Online shopping made simple - - Polymer Logistics

Online shopping made simple - - Polymer Logistics
Online shopping made simple
Online shopping made simple - - Polymer Logistics
The online grocery sector is expanding at a rapid pace, with sales rising quickly
    across Europe. As a result, supermarkets and other retailers are having to
    address a variety of storage, distribution and delivery challenges in an attempt
    to maximise efficiencies, meet customer expectations and balance costs. This
    paper takes a look at the key technologies and trends underpinning the growth
    in grocery e-commerce for home delivery and click-and-collect pick-up. These
    advances are in areas such as reusable shopping containers which address the
    key challenges while ensuring that perishable goods arrive in perfect condition.

                                                            to grocery
                                                            The retail landscape in Europe has changed beyond recognition in
                                                            recent years, with the convenience of online shopping emerging as
                                                            a major competitive threat to traditional brick-and-mortar stores.
                                                            Historically, the online sector has been dominated by a handful of
                                                            global giants such as Amazon, who have cornered the market in
                                                            the supply of a wide range of non-perishable consumer goods such
                                                            as toys and games, books, clothes and electronic gadgets. More
                                                            recently, though, grocery e-commerce has come to the fore, with
                                                            most of the major supermarkets across Europe establishing an online
                                                            presence, alongside a number of smaller specialists.

                                                            Indeed, according to research by IGD, the European market for
                                                            online groceries holds significant potential over the medium-term
                                                            and is expected to expand by 66 per cent by 2023, adding $21
                                                            billion. That promise holds true in all of the biggest countries, with
                                                            the UK, Germany, France, Italy and Spain all predicted to record
                                                            strong growth rates. The challenge for retailers, then, isn’t a lack
                                                            of potential customers. In essence, it is more around expanding
                                                            grocery e-commerce in a cost-effective and efficient manner
                                                            that adds value to the bottom line and delivers the best possible
                                                            customer experience.

2   Online shopping made simple supporting the rise of grocery e-commerce, from the store to the front door                
Online shopping made simple - - Polymer Logistics
                                                                                 come into play
                                                                                 Before looking at how retailers are responding to opportunities
                                                                                 in grocery e-commerce, it is worth assessing some of the
                                                                                 underlying factors causing the surge in demand. Primarily,
                                                                                 it is about convenience: many consumers, particularly those
                                                                                 with hectic lives, want to make the most of their spare time
                                                                                 and find it easier and quicker to do their food shopping digitally.
                                                                                 Research has consistently shown that in terms of specific groups,
                                                                                 young people in metropolitan areas are particularly heavy users
                                                                                 of online grocery services. This demographic is comfortable with
                                                                                 using technology such as smartphones and tablets to organise
                                                                                 many aspects of their daily lives.

                                                                                 However, while there are some consistencies in terms of the types of
                                                                                 users of online shopping, there are some notable national variations
                                                                                 across Europe when it comes to both the rate of uptake and the
                                                                                 kinds of distribution and delivery services being provided (see
                                                                                 box for more details). The UK, for example, is a relatively mature
                                                                                 market compared to other European countries, with the channel
                                                                                 share of online grocery retail standing at around 7 per cent. The
                                                                                 majority of these services are home delivery, with major supermarkets
                                                                                 such as Tesco and Asda investing heavily in their delivery fleets.
                                                                                 France, meanwhile, also has a sizeable market for grocery
                                                                                 e-commerce, representing around 6 per cent of the overall share.

                                                                                 In other countries, though, online shopping is still in its infancy.
                                                                                 In Germany, only 1 per cent of food purchases are made online,
                                                                                 and the majority of these transactions are based on a ‘click and
                                                                                 collect’ basis rather than home delivery. And in southern European
                                                                                 countries such as Spain and Italy, where there is a strong cultural
                                                                                 ethos of shopping at local markets, online grocery shopping
                                                                                 remains comparatively small-scale.

                                                                                 In all cases, though, the adoption curve is upwards. More recently,
                                                                                 demand has been further accelerated as a result of the Coronavirus
                                                                                 outbreak. Because of the social distancing and lockdown measures
                                                                                 put in place to combat Covid-19, a much broader range of people -
                                                                                 many who had previously shunned home delivery or click-and-
                                                                                 collect pickup - are now seeing the convenience in buying goods
                                                                                 online and eliminating the need to walk up and down supermarket
                                                                                 aisles. And experts and industry leaders agree that this surge
                                                                                 in demand will have a lasting effect in a post-Covid 19 world,
                                                                                 as more people become accustomed to this new way of doing
                                                                                 their weekly shop. A recent study from research firm Mintel,
                                                                                 for example, states that after four consecutive years of modest
                                                                                 growth, the change of shopping behaviour resulting from
                                                                                 Covid-19 will see the UK’s online grocery shopping market
                                                                                 grow by a massive 33% in 2020.

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Online shopping made simple - - Polymer Logistics
The challenges of grocery e-commerce
    So, while the momentum is undoubtedly behind supermarkets                    stores’. The latter are large warehouse-type distribution centres
    and other retailers looking to develop their grocery e-commerce              which are laid out like traditional shops but are solely designed
    activities, there are some common challenges that need to                    to fulfil online orders. These windowless facilities dispense with
    be overcome.                                                                 customer-focused infrastructure such as product point-of-sale or
                                                                                 check-outs, being designed for more streamlined route optimisation
    Firstly, it can be a costly business – with substantial expenditure          for teams of workers armed with electronic scanners. Dark stores
    needed for everything from transportation through labour costs               themselves are increasingly relying on higher levels of automation,
    (for picking, packing and delivering). An investment in containers           enabling supermarkets to lower the overall cost-per-pick. In
    that protect groceries during the entire picking, packing and                addition, online orders continue to be fulfilled by staff in traditional
    delivery process is crucial. Indeed, as we will see later, container         stores, with pickers often handling multiple orders at any one time.
    choice can be particularly important, with careful selection not only
    minimising upfront costs but also helping to drive down ongoing              But product selection is merely the first stage in the online
    ‘cost of ownership’ by supporting efficiencies in a number of areas.         grocery order fulfilment process. Irrespective of the type and
                                                                                 mix of operations a retailer may employ, there is one common
    Retailers also face pressure to meet ever-growing consumer                   requirement – containers into which the items, once selected, can
    expectations, risking reputational damage if standards are not               be placed, transferred to delivery vehicles and then transported
    met. For both home delivery and click-and-collect, customers                 to the consumer’s home or local collection point. Selecting the
    expect to receive high-quality, fresh product, on time and in good           appropriate container technology is far from a trivial decision
    condition. That requires a highly sophisticated and well-organised           as container choice can have a significant impact on almost
    logistical setup, starting at the warehouse / store, all the way to          every aspect of the online delivery process. That’s why careful
    the front door or the pick-up point.                                         consideration needs to be given to crate design and factors
                                                                                 such as re-usability and total cost of ownership.
    These factors have led retailers to evaluate a wide variety of solutions
    for e-commerce. These include everything from mini-fulfilment
    centres to fully automated warehouses, as well as, so-called ‘dark

4   Online shopping made simple supporting the rise of grocery e-commerce, from the store to the front door               
Online shopping made simple - - Polymer Logistics
The importance of
                                                                                 good crate design
                                                                                 The transportation and delivery of groceries bought online has
                                                                                 seen some considerable advances in recent years as supermarkets
                                                                                 and other retailers have worked hard to improve and grow their
                                                                                 offering. Among the key issues that retailers must deal with as
                                                                                 they manage the evolution of their online grocery businesses are the
                                                                                 efficiency of the picking and fulfilment process, management of the
                                                                                 storage of orders prior to delivery, and the physical delivery itself.
                                                                                 Selecting a suitable crate technology is vital in addressing all of
                                                                                 these issues. Such a consideration should be based on several
                                                                                 criteria, including durability and re-usability, along with design
                                                                                 characteristics that optimise process efficiency and minimise
                                                                                 storage overheads. The integration of technologies that support
                                                                                 traceability and monitoring are also increasingly important factors.

                                                                                 Designed explicitly with home shopping and click-and-collect
                                                                                 pick-up in mind, reusable crates eliminate much of the household
                                                                                 cardboard associated with e-commerce. The latest crates also
                                                                                 provide better protection against product damage, while improved
                                                                                 ergonomics have made them easier to handle in transit, resulting
                                                                                 in improved operational efficiencies. Many of these crates are
                                                                                 also foldable, nestable and stackable, ensuring the optimum
                                                                                 use of storage and transport space whether empty or full.

                                                                                 In addition, some of the more recent generations of crates also
                                                                                 offer the option to add IoT (Internet of Things) connectivity for
                                                                                 asset tracking, which can mitigate the inefficiencies and costs
                                                                                 associated with crate loss. Sensors can also be incorporated into
                                                                                 the crates to monitor ambient conditions when goods are in transit
                                                                                 and maximise product freshness.

                                                                                 Most of the big retailers work with transport packaging and
                                                                                 logistics providers to develop bespoke designs that suit their
                                                                                 specific requirements. These home shopping crates are then
                                                                                 typically acquired through the placing of substantial orders,
                                                                                 which often amount to hundreds of thousands of units,
                                                                                 or can be rented on a fixed-term basis.

5   Online shopping made simple supporting the rise of grocery e-commerce, from the store to the front door              
Online shopping made simple - - Polymer Logistics
Reusable crates in greater detail
    So, let’s take a look at the characteristics of the latest reusable          have a significant impact on order fulfilment optimisation. Carrier
    crates, identifying some of the specific design considerations               bags can be hooked inside the crate, keeping them open, and
    that make them fit-for-purpose.                                              therefore allowing for easier and faster goods picking by the
                                                                                 customer fulfilment team. Handholds on all four sides of the
    For online shopping, the market is primarily dominated by foldable           crate can also assist with more convenient handling.
    or nestable crates. These have to be lightweight, yet extremely
    durable, as they can be used for many trips in a single day,                 Meanwhile, in terms of product protection, the use of a solid base
    stacked in vans and shuttling from store to house or pick-up                 ensures that any liquid spilt from, say, a pint of milk can be contained,
    point. The design of such crates is often the result of a carefully          preventing spillage to the crates below and the subsequent spoil
    considered research and development process, with engineers                  of the order. This is increasingly important as the use of carrier
    using software-driven techniques such as finite element analysis             bags are being phased out in many countries for environmental
    to identify and execute the smallest refinements. When taken as              reasons, with groceries being placed directly into crates instead.
    the sum of their parts, these seemingly minor design features                Uncontained spillage can, therefore, have a major impact on
    can deliver considerable performance advantages.                             cleaning requirements – both of the crates and the interior of the
                                                                                 delivery vehicle. Also, crates are often designed with perforated
    For example, in terms of ergonomics and functionality, simple                walls to reduce weight and when empty can be conveniently
    enhancements such as featuring bag hooks on the top rim can                  nested to reduce storage space.

6   Online shopping made simple supporting the rise of grocery e-commerce, from the store to the front door                
Online shopping made simple - - Polymer Logistics
The use of IoT in grocery e-commerce
    Another exciting development is the application of Internet of               have time to climb flights of stairs to deliver and unload grocery
    Things-based tracking systems to e-commerce crates, which                    orders, and often leave the crates behind.
    can dramatically and immediately reduce losses and improve
    operational efficiency. The adoption of this technology mirrors              The use of IoT helps with such attrition in two primary ways. Firstly,
    the trend to digitalisation seen in the wider logistics sector,              the system allows for the tracing of all delivered crates, particularly
    where the availability of smaller, cheaper and more reliable                 the ones left on premises by the driver, enabling collection at a
    sensors has led to the connection of a more extensive range of               later point in time. Also, such technology can drive behavioural
    assets. These sensors, embedded on equipment such as pallets,                change around the use of home shopping crates, establishing
    roll-cages and crates, provide a stream of data that can be sent             them as reusable and sustainable assets, rather than disposable
    over low-power, wide-area cellular and non-cellular technologies             boxes to be thrown away. In the future, delivery drivers could be
    such as LoRaWAN and Narrowband IoT to the cloud, where it can                incentivised to ensure they keep track of stocks, returning them
    be analysed to deliver real-time information factors such as asset           for use for other customer orders.
    location, surrounding temperature and humidity.
                                                                                 Moreover, IoT isn’t restricted to helping to reduce attrition, as there
    As the cost of such technology has decreased, suppliers have                 is the potential to use this type of technology for the monitoring of
    started to use IoT as a means of tracking the location of shopping           food condition. Sensors attached to home shopping crates can
    crates. At present, attrition is a significant problem in the grocery        be used to ensure that perishable goods remain within specified
    e-commerce sector, with some of the major supermarkets losing                temperature/humidity parameters while in transit, ensuring that
    as many as 1,500 crates a day. This adds up, over time, and can              they reach customers in optimum condition. This is an increasingly
    have a marked impact on the profitability of operations. It is a             important consideration for many consumers, who are interested
    particular problem in major cities such as London, which have a              in the ‘farm-to-fork’ journey of their food as part of broader
    high percentage of flats among the housing stock. Drivers do not             sustainability concerns.

7   Online shopping made simple supporting the rise of grocery e-commerce, from the store to the front door               
Online shopping made simple - - Polymer Logistics
Plotting crate innovation going forward
    It is clear, then, that there has been some notable innovation taking        Future crate designs are also going to have to take account of
    place in the home delivery sector. Those advances - from ergonomics          the increased use of automated warehousing being pioneered by
    and functionality, through to digitalisation – will continue to evolve       organisations such as Ocado. These facilities use intelligent robots
    as supermarkets focus on cutting costs and boosting customer                 for picking and placing to reduce labour intensity and increase
    service. So, where next for grocery e-commerce? What sorts of new            speed and efficiency at the order fulfilment stage. Here, reusable,
    technologies and trends might emerge as the market for home                  standardized crates that are strong enough to protect what’s inside
    shopping continues to expand across most parts of Europe?                    and are compatible with – and can potentially communicate with –
                                                                                 the warehouse systems are essential to efficient operation.
    Firstly, there is the potential for additional data capture as a means
    of increasing customer personalisation, driven by an extension of            Sustainability will also become an even greater consideration.
    the digitalisation process that is already taking place. At present, as      While the shift to returnable packaging solutions such as plastic
    previously discussed, IoT-based technologies are primarily being             crates helps eliminate the cardboard associated with online grocery
    used to track the location of assets and monitor the conditions of           shopping, consumers still want to know that the thermoplastic
    groceries during transport. However, in the near future, they could          polypropylene used to make crates can be disposed of in an
    be deployed to more closely link crates with the preferences of              environmentally sensitive manner. That means crate producers
    individual customers and their shopping habits. For example, once            and suppliers will be expected to work together to establish
    a crate is picked, a more data-driven customised experience might            effective recycling programmes. For example, schemes where
    provide a print-out of recipe suggestions inserted into the shopping         old crates are bought back from retailers and ground up so that
    basket, with the aim of building long-term brand loyalty.                    the base materials can be re-used in future crate production.

    It is also worth noting that a crate can have an impact beyond
    the operational. By definition, the act of online shopping takes the
    user away from the in-store experience and associated exposure
    to the supplier’s brand. For a company looking to ensure its brand
    and its values remain front and centre with its online customers,
    the look, feel and usability of the website is key, but so too is how
    the products are delivered. This is especially true if those products
    are being brought into an individual’s home. Appearance, finish,
    quality, logos and graphics can all tie into a consumer’s brand
    aspirations, which means that customised and branded crates
    have a role to play in the overall customer experience and how
    the customer ultimately perceives the retailer. This is one of the
    reasons behind the growth in the use of more natural ‘wood-look’
    crate designs, not least from niche online businesses entering the
    grocery e-commerce sector and supplying, for example, organic
    produce boxes from local suppliers.

8   Online shopping made simple supporting the rise of grocery e-commerce, from the store to the front door            
Online shopping made simple - - Polymer Logistics
Grocery                                                                      Why partnership
    e-commerce as                                                                provides the
    a force for good                                                             answers
    We have seen, then, that grocery e-commerce is a hotbed of                   The growing popularity of grocery e-commerce, and the highly
    innovation and the market remains buoyant across Europe. The                 transient nature of the market, presents some real opportunities.
    same positivity exists in the wider world of online shopping, with           In particular, supermarkets and other retailers are looking to
    the latest research from the World Economic Forum suggesting                 form long-term partnerships with supply chain logistic providers
    that demand for last-mile delivery is expected to grow by a                  who can help deliver technical innovation that results in added
    staggering 78% by 2030, with online stores, e-grocers and food               business value.
    delivery services all competing to offer faster home deliveries.
    This trend is being fuelled by growing urbanization, says the                At Polymer Logistics we have worked with many of the leading
    Forum, with 60% of people expected to be living in cities by                 supermarkets across Europe to design and manufacture bespoke
    2030. The risk, though, is that this rapid expansion could have              reusable shopping containers that meet both strict performance
    a negative impact on the environment, putting more vehicles                  specifications and detailed branding specifications. These crates
    on the road and producing higher emissions.                                  have been proven to help retailers improve order fulfilment
                                                                                 operations at the same time as providing better product
    Looking to the future, there is hope that technology will be                 protection, improved ergonomics and the elimination of
    able to mitigate the environmental impact of online shopping, or             cardboard associated with e-commerce.
    even help to significantly reduce emissions compared to today’s
    levels, particularly as fewer consumers choose to drive to stores.           Success in this sector is helped by the fact that Polymer Logistics
    The World Economic Forum report - The Future of the Last Mile                offers a full service that includes in-house R&D and manufacturing
    Eco-System - points to 24 specific technology-focused fixes that             capabilities. This supports the ability to partner with customers
    could reduce the impact of e-commerce. These range from the                  in the retail sector to bring new ideas to market in a shorter
    use of automated robots and hydrogen-electric vans, through to               timeframe. In-house manufacturing also means the company
    dynamic re-routing of delivery vehicles and customer collection              can provide supermarkets and other online retailers with more
    from lockers. The point is that providers of online shopping services –      flexible and reliable control over the stock of reusable crates,
    whether supplying groceries or non-perishable consumer goods –               which is a crucial consideration as online shopping grows.
    are going to have to innovate on a continuous basis if they are to
    remain relevant in what will be a highly competitive global market.

9   Online shopping made simple - supporting the rise of grocery e-commerce, from the store to the front door       
Online shopping made simple - - Polymer Logistics
                    $22.1 bn

                                                         $17.2 bn
         $14.6 bn

                                              $11.6 bn

                                                                                               $3.8 bn

                                                                                                                                 $2.0 bn
                                                                                     $1.3 bn

                                                                                                                       $0.9 bn
                               8.7%                                 8.2%                                 23.2%                             17.9%

         2018       2023       CARG           2018       2023       CARG             2018      2023      CARG          2018      2023      CARG

                          UK                             FRANCE                                GERMANY                             SPAIN

        A snapshot of the online
        grocery market across Europe
        UK                                                                        S PA I N
        The most mature European market for grocery e-commerce,                   Although it has a much smaller online grocery sector than
        with major supermarkets such as Tesco, Aldi and Morrisons                 the UK, France and Germany, Spain could actually record
        offering a home delivery service in what has become a very                the biggest percentage growth of any European country over
        popular route to market. Online-only retailers such as Ocado              the next five years. McKinsey suggests that 49% of Spanish
        also have a strong presence in the market. Research by Mintel             consumers would be happy to shop online, if the service were
        suggests that the 25-34 age bracket is the most enthusiastic              available in their area. Historically there has been a cultural
        when it comes to having groceries delivered, with almost                  resistance to online delivery, with local markets a popular
        two-thirds having done some shopping online.                              source of fresh goods such as fruit and vegetables.

        FRANCE                                                                    I TA LY
        The second largest European market for grocery e-commerce,                The fast-moving consumer goods sector remains very fragmented
        and one that is characterised by strong latent demand. According          in Italy, with several hundred medium-sized retailers servicing
        to McKinsey, one-third of consumers who have never bought                 the market. This has resulted in a lack of scale which has hindered
        groceries from the internet say they would “probably” or “certainly”      the online grocery sector. However, in recent months supermarket
        think of doing so within the next six months if the service delivered     groups such as Unicomm (Emisfero), Flor do Cafè and Nonna
        to their street. The concept of ‘buy online, pick up in store’ is         Isa have all established online grocery services, indicating a
        popular in France, with many retailers having invested heavily            positive trend. According to the magazine My Fruit, the market
        in a network of pick up points.                                           for online fresh and packaged foods in Italy rose by 130% in
                                                                                  the first four months of 2020. Traditionally, click and collect has
        GERMANY                                                                   proved popular in Italy, with many citizens preferring to pick up
        Much slower to embrace online grocery compared to France and              groceries as part of their commute.
        the UK, with many Germans preferring to look, touch and feel
        perishable goods before they buy. Many of big supermarkets
        have a high density of city-centre stores and as a result have
        been reluctant to invest in the storage, logistics and delivery
        infrastructure required to enter the online sector in a big way.
        The figures are moving in the right direction, though, with recent
        research suggesting Germans are beginning to recognise the
        convenience offered by home delivery.

10   Online shopping made simple - supporting the rise of grocery e-commerce, from the store to the front door          
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