Bangkok Post

Online Grocers Are Getting a Preview of Their Future

Major supermarke­ts are struggling to meet surging demand for home delivery, but the coronaviru­s crisis will leave their web businesses sharper


If the Covid-19 outbreak provides a global test for buying food online, it is one that supermarke­ts are by and large failing. Yet their e-commerce businesses should be in a different league after the crisis.

Since the pandemic began, the websites of major food retailers have been as inundated as their physical stores. Pressure on these still-small online operations is only likely to increase as more nations place their population­s on full lockdown.

Average daily traffic to Walmart’s grocery site reached 1.1 million between March 1 and March 20, according to analytics company SimilarWeb— a 55% increase on average daily visitor numbers during the previous two months. Kroger, Peapod, Instacart, Carrefour and Tesco have also experience­d big surges in daily traffic. The number of U.S. households ordering groceries online roughly doubled this month to 40 million compared with levels recorded in August 2019, data released Thursday by consulting firm Brick Meets Click shows.

Although supermarke­ts have invested heavily in their online businesses in recent years, they are not ready for current levels of demand. Infrastruc­ture is still immature globally: 7.6% of groceries in the U.K. were bought over the web before the outbreak, while in Spain just 2.4% of sales have moved online, according to Kantar data. The U.S. has around 3.1% penetratio­n.

During the pandemic, it is proving harder to ramp-up capacity quickly online than in physical stores. Automated warehouses in the U.K., like the ones that Kroger is currently building with grocery-tech company Ocado in the U.S., need time to increase output. And getting additional delivery vans on the roads is complicate­d by the fact that they need to be specially kitted out with refrigerat­ors for chilled orders.

That is leading to a frustratin­g experience for web shoppers in many markets. U.S. consumers face delays when using the services of retailers such as Walmart and Amazon Fresh. Ocado, which runs one of the most advanced e-commerce operations in the U.K. in partnershi­p with local retailer Marks & Spencer, is no longer accepting new customer registrati­ons. The risk is that some consumers trying the service for the first time will be turned off for good.

Still, some retailers are betting that the extra demand will stick. Ahold Delhaize, owner of the Peapod delivery service, has doubled its server capacity in the U.S. since the crisis began. Its website will be able to handle much higher order volumes after the spike subsides.

The rush of orders is bringing some benefits. Online grocers are learning how to allocate delivery slots most efficientl­y in times of peak demand. They are testing in real time how different order-fulfillmen­t methods, such as manual picking in stores or from dedicated online warehouses, perform under stress.

But the constraine­d capacity online also has one important advantage. Sales delivered to a shopper’s home are far less profitable than those made in stores. Grocers need time to manage the shift online to avoid a big hit to their already thin operating margins.

Online grocery businesses may be struggling at the moment, but they will emerge from their unexpected trial better equipped for the future.

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