Dive Brief:

• A survey of 350 global retailers found that only 10% are making money off their e-commerce services, according to CNBC.
• According to PwC and JDA Software, which jointly conducted the survey, shipping fees, labor costs and high return rates are cutting into sales and keeping companies from turning a profit.
• In response, 62% of retailers said they plan to raise their order minimums for free shipping, while 55% said they would raise their order minimums for in-store pickup.

Dive Insight:

Supermarkets don’t face many of the shipping and return hurdles that department stores and other retailers do, but this survey still underscores some difficult realities for grocers entering the e-commerce space.

Hiring the right number of employees to meet demand still seems to be a work in progress. Kroger, Wal-Mart and other retailers are bringing on part-time workers to pull products from shelves and assemble orders, but online demand can be difficult to predict. Will retailers have adequate staffing in place as they offer faster, more convenient order fulfillment?

The JDA/PwC survey also seemed to indicate that many retailers have overcommitted themselves in the race to offer fast, inexpensive product delivery. Indeed, 62% said they plan to raise their minimum order amount for free shipping, indicating economic realities are edging their way into customer acquisition efforts. In the fiercely competitive supermarket industry, with companies feeling pressure to stay ahead of each other — and ahead of Amazon — some companies could move away from profitability as they try to move closer to consumers.

Many grocers have partnered with third-party service providers like Instacart and Amazon Prime in order to streamline their services. These companies relieve many of retailer's operational headaches, but do cut into grocers’ already thin margins. They also control interaction with customers, which could have negative implications from a branding and execution standpoint.

As the e-commerce race heats up, it appears that big players with deep pockets could stand to benefit the most. Indeed, while most retailers claim they want to increase their minimum order amounts for services like free delivery and in-store pickup, the survey noted, Wal-Mart and Amazon both dropped their minimum order amounts for free shipping.