Cost of milk: $4. Cost of Delivery: $5. Any takers?
As the spate of Q2 2020 results came out recently for the retail industry, one category - grocery - did disproportionately well, especially compared to the doom and gloom of department stores and specialty retail. The numbers speak for themselves. Publix reported $11.2B of revenues up 21.8% compared to Q2 2019, with profits up a whopping 106.8% YoY. The behemoth in the category Kroger beat street expectations and reported revenues of $30.5B, an 8.2% increase in Q2 sales compared to 2019.
Kroger also reported that their digital sales went up by a phenomenal 127% compared to 2019 for the quarter. That’s the key to the success of grocery stores in the age of COVID. Grocery online has been setting records this year, with monthly online sales going up from $4B in March to $7.2B in June 2020. That is a cool 80% uptick in four months!
However, not all grocery chains are enjoying their increased presence online. It comes down to profitability, culture, and reputation. It is difficult to justify the $5 cost of delivery for a $4 gallon of milk. There are also additional costs associated with storage. Innovation in the form of just-in-time suppliers, curbside pick-ups, and micro-fulfillment facilities help alleviate some of that pain, but it’s all in the execution.
Some grocers have tried to solve the problem using third party logistics companies, but often this is like playing Russian roulette! Bad customer service tarnishes the brand of the grocer.
Think about this: in a recent survey, only 56% of online grocery customers were willing to try the last grocer they tried to buy merchandise from. There will be a big winner in this space who will use technology and social innovation to crack the code. We as customers cannot wait!