dead as a result of these illnesses. With numbers that high, it is important that retailers be proactive when it comes to food recalls to ensure the well-being of the population. Unfortunately, while retailers are typically good about removing these recalled products from their shelves, communicating with their customer base about these recalled items is an entirely different matter. A recent report shows that grocery stores were remiss in their keeping their consumers well-informed about food recalls. The study, released by the U.S. Public Interest Research Group (U.S. PIRG), a federation of non-profit organizations that employ grassroots organizing and direct advocacy with the goal of effecting liberal political change, surveyed 26 supermarkets in the United States with regard to their practices on how they notify customers about food recalls, and only four of them were found to be given passing grades, indicating that more stores need to ramp up the effectiveness in dealing with this food safety and health issue. The study found that 84 percent of the stores it surveyed did not “adequately inform the public about recall notification efforts.” It also found that they failed to inform customers on how to sign up for notifications from a store or where to find in-store postings about recalls. Out of the retailers that were reviewed, the only chains to pass were Harris Teeter, Kroger, Smith’s and Target. “Stores can play a key role in customer notification as they are access points in the food safety system that consumers most regularly and frequently interact with,” the study states. “And often, customers return to the same store again and again so understanding that stores notification policies are critical.” The study also notes that “grocery stores are in a unique position to keep shoppers safe by effectively informing shoppers about food recalled due to a variety of hazards, filling gaps in the nation’s recall system. Through loyalty programs and purchase histories, stores have unique information about consumers that should allow them to provide targeted alerts to customers about recalled products. Stores can see sales of products drop after recalls and may receive some blame for failing to notify consumers. But, proactively warning customers they may have purchased recalled food is more than a critical mechanism to protect public health–it could help inoculate the grocery store from consumer outrage.”
If you would like to see the full report, go to https://uspirgedfund.org/feature/usf/food-recall-failure.
Fabric, a company that specializes in micro-fulfillment centers for grocery operations, recently released an in-depth report about the state of the online grocery business in 2019 and the potential difficulties that lie ahead. The study, entitled “All Roads Lead to Online Grocery,” analyzed what it considered some of the biggest drivers of e-commerce growth as well as some of the challenges retailers will face as they expand their e-commerce offerings.
The report found after many years of online grocery penetration hovering at two percent, the online share of sales it is now tracking will be in the double digits by 2024. The percentage of people who regularly purchase groceries online more than doubled from 17 percent to 37 percent in 2019 alone and the average industry estimate for the growth of online grocery in 2019 was 30 percent year-over-year.
In 2019, curbside pickup was one of the biggest drivers. Curbside pickup locations by major retailers grew by 68 percent, and locations that offer same-day delivery grew by 48 percent. Twenty one percent of the U.S. population tried curbside pickup and the channel was estimated to account for 70 percent of online grocery sales. Walmart’s roll-out exceeded its initial plans for curbside pickup by launching 3,100 sites in 2019, a 45 percent increase from its initial plan to roll out 2,140 locations. Target made the service available from 94 percent of its stores and Instacart expanded its pickup service to more than 50 grocery partners, including Wegmans, Aldi, Publix, Food Lion and Sprouts. In fact, Instacart plans to double that growth by the end of this year with the largest pickup retail footprint in North America by bringing the service to all 50 states. According to Nilam Ganenthiran, president of Instacart, “2020 is the year of the pickup.”
Same-day delivery, another big driver of grocery e-commerce, grew by 48 percent in 2019 with the number of major retailer stores offering the service going from 5,216 at the start of the year to 7,642 by year’s end. Eighty-seven percent of Target stores offered same-day delivery through Shipt while 88 percent of Albertsons stores and 80 percent of Kroger stores offer same-day delivery through Instacart. Peapod, the e-commerce division of Ahold Delhaize announced that in 2020 that same-day or immediate delivery options will become available to 65 percent of its shoppers.
While much of the report discusses the expected continued growth of the online grocery sector, it also points out three critical problems that retailers will need to address: speed of fulfillment, in-store picking, and profitability. The report found that not only was there a preference for same-day fulfillment over next-day or two-day, with 65 percent of those people willing to consider shopping from a different retailer if their normal grocery store didn’t provide the service, but that they were willing to pay 25 percent more for the option in 2019 than they were in 2018. As for the challenge that in-store pickers pose, they were found to negatively impact the shopping experience of the consumers. Additionally, third party in-store picking is believed to pose a strategic threat to the relationships of the retailers to their customers, with four out of 10 customers found to be more loyal to Instacart than they are to the retailer itself, which is potentially a huge problem since many grocers look at third-party picking companies as just a temporary stop-gap solution until they figure out a more long-term and fiscally amenable solution. As for profitability, in the short term, manual picking is unsustainable, with it estimated that retailers lose $5 to $15 on every manually picked online grocery order, and about $2.50 on every order fulfilled by Instacart. Therefore, retailers should really look deeply into micro-fulfillment, which eliminates more than 75 percent of in-store picking costs, leverages pre-existing assets such as retailers’ stores, and is relatively easy and fast to deploy and can make even on-demand deliveries profitable.
The race is on, and in this highly competitive and overstored industry, only those retailers that are forward-thinking enough to look at smart and efficient solutions will be the victors. To see the complete report, go to https://getfabric.com/2019-grocery-report/.
Until next month…