Distribution: Groceries

A key change to the way we live over the last fifty years has been in the way we shop for our groceries. Instead of visiting the butcher, the baker and the candlestick maker as needed we now jump in our cars and visit an out-of-town supermarket once a week or so. Internet ordering and home deliveries are making a dent in this but are far from perfect.

This section discusses:

Existing Provision

What

The breadth of items sold by the major supermarkets has grown considerably from the limited range that used to be available in most high street shops. Britain has lagged the U.S. and the continent and it is only in the last few years that Tesco and others have stocked electrical goods and the like. However, this is really the grocers taking on the specialist retail chains and is not what we are considering in this section.

This is therefore referring to one of the few types of shopping that even most women do not enjoy (according to my wife at least). Here we use the term to cover the regular day-to-day household items that we all have to buy – or have bought for us if we’re lucky enough. Food, drink and household cleaning products, toilet rolls and so on make up the bulk of the items being considered.

Even within these categories, however, the number of different items available has grown hugely over the last few decades. This range of choice is one of the key factors that drives us to shop in the larger supermarkets instead of the local corner shop or village store.

How

In small villages, those without cars may still do their weekly shopping at the local village store but most people will drive or take the (sometimes free) bus to the nearest supermarket or hypermarket.  

The new alternative is to shop online and have your goods delivered to your door. This introduces new problems as not all items are in stock at all outlets. Short-dated items are a common complaint from some. The number of substitutions and the degree of common sense applied in matching these seems to vary widely from one vendor to the next. All seem to be incapable of realising that any alternative cheddar would probably be a suitable replacement should the specific brand of cheddar cheese ordered be out of stock. Either that or supermarkets are running out of all types of cheddar on a regular basis.

The delivery vans used (in the UK) are invariably diesel, 3.5 tonne models with chiller and/or freezer compartments. Most use plastic crates but annoyingly fill these with vast numbers of plastic carrier bags – often with only a couple of items in.

Volume and Frequency

Because of the need to travel some distance; the pricing incentives to buy larger quantities of items and the desire not to waste any more of our lives than we have to, we tend to fill whole trolleys and shop no more than once a week.

Online grocery shopping also encourages one to order large amounts. There is often a minimum order of £40 or more before delivery is free and the system is geared towards filling delivery vans with a relatively small number of fairly large orders. This is presumably because of the overhead of the van and driver visiting another address. Hence, although the supermarkets themselves understand only too well that “just in time” ordering and delivery is key to minimising waste, they don’t seem keen to let their customers realise this.

Online shopping with delivery to your door is available from all the big players. Someone needs to be in to receive the order; there is usually a minimum order value and delivery is often scheduled in one hour slots. Approaching Christmas, these slots become highly prized (hence my wife’s trick of ordering one large item as soon as the slots are made available then changing her order a few days before the delivery slot. (Tip: don’t forget to cancel the original large item. We did end up with a case of twelve bottles of Advocaat one year.)

Financial Model

Supermarkets have huge buying power, sophisticated logistics and stock control system and hence are very competitive. Small shopkeepers often cannot buy items from their wholesalers as cheaply as consumers can buy them from the supermarkets.

There are major financial incentives to buy in bulk – with some chains (such as “Sam’s Club” in the U.S.A.) specialising in bulk purchase discounts.

Existing delivery services typically charge a significant delivery charge - unless, in many cases, you order at least, say, £50 of provisions at a time. This encourages overconsumption, overestimation and fewer, larger “shops” at longer intervals.

Providers

The half dozen or so major supermarket companies in the UK dominate the market for grocery shopping. Tesco, Sainsbury’s, Asda and Morrison’s have around 75% of market share. All now run online shopping services with delivery to your door.

Smaller, “convenience stores” make up much of the remainder of this sector but as the name implies, they tend to be used because of how close they are rather than any other advantage over the larger stores.

Trends

There is a steady stream of incremental changes as the major players continually fight for market share: Increasing ranges of products; longer and longer opening hours; self-service tills and so on.

None of them seem terribly keen to encourage you to buy no more than you need.

With Localnet

What

Although a localnet hub is much smaller than a hypermarket, the range of goods offered need not be any more limited. Yes, if you need it on the next delivery round or want to pop in and collect something you will be limited to what is in the hub at that time. However, goods stocked can be heavily tailored to the demands of the relatively small customer base.  It may only take a small number of customers ordering the same type of cat food to make it worth the LocalHub keeping some in stock.

How

Items ordered online may be delivered the same day if they are regularly used and hence kept in stock at the LocalHub. Worst case, these are shipped to the LocalHub overnight and delivered the next day. Although the early morning delivery round is deliberately focused on mail and breakfast items, a premium can be paid for early delivery of groceries.

As happens at present with grocery deliveries, goods will have to be separated according to their temperature requirements: ambient, chilled and frozen. The latter are ideally delivered into a temperature controlled delivery bay - otherwise someone needs to move them to the freezer or refrigerator. For ice cream, this needs to happen very quickly. For frozen goods that are actually to be defrosted and eaten that day it is less of an issue.

When groceries are delivered, the previous  OmniBoxes, now partially filled with recyclable glass, metal, plastic and compostable waste is/are collected. The volume of material being thrown away is normally in proportion to the volume ordered so a family taking delivery of two boxes of groceries will subsequently have two boxes available in which to return recyclables.

Some items that are used for long periods and in significant volumes (pet food, washing powder, flour and so on) may be delivered in reusable boxes that stack on specially designed shelves.

A LocalHub cannot really be allowed to be a branch of any one supermarket chain. It should act, instead as a neutral and unbiased delivery service. Customers could shop online with their preferred supermarket. The minimum order qualifying for free delivery should be less as all deliveries to the area go via the localnet rather than require the supermarket to run a residential delivery service.

However, the best option for customers would be if the LocalHub offered an online service through which they could see and compare the options from all of the supermarkets. One could then pick some cheddar from Waitrose, a bottle of wine offered by Tesco, the crackers from Sainsbury and so on without worrying about each one having to reach a minimum order level or having to pay five or six separate bills. If their stock control were accurate in real-time, the user could also make his own goods automatically ends up with those two boxes which they can fill with the packaging and waste resulting from their contents over the next few days.

Volume and Frequency

If we want to reduce food waste (currently running at about a third of all food purchased) we must stop buying food so far ahead. No-one can predict what is going to be left over from each meal; who is going to turn up for each meal; how quickly the enormous bunch of bananas on special offer will go off; how large the portions really are in a new recipe and so on.

The key ways to do this are to:

Financial Model

Localnet will effectively be acting as a consolidator and price comparator site for several supermarkets that will supply the hub. It therefore looks to their backbone distribution network as if it were a small neighbourhood supermarket such as a “Tesco Express” store. Deliveries would typically be made overnight by articulated lorry to the hub as they would to a normal outlet.

A supermarket chain taking consolidated orders and invoicing from a LocalHub is not incurring the doorstep delivery costs, the premises or staff overheads of running a store in that neighbourhood so should be able to offer goods to the LocalHub at a discount to the online and in-store prices which the residents will expect to pay.

Providers

The existing supermarket chains could continue to operate but probably with smaller stores and larger stockrooms where orders are fulfilled.

Convenience stores and “village shops” will find it hard to compete but could migrate into the LocalHub and/or their staff transfer to the LocalHub.

Evolution

This way of providing groceries opens up opportunities for small to medium local produce suppliers to bypass the supermarket chains. By dealing directly with a small number of LocalHubs in their area, a farmer or manufacturer gains access to the entire community of that area on a level playing field with the supermarkets. When a resident of a localnet area clicks on Meat > Bacon they can be shown the local farm’s produce on the same price comparison screen as the offerings from the major chains.

Supermarkets should migrate to be closer to their LocalHub so that turnaround time is reduced. Where a LocalHub is not near a supermarket or does not justify one, then the LocalHub could be integrated into the supermarket's logistics chain as if it were a convenience store belonging to the chain. A delivery lorry may therefore call overnight to replenish stocks of staples and deliver non-standard items that were ordered by residents the previous day.

 

Comparison

The table below assesses the impact of localnet on this service on a scale of -5 to +5 (details here)

  Existing services As part of localnet Score
Scope Vast range available. Can make all of this visible. 0
Frequency Distance and minimum cost encourage weekly shopping. Deliveries mostly next day. Ease of use encourages two or three shops per week. No minimum order. Same and next day. +2
Security Not applicable. Not applicable 0
Convenience Drive several miles and stand in queues or Online shopping.  One hour slot and must be in for delivery. Pick and mix from all chains. No need to be in for delivery. +2
Cost Very competitive market. Should be able to pass through at same cost 0
Quality Substitution skills vary. Can choose alternative supplier if out of stock. +1
Carbon Footprint Diesel delivery van. Long route just for groceries. Electric vans shared journey. +2
Time Visit store several miles away or Stay in for delivery. Unattended delivery. +2
Resources Used Carrier bags wasted Reusable boxes.
Exact portion measures and part filled containers reduce waste. 		+1
Reuse & Recycling No special effort made. Weekly shopping and bulk buys encourages waste. Delivery box used to return four categories of recyclables. +3
Landfill Waste Outer packaging/wrappers. Exact portions. Less waste. +1
Other Differentiators When trying new things, it's nice to be able to pick them up and at least touch if not taste or smell them. Access to all chains via single portal.
Direct access to local suppliers integrated. 		+2

Services