As digital transformation accelerates across retail, grocery stands out as a sector with both immense opportunity and distinct profitability challenges. While online grocery sales have surged—driven by shifting consumer expectations for convenience, speed, and safety—many grocers find that e-commerce is less profitable than their traditional in-store business. Understanding why, and how to address these challenges, is critical for grocery executives seeking to build a sustainable, future-ready digital operation.
Grocery e-commerce faces a unique set of hurdles that make achieving profitability especially complex:
Research shows that more than half of grocery executives say their e-commerce business is less profitable than in-store operations, and expectations for profit improvement lag behind other retail sectors. Yet, with digital grocery adoption now mainstream, the imperative to optimize is stronger than ever.
Despite these challenges, leading grocers are finding ways to improve e-commerce profitability by rethinking fulfillment, pricing, inventory, and the customer experience.
Micro-fulfillment centers—small, automated warehouses located close to customers—are emerging as a powerful lever for grocery e-commerce. MFCs enable faster picking and packing, reduce last-mile delivery costs, and can be integrated with existing store networks for click-and-collect or rapid delivery. Grocers are also experimenting with hybrid models, such as in-store picking, dark stores, and partnerships with third-party delivery platforms to flex capacity and manage costs.
Dynamic pricing, long used in other retail sectors, is increasingly relevant for grocery—especially for perishables. By leveraging real-time data on demand, inventory levels, and expiration dates, grocers can adjust prices to minimize waste and maximize margin. For example, markdowns on items nearing expiration can drive sell-through, while personalized promotions can increase basket size and loyalty without eroding overall profitability.
Accurate demand forecasting is essential to balance availability with waste in grocery. Advanced analytics and AI-powered models can synthesize internal data (historical sales, digital traffic, promotions) with external signals (weather, local events, social trends) to predict demand at a granular level. One leading grocer improved forecast accuracy by 75% using machine learning, significantly reducing both out-of-stocks and spoilage. Real-time inventory visibility across stores, warehouses, and digital channels enables grocers to fulfill orders from the most cost-effective location and nudge customers toward profitable fulfillment options.
While operational efficiency is critical, customer experience remains a key differentiator in grocery e-commerce. Grocers can stand out by:
Grocers like Loblaw and Carrefour have demonstrated that investing in unified digital platforms, robust mobile experiences, and data-driven personalization can yield both higher customer satisfaction and improved profitability.
Modern loyalty programs go beyond points and discounts. By leveraging customer data, grocers can deliver targeted offers, early access to deals, and even partner with third-party brands for exclusive experiences. These programs not only drive repeat business but also create valuable first-party data assets.
Retail media networks—where grocers monetize their digital real estate and data by offering advertising opportunities to brands—are another fast-growing revenue stream. As third-party cookies decline, brands are eager to reach shoppers at the point of purchase, making grocery e-commerce platforms highly attractive for targeted advertising and promotions.
To meet rapid delivery expectations without shouldering all the cost, many grocers are partnering with third-party delivery platforms and logistics providers. These partnerships can provide scalable capacity, access to new customer segments, and technology solutions for route optimization and real-time tracking. However, it’s essential to balance the benefits of speed and reach with the need to protect margins and maintain control over the customer experience.
Grocery e-commerce profitability is not a one-time project, but an ongoing journey of operational excellence, digital innovation, and customer-centricity. The most successful grocers are those who:
At Publicis Sapient, we partner with leading grocers worldwide to navigate these complexities, drawing on deep expertise in digital transformation, data science, and operational strategy. Our work with clients like Loblaw and Carrefour demonstrates that, with the right approach, grocery e-commerce can be both a growth engine and a source of sustainable profitability.
Ready to optimize your grocery e-commerce operations? Connect with our experts to start your transformation journey.