Online grocery services struggling to keep up with rising demand

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LONDON (AP) – A pandemic forcing everyone to stay at home could be the perfect time for online grocery shopping. In practice, they are struggling to keep up with rising orders, underscoring their limited ability to respond to an unprecedented surge in demand.

After panicking over shelves left in stores without staples like pasta, canned goods and toilet paper, many shoppers quickly found online grocery delivery locations nearly impossible too.

“It’s getting harder and harder to prepare a meal,” said Paul Smyth, a software engineer who lives near Manchester, England, where the online grocery industry is particularly advanced. He is a long-time customer of the British online supermarket Ocado, but has not been able to win a niche since his last delivery two weeks ago.

The problem for many delivery services is to increase staff to pick up goods from stores and deliver. But for Ocado, a cutting-edge service that relies on warehouse robots, the significant increase in deliveries would mean too much investment in new machinery and warehouses too late to catch up with rising demand.

Smyth said he was running out of meat and frozen foods but wanted to avoid going to the supermarket because he feared his asthma, diabetes and high blood pressure were risk factors. he catches the new coronavirus.

“I will not panic for a week, but if I have to wait another two weeks for a delivery window, it will be very close to the bone. “

The coronavirus crisis is helping the e-commerce industry, but the problems at Ocado and other online grocers highlight how difficult it is for the industry to quickly expand online delivery.

In the United States, the grocery store had only migrated slowly online, accounting for 3% of the retail food market, according to a report released last year by Deutsche Bank.

When the crisis erupted, delivery orders surged while millions of Americans stayed at home. During the week of March 2, even before some cities and states place home orders, grocery delivery sales from Instacart, Amazon and Walmart all jumped at least two-thirds from to the previous year, according to Earnest Research. Instacart, a partner platform of more than 25,000 stores in North America, says orders in recent weeks have jumped 150%.

As a result, customers in New York City, hit hard, wait days to schedule deliveries that usually take just a few hours.

In China, where the epidemic began earlier this year, ubiquitous food apps on smartphones have helped millions of people through months of tight lockdowns. Despite this, Freshippo, the supermarket chain of the e-commerce giant Alibaba, is said to have recruited dismissed restaurant workers for temporary staff, as more customers placed orders by app and the average size of baskets jumped over the course of the year. first half of February.

According to market research firm Mintel, the UK online grocery market, one of the most advanced in the world, would account for 8.3% of all sales in 2020. Nonetheless, Ocado and the online arms of Brick and mortar rivals like Tesco, Sainsbury’s and Walmart, owned by Asda, have all been booked. To be fair, they prioritize slots for vulnerable customers.

Ocado has been a pioneer in online grocery shopping in the UK since 2002 with automated warehouse robots and has licensed its technology to other companies, including Kroger. This experience was not enough when his website melted after traffic quadrupled.

The company has struggled to bring systems back to normal by taking its smartphone app offline and stopping new account openings. He temporarily blocked his website and then made all visitors wait in a virtual queue, alienating long-time users.

“It was as if they had completely abandoned their customers,” said Smyth, 50, who waited up to four hours online to find that there were no delivery slots. Ocado now has a new system for allocating slots, but Smyth has still been out of luck and makes do with basic items in a local store.

CEO Melanie Smith emailed customers to say that demand had reached 10 times the normal level. His message came after Prime Minister Boris Johnson announced new lock-in rules and urged people to use food delivery services.

Whenever the British government announces new measures to fight the virus, she said, “we are seeing an extraordinary new surge in customers.”

“No matter how difficult we work, we will not have the capacity to meet unprecedented levels of demand.”

Ocado operates three warehouses where cube-shaped robots on wheels slide along vast grids, picking up crates of soda, tea bags or apples and delivering them to “picking stations”. There, humans or robot arms gather customer orders to be delivered by a fleet of vans.

The company said it processed 343,000 orders per week during the quarter ending March 1, and sales have since doubled. Analysts note that the primary factor influencing the growth of an automated system like Ocado’s is warehouse capacity.

“There are only a few warehouses you can build,” said Simon Bowler, analyst at Numis Securities. It takes Ocado up to two years to build a warehouse, so “saying today we are going to build a new warehouse, that does not solve the problem here and now. A fourth warehouse was destroyed by fire last year.

Traditional supermarkets have their own less sophisticated online operations, using people to pick up items from the shelves.

It’s “a little easier to adapt to sudden and huge increases in demand,” said Bowler – you just need to hire more people.

Businesses have started to do this. The British supermarket Morrison’s hires 2,500 additional drivers and pickers. Amazon is looking for an additional 100,000 employees, while Instacart plans to add 300,000 employees in concert, more than doubling the number of people it chooses and delivers.

However, Instacart employees have struggled to reach their efficiency targets as stores impose rules of distancing and business pushes.

This highlights the main disadvantage of human store pickers, Bowler said: they are 10 to 15% less profitable than robots.

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Zen Soo in Hong Kong and Alexandra Olson in New York contributed to this report.

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Follow the AP coverage for the virus epidemic at https://apnews.com/VirusOutbreak and https://apnews.com/UnderstandingtheOutbreak.

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Follow Kelvin Chan on twitter.com/chanman



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