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What's Up: The Up's and Down's of Business

Updated on August 9, 2015

Could the grocery industry be the next to get reshuffled by the internet?

The grocery industry is nearly always hiring. What supermarket does not need somebody for the night shift, or a cashier or a bagger? Many stores are desperate enough for workers that they are even willing to hire rehabilitated convicts, which hardly are a commodity in the employment market. However, this seemingly secure industry may be on the brink of a shake-up, albeit moderately gradual in nature, that could changes things permanently.

The shift to online shopping began a long time ago. It will be hard for online shopping to ever be a truly legitimate threat to clothing stores or shoe stores. Many people prefer to try on their clothing or shoes first, which they can't do online. Until recently, online grocery shopping was hardly a threat to the physical store locations. Recently, retailers have tried to streamline their processes so that they offer lower prices than before online. Walmart now sells many of it's items online for the same price as it does in stores. Most, however, still use shipping companies rather than their own trucks to ship the goods purchased, which does not correct the other serious problem which is the ability to effectively ship perishable goods. As long as this continues, it will not be possible for perishables to be purchased online for the most part, and the physical stores will still have a niche. Still, though, this could be a matter of time, too. Amazon has introduced Amazon Fresh. It is likely that many others will follow in their footsteps.

Some grocery retailers have already tried to combat their shipping companies' lack of refrigerated trucks by using dry ice and other packing materials to prevent spoilage in the packages. Still, shipping companies usually charge by weight at least to some degree, so it can make it difficult to ship items such as milk (a gallon of milk is over 8 pounds) in this fashion. To start delivering a wider spectrum of perishable goods in a competitively priced fashion for the consumer, retailers will have to begin to actually ship the purchased goods straight to the door of the purchaser in their own refrigerated trucks (while it would use a lot of extra truckers to do deliveries, it would reduce the need for cashiers- payment would be done online- and save the cost of shipping with shipping companies). It will, however, likely take time for stores to progress far enough to start delivering directly to their customers' doors in their store's own trucks. It therefore is likely that the progression will continue slowly and steadily. Initially, when the larger retailers, such as Walmart, start offering perishable items online (most of the larger retailers have not done so yet, but it may happen not too far down the road), they will likely begin to start offering certain more easily shipped (higher cost, lower weight) perishable items, at slightly higher costs than are charged in stores to figure for the cost of the dry ice and other packing materials. As this continues, such operations will also get streamlined and the packing materials will be bought in heavy bulk. As a result, these retailers at some point will likely no longer have to continue to put on a shipping surcharge for the perishable items that they do ship, or if they do, it would be more of a nominal one.

The reason why retailers currently usually prefer not to deliver online orders in their own trucks is because of a fear that the distance between one delivery and the next would make it ineffective in a cost analysis. That is why progression in delivery methods and items offered online will have to be be gradual, to ensure that when the retailers eventually do begin shipping the items themselves, their online order deliveries will have enough of a proximity to each other to ensure cost effectiveness. This point will likely only be reached for retailers like Walmart, and others, after they have firmly established a market footprint online for the more easily shipped perishable items. Once they actually begin shipping in their own trucks, though, nearly any and every item would then be able to be offered online. When online ordering eventually does become this all-encompassing, it will likely cause the closure of many of the physical supermarkets. Some of these closed stores will then likely become extra warehouses for online orders to better profitability even further than the shift to online shopping will have already done, as the profitability of online grocery retail partially depends on the quantity of warehouses that a company has to ship from and the distance from one warehouse to the other. The farther the distance that the truck has to transport the goods, the more trucking costs that have to be built in, and theoretically, the less profit that can be made.

One may ask, why are retailers now pushing their online shopping options? The majority of the overhead involved for retailers in online shopping is trucking. Website maintenance is hardly inexpensive, but it is a fraction of the cost of even electricity for all of the stores that the major retailers have, let alone the cost of the stores themselves or the extra workers that are needed in stores. So the issue is whether it is cheaper for a retailer to maintain physical stores, or maintain a website, added warehouses and cover trucking costs. It is going to take time for the latter to be more cost effective for retailers. Still, online ordering has the potential to be a serious money-saver for retailers ultimately. The retailers have figured this out, and are trying to slowly push things along until circumstances reach the point that the retailers can start saving that money by shifting the majority of their sales from stores to online. Believe it or not, many retailers have been building towards such concepts for longer than many realize. People are noticing the online shopping more now because of more widespread advertising campaigns, and because many folks do not notice a trend until they are already midway into it.

It is not time to panic yet for employees of grocery stores. If grocery stores ever will be obsolete, it is some time in the very distant future. Still, although, one looking to embark on a career in a grocery chain should consider that there is a risk that they could end up getting laid off if it is their store that gets closed. In most industries, things get shaken up and reshuffled over time. The grocery industry likely will suffer a similar fate. Blockbuster was made obsolete by the internet. Many booksellers have lost much of their niche to "e-books." The internet can and likely will change the grocery industry. Will today's under-employed become tomorrow's unemployed? Only time will tell for sure. However, one way or the other, many of the workers will likely just get transferred to warehouses when their stores get closed.


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