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Meeting the Store-to-Home Delivery
Challenge: E-commerce Grocery Solutions
E-commerce grocery shopping has the
potential to become one of the most impactful
disruptors to the U.S. retail landscape over the
next few years. With the total Food and
Beverage market valued at $700 billion—and e-
commerce currently accounting for less than
1% of that market ($70 million)—a potentially
lucrative opportunity exists for traditional
grocers to expand into this virtually untapped arena.
As e-commerce has grown within the segment, pure-play e-commerce grocers—such as Peapod, Fresh
Direct and (of course) Amazon Fresh—have emerged. Further, most brick-and-mortar grocers are
specifically feeling the Amazon threat. With Amazon Pantry and Amazon Prime now delivering non-
perishables and consumer packaged goods (CPG) products to customers’ doors, the online behemoth’s
entrance into the perishables market has prompted multiple traditional grocers to enter the e-commerce
market to varying degrees.
In direct contrast to the pure-play grocers, who operate within limited markets due to the infrastructure
needed to support such an endeavor, traditional brick-and-mortar grocers have a distinct advantage: an
existing network of multiple stores spread either regionally or nationwide.
The Market Is Growing
Figure 1: Online sales as a percentage of total sales
Source: BI Intelligence
Figure 2: Top reasons to shop
online
Source: Brick meets Click

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Online grocery shopping is no longer a niche behavior among consumers, and 2017 could be a landmark
year for the growth of purchasing food online. A recent Harris Poll found that 31% of Americans purchased
food products online in the last six months. In addition, 10% of Americans report that online purchasing had
replaced some—or all—of their routine grocery shopping trips.
The big factor driving customers to shop online for groceries is convenience. As with other products, online
shopping saves time, eliminates a trip to the store, or offers the ability to pick up groceries whenever and
wherever.
Unlike shopping for other products, online grocery customers expect something of a different experience—
considering that perishables and chilled or frozen items might be in their shopping carts. However, as they
have become accustomed to the ease of online shopping from non-grocery retailers, shoppers do expect
the transaction and delivery to be seamless.
Therefore, traditional brick-and-mortar grocers must continuously monitor the services offered by non-
traditional competitors, including pure-play e-commerce grocers, consumer goods companies and home-
delivery ingredient services. Further, brick-and-mortar grocers’ logistics practices must become more
nimble in order to improve the cost-to-serve in last mile delivery to the consumer.
In spite of the drivers outlined above, the largest potential obstacle to online grocery shopping is that the
majority of shoppers prefer to select their own fruit and vegetables. This is a consistent finding across
many surveys.
Figure 3: Barriers to online shopping
Source: Brick meets Click

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To overcome this reluctance, traditional grocers must figure out how to blend the channels to allow
customers to order non-perishables online, then shop in-store for items they prefer to select themselves—
such as fruit and vegetables.
Picking the Online Basket
Depending on the size of the chain, traditional brick-and-mortar grocers have a network of stores either
throughout the country or a specific region. The ability to offer an online service where items are picked
from inventory already on shelves within a store allows them to take advantage of their current assets.
Picking in-store, regardless of whether the items are
destined for delivery or customer pick-up, allows the grocer
to use store inventory for e-commerce fulfillment.
Using store associates to do the picking and having a
dedicated, short-term storage area designated specifically
for these orders, allows the grocer to offer an online
capability to its customers and provide the first phase of the
“grocery omni-channel” experience.
There are also challenges to this approach that a grocer must consider and plan for, the most critical being:
• Picking efficiency
• Out of stock items
• Store crowding
• Substitution process
Apart from the first one, these challenges can all negatively impact the customer experience of both online
and in-store shoppers. The other big disadvantage by using the stores for picking is there comes a point
when the capacity of the store is reached, then what?
An alternative to picking from store shelves is to create a dedicated e-commerce fulfillment facility that only
fills delivery and customer pick-up orders within a certain geographic area.
Delivery Versus Pickup
In Europe, grocers have developed extensive home delivery and in-store
pick-up options for their customers. In the U.S. the market is
geographically larger and more diverse. That’s why pure-play e-
commerce grocers—such as Amazon Fresh, Peapod and Fresh Direct—

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have developed a specific delivery network within the cities they serve.
For brick-and-mortar grocers, the challenge is how to provide home delivery
efficiently and cost effectively to suburban neighborhoods. As an example of
the potential inefficiency in the last mile delivery process, customers can pick
delivery time, meaning a grocer could be delivering to the same street
multiple times in one day.
To avoid this issue, the majority of grocers who sell online (or are about to)
use pickup-at-store (also called click-and-collect) as their fulfillment method.
The advantage is easy to manage and existing store associates can be used not only for picking but
delivering the groceries to the customer. The disadvantage is storing picked orders either takes away
space from the valuable retail floor or further reduces available space in the back storage room.
The alternative is to create a hybrid of the
central e-commerce facility with the local
store pickup.
Giant has implemented this process by
picking centrally and delivering orders to
pick-up points located at the local stores.
This approach removes most of the
disadvantages of store picking, while
improving the quality of customer experience.
Remote Pickup Locations
An additional option exists between delivery and pick-up at store for grocers selling online. This is some
form of remote pick-up where the store and the customer meet at a third location, including the store
parking lot where orders are manned by a store associate.
Peapod has tried dropping a small container at certain
locations—including at other retailers—to meet customers
with their groceries there.
Other grocers have tried and are still evaluating the locker
concept. Although lockers could be a completely unmanned
option, most have placed them at a staffed location where

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customers can be assisted if necessary.
All these remote concepts allow a grocery to group separate, but geographically similar, orders together for
greater efficiency in last mile delivery.
TGW has taken the remote locker concept to the next level by
automating the collection point. This offers several advantages for a
grocer selling online. The system comes in two models: one attached
to a store and the other standalone.
When located alongside a store, the system automatically stores
orders outside of valuable retail space or the limited space in a
backroom.
The standalone system can be placed in any location that the grocer deems convenient for its customers,
such as next to a gas station, on a college campus or near a train station.
For more information about TGW’s e-commerce grocery solutions, please contact
Andy Lockhart, Vice President Sales, Integrated Systems at 616-414-2633 or
andy.lockhart@tgw-group.com.
About TGW Logistics Group:
TGW Logistics Group is a global leading systems provider of highly dynamic,
automated and turn-key logistics solutions. Since 1969 the company has been
implementing different internal logistics solutions, from small material handling
applications to complex logistics centres.
With about 2,600 employees worldwide by now, the Group implements logistics
solutions for leading companies in various industries. In the business year 2015/16,
the TGW Logistics Group generated sales revenues of 532 million Euros.
Pictures:
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Contact:
TGW Systems Inc.
6870 Grand Haven Road
Spring Lake MI 49456-9652
United States
Phone: +1.231.798.4547
e-mail: usinfo@tgw-group.com
Andy Lockhart
Vice President Sales/Integrated Sales
TGW Systems Inc.
andy.lockhart@tgw-group.com