Online food retailers generally use one or any combination of four approaches to distribute grocery orders to customers Some retailers, such as Sainsbury’s in the United Kingdom and Colruyt in Belgium, offer more than one approach. Tesco goes even further—already offering both in-store click-and-collect service and home delivery, it has begun investing in shadow warehouses to increase the efficiency of home delivery. The following describes the online grocery approaches of some of the more established retailers: Shadow warehouses (pickup). The shadow warehouse approach already used by companies such as Chronodrive, Leclerc, and Système U has become popular in France. Traditional retailers such as Intermarché and Carrefour are currently in test phases with this approach, and German retailer Real has initiated a test phase in two markets. In the United States, one example of this approach is Farm Stores, a Florida-based online grocer with drive-through pickup. One major obstacle to online grocery is quite simply that customers are happy with how they get their groceries now. The advantage of the drive-through pickup is the time savings—online shoppers can often collect their groceries without having to get out of their vehicles. Chronodrive, a sister company of French hypermarket chain Auchan, is currently expanding the number of its outlets to 32 in France and boasts that its pickup process takes less than five minutes. The approach succeeds because of its efficiency; on the other hand, the absence of personal contact can hamper both marketing and customer service efforts. Shadow warehouses (home delivery). Similar to the first approach, home delivery managed from a central distribution center is frequently used by pure online retailers that do not have traditional retail stores. It is common in the United States, where Peapod (founded in the United States in 1989 and now owned by Netherlands-based Ahold), FreshDirect, EfoodDepot, and Netgrocer have made a dent. This approach is moving forward in Europe, too, led by Switzerland’s LeShop, which has partnered with the Swiss postal service for delivery, and the U.K.’s Ocado. Even traditional retailers that offer home delivery, such as Tesco, are opening centralized shadow warehouses to benefit from more efficient picking and delivery. The efficiency and time-saving features of this approach can be valuable to customers, but the level of customer service involved can also make it comparatively expensive. Store-based (pickup). This business model allows customers to pick up pre-packed groceries from traditional retailer outlets. Publix and Albertsons in the United States have abandoned store-based home delivery in favor of pickup. This approach is easy for traditional grocery retailers to adopt within their existing structures. But customers often see little difference between online and offline channels and, ultimately, may prove unwilling to pay a premium for the service. When moving into the online business, traditional food retailers often choose to offer both click-and-collect and home delivery from their stores. Store-based (home delivery). Traditional retailers entering the online business often take advantage of their retail outlets and pick customers’ products for delivery from their existing stores. The U.K.’s Asda uses this approach, while others such as Sainsbury’s, Simply Market, Colruyt, and Delhaize offer in-store picking and click-and-collect. In-store picking is waning in popularity among retailers because of delivery inefficiency, costs, and availability. Furthermore, trade chains are encountering local competition; for example, in many countries, including the United States, it is already common for some single-location stores to offer home delivery in two hours. Shopping Around: It’s All In the Details After examining the leading business models for online grocery, our survey findings helped identify ways to improve online grocery retail. The improvements fall into three categories: customers, operations, and success factors. Customers Our focus turned to how and what online grocery shoppers buy. In general, executives agree that the customer base will widen with the Internet-savvy generation. Busy young professionals who value the opportunity to save time and young mothers seeking to avoid busy supermarkets are the main target group in online groceries. As one young mother puts it, “Online grocery shopping is convenient and it saves time. I do not need to carry heavy bags and I can avoid long lines.” Please download the attached file.
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