The COVID-19 pandemic was a watershed moment for the grocery sector, catapulting digital grocery from a niche channel to a core pillar of the industry. What began as a rapid, necessity-driven shift to online ordering, delivery, and click-and-collect has now become a permanent fixture in how consumers shop for food and essentials. As the dust settles, grocery executives face a new and urgent challenge: how to sustain digital momentum while making online grocery not just viable, but profitable.
Before the pandemic, online grocery accounted for just 2-3% of total sales in most markets. Today, that figure has surged to 12-15%—a transformation that would have taken years under normal circumstances. This digital acceleration has brought new growth, but also exposed a fundamental truth: digital grocery is structurally less profitable than traditional brick-and-mortar operations. The costs of picking, packing, and last-mile delivery can quickly erode margins, especially when free or low-cost delivery is the norm and customer expectations for speed and convenience are higher than ever.
The profitability challenge in digital grocery is rooted in three main cost drivers:
To move beyond emergency fixes and build a resilient, profitable digital grocery business, leading grocers are embracing a multi-pronged approach:
Encouraging customers to use click-and-collect (curbside pickup) over home delivery can significantly reduce last-mile costs. By bridging the gap between digital convenience and physical immediacy, click-and-collect offers a win-win: lower operational costs for grocers and flexible fulfillment for customers. Some grocers are experimenting with premium delivery slots, loyalty incentives, or exclusive offers to nudge customers toward this more profitable channel.
Advanced analytics and machine learning are transforming how grocers manage inventory and forecast demand. AI-powered tools can anticipate spikes in product demand, optimize picking routes, and reduce costly stockouts or overstock situations. Real-time inventory visibility across stores, warehouses, and third-party partners enables grocers to dynamically allocate resources and improve order accuracy—critical for both customer satisfaction and cost control.
Returns and substitutions are a persistent pain point in digital grocery. Leading grocers are implementing smarter returns policies, such as encouraging in-store drop-offs or allowing customers to keep low-value items, to reduce reverse logistics costs. AI-driven analysis of return patterns can also inform product assortment and fulfillment strategies, further minimizing unnecessary costs.
Grocers are rethinking fulfillment by:
This flexibility enables grocers to scale efficiently and respond to shifting consumer preferences without overcommitting capital.
Digital grocery can limit impulse purchases and serendipitous discovery—important revenue drivers in-store. To address this, grocers are leveraging customer data and AI to personalize recommendations, offer targeted samples, and create engaging digital experiences that mimic the best aspects of in-store shopping. Integrated marketing automation and CRM tools help maintain customer engagement and drive repeat purchases.
The future of grocery is defined by agility, innovation, and a relentless focus on the customer. Grocers who sustain their digital momentum, address profitability head-on, and invest in resilient, technology-enabled operations will not only weather future disruptions—they will lead the next era of grocery retail. The time to act is now: those who invest in sustainable digital growth today will define the future of grocery for years to come.
Ready to shape the future of grocery? Publicis Sapient stands ready to help grocers unlock new sources of value, build lasting customer relationships, and achieve sustainable growth in a rapidly evolving landscape.