The problem with picking; fulfilling orders in an online world

Urban Engström

Marketing Manager, StrongPoint Cub

October 16, 2018 | Other

The ecommerce revolution has forever changed the way we buy goods and services – including food. Why visit a supermarket when you can order exactly what you want from the comfort of your own home? Stress-free and convenient, online food shopping makes perfect sense for consumers.

But by reducing the customer’s physical involvement in the purchasing process, retailers now find their job is more complex and costly. In the past, we would visit a supermarket, pick our own “order”, and transport the goods home again. But in an ecommerce trading model, these responsibilities are pushed back to the retailer, eroding profit margins in the process.

There are two ways retailers can control these additional back-end costs:

  • Picking is performed in centralised warehouses – known as “dark stores”. This approach is quick and efficient because there is minimal handling of each item. And because access to the dark store is restricted, picking is never interrupted to deal with shop floor issues.
  • Picking is performed in existing retail stores. Under this model retailers “piggyback” ecommerce operations on their existing stores and delivery network. Orders are picked from stock at the store closest to the customer’s house to reduce final-leg delivery overheads.

By using their existing stores network, food retailers can keep initial infrastructure costs low. So why should they consider dark stores?

Optimised back-end operations

Where physical supermarkets are optimised to suit the shopping needs of the consumer, retailers have greater control over a dark store. Shelf and storage layout can be arranged to optimise picking and packing processes, offering the potential to markedly increase volumes.

In a traditional supermarket, items are moved from delivery truck to shelf to shopping cart to bag. In a dark store however, items are only ever handled once – from delivery pallet into a bag ready for delivery to the customer. Reduced handling makes the picking process faster – and better protects each food item in transit.

The trouble with travel

There are potential drawbacks to dark stores however. Take Sweden for example, a very large country where most cities are located in the south. A dark store can serve the south, but the distance to towns in the north of the country is too great to operate profitably.

In this example, food retailers may benefit from a hybrid operating model. A dark store in the south can process orders from customers in cities. In the north the retailer can use their supermarket network as ecommerce picking hubs because they have the necessary infrastructure to serve customers locally. In these remote locations, retails can offer home delivery or Click & Collect services according to the needs and preferences of their customers.

Every use case will be different

In an ideal world retailers would be able to choose one model and deploy it across their entire ecommerce operation. But food ecommerce is rarely that simple and it is highly likely your business will need a combination of local supermarkets and dark stores.

Where this is the case, you will need to ensure operations are tightly managed and optimised as far as possible. Your choice of technology will be critical to increasing operational efficiency without compromising the quality of goods and services you offer your customers.