Grocery retail stands apart in the world of e-commerce. While digital sales have surged across all retail sectors, grocery retailers face a particularly steep climb toward profitability. According to recent industry research, grocery is among the least optimistic sectors regarding e-commerce profit improvement—only 61% of grocery leaders expect e-commerce profits to rise in the coming year, compared to higher expectations in other retail categories. This caution is well-founded: more than half of grocery retailers say their e-commerce business is less profitable than their in-store operations, and nearly a quarter report that their digital channels are not profitable at all.
What makes grocery e-commerce so uniquely challenging? The answer lies in a combination of high fulfillment costs, complex inventory management, and the relentless demand for speed and accuracy. Unlike other retail categories, grocery orders are often large, perishable, and require rapid, precise delivery—factors that drive up operational costs and strain traditional supply chains.
Grocery e-commerce is defined by its need for speed and freshness. Customers expect same-day or next-day delivery, often with narrow time windows. The cost of picking, packing, and delivering perishable goods—sometimes in temperature-controlled environments—can quickly erode margins. Last-mile delivery is especially expensive, and the need for accuracy (no substitutions, no missing items) adds further complexity.
Grocery assortments are vast, with thousands of SKUs, many of which are perishable or have short shelf lives. Real-time inventory visibility is critical to avoid out-of-stocks and substitutions, both of which can damage customer trust. Managing inventory across stores, warehouses, and digital channels requires sophisticated systems and seamless integration.
Unlike apparel or electronics, grocery returns are rare—but when they do occur, they often result in waste rather than resale. Managing shrinkage, spoilage, and the cost of unsellable returns is a unique challenge for grocers.
Grocery shoppers are highly price-sensitive and expect convenience, speed, and accuracy. Features like buy-online-pickup-in-store (BOPIS), curbside pickup, and flexible delivery options are now table stakes. Meeting these expectations while maintaining profitability is a delicate balancing act.
Despite these challenges, leading grocery retailers are finding ways to modernize operations and improve margins. The most successful strategies focus on digitizing the store, modernizing the supply chain, and leveraging automation and data.
Micro-fulfillment centers—small, automated warehouses located close to customers—are emerging as a key solution for grocery e-commerce. MFCs enable rapid, efficient picking and packing of online orders, reducing labor costs and speeding up delivery. Automation, including robotics for picking and inventory management, further drives efficiency and accuracy. Among grocery leaders, investment in MFCs and automated fulfillment solutions ranks as a top priority for both current challenges and future growth.
Real-time inventory visibility across all channels is essential for grocery profitability. Unified order management systems allow grocers to fulfill orders from the most cost-effective location—whether that’s a store, warehouse, or MFC—minimizing stockouts and substitutions. Advanced analytics and AI-driven forecasting help optimize stock levels, reduce waste, and ensure the right products are available at the right time.
Grocery retailers are investing in robotics not just in warehouses, but also in stores—for tasks like inventory tracking, shelf scanning, and even cleaning. Digitizing the store environment, including modernizing POS systems and enabling mobile app support for “just walk out” solutions, helps bridge the gap between digital and physical experiences. Robotics and automation free up staff for higher-value tasks and improve operational efficiency.
Optimizing shipping and delivery partners, offering multiple fulfillment options, and leveraging data to route orders efficiently are critical for controlling costs. Some grocers are experimenting with hybrid models—combining in-store picking for local orders with MFCs for high-volume or distant deliveries. Returns optimization, while less of a focus in grocery, can still yield savings by minimizing waste and streamlining reverse logistics for non-perishable items.
Personalization is a powerful lever for increasing average order value and customer loyalty. AI-driven recommendations, targeted promotions, and personalized offers can drive repeat purchases and higher basket sizes. Additionally, grocery retailers are increasingly monetizing their digital platforms through retail media networks—offering targeted advertising opportunities to suppliers and brands, creating new revenue streams that offset operational costs.
Publicis Sapient has partnered with leading grocery retailers to modernize their digital operations and drive profitability. For example, we helped a major grocer build a world-class digital organization, enabling agile innovation and launching initiatives such as online grocery shopping with in-store pickup across hundreds of locations. Another global grocery leader worked with us to co-create a next-generation omnichannel transformation strategy, integrating front-end customer experience, logistics and supply chain, digital in-store solutions, and advanced marketing and loyalty programs. The results: double-digit growth in food e-commerce sales, improved customer satisfaction, and a scalable foundation for future innovation.
Grocery e-commerce profitability is not an unattainable goal—it requires a sector-specific approach that addresses the unique operational, technological, and customer experience challenges of the industry. By investing in micro-fulfillment, robotics, inventory visibility, and data-driven personalization, grocery retailers can unlock new efficiencies, improve margins, and deliver the seamless, convenient experiences customers demand.
At Publicis Sapient, we bring deep expertise in digital business transformation, supply chain modernization, and omnichannel strategy. We help grocery leaders move beyond survival mode to build profitable, future-ready e-commerce operations. The future of grocery is digital, automated, and customer-centric—and the time to act is now.