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E–grocery: smart logistics is the key

NewsFromThePlatform | November 25th, 2015

As Jeff Bezos and Jack Ma have very well understood, digital and physical networks are increasingly interconnected. We order online, confirm by email, but then we receive our goods thanks to a courier that delivers them to our door or to collection points.

We all know that the digital economy, and in particular the food delivery market – which today generates a turnover of 400 million euro – would not exist without a timely delivery. In a business such as e-grocery, where the product is geographically located, travels on a short supply chain and has to be fresh when it gets to the end user, delivery is nearly as important as the product itself.

A survey conducted by Cortilia shows that the e-grocery customer looks for quality, short supply chain (essential for 76% of buyers), seasonal products (75%) that come at a good price (76%). Besides, customers are mainly women (80%) – most of whom are professionals (86%) and mothers (59%): such is the identikit of busy women who are usually very attentive to reach the perfect combination between timing and good logistics. Moreover, the 66% of these women can be easily inscribed into the so-called category of “white collars”, who more than anyone else appreciate the opportunity of having their products delivered at home at an established date and time.

So what is the most important thing to do if we want to achieve the perfect balance between product and service?

First of all, we should collect top quality raw materials from farmers who take care not only of their products but also of the land where they grow them – since this is exactly what keeps their organoleptic qualities unspoiled during their journey from the field to our home.

The next step to take if we want to succeed in the peculiar world of digital markets is having an efficient supply chain, i.e. a strategic relocation of warehouses where you can store goods from different companies around each area and assemble them into packages for the individual end consumer.

Maintenance of the cold chain and choice of packaging are the third and fourth key elements: paper and cardboard for fruit and vegetables are – among all – the kinds of packaging that provide the best balance between quality, price, weight and size.

And if functional warehouses, efficient transport and reliable packaging systems help increase service quality, from a logistics perspective the real challenge – which means the perfect service for the customer and the best economic value for the company – is reducing the lead time between production/collection and delivery. According to a survey by Netcomm and Human Highway, the ideal delivery service must be first of all “fast” or “quick” (respectively 19% and 5% of the words used in the description), on time (17%), precise (4 %), reliable and safe (3%).

This is what makes the difference in end-user satisfaction. And it’s precisely in the realm of logistics that technology becomes essential, optimizing the so-called “last mile“. In fact, the tasks of transportation, routes and delivery coordination are more and more frequently assigned to logistics softwares, so as to reduce not only time and costs, but also our impact on the environment.

A very common way to solve the “last mile” problem is arranging pick up points, which are becoming more and more popular all over Europe: +680% just in the last year, as reported in “The State of online grocery retail in Europe”. Pick up points are the most used delivery system by online retailers, even though consumers everywhere usually prefer home delivery – better if low cost or even free.

Logistics is thus turning into a key factor for the success of online e-commerce, especially in the e-grocery sector. This is why a giant like the German DHL has created its own digital agricultural market – Allyouneedfresh.de – starting from its core activity, which is, precisely, express delivery. AliBaba, too, has bought the logistics company YTO Express and then has opened AliExpress; just like Amazon, which after Prime Now (one-hour delivery from local shops) has opened its e-grocery service, AmazonFresh.

If, as it seems, the on-demand economy and mobile economy will continue to grow, a major change will occur throughout the supply chain. New challenges will create new potential businesses, based on digital networks. Thanks to this model, the gap of information between producer, retailer and consumer will finally be reduced.