McKinsey&Company
Struggling to deliver a profit
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Cheap groceries aren’t cheap. New grocery-delivery start-ups, many testing their models in New York City, are discovering that while it’s possible to deliver groceries quickly, delivering them profitably is a tougher nut to crack. Although consumers have welcomed the service (sales are surging for the handful of fast-delivery start-ups operating in NYC), high costs for labor and marketing make scaling these businesses a hard climb. [WSJ] |
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Dark stores go dark. Some European cities are considering curbs—and two have enacted a one-year freeze—on grocery-delivery companies’ “dark stores,” facilities that aren’t open to walk-in customers and serve exclusively as distribution centers. Residents are increasingly complaining about neighborhoods dotted with warehouse-like facilities and noise from delivery vehicles. [Reuters] |
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Why it matters. In the US, online-grocery sales penetration as of June 2021 was three times above prepandemic levels, rising to low double digits. Increasingly, consumers are demanding convenience, value, and speed. But while sales are strong, making a profit is tricky: costs for delivery can amount to 10–13% of sales, while store picking and other operations can take another 11–14%. |
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Globally, think locally. There’s no silver bullet for profitable grocery delivery. Instead, different regions demand customized approaches that might include traditional stores, dark stores, or highly automated fulfillment centers, combined with various last-mile strategies. Read on to learn how grocers can tailor a profitable approach to each market and market segment. |
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| — Edited by Katy McLaughlin |
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