Over the years, you might have seen the rapid growth of online grocery deliveries taking over traditional means. Multiple surveys indicate that this online market is expected to grow at a CAGR of 24% in the next five years. However, the future of grocery delivery will depend on how the top player is able to handle the surge in demand.
Grocery delivery has been around for some time, and there is no reason to believe that it will fade soon. With the adoption of mobile apps to facilitate delivery in minutes, the market is changing at an exponential rate. In other words, there is no better time than now to invest in a market full of promising ground.
You can start by creating a platform that helps local grocery retailers sell their products on the marketplace. This type of business is popularly labeled as an ‘on-demand’ grocery delivery model.
To understand the challenges that you could face with this type of business model, first learn how it works.
How does online grocery delivery work?
Imagine you have a place that provides daily essentials, from fresh groceries to packaged dairy products. When someone wants to buy from your place, they have to follow certain steps to make a purchase. Choosing the products, adding those products to their cart, and making the payment are some essential steps to be followed.
However, in the online grocery delivery model, consider doing all of this but adding an extra step. That step is the process of having these groceries delivered to your customer’s doorstep. Here, your platform receives the order after payment confirmation. The grocery store then packs the groceries. Your app assigns a delivery partner, and the overall process takes around a few minutes to complete.
As easy as this sounds, there are multiple challenges that can emerge in each step of the process. Let’s understand some of them in the context of business startups.
Common Challenges In The Online Grocery Delivery Business
The chances of dealing with multiple grocery orders could be tough to manage. Keep in mind that your business primarily revolves around assigning the delivery partner as quickly as it can. More than that, the quality of the grocery delivery must match in-store delivery expectations to retain customers. It should be clear in advance that grocery essentials could run out of stock.
If you are starting to feel overwhelmed, don’t worry. Here are some of the top challenges, along with solutions that you should stick to in the long run.
Without a doubt, the grocery delivery business is highly competitive. The core of the business takes on the challenge of delivering groceries in minutes without compromising quality. Many businesses, with months of preparation, have found their way to make the delivery window smaller than before.
At the end of the day, customers will obviously go to the business that can send groceries in a much shorter time. These well-established grocery businesses are known to be startup killers and lure their customers with discounts and offers.
Let’s be clear on this issue. There’s always some competition on the side for you to maintain the competitive spirit of entrepreneurship.
What you can do on your part is make the delivery process more streamlined. Use technology to offer a more personalized shopping experience. Offer an invaluable grocery item that is rare to find among top grocery stores. All you have to do is do proper and thorough market research and find out what your customer wants.
Once you see the difference, the same could prove beneficial to building customer loyalty and trust. Eventually, this will result in making more profits than before.
Before you try to enter the online grocery delivery business, consider yourself to be a logistic delivery business. The difference is that your goods and products are groceries.
If you look right now, most online grocery or e-grocery businesses focus more on their fleet of drivers. This is largely done because getting requests on the app is comparatively easier than delivering the said groceries in under a few minutes.
The reason behind this could be related to some factors that are not under the control of the driver. There is imminent traffic congestion, the wrong route direction, and a vehicle issue that could extend the grocery delivery ETA.
To deliver groceries before the estimated time, smartly integrate maps that automatically route the customer to the nearest available store.
Based on multiple real-time factors, such as driver availability, travel distance, weather signals, and more, your grocery app can estimate the time of delivery accordingly.
Above all, an efficient delivery system is put into place to tackle these challenges from the start.
Changing Consumer Behavior
The effect of an increasingly digitalized lifestyle has led to a rapid transformation in the buying process. Consumer behavior is unpredictable, as it tends to change with time.
Even a small error can be a major cause of disapproval among consumers. Building a loyal customer base requires top-notch service and a robust system of grocery delivery.
To really excel in customer experience, you need to understand what your customers really want. In grocery delivery, there are three factors that your customers look for before making the purchase.
These are convenience, cost, and quality. You need to understand that your customers expect to shop whenever it’s convenient for them.
In addition, your customers also expect a variety of quality grocery items to be available. They want their orders to be ready in a timely manner and around their schedules.
For example, if they have ordered the groceries in the afternoon, have them delivered in time before dinner that evening. If you continue to make strides towards faster delivery, other independent grocers will stand before you as partners as well. This could deepen your grocery inventory list and attract more customers as well.
In an online grocery delivery business model, operating losses are a big issue that cannot be ignored. Aside from higher operating losses, there is also the presence of low margins, unhappy customers, unsuccessful deliveries, etc.
During the early startup days, these factors can pose a serious challenge. It can also result in creating an imbalance between the generated revenue and operational costs.
An operating loss happens when your expenses exceed the profits you make. In any on-demand delivery model, you have to be aware of the overall cost before your customer places an order. When it comes down to the core functions of operations, ensure that everyone stays on the same page. This is done by circulating real-time data about transactions, inventory, and the location of the order placed.
Over the years, people have been witnessing their grocery bills increase as prices rise on virtually everything. These prices are expected to rise for a variety of reasons.
Higher labor costs, transportation delays, and capacity issues are some of the major reasons behind this fluctuation. However, this type of challenge is faced by both traditional and online grocery stores.
Changing the prices ultimately affects the bottom-line profit. For a grocery app, it is difficult to work around these ever-changing fluctuations while offering competitive rates to buyers.
Start with a long-term financial plan and stick to it. The basic idea is to stick with a stable, year-long plan that is designed to deal with market volatility with ease. In the grocery delivery business, you may use multiple suppliers tracked with the same plan to ensure competitive pricing. This helps to mitigate the impact of potential price increases in the future.
Other supply strategies include planning your financials for the entire year in advance. In this way, your grocery business can fix the price caps with either a fixed percentage or a commodity price index. In other words, whenever the price increases, you will not be alone to handle the outcome.
As a rule of thumb, after you have launched your grocery app, always carefully negotiate raw materials and commodity pricing.
Starting A Grocery Delivery Business With An App
Like Instacart and HappyFresh, you can also start an online grocery delivery business easily. These businesses work on the on-demand business model, where you fulfill customer demands almost instantly.
Here, the app plays a major role in getting new requests from the customer and forwarding that order to the local grocer. Along with this, there is also the prime service of delivery in minutes, which your grocery business should excel at.
But before all this, let’s focus on the app itself.
To start a grocery delivery business, you need to develop three interfaces for your app platform. The first is the one that your customer and driver see; the second is for the grocer; and finally, the last one is for you. The last one is more of a panel than just an app. It is made specifically for the business admin to oversee every single component of the business.
Apart from this, you will also need a website to make the presence of your business more reliable than before. All of this happens after you have done the market research and have understood your target audience.
Now comes the part about designing and developing the platform with features like those mentioned in Instacart and HappyFresh. It should be noted that this process takes most of your time as an entrepreneur, affecting your finances as well.
That’s why most of the emerging startups are using the pre-built solution to launch their apps instantly on the market.
A Ready-Made App For All Your Needs
If you think about a grocery app, what comes to mind? Easy-to-use navigations, simple buttons, and interactive design elements, among others, might be some of the things you can relate to.
However, adding such features via coding to design a platform from scratch is only a feasible solution when your business idea is unique in itself. Here, many grocery delivery apps have already been launched and are racking up billions in profits.
So why don’t you buy their source code and rebrand it?
Over the past years, top entrepreneurs have been buying many ready-made grocery delivery apps as they are cost-effective methods and easy to launch.
Furthermore, there is no copyright issue, and your business runs smoothly side by side with the top grocery giants. From a cost perspective, taking this road saves you a lot of money when compared to hiring app developers.
The same goes for the time value as well. The entire rebranding process, or ‘white-label’ process, hardly takes around 1-2 weeks to complete.
Coupled with many challenges in different facets, a grocery business fuels the delivery service to become more agile than ever. Apart from this, entering this market in itself has been riddled with many challenges since the first step. These challenges are shaping delivery businesses and the grocery retail market.
The adoption of online grocery shopping is expected to penetrate a staggering 25% of the global market by 2030. With the addition of on-demand deliveries, consumers will have multiple options to choose from in the near future.
If you want to start early, try to understand changing consumer behavior, be more conscious of your values, and stretch your budget when needed. Who knows, maybe grocery shopping could be a great start for you to expand your on-demand model to other industries as well.