Challenges Faced by Online Grocery Businesses & Their Solutions

Last Updated: February 21, 2022

According to Statista research, the US online grocery market is constantly growing, with sales forecast to reach 187.7 billion U.S. dollars by 2024. This opportunity-rich industry offers a decent starting point for entrepreneurs who want to start an online grocery business. However, once you start a business in the grocery industry, it is important for you to know grocery delivery challenges. In this blog post, we will share information on online grocery store problems and solutions related to inventory management, taxes, marketing, and more.

Table of Contents

• Challenges Faced by Online Grocery Stores and Their Solutions
  – Spoiled Inventory Management
  – Inefficient Inventory Module
  – Changes in Tax
  – Changing Consumer Behaviour
  – Reverse Logistics Management
  – Penetration into Small Towns/Communities
  – Time Restriction in Marketing and Marketing as a Revenue Source
  – Non-availability of Buyer Mobile Apps
  – Not Catering the Aged and Audience with Disabilities
• Conclusion

Challenges Faced by Online Grocery Stores and Their Solutions

Spoiled Inventory Management

Wastage is a critical problem that businesses look forward to addressing. There are a number of ways to understand how food/grocery wastage impacts a business. The problem can be resolved through an inventory management system. If you already use an online grocery ordering and delivery software, customizations might be possible to develop a new module to address the wastage problem. Just-in-time supply systems integrated with state-of-the-art grocery inventory management API can minimise inventory costs to an extent.

Inefficient Delivery Management

One of the common grocery delivery challenges is the absence of technology to manage and bring visibility in the last mile. While most grocery ordering and delivery systems do offer basic functionality it is important to customise the system as per your use case as there is no one-size-fits-all solution. Essential components of an effective grocery delivery system are mobile apps for delivery drivers.

Grocery delivery mobile app improves efficiency as it leverages important features of the mobile hardware such as geolocation, and more.

It’s hard to break the threshold called hyper-local segments with one delivery system, especially when the customers expect same-hour delivery. Product quality, time, and delivery cost – all these critical factors impose a huge challenge for an efficient delivery system.

Below mentioned are some common e-grocery delivery challenges that online grocery marketplaces come across and their respective solutions:

Direct Delivery: In this grocery delivery logistic model, potential consumers place orders for grocery delivery through the grocery marketplace. The order details are received by the fulfilment centre where the pick-up, packaging, and shipping functions are performed. Next, the orders are delivered using the services of the delivery partners.

• Challenge: The challenge here is to intuitively manage the functioning of the grocery eCommerce marketplace. The Marketplace owner will have to incur extra expenses for making arrangements for warehouses and storage spaces. Facility centres are mostly located on the outskirts which might hamper effective same-day deliveries. Also, the management of delivery routes for on-time deliveries may come up as a hurdle.
• Solution: For bulk orders with a proposed minimum order value, the admin of the marketplace can introduce the option of free deliveries. Also, the option of completing deliveries the same day irrespective of the time at which the order was placed can be beneficial. 

Click-and-Pickup: Using the click-and-pickup method, customers can place orders for groceries via an online grocery marketplace and schedule self-pickup. The customer can choose a specific date and time for self-pickup; meanwhile, the store executive can prepare the order and notify the consumers through the marketplace whenever the order is ready. 

• Challenge: Here the challenge is that the traditional grocery store must actively manage the grocery eCommerce platform. Second, prior labour should be appointed to initiate proper packaging, staging, and delivery of groceries to the customer. Infrastructural arrangements to unload orders should also be made.
• Solution: The advantage of this approach is that extra delivery costs can be avoided as the customers will make arrangements for self-pickups and bear the extra costs on their own. The vendors will not have to worry about making arrangements or associating with a delivery partner for same-day deliveries.

Partnered Delivery: This model is a combination of both, the self-pickup delivery model and the direct delivery model. After placing an order for groceries, the customer will select a time and date slot for getting the order delivered. Customers can select a particular store for this purpose. The owner of the grocery eCommerce website will arrange for a delivery partner who will be responsible for fulfilling the delivery. 

• Challenge: The problem here that online grocery store owners face is to ascertain whether the associated stores have ample stocks. Since customers can select a particular store, the service provider will have to partner with multiple stores for better sales. Additional delivery costs might be incurred.
• Solution: Traditional stores will get a platform and experience better sales and profitability. The stores do not need to invest in the construction of any infrastructure to fulfil orders. Since employees can make deliveries, additional workers do not have to be employed.

Micro Fulfilment Centres: Customers will place an order on the grocery eCommerce website and select a date for getting the order delivered. The website owner can partner with Micro Fulfilment Centres instead of making self-pickups to complete deliveries. When the order is placed by the customers, the MFCs will also be notified as per the customer’s postal code. The MFC will be responsible for getting the order processed and picked.

• Challenge: 24 hours inventory availability is a challenge as MFCs are designed specifically to fulfil online sales for groceries. Also, the admin of the marketplace must maintain personal inventories to minimise the possibility of missed leads and failed order fulfilment.
• Solution: Partnering with MFCs can be advantageous for the grocery eCommerce marketplace as additional labour does not have to be employed. On associating with MFCs, effective inventory management can be practised with the help of reporting and analytics stats.

Changes in Tax

Every business has dependency on government policies and regulations. There are times when changes are proposed and government policies and regulations are modified. Businesses have to follow the lead and make necessary changes as well. In the case of an online business, the changes have to reflect on the grocery ordering and delivery system as well. While a small business needs few changes, large grocery chains can adopt a more proactive approach to tax management from their existing system. There are two ways this can be achieved. The first one requires less time and includes integration with a third party tax management system like TaxJar or Avalara. Alternatively, a tax management module can be developed from scratch but may require more time.

Changing Consumer Behaviour

The market is constantly evolving as consumer expectation is constantly growing. To succeed in such a competitive environment, a marketing strategy is required. To support the strategy, the grocery ordering and delivery software should come pre-installed with important marketing features. For example – to send newsletters, the system should have a newsletter management feature. Similarly, for a grocery business to stay profitable, other marketing capabilities are required such as blog management, discount coupon code generation, affiliate management, paid advertising management, and more. The experience greatly improves with additional factors which includes availability of mobile apps.

Reverse Logistics Management

An ideal scenario for value addition is that when an order is placed, it should be delivered to the consumer. Finally, after receiving the item, the consumer should find the item valuable. However, there are times when the consumer orders an item by mistake, finds the received item to be of wrong shape or size, and more. No matter what the reasons are, it is an operational challenge to make the reverse logistics process profitable. To enable reverse logistics within the grocery ordering and delivery software, features like refund management, order cancellation, and more.

Penetration into Small Towns / Communities

Small towns or tier 2 or 3 cities have a close-knit community which have different market dynamics. For example, in a certain neighbourhood, the consumer behaviour involves going to the same vendor with a brick and mortar store. For the success of your online grocery business, you need to reevaluate the business model and see what works best in the area of operation. After carefully analysing the area and its challenges, you can finalise the preferred business model – single vendor or multi vendor. Based on the selection of business models, you can either start selling your own grocery items or onboard vendors. In the latter case, you need to devise vendor onboarding strategy and make it worthwhile for the vendors to list their products on your website.

Time Restriction in Marketing and Marketing as a Revenue Source

As a business owner, you are always short on time. However, the marketing activity is time consuming and yet an important part of the business function that cannot be ignored. While many aspects of marketing can be managed with free digital marketing tools, however, many of the useful ones are paid. For an online business, on-page and off-page search engine optimization (SEO) holds greater importance. On-page SEO requires technical knowledge and off-page requires less technical knowledge but consumes more time daily. If time is less, then a digital marketing service provider can be consulted.

A customizable online grocery ordering and delivery solution presents an opportunity to develop important marketing features within the system. For example, if the goal is to reach out to people who are a registered member of the online store, then email marketing features can be used to share relevant information. Similarly, discount coupon code management features can be used to generate coupon codes. Depending on the business model, if you plan to onboard vendors, marketing features can add additional revenue sources. Consider the example where a vendor wants to list a product on the homepage. He can do so by choosing the advertise option.

Non-availability of Buyer Mobile Apps

In the online grocery shopping ecosystem, most transactions take place on handheld devices. Out of different touchpoints for an online business, the importance of mobile devices is constantly growing. Due to the added mobility, the use-cases are nearly endless. For an online grocery business, mobile apps are an essential part of the business model and marketing strategy. In addition to the ease and convenience of online shopping, mobile apps offer more visibility. For example – using buyer mobile apps, a buyer may place an order for groceries. On the other hand, using the delivery app, the delivery staff may update the status – picked up, en-route, at doorstep, and delivered. Hence, mobile apps for buyers and delivery staff play an important role.

Not Catering the Aged and Audience with Disabilities

Many software solutions are designed and developed considering regular audiences. During the development phase, many IT solution providers tend to skip two areas – web accessibility and design practises to make website senior friendly. For an online grocery ordering and delivery website, the audience includes older as well as disabled people. As the frequency of ordering groceries might be more than other niche ecommerce segments, hence, it is important to make the website more accessible and senior friendly. Colours can create differences and bring ease for the older generation to understand the website. Similarly, to make the website accessible for disabled, one has to follow the internal web standards. For example – many disabled people or seniors have poor motor skills and cannot use a mouse. In such a case, keyboard controls are preferred.

Conclusion

Starting an online grocery business can be challenging if you don’t have a software solution to support your management activities. The above list addresses most of the online grocery store problems and solutions. For many problems, there is an option to customise your existing online grocery ordering and delivery solution or you can buy an advanced readymade solution like Growcer.