Home / Business / Online food services are struggling to meet increased demand

Online food services are struggling to meet increased demand

LONDON (AP) – A pandemic that forces everyone to stay at home could be the perfect moment for online grocery stores. In practice, they struggle to keep pace with the increase in orders and emphasize their limited ability to respond to an unprecedented surge in demand.

After the panicky purchase of shelves from the left store, which had been deprived of basic foodstuffs such as pasta, canned food and toilet paper, many buyers quickly found that it was almost impossible to get online delivery slots for groceries.

“It is becoming increasingly difficult to put a meal together,”

; said Paul Smyth, a software engineer who lives near Manchester, England, where the online food industry is particularly advanced. He is a long-time customer of the British online supermarket Ocado, but has not been able to land a slot since his last delivery two weeks ago.

The problem for many delivery services is that the personnel are ramped up to pick and deliver goods in stores. For Ocado, a state-of-the-art service that relies on warehouse robots, a significant increase in deliveries would mean a large investment in new machines and warehouses that is too late to capture the surge in demand.

Smyth said he is slowly running out of meat and frozen products, but wants to avoid going to a supermarket because he fears that asthma, diabetes, and high blood pressure are risk factors when he gets the new coronavirus.

“I won’t panic for a week, but if I have to wait two weeks for a delivery date, it will be very close to the bone.”

The corona virus crisis is giving the e-commerce industry a boost, but the problems facing Ocado and other online grocery stores make it clear how difficult it is for the industry to scale online delivery quickly.

In the United States, online grocery shopping was slow to move online, accounting for 3% of grocery retailing last year, according to a Deutsche Bank report.

When the crisis hit, supply orders rose when millions of Americans stayed at home. In the week of March 2, before some cities and states ordered home stay orders, sales of Instacart, Amazon and Walmart increased at least two-thirds year-on-year, according to Earnest Research. According to Instacart, a platform that works with more than 25,000 stores in North America, orders have increased by 150% in the past few weeks.

As a result, customers in New York City spend days waiting to schedule deliveries that typically only take hours.

In China, where the outbreak started earlier this year, ubiquitous smartphone food apps helped millions survive months of severe blocking. Nevertheless, the supermarket chain Freshippo of the e-commerce giant Alibaba has reportedly hired laid-off restaurant employees for temporary workers, as more customers switched to ordering via app in the first half of February and the average basket sizes jumped.

According to market research firm Mintel, the UK online grocery market, one of the most advanced in the world, is estimated to account for 8.3% of all sales in 2020. Nevertheless, Ocado and the online weapons from competitors such as Tesco, Sainsbury’s and Walmart-Asda were fully booked. To be fair, they prioritize slots for vulnerable customers.

Ocado has been a pioneer in online groceries in the UK with automated storage robots since 2002 and has licensed its technology to other companies such as Kroger. This experience was not enough when the website collapsed after four times the traffic.

The company struggled to get the systems back to normal by taking its smartphone app offline and stopping new account registrations. It has temporarily blocked its websiteThen all visitors were kept in a virtual queue and alienated long-term users.

“It just felt like they had completely left customers,” said Smyth, 50, who waited four hours online and found that there were no delivery slots. Ocado now has a new slot allocation system, but Smyth has not been lucky enough to get away with basic local business items.

CEO Melanie Smith emailed customers to let them know that demand has risen ten times normal. Her message came after Prime Minister Boris Johnson announced new blocking rules and urged people to use food delivery services.

Every time the UK government announced new measures to fight the virus, it said, “We are seeing another extraordinary surge in customers.”

“No matter how hard we work, we will not have enough capacity to meet the unprecedented demand.”

Ocado operates three warehouses with cube-shaped robots on wheels Drive along huge grids, pick up boxes of soda, tea bags or apples and deliver them to “picking stations”. There, people or robotic arms put together customer orders that are to be delivered by a fleet of delivery vans.

The company said it processed 343,000 orders a week in the quarter ended March 1, and sales have doubled since then. Analysts find that the main factor influencing growth in an automated system like Ocado’s is storage capacity.

“There are only so many of these warehouses that you can build,” said Simon Bowler, an analyst at Numis Securities. It takes up to two years for Ocado to build a warehouse. “If we say today that we are going to build a new warehouse, this does not solve the problem here and now.” A fourth warehouse was destroyed by fire last year.

Traditional supermarkets have their own less sophisticated online processes where people get items off the shelves.

It’s “a bit easier to anticipate sudden huge increases in demand,” said Bowler – you just have to hire more people.

Companies have started. The British supermarket Morrison’s hires 2,500 additional drivers and order pickers. Amazon is looking for 100,000 more employees, while Instacart plans to hire 300,000 gig employees, which more than doubles the number of employees who pick and deliver food.

Nonetheless, Instacart employees struggle to meet efficiency goals as businesses impose distance rules and business spurts.

Bowler said this is the main disadvantage of human shopkeepers: they are 10-15% less cost effective than robots.

__ __

Zen Soo in Hong Kong and Alexandra Olson in New York contributed to this report.


Follow AP virus outbreak reporting at https://apnews.com/VirusOutbreak and https://apnews.com/UnderstandingtheOutbreak.


Follow Kelvin Chan on twitter.com/chanman

Source link