Dive Brief:
- Hy-Vee will close down its four Aisles Online fulfillment centers the week of March 23, a company spokesperson told Grocery Dive. Local news sources first reported the company’s plans.
- Online order fulfillment will be transferred back to individual grocery stores, where orders were initially fulfilled when Aisles Online launched in 2015. Since fulfillment began in stores, the company is already set up for the change.
- According to the spokesperson, customers want a full assortment of products, personalized shoppers and same-day pickup at stores, and those services can’t be fully provided when orders are processed at a fulfillment center.
Dive Insight:
Hy-Vee began opening fulfillment centers for Aisles Online shortly after the service debuted five years ago, with a three-site expansion announced in 2017. The company has centers in Omaha, Nebraska; Kansas City, Missouri; Des Moines, Iowa and Eagan, Minnesota. The company has not said what it will do with the existing fulfillment centers.
By building dedicated e-commerce warehouses, Hy-Vee set up to fill a high volume of orders near major metropolitan areas. But shopper demand may not have matched the company's forecast, making the fulfillment centers more costly than they were worth. Consumers are also showing they like store pickup just as much, if not more than, home delivery, and fulfilling those orders from stores same-day is typically more efficient than shuttling orders in from a separate warehouse. Stores can also, as Hy-Vee noted, fill the full assortment of products customers are used to buying.
The advantage of these distribution facilities is that they take pressure off stores to supply a growing number of online orders. But recent innovations like dark stores and micro-fulfillment centers (MFCs) promise to help retailers fill orders cost effectively at the local level through automation and picking systems that are optimized for e-commerce.
Micro-fulfillment company Fabric recently said it found 65% of shoppers would consider going to a different retailer if their usual store didn’t provide same-day delivery or curbside pickup. Additionally, 92% of surveyed shoppers want orders fulfilled same-day, whether via delivery or pickup.
At the beginning of February, the company ended 24-hour operations at all stores in order to better assist shoppers during busier business hours.
The overarching goal with these recent moves — including the closure of grocery fulfillment centers — appears to be improving efficiency. Rather than have excess staff, operating hours and physical spaces, tightening up across the board can help the grocer cut costs and improve operations.
