- Tags:: 📜Papers, E Groceries
- Authors: Saskia Seidel
- Link:: https://www.sciencedirect.com/science/article/pii/S2213624X21001759
- Zotero Link:: seidelOneGoalOne2021
- Source date:: 2021
- Finished date:: 2021-03-02
The knowledge here comes from expert interviews and literature review.
E-grocery es veneno, pero huele a canela, pero es veneno, pero huele a canela…
online groceries – especially fresh food – is still bottom of the league in terms of the total share of product groups sold online. Nonetheless, the online turnover of groceries is showing continuous growth and it is expected to comprise up to 2.5% of the European food market by 2023 (IGD, 2019) (…). Despite rising sales figures, the online division of bricks-and-mortar groceries is still mostly in deficit.
And COVID is an illusion:
A work by Dannenberg et al. (2020), who studied the impact of COVID-19 on the grocery market, confirms an increase in the online grocery market, but also (…) that even e-grocery services experienced an extraordinary growth during the pandemic crisis this does not yet indicate a long-term shift from stationary to online grocery retail
Limited applicability of the studies you find around there:
the offers of online groceries may differ from country to country and also between neighbouring countries like Germany and France. The question arises as to the effects that differing forms of supply have on logistics and transport and whether a scheme can be drawn up that can be applied to different markets.
Why Germany and France? Because:
These are among the European nations with the highest turnover in food retailing.
Shopping basket
No fresh stuff:
The share of fresh food online is mostly below 10%, but with a higher proportion at drive. The German online shopping cart is similar, with frozen and fresh products making up less than 10% of the shopping cart.
Would this impact physical supermarket design?
Since there are few fresh products in the shopping cart, especially with HD, it could also be conceivable that the PoS could focus on freshness and reduce the amount of shelf-stable food and non-food products and thus also the amount of retail space in future.
More items are bought onlinr:
The average number of items purchased is up to 1.7 times higher than that of customers who buy in a traditional hypermarket. This trend has also been noted by market experts in France (Dauvers, 2020).
Delivery format
Amazingly, in France, MercadonaAuto would be a success:
, the drive through (hereafter called drive) to pick up previously online ordered and prepared baskets of groceries is the dominant delivery format in France. According to Nielsen (2019) 81% of all food online sales was generated via drives. (…) The drives concept (see subsection 4.1.2) has a customer base of about 26.7% of French households, but with a higher average shopping basket, at €68, than HD (home delivery) with €42 and a higher frequency of purchases (eleven versus five purchases per year)
Unlike in Germany:
German customers see little added value in collecting goods. They prefer home delivery (Morganti et al., 2014). According to a study by McKinsey & Co., collecting goods only becomes attractive with a delivery fee of at least €3 (Joress et al., 2016).
The paper details a classification of drives:
- At store in hypermarkets.
- Coherent drive: in hypermarket, but with own warehouse).
- Isolated drive with dark store.
- Isolated drive without dark store: food delivered from online warehouse.
- Piéton: within city supermarkets, but food delivered from online warehouse, to collect by a pedestrian.
- Click and collect: the classical. Picking is done in the store.
Home delivery
The main challenges reported by interviewees are, in order, last mile, picking costs.
Achieving a last mile delivery becomes the key success factor for grocery sales once they enter the online market (Punakivi and Saranen, 2001).
The problems with home delivery, especially during its introduction, are often a lack of logistical know-how, coupled with long preparation/commissioning times, low productivity, and high logistics costs. This is then reflected in higher product prices and up to two days’ lead time for deliveries. Both these factors make it unattractive for customers. To counteract this, many retailers have entered into co-operation with logistics service providers, both for warehousing and the last mile, and have started to establish new locations for exclusive online distribution.
Picking
Picking constitutes a large proportion of costs; in consequence, the costs per order should be kept as low as possible. According to the interviewees, the costs per order are between 60 and 75 cents.
In store is only a temporal solution:
When picking in the store takes place (store-based picking system), the process chain of stationary retail is only extended by the process elements of delivery logistics. This is the case in France and in some testing areas in Germany. Few companies retain this model later in an advanced stage as the picking costs are too high. In addition, store picking can lead to competition between picker and customer but, more often reported and far more relevant, to problems with store inventory management
Last mile delivery
Delivery fee depends on many things:
shopping cart value, time of day and size of the time window, delivery area, number of customers ordering nearby and other factors.
Obviously, demanded slots are around work time:
Agreeing to the interviewees, early morning times and slots after 6 p.m., see the greatest demand.
Retails are aiming to predictability (e.g., the green truck of Ocado Demand Management E Fulfillment)
To generate better predictability, retailers try to encourage regular orders from customers. This can be done in different ways, and incentive systems such as discounts are usually chosen. By marking time windows in which deliveries within a radius have already been agreed upon, customers are encouraged to choose their delivery windows in a similar time window. If this is successful, orders can be better bundled in one area and tours can be optimised.
Having delivery slots prevents you from using the shortest routes:
And the shorter the delivery costs… the higher the costs for the e-grocer:
A more recent work also addresses the issue of delivery windows: Wagner et al (2021) find that especially the choice of narrow delivery windows and short time spans between order and delivery increase logistics costs. For example, a delivery window of three hours is 3045% more expensive for a company than a delivery window of nine hours (ibid).
Obviously, same-day delivery is even more complex:
consumer density is mostly not high enough to operate at a tolerable level of costs. Same-day delivery presents a major logistical challenge in terms of costs and planning complexity. With more lead time, routes can be better optimised.
An interesting idea: the milk-man principle for routes:
The aim is to use fixed routes to reduce drop costs and achieve better capacity utilisation per tour. However, this has an effect on the supply offer, as no individual delivery times can be selected by the customer. This model has not so far been used by the interviewed retailers.
Gorillas de la vida:
home delivery is primarily carried out with sprinters. Since the onset of Covid-19, smaller orders are also possible, and these are delivered by bicycle or cargo bikes. In the overall picture, though, this is a relative exception and mainly limited to city centre.
Note the idea the authors suggest… cooperation…
Cooperation between retailers on the last mile could be one option for further reducing costs for retailers, whilst at the same time contributing to the reduction of distribution-related emissions. Establishing these will be difficult due to the competitive situation, but enormous cost savings, which could be gained by bundling and by improving the efficiency of last-mile transport, are attractive.
The IT Crowd
Besides logistical challenges (…), the challenges also include technical ones. IT plays a major role (…) especially the adaptation of internal processes.
👀
Retailers use machine learning to enable demand-driven inventory placement. The goal is to have a product database of good data quality across all channels, regardless of whether they are operated separately (multi-channel) or as part of a network (omnichannel). If systems succeed in being intelligently networked so that procedures do not have to be keyed in multiple times, large processes can be optimised and high costs saved. This also applies to logistics.
Other e-grocery consequences
In mobility:
centralised drives makes it impossible for customers to shift from a private car to more sustainable forms of traffic, as food shopping requires the use of a car.
As regards customers, the question arises as to whether online grocery shopping at least changes their mobility behaviour positively. This is not easy to answer since it is unclear to what extent online purchases actually substitute journeys taken for individual shopping trips or whether they are made rather as a supplement (…) And beyond that, what customers do with their newly acquired free time. Do they make other trips?
On reduction of costs and employment:
The interviews also revealed that once online grocery becomes firmly established, this provides an opportunity to reduce the number of physical stores. This could be attractive for retailers as maintenance costs as well as personnel costs in the warehouse are less expensive than those that have to be spent for a full-service grocery store. But what does that mean for the local supply and for employment? The effects of online trade on transport and urban development are therefore a particularly fruitful area for further study.
Other interesting refs
Wagner et al. (2021), which examine the impact of subscriptions on deliveries.
Wollenburg et al. (2018) conducted a comprehensive study on changes of supply chains for online grocery retail