Food E-commerce business models, with a few rare exceptions, do not achieve profitability. Particularly those that rely on home delivery in urban areas.
At the same time, cities that are legitimately looking for “breathing space” are suddenly changing road flows by limiting main access and prioritizing journeys by public transport, on foot and by bike.
However, urban customers are increasingly turning to digital purchasing and the growth of food e-commerce, which was already strong, driven by Drive, exploded during the Covid crisis.
It is therefore necessary to find solutions that can meet consumer expectations, while ensuring the profitability of traders and the objective of cities to limit traffic and nuisance caused by deliveries.
1. The rise of food E-commerce
For the first time, consumer goods (PGC) e-commerce saw tremendous acceleration : +42 % in 2020. Data from 2021 confirm this trend with growth of + 7 %. 2022, which will follow the same rhythm.
But the complexity of logistics operations in urban areas remains a limit to the sustainability of this growth.
The Covid period has caused the development of new E-commerce activities such as Quick Commerce… but at what cost?
These companies have organized colossal fundraising on the financial markets and created completely unoptimized operating models, based on the promise of delivery of food products in less than 15 minutes, leading to a reaction from elected officials to block this model with new legislation. (be careful of collateral damage…).
Can we create a virtuous model to deliver a packet of butter and a pack of water in less than 15 minutes when this reduced time goes against the massification and consolidation of flows?
The Drive model cannot fully develop in urban areas for several reasons. Firstly due to lack of space and locations but also because it fits less and less into the aspirations of urban consumer customers who use their motor vehicle less and less.
Home delivery can be a solution, but the difficulty is twofold, with the profitability of the model and the nuisance it causes. The rapid increase in the volume of deliveries, with an increase of 36% in the number of vehicles in city centers by 2030, will lead to more air pollution, greenhouse gas emissions and traffic jams. Home delivery must, therefore, demonstrate its capacity to evolve and transform towards a sustainable and decarbonized model.
The economic model is complex, difficult to make profitable and uberization is often used when we cannot find the right operational cost model, because we transfer this optimization that we have not managed to achieve, to the delivery person who is paid by the task.
We know the harmful impacts of this type of strategy and we will have to return to more serious models with an end customer who pays for a professional delivery within a protective social framework. Likewise, the automation of operational processes across the entire logistics chain and up to customer delivery must enable a high level of service, the creation of new professions with strong technical skills and the necessary profitability of delivery.
2. Urban consumers want quality and sustainable service
The report of a marketing study carried out by the COGISION firm in April 2021 presents an in-depth analysis of consumer behaviors, attitudes and experiences with regard to online purchases of food products.
This study shows on 600 Parisian consumers interviewed that:
- 90% want an accessible shopping solution that simplifies the act of purchasing and makes life easier
- 89% want to save time on the purchasing process
- 75% pay particular attention to the subject of carbon-free and nuisance-free logistics
- 72% are looking for more attractive price offers
- 65% are looking for a wider range of offerings (number of SKUs available)
- 64% are looking for more frequent and bigger promotion offers
Along with these elements, the urban consumer is first and foremost a citizen who takes a particular interest in the quality of his or her living environment.
In a city where the emphasis is placed on the development of soft mobility and the search for a peaceful city, the exponential growth of e-commerce induces urban nuisances which cannot remain unresolved.
3. Massification and consolidation of flows, the promise of sustainable logistics
A sustainable urban logistics solution for food e-commerce must be based on two fundamental principles: the massification or pooling of multi-actor flows and the consolidation of delivery flows at a collection point.
This massification is an essential point because, while each commercial player only uses its network and its dedicated resources, here the resources are shared and the trucks are optimized from the “first mile”.
The other essential element of sustainable logistics is consolidation at a delivery point because it avoids the means and costs of delivering the last few meters. It is the customer who comes to collect the groceries on foot or by bike.
Moreover, users are increasingly looking for local collection point solutions and pickup points are increasingly used by households for online purchases. Walking is the primary mode of travel in Paris and the inner suburbs (52 %, +9 %), followed by private car (37 %) and travel by public transport (12 %).
In comparison between the home delivery model and that of the collection point, the positive impact on the environment is clear.
For cities, the network of collection points allows:
- Consolidation of flows on a single delivery point and multi-actor pooling which makes it possible to considerably limit the movements of private vehicles and delivery vehicles in large cities, particularly during loading/unloading.
- Route optimization which leads to a higher filling rate of delivery vehicles and the centralization of storage on the outskirts of cities, avoiding the multiplication of resources.
- Limitation of unauthorized parking and the blocking streets by home delivery trucks reducing nuisance for residents.
- Limitation of the use of a private car.
The digital revolution also means giving local businesses a tool to develop their offer. Here again the collection point must play a driving role and can be used by them as a delivery point outside their store's opening hours, and even to extend their sales scope.
The network of collection points, taking into account all its benefits, could today be considered a network of public interest.
4. The personalized collection point is the future of e-commerce
The modern customer has become protean. Depending on their situation, their aspirations, and the time of year, they must be able to choose between offline purchasing solutions, home delivery solutions or collection points.
The last meters of delivery are the most expensive. LAD has its place, especially when it knows how to adapt to social and environmental requirements, but it will have its limits to answer to the growth of E-commerce.
The difficulties of traveling in cities require a proactive review of delivery methods, firstly decarbonizing them but also rationalizing them.
With automated collection point solutions, they can access a better offer simply and quickly, offering a wider range of products mixing products from their favorite local retailers and merchants. He becomes active again in the act of E-commerce purchasing by coming to collect his groceries on foot or by bike.
The city center is once again becoming the place of life in which all residents can experience a simplified withdrawal from their daily life journey (leaving school, the metro, the gym, the desk). It is the concept of the quarter-hour city which advocates urban hyper proximity as a lever for improving the quality of life and reducing carbon-intensive transport.
The merchant can offer an operational solution which ensures the profitability of its E-commerce model and above all a solution which combines digital and the physical point. It is the digitalization of the act of purchasing on the web that leads to better loyalty.
Urban logistics has become an essential dimension in the city. It must innovate, be respectful of new urban desires such as proximity, the environment and social well-being.
Sources:
Logicity study: https://logicites.fr/
https://www.sustainability-report.delipop.com/wp-content/uploads/2022/07/Delipop-rapport-FR.pdf
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