Grocery retailers say the biggest challenge they face is low profitability for their online businesses
MIAMI, Sept. 20, 2021 /PRNewswire/ -- Wynshop (formerly ThryveAI), the leader in digital commerce for local store-based retailers, today announced findings from its State of Digital Grocery: Growth at the Cost of Profitability study, conducted in partnership with research and insights firm, Incisiv. The biggest challenge facing grocery retailers is the low profitability of their online business, according to the study, with 86% of grocers indicating that they are dissatisfied with their online profitability.
The rapid growth of digital grocery shopping in 2020 was tremendous for revenue (+9.5%), but that has not translated into profit, however, due to losses on online orders (-70%). In addition, most retailers who outsourced to third-party fulfillment platforms like Instacart and Rosie worry about losing touch with their shoppers (84%) and that these providers will become direct competitors in the future (81%).
"Given the spike in digital grocery shopping since the pandemic, it's shocking that the average gross margin for digital orders was just 9% in 2020, causing many grocers to lose money on their online orders," said Gaurav Pant, Chief Insights Officer at Incisiv. "Our latest research with Wynshop shows that the current model is not sustainable for grocery retailers. If the existing sales and profitability trends continue, grocery retailers will lose $14 million in gross margin for every billion dollars of sales by 2025."
Digital Operations Must Be More Efficient
Third-party platforms like Instacart transacted almost as much business as grocers did on their own in 2020. The State of Digital Grocery: Growth at the Cost of Profitability study summarizes the inefficiencies retailers experience with digital operations and explains why grocery retailers need to focus on operational levers, upgrade their technology, and overcome their dependency on third-party platforms to plug the profit leak.
Amongst other key findings from the study, U.S. grocery retailers reported that:
59% of their third-party delivery partnerships are unprofitable
92% are dissatisfied with their online order picking efficiency
86% are dissatisfied with their labor utilization
72% lack an accurate view of their store inventory
"For grocery retailers to continue to grow their digital businesses in a way that doesn't come at the cost of profitability, they must improve their operational efficiencies by re-imagining their processes," said Neil Moses, CEO of Wynshop. "We hope the research we uncovered with Incisiv empowers retailers to prioritize their online businesses and create a roadmap that includes owning their brand experience and shopper data, deploying technology to improve fulfillment, picking efficiency, last-mile delivery and other critical areas that will help lead them to higher profit margins."
Click here to download "State of Digital Grocery: Growth at the Cost of Profitability".
The research study is based on a survey methodology spanning 206 U.S.-based grocery retailers. The majority of respondents (88%) were Director-level and above and nearly a third (32%) of respondents represent companies with over $1 billion in revenue. The survey was conducted between April—June 2021.
Learn more at Groceryshop
Wynshop is exhibiting at Groceryshop 2021 until September 22 in Las Vegas. To learn more about the study stop by booth #609 or set up a meeting.
Incisiv is a next-generation industry insights firm that helps retailers and brands navigate digital disruption in their industry. Incisiv offers consumer industry executives responsible for digital transformation a trusted platform to share and learn in a non-competitive setting, and the tools necessary to improve digital maturity, impact and profitability. More information is available at incisiv.com.
Wynshop (formerly ThryveAI) is an ambitious team of digital evangelists and innovators obsessed with a solitary mission—to help grocers and other local store-based retailers grow wildly successful online businesses. Our refreshingly easy-to-use digital commerce platform enables efficient in-house picking, reduces fulfillment costs, and gives retailers the ability to fully personalize the customer journey, amplifying shopper loyalty. Learn more at www.wynshop.com