Comment by Closi | Hacker News Reader

Comment by Closi | Hacker News Reader

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This approach is much more expensive in the U.K. at least - I’ve done these sums for retailers (I’m a logistics consultant who specialises in e-commerce and grocery) and it’s hard to make a distribution centre cost competitive if you have an established store estate that you don’t want to get rid of.

In short, a distribution centre gives you:

* improved pick efficiency (depending on the level of automation), offset somewhat by maintenance costs and the cost of capital.

* increased delivery/transport costs (stores are generally closer to the customer than the cross dock point / outbase, vehicles are already going to the store for the main delivery)

\ flowing more product through existing retail points reduces waste (expiring products).

* increased property cost (you have to pay for a distribution centre at c£9 per square foot incl rates etc, while in retail the space is more expensive but you are already* renting it).

The one thing a fulfilment centre does give you is better service though. You can hold more range, better track dates/batches so you can give your customers the expiry dates on the website and increase availability.

So the honest answer is that delivery from a central point isn’t a slam dunk, and can definitely work but probably won’t be cheaper.

You see all this with Ocado in the UK, right? Distribution centres only, so great range, and a brilliant app … but as I understand it they make most of their money selling tech to other retailers.

Does the loss of normal customers factor in the calculation? Tesco are the biggest grocery store in the UK and their from store fulfilment is beyond annoying for me. So much so that I avoid shopping with them now.

I'm guessing stores in the UK tend to be smaller. In-store distribution is mildly annoying in US supermarkets but no more so (in fact less so) than stocking that blocks aisles is.

Much more, since you have to navigate around 2 to 6 fulfillment trolleys in every aisle, as well as the usual restocking trolleys and random staff walking around and not appearing to have any purpose.

Which indicates fulfillment is best done by a company whose primary business is fulfillment, not brick and mortar retail. This is a classic disruption scenario.

I don't read that at all. I read it as there are pros and cons and, in practice, the relatively limited grocery delivery/pickup that happens seems to be from B&M stores. I expect that any delivery/pickup businesses that didn't thrive in the past 18 months aren't going to.

Not really - centralised distribution doesn’t mean it’s best done by a company whose primary business is fulfilment, and in fact most major supermarkets have the in-house capability to run these depots by themselves if they want to (for e-commerce grocery specifically there are advantages in running yourself).

All this basically sums up to “it depends”!

While I never ran the numbers, that was my conclusion as well. Cost wise, use your existing retail infrastructure. It is easier so, to set up a separate fulfillment flow for home deliveries. It's a trade of, like always.

This is starting to change in the UK as the proportion of customers ordering online keeps increasing, for example Tesco have started setting up "Dotcom centres": https://www.tescoplc.com/news/2013/tesco-opens-sixth-grocery... (of course that's best of both worlds, fulfil from your existing stores until the demand justifies a dedicated centre)

Don't they already have distribution centres? When covid started, some local store chains just started supplying consumers from the same distribution chain through which they (re)supplied all the many small stores they had.

Not the parent poster, but a distribution centre for stores has a different function to a distribution centre for individual customers. The former is about getting whole boxes of products onto large trucks to deliver to stores, the latter is about getting individual items from inside those boxes into bags in vans for individual customers. For that you need a different warehouse layout and many large businesses won't have that space available for the scale they need.

Given the cost of delivery, Do you think some version of grocery pickup is here to stay? Or over a few years those will be gone?

And does this mean someone will probably build a parcel locker network for groceries?

I'm certain they will, at least here in Sweden. We have bought most of our groceries online for years. It is worth quite a bit to not have to use half a Sunday to drive to a big ugly supermarket surrounded by a huge parking lot and then run around trying to find whatever that isn't where I expected it to be.

It isn't common in the UK, where online supermarket shopping has existed since about 1997. (And not as some obscure thing, the biggest supermarket launched it then.)

I know Sainsburys was trialing back then, I knew one of the developers on the project at BT.

One of our team members was an alpha tester, and one delivery he got was a pallet of salad cream instead of just one bottle.

Over 20 years later, this still happens to me every time I ever buy root ginger.

I always want a lump / knob / finger / whatever of ginger, and without fail forget that the unit of measure is a kilogram, which would take me months to get through.

Click-and-collect from supermarkets' existing stores is likely here to stay. It's very appealing for people on strict budgets, because you don't get to the cash register then realise you have to put things back.

However, any retailer with existing stores wants to operate click-and-collect from those, as if you realise you forgot something on your order you'll go into the store.

on an item where quality parameters vary so much ( size, visual shape, ripeness etc), customers will not give up the value of touching and picking an item. This applies to a cabbage or a fish.

In the case of a pair of socks which are standardized, they may not care as much to physically pick up stuff.

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I have always thought that the disruption to costco would be an online warehouse, that could gather the customer's preferences ( patterns of buying - and consolidate them and send them to localized centers ). Customers can then pick them up or have them delivered. Discovery will purely be through the web.

> Click-and-collect from supermarkets' existing stores is likely here to stay. It's very appealing for people on strict budgets, because you don't get to the cash register then realise you have to put things back.

People on strict budgets typically also need to stretch that budget as far as they can; they likely can't absorb the markups on each item that pays for the in-store shopper to collect them.

In my country, there's no markup or service charge on click-and-collect.

That just means it's baked into the price like "free" shipping.

How much is the scenario helped by significantly reducing the number of SKUs? e.g., customers are choosing from two toothpaste options rather than 10+?

Costco & Trader Joes have been massively successful by reducing SKUs.

Depends on the market position you're targeting.

If a shopper wants milk, bread and scented candles, and you don't sell scented candles when your competitor does, they'll go to your competitor for candles and pick up their milk and bread at the same time.

So if you want to get a customer's main weekly shop, you can't cut your range too far.

Of course, there's a space in the market for gas station convenience stores with a smaller range, higher prices, great convenience and no aspiration to get the customer's main weekly shop.

Is anyone incorporating distribution hubs and commercial kitchens?

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