Welcome to Chapter 3 of our 10-step guide: What to consider when starting your on-demand grocery service. In this chapter we will help you to decide the right delivery program for your store.
This post first appeared in 2019, but has been updated in 2022 for relevancy.
In the previous chapter we discussed the strategic decisions on your pricing and assortment of online grocery service. Finding the delivery model that best suits your clients and matches your resources is closely linked to your assortment and pricing and should therefore be included in your overall strategy.
In this chapter, we will first talk about each of these options separately, and finally bring up the questions you need to answer in order to choose the best option for your store. With grocery on demand, you have three delivery models to choose: home delivery, in-store pick-up and remote collection points.
The most important target groups for home delivery are families with small children and people with physical restrictions. For these customers, home delivery is by far the easiest option and they are willing to pay for this convenience.
Customers with a need for home delivery of grocery can stay in the comfort of their house and not have to worry about lifting or carrying. Therefore they tend to order in big bulks. Home deliveries are also well placed in city centres, where fewer people have their own car and the local corner shop tends to have limited assortment.
The best way to maximize the efficiency of your home deliveries is by deploying a fulfilment tool specifically designed for planning delivery routes in real time (read more about the Naveo Commerce grocery delivery system in Chapter 4).
With this grocery delivery system, your drivers are able to add specific orders to a certain route and assigning drivers is as easy as dragging a file from one folder to another on your computer. It is important your customer support can follow the deliveries in real time, keeping you and your customers constantly updated.
When setting up your home deliveries, keep in mind that while customers greatly value short delivery slots, the shorter the slots, the more expensive it is to organize your delivery. Therefore, combining short delivery time slots in the high-density and high-demand areas with longer slots for low-density areas, is worth thinking about. Also delivering to low density areas only once or twice during the week will help you to manage your profitability.
Pick-up programs are the main driver of growth in habitual online grocery shopping at the moment. Pickup has had a particular appeal with a demographic that you as a retailer should pay special attention to: the millennial moms. For many customers the ultimate convenience in grocery shopping is to choose the pick-up time that best suits their schedules, not having to wait for delivery around the house.
In-store collection points have the important advantage of you meeting the customer face-to-face. This gives you the chance to receive direct feedback, interact with your customers and to make sure everything is correct with the order. The orders can be adjusted and completed on the spot – a factor that is known to have a positive effect on ordering produce and perishables.
Another advantage of in-store pick-ups is that while the customer is already there, they might be provoked into some more shopping. Also, in this option you don’t need to care about restrictions involved in selling alcohol and tobacco products since you are able to check the customer’s ID. Think about adjusting your pickup time slot lengths and pricing by day-of-week and time as you would with home deliveries.
Whereas, the Click & Collect system is a variation on the same idea. Popularised during the Covid-19 pandemic due to the reduced risk of infection in-store, customers placed a grocery order online and then drove to their nearest site to collect.
Again, this creates added opportunity for customer loyalty and retention. In 2022, Tesco have launched a monthly plan to their UK customer base which sees one fee secure them any slot for collection. Whilst this may be less cost efficient for them in the short term, Tesco can rely on their customer base to essentially ignore all other click & collect options on the market due to their subscription basis.
Some of your potential customers might be living far from your store. For those customers, you can choose to offer a once a week home delivery service, or longer delivery slots. Another option is to set up a remote pick-up service where all orders are delivered to a pick-up location at a specific time for an hour or two, with the driver waiting on-spot.
This would save you a lot of time and cost while still adding value to the customer.
The most cost efficient form of pick-up services are the ones that require no on-site personnel (we call them cold stations): simply set up a locker where all your orders are delivered and let your customers pick up their groceries at their discretion. Good locations for cold stations are in busy sites such as train stations and airports as well as in lobbies or courtyards of large apartment complexes.
How to make the decision on whether to implement a pick-up, home
delivery service or click & collect? This depends on your customer base and the budget in use. If your resources are limited, a pick-up model is usually the best way to get started.
Pick-ups are not as tied to time slots and for many people, swinging
into a parking lot for a few minutes makes more sense than waiting
around the house for a delivery. It’s always easier to expand from
pick-ups to home deliveries than the other way around, and this way you
have a good opportunity to analyze which products sell well online
before expanding to home deliveries. The pick-up model is many times the
most cost efficient option, too: most customers are willing to buy the
same, or close to the same, price for Click & Collect than for home
delivery while your logistics expenses remain considerably lower.
The best way to help your decision making is to carry out a customer
survey and let your customers tell you which delivery models work best
for them.
Naveo tip: See the potential in your area. When defining your
potential customer base, be as creative as you can. Is there a business center or a hospital nearby? Why not bring the offices a basket of freshly baked cupcakes along with some free delivery coupons, and put up a poster in the lobby letting them know about your click & collect and delivery service? After long shifts, the busy professionals will more than likely appreciate having their groceries waiting for them at the parking lot as they head home.
Before choosing your delivery model, think about the following questions:
As Naveo Commerce plans its exciting launch of Scan & Go supermarket technology, we look at the key differences between this and self-checkout services already offered in most grocery stores.
As Naveo Commerce plans its exciting launch of Scan & Go supermarket technology, we look at the key differences between this and self-checkout services already offered in most grocery stores.
Customers are becoming increasingly used to a seamless purchasing experience. For the grocery sector, getting this right can be challenging, but as Naveo Commerce CRO, Tomas Granö shares, having a coherent, customer first personalization strategy in place is key.
