The Giant Company's e-commerce brand, Giant Direct, has gotten off to a strong start in the Philadelphia area since launching nearly three years ago. So strong, in fact, that it’s struggled to keep up with demand.
“We’ve been over capacity in the Philadelphia region,” said Nicholas Bertram, president of The Giant Company.
Giant Direct has a dedicated e-commerce hub in nearby Lancaster, Pennsylvania. It also has four small fulfillment sites, or “warerooms,” attached to stores in the suburban neighborhoods around Philadelphia. But those buildings aren’t proving very efficient at meeting delivery demand inside the city’s urban core, where The Giant Company only operates a few stores.
Help is on the way. On Monday, The Giant Company opened an automated e-commerce fulfillment center (EFC) aimed at catapulting the Giant Direct brand in Philadelphia. The 124,000-square-foot facility, located next to the airport just south of the city center, will stock a supermarket’s worth of products, from rotisserie chickens to frozen meals, and provide delivery to the city proper as well as its four surrounding counties. The Giant Company expects the EFC to fulfill up to 15,000 delivery orders each week.
Starting Nov. 16, the facility will also help the Carlisle, Pennsylvania-based grocer reach into parts of southern New Jersey, where it doesn’t yet operate any stores — providing a crucial test of the brand’s reach.
As grocers look for ways to establish their own online brands in order to deepen shopper loyalty and improve the economics of online ordering, Giant's EFC marks a significant step toward e-commerce autonomy. It will be closely watched by parent company Ahold Delhaize as it looks for ways to automate order fulfillment across its various supermarket brands in the U.S. and in Europe.
"We're actually putting ourselves in a position to capture or grow that customer awareness and really build from that," said Darren Russ, The Giant Company's director of e-commerce operations. "We are coming in, in my opinion, from a point of strength."
Reaching new markets in and around Philadelphia
Giant Direct's Philadelphia EFC features two large automated fulfillment systems, one for ambient products like cans of soup and bottles of shampoo, and another for chilled items. Workers load inbound products into the system in bulk, and then as e-commerce orders come in, a hive of robots scurry along the grid-like platform picking items to send to workers for bagging.
In between the two grids is a manual-picking space where workers gather items that can’t go into the robotics system and combine those with items picked from the grids before loading orders onto Giant Direct trucks for delivery.
The facility, which was engineered by robotics company Swisslog, can handle order volumes that are five to 10 times what its supermarkets can, said Chris Lewis, president of supply chain for Ahold Delhaize USA. It also brings down the cost of picking and packing each order.
“It doesn't change our last-mile costs, but it does change the order fulfillment costs,” said Lewis.
The EFC also serves as a cross-dock facility for Giant Heirloom Market, the company's urban specialty format, with workers transferring items from large distribution trucks into smaller trucks that can better navigate city streets.
Although the facility is built to fuel the Giant Direct brand, it also fills third-party orders and has a dedicated space where drivers from Instacart and other companies can gather those orders. This reflects a complex reality for The Giant Company and other grocers: Even as they look to establish their own e-commerce brands, they still want to tap into the deep well of shoppers using marketplace apps.
“I'm very much pro Giant Direct,” said Bertram. “Having said that … we need to be on that marketplace platform as well.”
In addition to supplementing its delivery service in Philadelphia’s suburbs, the facility will help The Giant Company reach new neighborhoods in the city proper. Although the grocer has numerous stores positioned in surrounding Bucks, Chester, Montgomery and Delaware counties, it only has five stores currently in the city proper, with plans to add a sixth later this week and grow to 10 locations by 2023.
At the same time, Giant Direct will also venture across the Delaware River and fill orders in the New Jersey towns of Camden, Cherry Hill, Gibbsboro, Haddonfield, Marlton, Medford, Mount Laurel, and Voorhees, where it doesn’t operate any stores. Additional towns in the area will begin offering the service over the next several months, the company said in an announcement.
"If we can perfect a model, and if this model is the one or we continue to adjust it, we think there's a lot of application in other brands in the company and in multiple stores."
President of supply chain, Ahold Delhaize USA
The Giant Company isn’t the first grocer to use e-commerce to expand its reach into new geographies. Close competitor Kroger now offers its delivery service in Florida and will eventually offer it in the Northeast — two regions where it doesn’t have any stores on the ground. But Russ said the jaunt over to New Jersey will keep Giant Direct in familiar territory.
“Recognition of our brand is very high in Greater Philadelphia and Southern New Jersey,” he said. “Those customers have been hearing our marketing messages for years and seen how we’ve built our brand."
The facility can expand delivery to markets even further afield, said Lewis, and add new services, as well, depending on its performance. Bertram said the Giant Direct EFC has space left intentionally vacant to meet opportunities that might emerge in the coming months. He said he’s interested in getting deeper into catering, offering ghost kitchens and expanding the company’s B2B delivery arm.
“There are ideas that I think at some point we'll explore with this facility that can enable even more extension of the Giant Direct brand to customers," Bertram said.
A test case for Ahold Delhaize
As the EFC’s robot-powered array revs up and begins filling orders, The Giant Company's parent, Ahold Delhaize, will keep a watchful eye on it.
The Netherlands-based grocery company, which likes to use its various banners as test labs for innovations that could scale companywide, has dabbled in robotic e-commerce fulfillment and is looking to crack the code on making these facilities profitable, said Lewis.
Over the past 18 months, The Giant Company's sister chain Stop & Shop has been testing an automated micro-fulfillment center (MFC) engineered by Takeoff Technologies that’s attached to a store in Windsor, Connecticut. Lewis said the machinery and software perform well but still need refining to get products accurately and efficiently into customers’ order bags.
He said the refinements are happening across multiple facets of the system, and said the companies are trying to determine how to boost the number of times the system can run in a 24-hour period, thus maximizing the investment.
“We’re still trying to figure out what a scalable micro-fulfillment solution could be,” Lewis said.
He said The Giant Company and Ahold Delhaize chose Swisslog and its AutoStore solution for the Philadelphia EFC because of its flexibility, both in terms of the system’s construction and cost structure, and because of the large number of items it can put through automation. He compared the system to an erector set and said it can adjust to fit a variety of spaces, including store backrooms.
The system also promises to improve the quality and accuracy of orders, with the ability to track product levels and fulfillment times much better than store-based picking and packing.
“If we can perfect a model, and if this model is the one or we continue to adjust it, we think there's a lot of application in other brands in the company and in multiple stores,” Lewis said.
Experts have noted that automated MFC technology, which has been closely watched by retailers and heavily promoted by companies like Takeoff, AutoStore and Fabric as e-commerce sales have risen, hasn’t yet lived up to its hype. But Lewis said it's “still early days” for the technology, which promises to bring rapid, efficient fulfillment to store backrooms and other small sites that sit close to consumers’ homes.
Lewis said he sees a lot of changes ahead for MFC technology over the next five years that will improve performance and bring down costs. Giant Direct's Philadelphia EFC, meanwhile, should be able to expand its addressable market as it brings down fulfillment costs, he said.
Figuring out how to move e-commerce fulfillment beyond overtaxed store is becoming an increasingly urgent matter for Ahold Delhaize and grocers across the U.S., Lewis said.
“I'm sitting in Maine, which is Hannaford territory. And they have a lot of stores that are very successful at picking from stores, and they're getting almost to their max,” he said. “So we’re hoping we can find a solution like this where there's a lot of applications for it across our footprint.”