The Big Switch: How Grocers are Bringing Last-Mile Delivery In-House

Written by

Team Egen

Published on

Oct 04, 2021

Reading time

3 min read

  • Retail
  • Innovation

Egen has worked alongside several leading grocery brands and retailers to build a last-mile delivery foundation in under 6 months.

Falling Dominoes

The dominoes fell quickly in March of 2020.

On March 6, 21 passengers on a cruise ship tested positive for COVID-19. By March 13 the president declared a national emergency and implemented a travel ban on non-US citizens.

By March 19, California announced the first major stay-at-home orders.

The swiftness of the pandemic affected everyone and every industry, but few felt the effects more immediately than grocers.

Forced to shut their doors but tasked with keeping the food supply chain moving, most had no other choice but to turn to well-established delivery partners like Instacart or Amazon.

Based on Incisiv’s Grocery Digital Maturity Benchmark 2020, a survey of over 90 grocery brands, here’s how the dust settled midway through 2020:

●   Instacart—37%

●   Amazon—23%

●   Direct from grocer—23%

●   SHIPT—10%

●   Other third-party—7%

Although many of these partnership decisions were made out of necessity and survival, many challenges remain for the 75%+ of grocers who don’t own their own last-mile delivery, including margin pressure, high degrees of brand switching, a significantly decreased rate of sustainable loyalty, and a lack of insight into customer and product data.

These challenges and others have grocers looking for more ways to own their own destiny as it becomes evident that e-commerce is here to stay. But challenges also persist in going it alone.

Building a Modern, Last-Mile Ready Foundation

At the heart of a grocer’s ability to own their own last mile is an end-to-end modern infrastructure that starts when a customer hits a website or mobile site and ends when a final test message is delivered alongside a perfectly picked and promptly delivered order.

Along the way is a tangle of disparate systems ranging from e-commerce to processing to fulfillment to merchandising and ERPs to last-mile delivery endpoints.

To pull off the perfect delivery, everything behind the scenes must move in lockstep.

Buildling Blocks of Last-Mile Delivery Process
Building Blocks of Last-Mile Delivery Process

Thanks to rapid advancements in the underlying cloud, DevOps, data, and API technologies now available to every business, building a cutting-edge software foundation that powers the modern grocer is no longer the arduous and drawn-out task it once was.

Egen has worked alongside several leading grocer brands to implement this level of comprehensive, underlying technology base in as little as 16 weeks.

And the benefits span not only the last mile but also the entire organization, including the following improvements:

●  More Accurate Merchandising and Forecasting: When you have more accurate insights into what customers are buying, by segment, and by channel, you can better anticipate what’s around the corner.

●  Smarter Customer Acquisition: The same goes for customer acquisition. Look-alike audiences become drastically more powerful with more data feeding the algorithms.

●  Third-Party Delivery Agnostic: When you have a flexible backend, it’s possible to switch in an instant between carriers and between channels like delivery, lockers, or even pick up.

●  Deeper Customer Loyalty: When you own your data, anything becomes possible for both tried-and-true promotions and for a new breed of innovative, hyper-personalized promotions.

The Economics of Last Mile Remain Broken

Of the many challenges grocers face due to outsourcing last-mile delivery, the fact remains to this day that the numbers don’t add up.

Thomas Parkinson, the founder of Peapod and current founder and CEO of Sifter, was recently quoted as saying, “The economics of last-mile delivery is completely broken.” And no one is immune to this reality.

In August of 2021, Amazon and Whole Foods stopped subsidizing last-mile delivery, adding a $10 delivery charge. Anyone caught in 30 minutes of traffic trying to save a few dollars quickly realized how good they had it for the past year.

A few weeks later, in September of 2021, Kroger announced a new partnership with Instacart with the ambitious goal of delivering groceries in 30 minutes or less. While the terms of the partnership weren’t disclosed, it’s probably safe to assume that the Kroger team heavily scrutinized Instacart’s typical arrangements for data and profit-sharing.

In-House Last Mile is Possible. And Economical.

Much has changed since the start of the pandemic, and much will continue to change moving forward.

The tech. has become efficient, fast, and affordable. There are more delivery options than ever before, from the new 3PL firms emerging every day and powerful shipping APIs like EasyPost that enable regional and multiple-carrier options to proceed with the click of a button to locker pickup—and, soon enough, to drones and autonomous vehicles.

The scales are tipping back in the grocer’s favor. At this point, it’s not a matter of if but when.

Download our CIO Playbook: Engineering Last-Mile Delivery


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