Tuesday May 13, 2014

Dark Stores

Toys"R"Us has been offering omni-channel (I'm so sick of that term) journeys such as buy-online-pick-up-in-store for several years.  Additionally they can use the store to fulfill online orders, which is an important part of their business, especially during the holidays.  Both cases require a store employee to pick product from the floor and move it to the backroom.  I was speaking with someone from Toys that told me a funny story about this.  You can imagine the chaos on the floor during the holidays, so when employees were picking items they were constantly being interrupted to answer questions or retrieve items from high shelves.  To combat the issue, employees assigned picking duty did so without an official uniform.  Yep, they had to wear street clothes to get the job done.

Although online grocery shopping hasn't yet taken off in the US, its quite popular in the UK.  Customers place their order online which is fulfilled at a nearby store and delivered by truck.  Pickers are given a large cart with separate bins for separate orders, and they use a tablet to efficiently navigate the store.  With enough orders, you can imagine those customers slowing down the pickers.  The grocery store layout isn't really conducive to both types of foot-traffic.  Thus the dark store was born.

Just as you might expect, the dark store has no customers and is used strictly for picking and fulfillment.  Its location and layout are similar to traditional stores, but there's no price tags, no endcap advertising, and no checkout lines.  Its a neighborhood warehouse, complete with fresh, frozen, and dry goods.

Sainsbury, Tesco, and Waitrose continue to open dark stores in the UK, filling 4,000 online orders a day per store in some cases. I suppose this makes perfect sense in areas where order volume is high, like in big cities.  Then in the suburbs, it might be acceptable to leverage the existing store, perhaps with an express lane for crowd-sourced deliveries like Instacart.

Although I don't know of any dark stores in the US, it wouldn't surprise me to hear that Amazon Fresh and Fresh Direct are using them.

Image from The Guardian: Waitrose, Aldi and Lidl eat further into major supermarkets' market share.

Thursday Jul 25, 2013

Crowdsourced Grocery Shopping

My wife hates grocery shopping.  She's shopped at lots of different brands, but its always the same time-consuming, uninteresting task.  For her and those like her, no investment in customer experience is going to help.  She just wants the food to show up at her front door.  That was the promise of Webvan, the famous internet failure in 2001.  Their problem was that they spent millions building warehouses and a fleet of trucks to do everything themselves. 

Peapod (owned by Ahold), FreshDirect (Morrisons has 10% stake) and AmazonFresh take a similar but more disciplined approach.  They built their warehouses and truck fleets more slowly based on demand.  They focus on metropolitan cities where its easier to compete, and they don't promise 30 minute delivery times as Webvan offered.  Those three companies are finding success because they took the time to learn the grocery business first, then figured out how to make money with home delivery.

But that approach requires slow growth with high infrastructure costs.  An alternative approach is to forgo the warehouses and trucks and leverage what's already available in every town.  Instacart takes a crowdsourcing approach to grocery home delivery.  Customers select their groceries from various nearby stores, then a personal shopper picks them up and delivers them the same day.

The 10-person company only serves San Fransisco right now, but they have 200 independent personal shoppers that get paid a fee plus tips.  (Pick better fresh produce, and you'll likely get a better tip.)  I imagine some of these people might form trusted relationships with their customers.

The secret is in the logistics.  The personal shoppers are given an app that helps them navigate to and within the stores efficiently.  The software does some optimization by combining orders so a personal shopper can more easily fulfill orders for multiple customers on the same trip.  Instacart has no warehouses or trucks, and only pays their personal shoppers when they are working.  And although grocery chains like Safeway are experimenting with their own home delivery service, in the end as long as sales are occurring they really don't care who's making those deliveries.

Seems like a pretty good plan to me.


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