Digital transformation

Over the years, grocers have had an on-again, off-again relationship with self-checkout.

Right now, use of the payment terminals is firmly on the upswing as the pandemic-driven push for shopping options with less contact has cemented self-checkout as a way to cut back long lines, ease shopper anxieties around COVID-19 and untether store associates from the front end.

A number of grocers, including ShopRite stores in Delaware, West Coast chain Good Food Holdings and Hy-Vee, have expanded self-checkout since the pandemic started. Retailers like Kroger and Walmart have gone so far as to pilot self-checkout-only stores.

Self-checkout fits into the larger move by retailers to offer more self-service options, from salad bars to ordering kiosks at the deli, and free up or replace workers for tasks robots can handle. Research and Markets, a global market research firm, early this year said it estimates the self-checkout system market in the U.S., which accounts for 41% of the global market, reached $1.4 billion in 2021. 

While self-checkout has come a long way from “the service robot” of the 1990s, it still poses pain points that can deter customers. A report by digital signage technology firm Raydiant last spring found 67% of surveyed consumers said they've experienced a self-checkout “fail.”

As self-checkout gains ground in grocery stores, technology companies are developing solutions to make them more attractive options for both shoppers and retailers. Here are just a few.

Resolving the “skip scan”

Retailers lose more than $60 billion in sales annually due to shrink, according to the National Retail Federation (NRF), and self-checkout can contribute to this problem by making it more tempting and easier for customers to skip scanning items.

To reduce “skip scans,” retailers have turned to loss prevention solutions to help catch potential shoplifters at self-checkout. 

In 2020, Kroger signed on with Irish artificial intelligence firm Everseen, which uses computer vision cameras to detect if a shopper didn’t scan an item. When a shopper “skip scans,” a video pops up showing a top-down recording of the shopper trying to scan the item — or not — and asks if the person wants to try again or not. After the second failed scan, the technology discreetly alerts an associate to intervene.

“When somebody sees themselves on a video, it’s irrefutable. That’s exactly what happened. We don’t have to argue with it and people self-correct,” Alex Siskos, Everseen’s vice president of strategy and growth initiatives, said during a joint interview with Kroger at NRF’s conference in January. 

Eighty-percent of the time, customers will self-correct after watching the video playback and no associate intervention is required, Tom Arigi, Kroger’s director of asset protection, said in the interview, which was hosted by OmniTalk.

“The overwhelming majority of the time, this is somebody that is not intentionally trying to get away with product,” Arigi said.

Since using Everseen, Kroger has seen increases in sales, inventory and accuracy, along with shrink reduction, Arigi said. The partnership has scaled up to more than 1,700 of Kroger’s more than 2,700 stores as of January.

Is that an orange or a tangerine?

Self-checkout can be a pain point for shoppers buying produce. More than three in 10 shoppers steer clear of fresh produce when using self-checkout, the Food Industry Association noted in a recent report. 

Instead of having to remember the four-digit item code or search through the menu of products to find it, companies like Extenda Retail, KanduAI and Toshiba are looking to make the process simpler and faster with produce recognition solutions. Arigi of Kroger said during NRF that produce recognition software is of keen interest to the grocery chain as it looks to further innovate in self-checkout. 

KanduAI, a technology company started in 2018 and headquartered in Tel Aviv, Israel, uses deep learning and artificial intelligence to recognize fruits and vegetables and provide a short list of possibilities to consumers. Shoppers can select if the item is organic or not. 

Ninety-two percent of the time, KanduAI’s solution shows the correct item among the listed choices, while the other 8% of the time, which would prompt users to search via the checkout interface, is mostly due to having trouble recognizing an item that’s bagged, said Ariel Shemesh, founder of KanduAI.

It’s not foolproof: Just as humans can mix up yams and sweet potatoes, the technology can get fooled into thinking a dark avocado is an eggplant or that an orange is a tangerine, Shemesh said. 

Still, KanduAI claims it shaves off time for shoppers at checkout stations and helps prevent mistakes. 

“From a retailer perspective, the important part is that there are less mistakes,” Shemesh said. “Without our system, there [are] approximately 18% errors, and with our system, this is reduced to less than 4%, so it's pretty significant.”

KanduAI’s technology is already deployed in stores in France and Israel and has just started tests with three “major” supermarkets in North America, including two in the U.S. and one in Canada, Shemesh said. 

Solving an age-old problem

Traditional self-checkout technology typically falls short when shoppers want to buy age-restricted items like alcohol, tobacco or certain prescription medications. Those items generally require a human worker to intervene to check the customer's ID and validate the purchase — introducing bottlenecks that can slow down lines, frustrate time-pressed shoppers and reduce the labor-saving benefits automation offers.

Seeking to overcome this challenge, startups that specialize in computer-based image recognition have been exploring ways to automate the process of confirming a person's age and clear purchases.

One of those companies, Austria-based Anyline, is testing mobile ID-verification technology it developed for police officers as a way to speed shoppers through checkout lines with retailers in the United States, South America Europe, said Lukas Kinigadner, the company's co-founder and CEO. Kinigadner would not say which retailers it is working with, but said the company could be ready to provide details about the tests later in 2022.

The technology, which compares an individual's face with a verified image associated with the person's age, has also been applied by banks looking to enable people to open accounts without showing up at a branch in person, Kinigadner said.

In an email, Kinigadner described two ways in which grocers can incorporate automated age-verification technology into their checkout procedures. In one implementation, shoppers add their driver's license or other photo ID to a retailer's shopping app, then scan their face at the point of purchase to permit facial recognition software to match the images and authorize transactions.

Retailers can also use camera-equipped security gates to ensure people permitted to enter a designated area of a store meet minimum age requirements, Kinigader said.

Kingadner said Anyline's technology is more accurate than humans at confirming a person's identity.

"If a person checks the ID and the person's appearance, the failure rate for humans is stunningly high," Kinigadner said. By contrast, with AI or machine learning, it's "very seldom that we generate false positives."

In January, U.K. grocery chain Asda said it has started working with Yoti, a London-based digital identity company, to test technology that lets shoppers buy alcohol at self-checkout stations without showing their ID to a store employee.

The system, installed at Asda stores in Pudsey and Stevenage, England, gives customers the option to look at a camera that can gauge their age when purchasing an age-restricted item to confirm they are old enough to buy the product. If a person appears to be younger than 25, the system offers the shopper the option to use an app to prove they meet the age criteria.

Asda said the system preserves people's privacy, but noted that shoppers who don't want to use it can work with a store worker to complete purchases that require age verification.

Self-checkout without bar codes

While conventional self-checkout systems typically use bar code scanners to read UPC codes on products, computer vision — the centerpiece of frictionless shopping solutions developed by Amazon and several other companies — has also emerged as a way to automate the checkout process for retailers.

Computer vision-based self-checkout systems are particularly appropriate for settings like convenience stores, sports venues and office cafeterias, where customers generally buy only a few items and are likely to be in a hurry, said Jack Hogan, vice president of strategic partnerships for Mashgin, which makes self-checkout units that sit on a countertop.

Mashgin's system uses cameras mounted inside the unit to identify several items at once, eliminating the need for customers to scan each product separately. The company's equipment can process transactions three to four times as quickly as traditional self-checkout systems, according to Hogan.

Rival firm Caper AI makes a similar checkout unit known as the Caper Counter, which uses cameras and a weight sensor to detect products. The device can handle complete transactions in 8 seconds, according to the company, which was acquired by Instacart last fall and also makes smart grocery carts that detect products as shoppers add them.

Caper and Mashgin both point to the fact that their units are simple to deploy as a selling point. Caper notes on its website that the Caper Counter can be up and running in an hour and requires only electricity and a network connection to function. Meanwhile, Mashgin was able to deploy its units to about 100 retail locations in less than a week, Hogan said.

Mashgin has also recently reduced the amount of time it takes to download product data to newly installed units so they can recognize products without the need to connect to a central database, Hogan added. That process, essential to deploying Mashgin's systems, used to take 12 hours, but can now be completed in less than 30 minutes, he said.

In addition, Mashgin realized that shoppers at the convenience-focused retailers that use its equipment often do not have access to electronic payment methods, so it added the ability for people to pay with cash, Hogan said.

Amazon is pressing forward with its cashierless tech-equipped supermarket operations in the wake of its recent decision to close retail locations that carried books, electronics and other non-grocery products.

Amazon announced in April that it has opened a new Fresh grocery store in greater Washington, D.C., equipped with its Just Walk Out checkout-free technology. The company also said it is developing three additional Fresh locations in the area, which a company spokesperson said will all have the computer vision-based system as well.

The new store, in Fairfax, Virginia, and the upcoming locations join the retailer's three other Fresh stores that have opened so far this year. Those stores, which are in Moorpark, California; Naperville, Illinois; and Seattle, all also have Just Walk Out, the spokesperson confirmed. 

Until this year, most of the grocery stores Amazon Fresh has opened have offered the company's Dash Cart as a high-tech alternative to conventional checkout stations. But that focus is increasingly shifting toward the Just Walk Out system, suggesting Amazon sees the technology as key to its budding grocery brand going forward.

Amazon opened its first Fresh store with Just Walk Out technology in Bellevue, Washington, last June, and has since brought the service to other locations in the chain. The Fairfax store is the company's first full-size store on the East Coast to incorporate the futuristic checkout system, according to a LinkedIn post by a real estate executive with Amazon Fresh.

Meanwhile, the first Just Walk Out-equipped Whole Foods Market opened in February in the capital city's Glover Park section. The company also uses the technology in its chain of Go convenience stores.

Amazon's Just Walk Out system uses ceiling-mounted cameras and artificial intelligence to track shoppers' selections as they walk around the store and automatically charges them when they exit.

A number of startups have developed checkout-free systems similar to Amazon's and have been rolling out the technology with retailers. Amazon also offers Just Walk Out to other retailers.

Amazon opened its first Amazon Fresh store near the nation's capital last May, when it began serving customers at a location in Franconia, Virginia, after debuting the banner in September 2020 in Woodland Hills, California. Now, Amazon has Fresh locations in Washington's Logan Circle neighborhood and Chevy Chase, Maryland, among the 27 grocery stores it currently operates under the brand.

At 30,000 square feet, the newly opened store in Fairfax, Virginia, is four times as large as the Amazon Fresh store in Logan Circle. It's also 8,500 square feet larger than the Whole Foods in Glover Park with the checkout-free technology.

Amazon declined to indicate when it plans to open the three Washington-area stores, which will occupy sites in Lorton, Manassas and Arlington, Virginia, but said it has started hiring hundreds of workers to fill full and part-time positions in the stores with starting wages ranging from $15.50 to $17.50 per hour, depending on the role and shift. 

Picking online orders is still causing headaches for grocers on multiple fronts, with customers often groaning about inadequate substitutions or bruised produce and in-store shoppers jostling with e-commerce workers to select products in the aisles.

Major players like Kroger are looking to solve those dilemmas with dedicated fulfillment sites for online orders and automation that takes the burden of order picking off store associates and gig workers. But many other grocers continue to rely on in-store fulfillment for online orders. Sometimes this is by choice — Walmart, for example, is leaning on its existing retail locations' proximity to customers to help fulfill online orders — and sometimes it's due to financial constraints that keep them from investing in off-site e-commerce infrastructure. 

Sources in the industry outlined three key areas grocers can invest in to help make in-store order picking more efficient while also offering a quality experience to both in-store and online customers: store design, technology and training. 

As an incentive to step up e-commerce fulfillment, some companies, like SpartanNash and Shipt, have positioned their workers as high-touch personal shoppers and promoted their services as a competitive advantage.

SpartanNash relies on its own workers to pick and pack orders for its Fast Lane and Groceries To Go services at close to 120 stores across the Midwest.

“What we find is that, as our customers get used to the program and used to [SpartanNash’s personal] shoppers who are working, they're going to say, ‘I specifically want Maria to shop my order. She knows exactly what I'm looking for,'" said Matt Van Gilder, SpartanNash’s director of digital marketing and commerce.

Designing (and redesigning) stores for picking efficiency

E-commerce fulfillment is a "huge" focus for grocers as they consider their store designs and layouts, said Craig St. Clair, associate principal at Cuningham, an architecture, design and planning firm. But the need for e-commerce infrastructure can vary store-to-store depending on customer demand and online order volume. 

“It’s a very store-centric thing. Every store has its personality in terms of the customer base around it — if they’re even receptive to doing online shopping," St. Clair said. 

Grocers are hesitant to invest in dedicated e-commerce facilities as consumer interest has waned following online shopping surges early in the pandemic, St. Clair noted. Overall, grocers that are seeing high online order volumes are looking to improve shopper flow and carve out dedicated spaces for online order fulfillment inside their stores, St. Clair said along with Gregory Houck, principal and director of new work at the same firm. 

Both St. Clair and Houck stressed the importance of grocers being flexible with their store design so they can accommodate e-commerce workers now and, eventually, automation, which Houck said forward-looking grocers are planning for in the next 10 to 20 years.

In some cases, grocers are moving dry goods and center store to the back-of-house and accentuating fresh foods departments and meal solutions front-of-house, they noted. This can enhance stores' "fresh" appeal while also pushing aisle shopping, which can get crowded with online and in-store shoppers, to the margins.

Mike Demko, senior vice president and global head of AutoStore Retail, said grocers are carving out dedicated picking spaces inside their stores stocked with fast-moving products.

For example, Angelo Caputo's Fresh Markets, a grocer in the Chicago area, uses 5,000 square feet at its flagship store to create a "fast pick area" stocked with products that have the highest online sales volume, Demko said. 

"If you think about grocery orders, everybody loves bananas, everybody buys milk, so there's some items that are much faster sellers than others," he said, noting that grocers can organize products in those dedicated areas based on how fast they sell instead of following in-store merchandising plans, which are made with in-store shoppers in mind. 

Leveraging technology to boost speed and service

Grocers and e-commerce providers have been turning to technology solutions to address picking problems, from speeding up the process to improving quality around product selection.

For example, Instacart announced earlier this year an in-store navigation tool with an interactive map of the grocery store to help locate products more easily as part of its rollout of features and services for its shopper community. Last year, Walmart said it saw customer acceptance of substitutions jump more than 95% after pivoting from a manual process for identifying substitutions to employing deep learning artificial intelligence for online grocery orders. Walmart noted deep learning allows it to consider hundreds of factors, like size, type, brand and price, when determining recommendations for out-of-stocks.

The effectiveness and usage of technology to drive picking efficiencies can vary depending on how a store operates, how much e-commerce volume it has, how quick the fulfillment window is and whether humans or robots are doing the picking and packing, sources noted. Speed and order volume, in particular, may determine which picking technology solutions retailers turn to.

A roughly 40,000-square-foot grocery store that uses software and scanning technology to pick multiple orders at a time from stores shelves can assemble roughly 60 to 90 units an hour. A "fast pick area," like Caputo's, more than doubles that up to about 150 to 180 units per hour, said Demko, who previously headed up pick-and-pack software company Locai Solutions, which AutoStore acquired last year. Demko also formerly oversaw operations at FreshDirect.

Automation, like robotic picking technology in the back of a store, can bring those numbers up to 400 units per hour, he said.

While automation is still off in the future, mainly due to its high costs currently, sources said they expect robots to eventually take over e-commerce fulfillment. 

“The killer of productivity in a store environment is travel distance,” said Demko, noting that grocers need to maximize the amount of work done within that distance or minimize how far pickers walk. 

The higher the e-commerce order volume, the more grocers can benefit from bundling batch picking — shopping more than one order at once — with zone-based picking, where certain pickers only focus on pulling items from different aisles, Demko said. 

A bagging-and-tagging process where pickers scan barcodes on the products and the bags they belong in can help with that consolidation process downstream, along with ensuring items don't end up in the wrong bags for different orders, he added. 

“The benefits of that batch-zone pick process are really about throughput and volume. If I'm only doing a few orders an hour, the amount of orders that might have items in common gets lower and lower," Demko said. 

While efficient, batch picking isn't always the speediest option and can potentially slow down rapid delivery service for one-hour or faster orders, he said. 

Demko said it's important that the mobile application used by the pickers is easy to use and aligns with visual cues in the cart, like knowing which customer's bags are where, and that the software works for all of the areas where picking takes place, from the sales floor to the backroom to designated "fast pick" areas.

Grocers can leverage data from picking solutions to measure and analyze factors like productivity levels and order accuracy and then look for ways to become even more efficient, he said. 

'Imagine you're picking for your grandmother' 

While technology may speed up the picking process, working fast can run the risk of making quality-control mistakes. That's where training comes in: "At the end of the day, technology is only as good as the people who use it," Demko said.

Quality control, which is included in worker training, can play a big role in customer satisfaction and cut down on order returns, sources noted. While technology and store design can help people find the pick the correct brand of avocado quickly, the picker ultimately decides which products meet the customer's expectation for ripeness and quality.

When Demko ran operations at FreshDirect, he said the training mindset there was: "Imagine you're picking for your grandmother."

"You've got to get that quality mindset, which is: When you pick up that leaf of that head of lettuce, look at it and make sure there isn't a leaf wilting on it … make sure you’re opening up the eggs and make sure there’s nothing broken," he said. 

Consumers have been especially reluctant to trust workers to pick fresh produce, meat and other perishables for them, making trust and quality control important to the picking process.

Store employees who pick online orders can also help manage shrink by setting aside products they identify as spoiled or not high quality, Demko said.

Shipt, which promotes the high-touch service provided by its personal shoppers as a key differentiator in the e-commerce delivery race, provides an “education produce guide” for its Shipt Shopper community. The guide covers three main areas: sight, smell and storage, according to a post from the company in late March.  

For example, Shipt encourages its shoppers to look for signs of dehydration, like wrinkling and shriveling, to help gauge freshness and to squeeze items like grapes and melons to determine the firmness.

“[A] great tip for picking out grapes is taking a look at the vine. Green vines mean the grape was freshly picked and handled properly in transport,” Shipt said in the blog.

SpartanNash workers receive training in a variety of areas for order picking, like bagging 101, how to understand expiration dates, and how to determine the quality and ripeness of produce. The training, which was developed in-house and is required for all of the company's personal shoppers, also delves into skills like identifying produce and the right types of meat. 

SpartanNash puts a “huge” emphasis on training to make its employees the “eyes and ears of the customer” and ensure customer satisfaction, Van Gilder said.

Both Shipt and SpartanNash are leaning heavily into worker training, aiming to have top-notch service fuel attachments between customers and specific pickers and help lock in customer loyalty.

“We're training our personal shoppers to be pickier than the customers who shop themselves,” Van Gilder said.

In an ideal scenario, grocers would have full control over their delivery, offering in-house, branded service with their own workers picking, packing and bringing orders to customers.

But the steep cost of owning delivery end-to-end mean grocers oftentimes can’t have it all. Paying for the costly last mile has always been a particular challenge, and the growing demand for services like 30-minute delivery only makes that more difficult.

Still, the pandemic has raised online shopping to new heights and emboldened grocers to launch or strengthen existing branded delivery — service where retailers control the experience and promote it with their logo — as they seek to own more customer relationships and data. Kroger is gradually rolling out its own delivery service nationwide, while regional grocers like Cub Foods, SpartanNash and Giant Food are investing in branded services that often exist alongside partnerships with app marketplace giants like Instacart and DoorDash.

Retailers generally believe customers have higher satisfaction with branded delivery, particularly with white-glove — premium — service, said Daryl Porter, senior partner of omni operations at Tomorrow Retail Consulting. Oftentimes, they're offering generous promotions to get shoppers to use them.

Branded deliveries can be extremely valuable for customers' first orders and bringing them back to the retailer again and again. "We know that if a customer can get to four orders, they can be extremely sticky with the retailer,” Porter said. 

SpartanNash, which has its Fast Lane service across more than 70 Midwest stores and Groceries to Go at its Martin’s banner in southern Michigan and northern Indiana, has seen that customers who place three orders are more than 75% likely to place another order with them, which then bumps to more than 80% after their fourth order, said Matt Van Gilder, SpartanNash's director of digital marketing and commerce.

Grocers that have customer density in specific areas can utilize route optimization and order batching to drive delivery costs down, said Porter. Kroger, for example, credits route optimization as a factor for why its variable fees can be as low as $6.95 for its expanding Kroger Delivers service. For grocers strapped for resources, numerous vendors, like Point Pickup and delivery management software solution eLogii, aim to help them tap into those efficiencies.

As grocers face a wider competitive landscape online to win shoppers' dollars, branded delivery can potentially unlock deeper shopper loyalty. But in the face of labor challenges and costs, grocers are trying to figure out how to optimize their own delivery services while minimizing downsides.

Discovering how to co-exist 

Sources said they expect grocers to run branded delivery services alongside popular app platforms while playing up key points of differentiation.

Giant Food, for example, aims to serve a variety of customer desires, from in-store shopping options to online, and sees Instacart, its partner since 2016, as another way to connect with shoppers, said Gregg Dorazio, who heads up e-commerce for the grocer.

With its own offering, Giant Delivers, which launched in 2019 as a refreshed version of its online grocery delivery platform formerly known as Peapod by Giant, the Ahold Delhaize banner is looking to offer customers flexibility with speed and fees for delivery, while also giving them price value through its own e-commerce service, Dorazio said. 

Grocers are showing they want to feed consumers' healthy appetite for faster delivery, but face the complexity of quickly delivering a high volume of orders.

Porter, who helped accelerate Walmart Canada's e-commerce strategy, expects on-demand, smaller basket orders of five to 10 items to heavily fall on crowd-sourced delivery models, while retailers will leverage branded delivery for stock-up trips and next-day delivery. Already, retailers are turning to providers like DoorDash and Instacart to manage faster service, particularly for orders in under an hour.

But several last-mile vendors are trying to solve the dilemma for retailers so they don't have to choose between speed or branded service. Store-hailing startup Robomart, which has just started rolling out on-demand mobile markets, is working on a branded, turn-key solution for retailers. So far, the fastest engagement from start to finish has been 1 minute and 51 seconds, while the average is under nine minutes, said co-founder and CEO Ali Ahmed. (Its website says it charges a "small hailing fee.") 

Robomart's vision is to offer an online marketplace where customers can find and hail retailer-branded vans for specific categories, like grocery, ice cream and pharmacy, with Robomart taking care of restocking and fleet operations while retail partners will select the SKUs available, control their branding and set prices, Ahmed said. 

Point Pickup, a retail-branded fulfillment and delivery provider that counts Kroger, Albertsons and Walmart among its clients, gives its workers the opportunity to shop the same stores and deliver in the same areas again and again, which helps them get faster at picking orders as they become more familiar with store layouts, said Tom Fiorita, the company's founder and CEO. 

Meanwhile, taking the route of scheduled delivery has the potential to promote cost savings to customers as a differentiator, while driving bigger baskets for the retailer. 

Determining what to own versus outsource

Figuring out which parts of branded service to fully control versus outsource has been a tricky area for grocers.

Giant Delivers gives the mid-Atlantic grocery chain more control over its e-commerce services and greater ownership of its relationship with customers by having its own employees handle picking, packing and delivering, said Dorazio.

The 30 seconds or so of face-time between drivers and customer is “critical" to learn customer preferences — like getting to know if they prefer delivery at the back or front door or if they don't want the driver to knock because the baby might be sleeping — and build a rapport over time, Dorazio said.

Other grocers that staff and train their own delivery drivers like to promote this fact to shoppers. As Walmart expands its in-home delivery, the retailer has highlighted the "highly-trained" associates with body-worn cameras it employs for the service — likely aimed at addressing some safety concerns over services that grant access to consumers' homes or garages. 

Owning and managing the delivery fleet can be challenging for grocers of all sizes. Labor and fuel costs, vehicle maintenance and doorstep time — the time drivers spend at each customer's residence — all eat away at grocers' wallets, said Porter.

Giant Food has run into bandwidth challenges with its limited number of drivers and trucks, particularly on Fridays and weekends — popular times for people to want to get their groceries. The grocer has found that recently lowering fees for weekday service has helped address those capacity issues by encouraging shoppers to shift from those typically busy delivery windows to slower weekday ones. "Tuesdays have now become as popular as Sundays in terms of delivery windows," Dorazio said.

Other grocers, meanwhile, have found success with delivery vendors to handle the complex and costly last mile. 

“Your typical grocer really is not equipped from a logistical standpoint, [an] employment standpoint to employ door-to-door delivery drivers. It’s not in their sweet spot,” said William Anthony, partner at law firm Blank Rome.

SpartanNash, which works with three different last-mile partners for its e-commerce services across its markets and uses its own drivers for a few select stores, has found that using third-party delivery vendors provides faster and more affordable service for customers, Van Gilder said.

Starting in 2018, SpartanNash began piloting with last-mile partners and has switched from relying mostly on its own workers to working with three vendors. The change was driven more by a desire to increase driver availability throughout the day for quick-turnaround service than by labor costs, Van Gilder said. SpartanNash employees pick and pack the orders, giving the company quality control. While the delivery drivers don't use branded vehicles, they do use branded paper bags, he said.

Minnesota grocer Cub is following a similar model of having its associates pick the orders and then using delivery drivers from a vendor. The drivers wear Cub-branded uniforms while making deliveries. 

Being aware of the changing labor landscape

As the grocery industry grapples with hiring and retention challenges, grocers face the question of when they want to use their own workers for e-commerce operations versus when to outsource labor, especially for the delivery portion. 

On the outsoucing side, the gig economy is booming, and flex work is a desirable option for drivers, according to Anthony and Porter. But there are legal and legislative challenges for grocers to be mindful of. Discerning between the classifications between employees and independent contractors can be tricky because criteria for the two often fall under numerous state laws, Anthony said. Some states are reconsidering how they classify independent contractors.

Grocers need to watch out for potential "joint employment" issues that could arise, like if they use a combination of delivery vendors and their own employees for the same duties, or if they control the method or means of how a contract worker performs their job, Anthony said.

“Independent contractors often point to ... a situation describing ‘Do you have employees doing the same thing that I do? Because if you do, then I can’t be an independent contractor,'" he said.

Anthony and Porter are hopeful companies can find a balance between employees and independent contractors.

“Giving more of those perks of full-time employment to the gig workers I think is where you see this going,” Porter said.

Regardless of the types of workers grocers rely on, they should let customers tip delivery drivers as a way to improve labor retention, sources said. Fiorita of Point Pickup noted tipping can give a “huge” bump, along with predictability, to workers’ pay, and customers who know their delivery driver tend to tip more, further incentivizing drivers to handle orders from the same customers. 

As technology improves e-commerce orders, like with choosing substitutions or robotic order picking, there may become less need for a human connection with online fulfillment. Grocers with existing fleets can instead focus on drop-and-go service, Porter said. At some point, perhaps humans won't be needed at all in the driver's seat, with companies like Nuro, which is working with Kroger, and Robomart, which plans to shift to autonomous vehicles as regulations allow, focused on a still-nascent future with autonomous vehicles.

Drawing shoppers over to branded delivery

While sharing the same turf as — and oftentimes also partnering with — popular marketplace apps like Instacart and DoorDash, grocers face marketing challenges with branded delivery. 

For Giant Food, finding the optimal strategy for communicating the value proposition of its in-house service is top of mind, Dorazio said.

“How do you get credit for moving customers through [our e-commerce site] and then into our pickup and delivery services when we know that is really a lot of the best value?” Dorazio said.

Along with recently updating its fees and minimums, Giant Food has also linked with CPG brands to offer delivery promotions to improve customer retention, Dorazio said. Like many grocers with branded delivery, Giant Food uses branded trucks, which Porter said have long been one way for grocers to draw attention to themselves, but are difficult to assess in terms of their marketing value.

The grocery chain isn't alone in trying to figure out how to incentivize customers to try their branded services.

Some, like Kroger and Ahold Delhaize, have recently launched subscriptions offering no-fee delivery, among other perks. SpartanNash is offering free delivery on all orders over $35 through its Fast Lane and Groceries to Go services during the month of February and last summer added half-off delivery fees to its e-commerce subscription program, which initially offered free pickup, Van Gilder said.

Free or lower fees are classic marketing moves that grocers are using for their delivery services.

"As we've started to get aggressive with our fee reductions and with our minimum reductions, I think that flexibility is moving more folks now over to engage with us when-they-want, how-they-want kind of model," Dorazio said.

DoorDash announced in late June that it plans to launch a dark store-powered rapid delivery service in partnership with Canadian grocer Loblaw.

PC Express Rapid Delivery will provide service in 30 minutes or less from an assortment of 5,000 to 8,000 items supplied by Loblaw and fulfilled through DoorDash-run dark stores, Fuad Hannon, DoorDash's vice president of new verticals, said in an interview. The rapid delivery service is launching in major Canadian cities in August, including Vancouver, the greater Toronto area, Calgary and Kitchener.

This partnership marks DoorDash’s first foray into using dark stores to power rapid delivery for a retail partner as it looks to diversify its service offerings and take on e-commerce leader Instacart.

After launching its own convenience delivery service, then shifting into 15-minute delivery followed by a store-based “express” delivery for Albertsons, DoorDash is now using its dark stores to power speedy delivery for a major retailer. The move underscores the company’s growing clout as a service provider for grocers as well as the mounting confidence it has in speedy delivery service, despite the sector’s many challenges.

PC Express Rapid Delivery allows customers to order convenience items with a quick turnaround time either through the DoorDash or Loblaw platforms. “We know that customers shop across multiple platforms,” Hannon said, calling the partnership expansion a “multi-platform play.”

The orders will come from dark stores run by DoorDash and supplied by Loblaw and delivered by DoorDash gig workers. Hannon said the fulfillment centers are a “few thousand square feet” and that the number of facilities for the metropolitan areas will vary depending on how many are needed to serve customers quickly. 

While the dark stores aren’t automated, Hannon said the picking systems and inventory stocking will help it “nail a 30-minute promise.” Hannon said the dark stores for Loblaw are “very similar” to DoorDash’s DashMart convenience service, which launched in the summer of 2020. In an interview last fall, Hannon said DoorDash planned to use what it has learned from operating DashMart online convenience stores to help power similar services for retailers.

“DoorDash has been operating in Canada for many years. And so one of the hardest things historically has been the logistics of the last mile network, and we're fortunate that we have a restaurant business that is a scaling business that powers 30-minute delivery,” Hannon said. 

The new service will allow DoorDash and Loblaw to tap into the different use cases around rapid delivery, where customers often need missing ingredients or snacks, Hannon said: “We know customers shop in different ways depending on the occasion, and this is us trying to reach customers where they are.”

The Loblaw partnership comes a few months after DoorDash announced an “express” grocery delivery service with Albertsons, with fulfillment happening at the grocery chain’s stores. In December, DoorDash launched a 15-minute delivery service in New York City, joining a crowded field of competitors.

In addition to the rapid delivery service coming later this summer, DoorDash will also list a “majority” of Loblaw’s 2,500 stores on its marketplace beginning in July, covering 85% of Canada’s population, according to a DoorDash spokesperson. 

DoorDash has been providing white-label delivery service for Loblaw through its DoorDash Drive fulfillment offering ”for a number of years,” Hannon said. Drive, which launched in 2016, has allowed DoorDash to extend its service beyond the DoorDash platform and give retailers access to an on-demand delivery fleet while keeping orders on their websites and apps. 

DoorDash’s multi-part partnership with Loblaw highlights the various services the e-commerce company is trying to offer grocers as it expands beyond its legacy restaurant delivery service. As online grocery sales have steadily come down from their early pandemic peak, DoorDash and close rival Instacart are trying to adjust and power more white-label and rapid delivery services that play to their strengths in technology, logistics and workforce size.

With 25 million monthly active users, of which 10 million are DashPass subscribers, DoorDash is leveraging its customer base of people who typically don’t order directly from a merchant’s app as an advantage for grocers seeking “incremental” shoppers and use cases, Hannon said.

DoorDash is moving assertively into grocery fulfillment services as Instacart, which has been a key online provider for grocers, adjusts its approach. In March, Instacart announced 15-minute delivery powered by “nano-fulfillment centers” as part of a suite of technologies and services for retailers called Instacart Platform. A month later, the company revealed it has started to offer rapid delivery service with Publix that’s powered by a few non-fulfillment centers. 

As online shopping has grown, retailers ranging from Walmart to The Fresh Market have adopted shoppable recipes as a way to join meal inspiration with digital functionality. In addition to shoppable buttons on partner recipe sites, companies are putting add-to-cart recipes on their own digital platforms, including social media and livestream channels.

These strategies are evolving, but for online grocers specializing in ethnic cuisine that thrives on social communities, culinary education and being able to customize a wide range of dishes, shoppable content has taken on inventive new forms.

Allowing users to post their recipes and get feedback from the online community has been one approach companies like Weee have taken. Food marketplace Quicklly launched a program that pays users for shoppable recipes they upload to its platform whenever someone clicks through and buys the ingredients. 

Along with prominently featuring shoppable recipes on their websites and apps, ethnic e-grocers are also using shoppable recipes to encourage customers to interact with each other.

Here are a few examples of how these online grocers are turning up the heat on shoppable content.

Weee: Making shoppable video contests a part of the "social flywheel"

E-grocer Weee, which sells Asian and Hispanic food, has been focused on social commerce since its founding and sees shoppable recipes as part of its "social flywheel." 

As the California-based company grows its assortment, it wants people to get excited about sharing products, which in turn will inspire other shoppers to try them out, Amanda Oren, Weee's vice president of merchandising services and planning, previously told Grocery Dive. 

To help do that, Weee is ramping up user-generated recipes and cooking content on its app to not only encourage interactions between customers but also to help educate them — especially its growing base of second- and third-generation shoppers who may be unfamiliar with certain ingredients and recipes. 

Shoppers on Weee's site or app can favorite shoppable videos or individual ingredients. Users can also share the content, write comments and view more from the person who posted it. 

The e-grocer's app has shoppable videos on individual product pages and in the “Community” part of its app, where users can find content uploaded by other users or by Weee. In that “Community” section, users can find limited-time, themed contests for shoppable videos, with gift cards offered as prizes ($5 for every featured video and $20 for five winners selected by Weee).

Weee has run two dozen contests since mid-October with a variety of themes, including pet treats, Halloween and baking. Popular ones have included “Lunar New Year," which had 455 posts with 4,100 views and “2021 Reflections & New Year Celebrations," which prompted 481 posts and 2,000 views. 

Umamicart: Encouraging twists to traditional recipes 

Asian e-grocer Umamicart, which focuses on a curated assortment of products, sees an opportunity to use shoppable recipes to not only help people cook and plan meals, but also to drive product discovery, particularly small-batch or artisanal brands, said Andrea Xu, its co-founder and CEO.

“We do have some recipes that are a little bit more complex, but typically we go for simple, easy-to-make and that really aligns with the customer that we're serving: someone [who] doesn't really have a ton of time but wants to make something that they really love to eat," Xu said, noting Umamicart puts new recipes on its site on a monthly basis. 

By giving people options among traditional and newer brands, the New York-based e-grocer, which debuted last spring, is encouraging customers to put their own twist on dishes, Xu said. 

The company is also using marketing emails with shoppable recipes to spotlight a variety of brands. For example, in a marketing email in February, Umamicart had a shoppable recipe button for tteokbokki, a popular Korean dish of chewy rice cakes, with a GIF showing how to make it with a button below it to “Shop Umamicart’s Version." Readers who clicked on the button got redirected to the recipe page on Umamicart, which includes a video of it being made, directions, the spiciness level and product recommendations for the ingredients with the option to add them all at once or individually to the cart. 

The email also invited people to "keep scrolling to make your own," with the rest of the email containing product recommendations for “recipe essentials," add-on items and a "Shop All" button that redirected to Umamicart's homepage.

Umamicart sent a similar email around the Vietnamese Lunar New Year focused on thit kho, a famous Vietnamese dish featuring pork belly. 

Umamicart is aware that some of its customers didn't grow up eating Asian foods but now want to learn how to cook Asian cuisine.

"We really see the popularity of Asian cuisine expanding well beyond people that have grown up eating it," Xu said.

Quicklly: Cooking up recipe submissions

As the focus on user-generated content grows, online South Asian food marketplace Quicklly has provided monetary incentives for people who submit shoppable recipes, said Quicklly co-founder Keval Raj. 

The startup, which sells its own products for nationwide shipping and also serves as a platform for stores to sell groceries and food for local delivery, rolled out "Quicklly Masterchef" in August 2021, allowing people to submit recipes for a commission (cash or rewards points) whenever someone buys ingredients from their recipe, Raj said. 

The recipe submissions fall under labels like “30 minutes or less,” “make ahead” or “healthy" along with recipes for holidays like Eid, Diwali or Easter. The recipes go through an approval process by Quicklly before they get posted. 

Customers shopping a recipe can add ingredients from multiple stores or from Quicklly's selection for nationwide shipping to their cart for a single checkout. On the back end, Quicklly uses product mapping that relies on geo-fencing to find stores within 20 miles of a user's ZIP code and then suggests products based on where they are sold at the lowest price, Raj said. Quicklly uses its technology to combine order fulfillment of items from several stores into one delivery, Raj said, noting the company benefits from its grocery partners often having stores near each other. 

Quicklly has paused taking new Masterchef recipes as it looks to optimize the existing ones. Ultimately, the company is working to build a pipeline for shoppable recipes and content that includes influencers and recipe bloggers, Raj said.

As Quicklly looks to expand geographically in the U.S., it's finding that shoppable recipes complement its same-day delivery services for its grocery partners and have also boosted its line of sauces for nationwide shipping, Raj said. 

While the marketplace has focused on targeting South Asian consumers, its new partnership with Instacart greatly expands its reach, bringing a potential need for content geared toward new consumers who may not be as familiar with certain ingredients and terminology, Raj said. 

Workers at Twin Cities grocery chain Lunds & Byerlys are now scanning shelves using handheld scanners outfitted with software from Pensa Systems to measure operational performance, according to a press release issued in April.

The program, which Pensa says is a cheaper alternative to aisle-scanning robots and cameras, uses computer vision and artificial intelligence to determine inventory levels throughout the day. Scanning a 70-foot aisle can happen in as little as 12 seconds, said Mark Abernathy, head of market development with Pensa.

The program provides “shelf intelligence data” that can help Lunds & Byerlys improve omnichannel performance, said Abernathy, and has costs offset through a data-sharing agreement with CPGs.

Some retailers have utilized aisle-scanning robots or fixed cameras that look out over their stores. Pensa’s scanning system relies on handheld devices that many retailers already have on hand, like phones, tablets and scanners, to log assortment levels. An employee can walk down the aisle “at a comfortable or brisk walking pace” with a device pointed at the shelves, said Abernathy, who formerly worked as Kroger's head of e-commerce operations.

The resulting video clip then gets uploaded to the cloud and analyzed, with artificial intelligence predicting stock levels in between scans, which can happen every hour or just once or twice a day, depending on the company’s needs.

This “device agnostic” approach is more cost-effective than relying on dedicated cameras or robots, said Abernathy. It’s also faster and more comprehensive than the “gap scans” employees often perform using traditional handheld scanners, he noted.

To further offset costs and monetize the program, Lunds & Byerlys has agreed to let CPG firms pay for access to its shelf data, which those companies can then use to improve demand forecasting, supply chain operations and planogram compliance, Abernathy noted.

By having a granular view into shelf-level performance, grocers can track out-of-stocks and improve their merchandising practices. They can also provide online shoppers with visibility into inventory levels, reducing the substitutions that frustrate many of them, and also help order pickers locate products in stores.

Getting brands involved can also improve operations overall by giving all stakeholders access to operational data, Abernathy said.

One potential complicating factor for the system is the supply chain disruption that’s continuing to roil the industry. Even if the system is able to identify out-of-stocks, stores may not have product on hand to fill the gaps. Abernathy, in response, noted that feeding shelf-level data to CPGs can help them improve their supply chain operations by being able to more accurately predict demand. 

The new scanning tool is the latest example of a retailer turning to advanced technology in order to closely track stock levels and shelf performance. By adding digital scanning tools, retailers aim to gather store-level data that’s on par with what they gather through e-commerce platforms, which log customers’ every click.

Grocers are increasingly turning to automated solutions and looking to maximize their store labor. They’re also trying to make their operations more efficient and turning to alternative revenue streams like digital media in order to help offset the high costs of online shopping and other digital investments.

“The bottom line is really pressured, and with the regional [grocers] that's really even more pronounced,” said Abernathy.