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2021: the year of evolution in food e-commerce

Home / News & Insights / 2021: the year of evolution in food e-commerce

In many respects, 2020 was a dynamic and pivotal year for food retailers. But rather than reiterating the effects of the pandemic in this blog, let’s look ahead and analyse what retailers can expect when it comes to e-commerce. It’s fair to say that the future is looking bright and should be approached with a healthy dose of optimism.

Author

Toine Cleophas

Commercial Solution Manager Food

A changing landscape

What we did notice in 2020 was that – driven by the growth of online sales – many retailers chose to scale up their activities manually. This made sense of course, as it was the least complex short-term option, and companies used their existing assets as much as possible.

However, retailers will soon be challenged to decide on the long-term direction for their e-commerce activities. They will need to scale up rapidly in order to keep pace with demand, and choose whether to make it a strategic part of their future business model or offer it as a (premium) service only.

Looking at the food landscape, it’s just not possible for all retailers to make a profit from food e-commerce. By 2030, some scenarios project that online groceries will represent 20-30% of grocery sales, with the remainder comprising traditional brick and mortar outlets.

With this in mind, retailers are making up their minds and working towards crucial decisions about the level of investment in food e-commerce for the coming years.

Positive discussions

One thing is certain – there will continue to be diversity in the number of operational models and application areas. Consider for example, online grocery operations at central fulfilment centres (CFCs) and local fulfilment centres (LFCs), as well as local store fulfilment (LSF) activities. The food landscape is therefore undergoing continuous change.

Based on insights derived from our discussions with food retailers, it has become clear that given varying regional market maturities, different supply chains, physical infrastructures, and store networks, they have many different strategies and service propositions.

No ‘silver bullet’

Our main conclusions from these discussions are that: firstly, no single integrator in the market can adequately serve every application area. Secondly, there is no ‘silver bullet’ when it comes to selecting the right solution.

Many integrators tend to push a single solution that claims to solve every problem. In our view, that’s not realistic. The market is constantly changing and complex. In addition, the maturity levels of online grocery markets – as well as different retailers – vary widely, also per country.

The focus instead needs to be on how to tackle the challenges facing food e-commerce in a structured way. Retailers also need to act now, whereas a few years ago, they were perhaps hesitant.

Long-term benefits

Automation is the only way to scale up an operation in a more sustainable way to match predicted growth. The key challenge will be to determine at what pace you will migrate from manual to highly automated operations, factoring in all the application areas and technologies available.

Our drive is to not think about short-term solutions, because we attach more value to the long-term perspective. This is helping us to think about sustainable solutions for the future and showing how we can be of benefit to the online food retail business.

For this reason, we instead refer to ‘migration paths’. These can be applied to any retailer, regardless of their individual journey towards automation, factoring in their market maturity and experience.

Migration paths

While ‘HOMEPICK’ is a Vanderlande solution, we consider it more as an umbrella term representing the different building blocks for food e-commerce. These can, in turn, be combined for different application areas and types of operations (CFCs, LFCs, LSFs etc).

Given different application areas, we are interested in creating variants of solutions, which contain a corresponding technology.

Offering this ability to jump in at different points on a migration path is going to be beneficial to food retailers. For example, they don’t have to step up from manual operations to full automation in a ‘big bang’. After all, everyone’s roadmap is different.

The next level

At Vanderlande, we’re not only interested in delivering the highest level of automation as a goal in itself. We thrive on long-term collaborative partnerships, and therefore, would also like to partner with companies beginning to explore the advantages of automation.

We’re on a journey with the market and close cooperation is key. The dynamics of food e-commerce are challenging food retailers and systems integrators to see the bigger picture, but we at least have the structure in place to build on – that is, a solution path based on flexible and scalable building blocks. Therefore, we invite food retailers to join us and jointly take this way of thinking to the next level.

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