hed 460 internet grocery (e-grocery) very few consumers shop internet for groceries 1 in 5 internet...
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HED 460
Internet Grocery (E-grocery)
Very few consumers shop Internet for groceries
1 in 5 Internet users who are the primary household grocery shopper are interested
42% would like to spend less time shopping for groceries
Almost 40% Internet users enjoy shopping for groceries
HED 460
Internet Grocery (E-grocery)
E-grocery can boost loyalty and increase market share
E-grocery is projected to be 2% of total grocery shopping
HED 460
Webvan – “pureplay” Launched June 1999 – Hi capital Hub and spoke strategy $260 mil. Sales in 2000 $1 bil. expenses Acquired HomeGrocer.com in August 2000
Mid 2003 relaunch in S. CA?? CEO resigned ~ March/April 2001 Shut down July 9 2001
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Peapod Launched 1989 Profit 1st Q 2001 in Chicago market Various strategies (from supermarkets
to dedicated distribution centers) Acquired in 2000 by Royal Ahold ($73
mil.) Pulled out of some markets and
aligned with different Ahold supermarket chains
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Save my username & password
New to Peapod?
Groceries foryour home
Groceries foryour business
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Tesco – U.K. Reports profit 1 mil customers/ 90,000 orders/week 90% customers reached with existing
store network – lower delivery costs National store base Bought US GroceryWorks.com (35%)
(Safeway owns 50%)
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Regionals PublixDirect – small dedicated
warehouses Palm Beach/Broward Counties 28 zip
codes plus 13 more by 2002 2002 Atlanta and Orlando
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Regionals Albertson’s
Central warehouse/existing stores 37 states: Seattle, Las Vegas, Los
Angeles, Vancouver, San Diego Average order $110/52 items Produce and meat in top 10 items $9.95 deliver, $5.95 pickup
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Delivery Models Next day service
2 hour delivery window $19.95/month. $9.95/order
Order-on-demand (ensenda) 60 minute delivery window
Pre-scheduled, unattended delivery (most are out of business) $35/month Receptacles/refrigerators
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Fulfillment Models Stores
Pick, pack, deliver – special carts Use existing assets
Distribution Centers/Warehouses Hand held radio frequency scanners to help pick products
Delivery to consumers
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Fulfillment – Logistics provider
Whyrunout.com California based – Statler Bros. stores Purchased customer referral rights from
Webvan, webvan emailed giving options Deliver drycleaning, film, health/beauty More than one store ($9.95, + $1.00
each) Deliver 2:30-8:30 p.m.
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Fulfillment – logistics provider
Ensenda Delivery service in local markets Uses existing stock from local
retailers Delivery within 60 minutes Couriers in 75-100 markets $19.95 delivery charge >sales and >order size reported
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Preferred Service Models
29
47
28
67
23
51
23
46
010203040506070
Sto
re P
ickup
Delivery
C-
Sto
re/m
edia
C-
Sto
re/m
eals
All InternetInterested
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Financials Few making profit Grocery profit is usually 1-2% Potential profit percent of up to
12% Infrastructure and volume are the
main barriers to profits
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Future
Not dead Partner with large food retailers Focus on concentrated urban
areas with wealthier clients (volume/profit)
Lack of national supermarket chain means success of local e-tailers
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Fulfillment Issues
Product availability Order processing Delivery Returns Customer service
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Fulfillment87 85 84
78 75
49
0
10
20
30
40
50
60
70
80
90
Fulfillment Capabilities Expected
Verify rcpt.AvailableVerify shipStatusBack orderLocal return
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Keeping Customers in the Loop
Circuit City Local store pick-up (Express pickup) Identify up to three local stores Checks availability at the local stores With Express Pickup no shipping Pick up at customer’s convenience
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Keeping Customers in the Loop
Staples Enter zip code at start of shopping for real-
time inventory availability Anything in-stock is available for next day
delivery
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Returns
29
41
53
0
10
20
30
40
50
60
Return Experience
ReturnedToo much HassleNo Effect
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Order Status (capability)
94.597.491.7
53.8
83.3
48.7
77.8
48.7
0102030405060708090
100
Confirm Back Order Shipped Tracking
Pure PlayMulti-channel
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Returns/Back Orders
4.3
5.1
3
5.9
0
1
2
3
4
5
6
Returns Back Order
Pure PlayMulti-channel
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Fulfillment Cost as % of Revenue
19
1314
11
02468
101214161820
Today 2 Years
Pure PlayMulti-channel
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Fulfillment Challenges
Lowering fulfillment costs Distributing globally Lowering total fulfillment costs Managing peak season volume Keeping up with order volume
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