Sunny Dhillon is an early stage investor at Signia Ventures in San Francisco, where he invests in start-ups of consumer and business software in retail technology, e-commerce infrastructure and logistics.
Other contributions from this contributor
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- Digital influencers and the subsequent dollars
In an instant Millennials, mothers and grandparents have given up decades of walking through dusty groceries for the convenient and novel use of online groceries. While Instacart, Amazon Fresh and others have been offering an alternative to the stationary grocery store for years, it is the pandemic that has classified them as essential companies and has given them a clear competitive advantage more than ever.
In recent months, however, not only has consumer behavior changed drastically, but the business model of food retailers worldwide has also changed fundamentally. These shifts are not temporary – in fact, they are here to stay, corona-catalyzed and permanent.
Fulfillment innovations can lead to efficiency and cost savings
For the consumer, the online grocery store generally begins and ends in the same way: you place your order through an app or website and hours later it is displayed on your door. But the way these orders are accomplished depends on the scope.
The best known approach comes from Instacart, This depends on hundreds of thousands of human buyers fulfilling customers' online grocery orders by shopping side by side with regular customers. The model clearly works for Instacart, which is worth nearly $ 14 billion after its last upgrade.
However, this model is far from ideal. Even before COVID, customers were known to displace regular customers, not to mention introducing high delivery costs and the element of human error into the fulfillment process.
An obvious solution is the Central Fulfillment Center (CFC). CFCs are large, independent warehouses that often serve different regions and can supply both brick-and-mortar stores and online grocery deliveries. As the volume of orders increases and consumers demand ever faster delivery times, the CFC model has already been innovatively designed.
Some grocers, particularly Kroger, believe that the introduction of robot automation in CFCs through solutions like Ocado can create economies of scale for fulfillment. These CFCs use fulfillment robots, which are controlled by air traffic control technology and run along a grid system and move goods over categorized boxes. Kroger continues to invest in the model and recently announced three new Ocado automated CFCs in the West, Pacific Northwest and Great Lakes regions of the United States. The smallest location is over 150,000 square meters.
During Kroger remains clearly associated with the Albertsons / Safeway, Walmart CFC model and many others prefer the Microfulfillment Center (MFC). MFCs, which are typically much smaller (e.g., approximately 10,000 square feet), are automated warehouses that have been cut from the back of existing stores and enable faster fulfillment times in a smaller geographic area, allowing chain stores to use their multiple geographic locations to act effectively Fulfillment / delivery hubs for e-grocery coverage.