With 60% of millennial shoppers now buying food online, and online grocery sales making up 7% of total grocery purchases in 2019 and expected to jump to 10% next year, Sam Mayberry, president of Sam Mayberry Consulting and formerly the head of product development of retail consumables for private label at Amazon, said the e-commerce food industry is growing faster than expected and retailers need to have a “last mile” strategy in place.
“We’re at a tipping point in the industry,” Mayberry said Nov. 17 to a full ballroom at the Private Label Manufacturers Association's (PLMA) Seminar Sunday at the Hyatt Regency in Rosemont, Ill., as part of the Private Label Trade Show.
Mayberry said that third-party delivery companies, new last mile solutions and supply chain processes are accelerating the pace of change for retailers.
The problem facing retailers — and he said they shouldn’t feel alone — is all of the last mile solutions out there (drones, autonomous vehicles, robots, and more) as well as supply chain tactics like building ghost stores for online fulfillment and more are laying on a table like jumbled jigsaw puzzle pieces. Companies need to find the right pieces that fit for them.
Mayberry then discussed three key areas of a last mile solution: networking, differentiation and investment.
“Networking is who do you align with,” he said. For the first piece, retailers must build partnerships that work for their customers. The Kroger Co., for example, has teamed with U.K. online grocer Ocado to build up to 20 highly automated e-commerce fulfillment centers throughout the U.S.; Walmart has partnered with a few autonomous delivery vehicles such as Udelv, Spark Delivery, Ford and others to test self-driving delivery. Sam’s Club has a partnership for delivery with Instacart, too.
Mayberry said in 2018 there were 103 e-commerce acquisitions and mergers, and more networking to be done.
The second piece of the last mile strategy is “differentiation” of private label products, particularly as share of private label continues to grow. He cited a Nielsen report that said premium products show the most growth potential over five tiers of pricing and total dollar share.
A key to doing premium private label well, Mayberry said, is that 53% of millennial shoppers pick a store based on that store’s product assortment and having the items they want.
The third ingredient to building out a last mile strategy is to invest in services that find the right balance of complexity and control over the overall customer experience. For a company like Amazon, the investment is higher on the spectrum of controlling the customer experience such as recently purchasing 20,000 Sprinter vans from Mercedes-Benz for its delivery partners versus a company that may just invest in a partnership with Instacart to manage that delivery experience.
As for some of the last mile solutions out there, Mayberry talked about the potential of drones with UPS, Prime Air and Google’s Google Wing drone programs, all getting FAA clearance for deliveries. Solutions like a drone could relieve a serious crunch in package delivery, particularly in highly populated areas, he said, citing that in 2017 New York City managed the delivery of more than 400 million packages. In 2018, 13 billion parcels shipped throughout the U.S.
Autonomous cars or last mile robots that roll along sidewalks and to a customer’s home are all options to be entertained. Mayberry said 76% of shoppers want to buy from a local retailer online, with 55% of those same shoppers willing to pay more for same-day delivery.
Retailers need to find a mix of what works for their shoppers. “Customers are willing to pay,” he said.