Strategies and challenges of Internet grocery retailing logistics

One of the most challenging sectors of the retail market today is the grocery segment, specifically e-grocers. Since the mid-1990's multiple companies have entered the e-grocer market. Few have survived. What is it about e-grocers that make them fail? What makes them succeed? What can we learn from yesterday's e-grocers that will enable the new players to stay afloat or even be called "the greatest thing since sliced bread?" Given that the industry is still in "transition," it is difficult to find definite answers to these questions. With the goal of gaining useful insights on these issues, in this chapter we analyze e-grocers, past and present, discuss different business models employed, as well as order fulfillment and delivery strategies. Among the three alternative business models, namely, pure-play online, brick-and-mortar going online, and partnership between brick-and-mortar and pure-play online, we observe that the latter model has a higher success potential by combining the strengths and minimizing the weaknesses of the former two models. We discuss order fulfillment methods used by current and defunct e-grocers, specifically, the mega-warehouse, in-store order fulfillment, and the hybrid store-warehouse, and provide an overview of their relative advantages and disadvantages. We also discuss alternative order delivery methods, including, attended and unattended home delivery, in-store pickup, and third-party pickup locations. We conclude with a discussion on lessons learned from failure and success stories of e-grocers, a summary of current trends and directions, and future opportunities.