A September 20th posting by Michael Brown in Supermarket News highlights the low profitability of online orders.  The situation was documented in a survey conducted by Wynshop, a research group specializing in digital commerce in their report State of Digital Grocery: Growth of the Cost of Profitability. This demonstrated the growth of online grocery ordering in 2020 but emphasized exceptionally low margins and losses on transactions.

Highlights of the report included:-

• 81 percent of retailers anticipate that delivery platforms will constitute future competition
• 84 percent of grocery operators are concerned that they will lose direct contact with consumers
• 60 percent of retailers recognize that home delivery using third party services are unprofitable

Margins are important since almost 70 percent of retailers are using third-party platforms. In the foreseeable future the ability to expand online grocery sales will rely on partnerships.  Target recognized the problems relating to third-party providers and acquired Shipt in 2017 for $550 million.

Grocery retailers are exploring options for alternatives among which micro-fulfillment centers appear to be a promising development.  Other areas to improve efficiency and hence operating margin include robotics for in-store assembly of orders, automated order pickup and introducing AI-systems to control inventory.

In 2020, COVID restrictions and consumer concerns initiated a substantial swing to online ordering.  As COVID recedes, most supermarket operators recognize that convenience will be a major determinant in retaining customer loyalty.