Market Report: E-Grocery Infrastructure 2023

Post-covid grocers no longer capacity constrained. Covid was an “e-grocery future preview”, medium to long term positive for vendors

Grocery business in post-covid phase

• The world was slowly returning to normal following huge covid disruption, some aspects quicker than others and varied between countries and continents
• Us sales of food & beverages remained at 7.5% annual growth rate from 2020, compared to pre-covid and longterm annual growth rate average of 2.8%
• Home working and inflation were thought to be some of the key continued drivers of alleviated growth levels
• E-grocery volumes appeared to slowly return towards pre-covid levels

E-grocery infrastructure m&a activity

• In oct 2022, walmart announced they would acquire alert innovation, a “3d asrs” vendor
• This transaction had echoes of amazon’s 2012 acquisition of kiva systems which transformed amazon’s fulfillment operations
• Notably, multiple e-grocery platform software vendors were also acquired during the pandemic

The automation approach changing

• Leading legacy and many pureplay grocers continued with automation deployments and trials, however the general consensus was that incoming inquiries were down, compared to 2020/21, but higher than pre-covid
• Much of the hype around the “mfc” had largely been replaced by a blended and more localised approach to solving online grocery fulfillment
• Few grocers experienced urgent capacity constraints and when combined with inflationary pressures this appeared to have led to an increased focus on stores

Grocery store interiors changing

• Grocery store interiors and layouts were changing to better meet current and future demand for online order processing, by own staff or delivery service providers
• Some vendors appeared to have focused on this and developed solutions for post-manual picking processes, such as completed order storage and consolidation automation

Automation profitability/ roi

• The emergence of the mfc around 2018 exposed important questions around roi in the highly complex e-grocery fulfillment automation space
• Interviews suggested grocers were profitable online, but just not as profitable as their legacy business

Digitisation of the grocery experience

• For legacy grocers, on- and offline customer experiences and buying continued to merge and “digital” replaced “omni-channel” to explain this trend
• The primary impact from this on infrastructure vendors could be increased integration with other systems

Longer term growth, positive

• Covid provided a preview for grocers of what their future will look like and perhaps what automation they need to have in place in the future
• Interviews suggested grocers had reacted very fast to surging covid demand and were perhaps now in a period of untangling some of those initiatives
• Whilst short term demand had declined to above pre-covid levels, the medium to long term infrastructure demand was perceived as robust

Three grocer interviews (see content)

• Interviews with three grocers provided insights to automation projects, challenges with buying automation and some post-covid strategic thoughts