If you analyze the European market of online services and platforms for selling grocery products, you may notice that it is still underdeveloped. However, while Europeans still do not prefer to buy groceries online, their ability to do so should not be overlooked.
Given the time and other overhead expenses associated with offline shopping, the potential for moving grocery stores to the digital plane is colossal.
In this article, our partners at WEZOM will give a detailed look at the problems of this niche in Europe and explain which grocery delivery service revenue model will help you become one of its leaders.
The Current European Grocery Delivery Market
Currently, there are not many European countries where online grocery delivery services are readily available. Apart from the UK with the Tesco supermarket chain that delivers groceries to consumers’ homes, the European market cannot boast of strong leaders in this niche.
The main reason for this stagnation is the reluctance to invest in such a resource-intensive area (this is due to the high cost of labor, as well as the cost of purchasing and maintaining vehicles, which together hardly exceed the maximum threshold for delivery costs). In particular, according to the McKinsey research, buyers are not willing to pay more than 7 euros per transaction for delivery.
The doubts of grocery market representatives are also reinforced by the disappointing statistics of those companies who have already tried themselves in this niche: most of them were unable to select an effective marketing strategy and expand their product range enough to make the demand for their online delivery services stable.
For example, in France, only a quarter of consumers who have ever bought anything online do so on a regular basis, while for the rest, high delivery costs and a limited assortment are key deterrents. And, of course, we should consider the doubts that potential audiences face: many are worried that products that they cannot touch and see personally will be of poor quality.
However, despite all these challenges, Europeans are still open to this type of service. For example, in France, 33 percent of consumers are willing to resort to them if they are available in their region, and for Spain, this figure reaches as much as 49 percent.
This means that to take a leadership position in this niche, you just need to find the right grocery delivery service business model that will help you eliminate customer concerns and find the best balance between overhead and profit.
Challenges in Grocery Delivery in Europe
It is crucial to understand that product delivery is a complex process, each of which must be carefully planned to overcome the above-described consumer concerns and reduce overhead costs.
Let's look at them in more detail:
Logistics and supply chain
Well-thought-out logistics and supply chains are perhaps the main keys to achieving profitability of grocery delivery services. In particular, we are talking about high-quality customer service, effective time management, and proper conditions for the storage and transportation of products. Creating this process requires time, effort, and money that many grocery retailers do not want to put forward.
Another pain point is overcoming consumer concerns, which are associated, first of all, with the quality of products and the speed of their delivery. And here, automation becomes a win-win solution, allowing you to reduce time for performing repetitive tasks (and, at the same time, reducing the risks associated with the human factor) and, thereby, freeing it up for more non-trivial ones. In particular, thanks to automation, you can minimize delivery time and also monitor the conditions in which products are stored and transported.
Demand and loyalty of consumers
To combat low rates of consumer loyalty, you need access to digital solutions that can track user behavior on your digital marketplace. From there, you can personalize your offerings to reflect the needs of your target consumers Plus, the most advanced solutions are able to personalize the user experience by matching products to each buyer based on their previous search history. All this together creates consumer loyalty to your company, encouraging them to make repeat purchases.
Last Mile Delivery Solutions for Grocery Businesses
What is the most successful model for a grocery delivery service? Based on the above challenges and ways to overcome them, we can conclude that last mile delivery services are the most viable and will help you conquer the grocery delivery market.
In particular, such services involve delivery directly from a local hub to the consumer's doorstep.
Let's find out how you can optimize them:
Use advanced technologies in your logistics and supply chain processes
These days, without automation of work processes, it is difficult to gain a foothold in any business niche, not to mention considering the prospects for scaling. In all this, specialized software solutions (for example, based on AI) can come to your aid – they will automate resource-intensive workflows and help you with planning and risk assessment.
Technologies designed to optimize logistics and supply chains, process consumer orders and requests, and manage warehouse resources can significantly improve the efficiency of your business without requiring additional staff. At the same time, you can also deploy solutions for analytics and effective risk management. Thus, you will improve the quality of the decision-making process and be able to build more accurate business strategies.
Cooperate with local delivery operators
Cooperation with local transport services will allow you to delegate the tasks of delivering orders to those who have experience in this field and the appropriate resources. This way, you don’t have to purchase vehicles yourself, organize their logistics, or waste time on technical inspection and repairs.
You should also consider the possibility of collaborating with several operators at once to be able to provide your consumers with several delivery options. Thanks to this, they will be able to choose the operator that is most convenient for them.
Maintain constant interaction with consumers
The lack of feedback from customers can give you the false impression that everything is going as it should. And, on the contrary, regularly collecting feedback and processing complaints/suggestions through specialized software will help you timely adjust your business strategy without compromising the reputation and profit of your business.
Implement returns management automatization
Returns are an inevitable attribute of any business related to the sale of grocery products, but their excessive number can become a real obstacle to its profitability. Fortunately, today, many digital solutions can automate the procedure for returning products according to pre-specified rules and conditions. This way, you will not only speed up the process but also ensure transparency for your customers.
How to Build a Successful Grocery Delivery Model
Now, let's move from theory to practice and find out what your online grocery delivery business model should be based on to succeed.
1. Establish Your Business Foundation
First, you will need to conduct thorough research of the local market to understand the needs of the target audience, the strengths, and weaknesses of competitors, as well as general trends. In particular, the two most promising areas are grocery delivery and prepared meals delivery.
You will also need to define clear objectives with time frames and legal regulations and standards for this type of service in your region.
2. Leverage Technology for Efficiency
To ensure better customer experience and operational efficiency, you will certainly need high-tech solutions that will help automate at least some of your business processes. Let's look at what exactly these solutions might be.
Technology Used in Grocery Delivery
Onfleet is a great tool for overcoming the grocery delivery challenges mentioned before.
Here are its main features:
- Route optimization. This feature considers time, location, capacity, and traffic to provide you with the best routing options.
- Search and filter. You can enter text, time, or status-based queries to find drivers, customers, or tasks you seek.
- Auto-assign. This feature allows you to assign the time for delivery to your drivers within a single platform.
- Effortless onboarding. Its interface has an increasingly low threshold and is simple to onboard new employees of your company.
- Real-time data. With Onfleet, you will get real-time data without any delays, which is typical for other GPS services like Google Maps or Apple Maps.
- Proof of delivery. Onfleet will provide you with evidence of completion delivery requirements: photos, signatures, barcodes, and notes.
- Analyze and improve. Finally, this solution will help you adjust your logistics by providing you with a detailed task history and comprehensive driver performance metrics.
3. Develop a Robust Supply Chain
To effectively manage your supply chain, you may need to partner with local transportation providers or, alternatively, utilize custom software to manage your fleet. Inventory management and ensuring quality control deserve special attention – modern solutions based on IoT technologies can help you with this.
4. Master Last Mile Delivery
Considering all the above advantages of last mile delivery, this business model definitely deserves your attention. At the same time, you should still consider the other concerns above – these are problems with logistics and supply chains, consumer concerns about freshness and overall quality of products, as well as the lack of special benefits compared to offline shopping (loyalty programs, discounts, fast delivery).
Each of these challenges can be completely or at least partially overcome using the Onfleet service, which will consolidate routing and dispatch operations in one platform. For example, this service is already successfully used by such well-known companies as Foxtrot, GAP, Total Wine & More, GrubMarket, Kroger, SweetGreens, Imperfect Foods, and many others.
In particular, this solution helped Imperfect Foods overcome the COVID-19 pandemic crisis – thanks to equipping their own trucks, dispatchers, and drivers with Onfleet’s last mile delivery software, they managed to stay afloat in such difficult times. Now, the company provides its delivery services to 200K+ customers.
5. Master Customer Service Excellence
You must understand that the advantage of your online service over offline shopping should lie, first of all, in the quality of service – this is what you need to focus on. For example, you can offer online loyalty programs, organize delivery of goods directly from suppliers, provide a “same-day” delivery option, etc. You will also need, as we indicated earlier, to regularly analyze customer feedback to improve and eliminate bottlenecks.
6. Scale and Grow
Once you have tested your chosen grocery delivery business model for at least a few months and it has proven to be viable, you can begin scaling your online delivery service. In particular, this could be new integrations with third-party services (for example, for adding new delivery methods), cooperation with new suppliers to expand the product range, and much more aimed at improving service quality.
Ready to Lead the Grocery Delivery Market in Europe?
Onfleet can help you enter the grocery delivery niche and take a stable position there. You’ll have access to a complete digital solution that will optimize the delivery process and save your resources for more important and non-trivial tasks.
Explore Onfleet’s free trial today to see how your last mile can be made even better.