The latest trend in retail logistics and yield optimization has emerged: Drive-up-only grocery stores. This takes the curbside pickup option that inflected during the pandemic, and makes it the only option. This model holds several potential advantages and disadvantages (more on those in a bit).
This concept crossed our desks last week when hearing about Addie’s, the Norwood, Massachusetts store that just raised a $10 million seed round to become the first drive-up-only grocery play. The 22,000-square-foot store offers 4,500 products that span the typical grocery range from dairy to deli.
Customers transact through a typical online shopping flow that’s familiar to anyone who’s done curbside pickup. That includes filling a cart with desired items, choosing a pickup time, and checking out. The drive-up experience includes indicating your arrival and having your groceries delivered to your trunk.
All of that of course isn’t new, but the novelty here is that it’s the only option offered. No checkout aisles, no customer service desk, and no shopping cart traffic jams. It also takes the art of merchandising out of the equation, including product placement, endcaps, and free samples for microwave hot-dog bites.
Is the World Ready?
And that brings us back to advantages and disadvantages of this model. Starting with the advantages, many of the in-store elements noted above are no longer necessary when there are no customers wandering the aisles. The store space can be bare bones, which eliminates considerable costs.
Besides resembling a warehouse, other grocery costs that can be tossed out include customer service personnel, and additional human capital for service-oriented posts (think: deli counter). Restocking and resetting aisles can also be less onerous without the mess that shoppers typically make of store shelves.
And without customers, warehouse personnel can be freed up to work more productively. This isn’t just because they aren’t pulled away from stocking and other logistics by pesky questions (“where do you keep the Sauerkraut?”), but they can use more effective tools without safety concerns, like forklifts.
And from an inventory management perspective, there’s greater accuracy. Mixing a curbside pickup and traditional in-store shopping (as most grocery stores do), leads to inaccuracies. That happens when online inventory doesn’t reflect items that are sitting in in-store shoppers’ carts prior to checkout.
All of the above means ample cost savings and operational efficiencies. And further tying it all together, the world may actually be ready for such a model, given shoppers’ acclimation to curbside pickup that was conditioned in the Covid era. It’s no longer a new thing where comfort levels need to be established.
Anything with a Barcode
But it’s not all good news. Moving on to the potential disadvantages – and playing devil’s advocate to a point made above – the world may not be ready for this model… at least in some ways. For example, are consumers ready to pick out their produce on a website and trust that it will be fresh?
For that reason, this model may be great for anything that has a barcode, but not perishables. And it’s sort of all or nothing from a shopper’s perspective. If you’re just getting laundry detergent and other commodities at a drive-up store, you still have to make a second stop somewhere else for fresh goods.
Most of these factors come down to behavioral economics, which involves psychology and other variables that are hard to predict. Put another way, it will have to be proven in practice. Meanwhile, confidence comes from projections that 20 percent of grocery shopping will be online by 2026.
As for next steps for Addie’s, it plans to expand its footprint with an eventual target of 2,000 locations. Its seed funding round noted above will be used to build out a team of executive and floor associates (with $20 per hour as a starting wage), and to refine its technological infrastructure to make it all hum.
