Grocery e-commerce is a red-hot consumer demand, but profitability is elusive. The CEO of a $500 million supply chain visibility company that counts Amazon and Walmart as customers explains why.
But so far, actual profitability has been elusive for online grocery ventures.
What that led to is kind of an afterthought. Transportation logistics is about, "Just save as much money as you can during the procurement process." They're often run by procurement experts., it was all about how can they drive down the cost from a percentage standpoint of cost of goods sold.
A woman uses a computer to control robots at the 855,000-square-foot Amazon fulfillment center in Staten Island on February 5, 2019.I think that's the trend that we're seeing is heavy investment into that area and potentially maybe they are bringing something in-house that they think is core to them, but I think they're also outsourcing just as much if not more of their total transportation and supply chain spending costs.
What you do with dry goods and what parcel carriers and LTL carriers and small-pack carriers, air-freight carriers what they all try to do is they try to leave the terminal or the operating center, the distribution center, they try to make a bunch of deliveries as closely as they can together and then they drive back from that last delivery to the store to wherever they're going.In a perfect world, you actually pick something up from your last delivery to the distribution center.
They can fill the whole car with groceries, five or 10 or 20 or 30 stops if it's a van or something. These are interesting challenges to solve.It's funny because you're mentioning drivers going up to 10-20 stops. I usually do Instacart for my grocery delivery. Usually, I order it and then 20 minutes later, someone's shopping and then right after they finish shopping, they deliver it. Which to me sounds like they're only doing one stop.
As a general trend, it doesn't surprise me at all. The challenge is what people say is they make it up in density or they make it up in volume. That's typically true in transportation because you can get multiple stops, but with perishable goods, you can't.You have to do a couple of things. Remember it takes 20 minutes or 30 minutes to walk the aisle floors and pick groceries.
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