Micro-Fulfillment Centers Will Be Key To Meeting Online Grocery Demand in 2021

Article originally posted on Globe St. on April 8, 2021

Micro-fulfillment centers and automation will be critical for grocery chains to meet still-burgeoning demand for online orders and deliveries quickly and efficiently, according to a new report on the sector from JLL.

“Micro-fulfillment centers (also known as MFCs) aren’t new, but they are a growing solution for many grocers,” the report notes. “MFCs provide flexibility as they are much smaller in size than a typical industrial-grade fulfillment center. They can be put into dark stores, adjacent to existing stores, or located centrally to multiple stores as a hub-and-spoke model.”

Despite restrictions lifting in many states, the demand for digital grocery sales continues to tick up, with major player Kroger posting 118% digital sales growth in the fourth quarter and competitor Albertsons partnering with Takeoff Technologies to create micro-fulfillment centers to specifically post online orders. JLL notes that Stop & Shop, Meijer and Target are all following suit with plans to begin building their own MFCs to increase digital reach.

Automation will also be king in 2021, as grocers drop major dollars on automated fulfillment facilities to improve delivery speed: “one of the biggest hurdles to fulfilling online orders,” the report notes, “is the inefficiency of grocery employees picking items for pickup or delivery alongside in-store shoppers.” Think manual pickers and robotic facilities that automate grocery fulfillment to allow grocers to stay competitive in a high-volume industry.

According to data from S&P Global Market Intelligence, using robotic equipment is 10 times faster than manually filling orders. The firm also maintains robotic fulfillment is more accurate and provides customers with vital real-time information about available items.

Recent deals in the space include Ahold Delhaize’s partnership with Swisslog to open a 124,000-square-foot e-commerce fulfillment center with capacity to fulfill 15,000 online orders per week in Philadelphia for Giant Direct later in 2021. Kroger also opened its first automated, $55 million Ocado customer fulfillment center last month in Ohio. The chain is the first of at least 20 in the works for the grocery giant, and the company has said it reduces order assembly times from upwards of 45 minutes down to six. And, of course, there’s Walmart. The retail behemoth has said it will build automated, 30,000-square-foot mini warehouses to facilitate grocery orders within existing store footprints to speed up delivery and pickup times for grocery orders.