Global insight: The last mile challenge in European retail

This story was originally published in Planet Retail's IT & Supply Chain newsletter on Thursday 14 November.

The so-called last mile problem is still the number one challenge when it comes to home delivery of groceries. Planet Retail's research director for retail technology, Björn Weber, highlighted some of the major difficulties on stage at last week's Consumer Goods Forum's (CGF) Operational Excellence conference in London.

For one thing, customers must wait around at home during their assigned delivery slot. For another, fulfilment is extremely expensive, primarily because retailers need to ensure a closed cold chain for fresh and frozen products – and are typically unable to pass on these costs to the consumer. Therefore, retailers are always keen to find alternative fulfilment models for online food sales.

In its vision of grocery retailing in 2020, Planet Retail predicts a hybrid shopping experience. Routine purchases will be automatically picked and packed while shoppers browse the fresh food area, inspired to purchase by smelling, touching and/or tasting the merchandise. Some facets of the idea have already materialised.

Leclerc, for instance, recently opened a hybrid Drive location. Furthermore, the French retailer has just semi-automated its 30th picking station. At the grocer's standalone Drive in Saint-Nazaire, goods-to-man-technology handles 4,000 of the 6,500 ambient items stocked.

In his presentation, Weber identified warehouse automation as vital in the fight for reduced supply chain-related costs. However, not all products are appropriate for picking in a semi-automated fashion and it may not prove economical to equip all Drive outlets with the technology, just those with considerably high throughput.

With 17 years of experience, Tesco is a pioneer in grocery eCommerce. Mike Yorwerth, its group technology & architecture director, is an advocate of click & collect, the retailer's equivalent of the French Drive concept. In his speech at the CGF conference, he explained how the method helps to solve some of the grocery eCommerce-related problems, such as reducing costs of the service and saving customers the wait at home.

Click & collect, he added, also allows shoppers to quickly add additional items to their shopping basket that appeal to them, especially from the fresh food department when they collect their orders. “Click & collect is retail fundamentals redefined,” Yorwerth declared, mentioning extended range, convenience and personalised service as the main drivers for its success - along with reduced handling fees.

Although investing in other types of warehouse automation, Tesco has not (yet) implemented semi-automated picking for click & collect. Nevertheless, the retailer is exerting considerable effort in getting its IT infrastructure ready, pursuing an agile development approach. Yorwerth said that the ultimate benchmark was to find an efficient solution to click & collect a pizza.

Fast implementation methods are also required to facilitate the retailer’s next steps. Tesco is already trialling a concept called Collect From Location, which allows customers to pick up orders from public places, such as schools or park and ride stops. Tesco's next IT challenge will be to provide a seamless shopping experience across multiple channels for multiple categories. As of today, customers have to visit three separate online pages to purchase groceries, general merchandise products and clothing.

In a similar vein, Weber called on his audience to realise it was no longer acceptable to operate data and insights in silos. To become fit for true multichannel retailing, retailers have to make sure their systems provide real-time access to data and full transparency across all channels.

Planet Retail is a partner of RBTE 2014, and Björn Weber is a member of the RBTE retail steering committee.