As grocers test out different approaches to get products to shoppers in a more efficient manner, food retailers are betting big on small warehouses to shore up their growing delivery operations. Walmart, Albertsons Cos. and other companies are creating small fulfillment centers close to locations already in existence and shoppers to fulfill eCommerce orders fast, The Wall Street Journal reported.
More supermarket companies are opting for this strategy over the bigger and remote distribution centers that the Peapod division of Koninklijke Ahold Delhaize NV and Kroger Co. are building to make deliveries over broader areas. The Jewel-Osco and Safeway chains owner is bringing on small fulfillment facilities at two stores in San Jose, Calif. and South San Francisco, Calif. with the help of Takeoff Technologies Inc. that creates automated warehouses.
Facilities that are called micro-fulfillment centers are often between 10,000 and 20,000 square feet and can fill roughly 4,000 orders weekly. The warehouses can be constructed in three months to half a year and attain profitability in a year.
Kroger, which is reportedly the country’s largest supermarket operator, is making larger distribution centers for delivery. It is reportedly betting that economies of scale will make the more significant investment valuable. Yael Cosset, chief digital officer, said per the report, “You control and you know exactly what’s in the facility.”
According to WSJ, food sellers were slower to embrace online shopping than other merchants since many of their shoppers still want to inspect items such as steaks and fruit before they make a purchase. However, online grocery shares jumped 15 percent in 2019 per a Brick Meets Click survey.
In separate news, Kroger and Ocado were joining forces to build the second of 20 planned automated warehouse facilities. The two companies had broken ground on what they referred to as America’s second “customer fulfillment center” (CFC), located in Groveland, Florida per a press release in July. The $55 million center, expected to become operational in 2021, is expected to generate up to 400 new jobs and will measure up to 375,000 square feet.