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Strategies for Success in the E-Grocery Industry Tong Niu Rochester Institute of Technology RIT Scholar Works Theses Thesis/Dissertation Collections 2008 Strategies for success in the e-grocery industry Tong Niu Follow this and additional works at: http://scholarworks.rit.edu/theses Recommended Citation Niu, Tong, "Strategies for success in the e-grocery industry" (2008). Thesis. Rochester Institute of Technology. Accessed from This Thesis is brought to you for free and open access by the Thesis/Dissertation Collections at RIT Scholar Works. It has been accepted for inclusion in Theses by an authorized administrator of RIT Scholar Works. For more information, please contact [email protected]. 1 Strategies for Success in the e-Grocery Industry Tong Niu Department of Hospitality and Service Management Rochester Institute of Technology 2 ROCHESTER INSTITUTE OF TECHNOLOGY Department of Hospitality and Service Management Graduate Studies M.S. Service Management Statement Granting or Denying Permission to Reproduce Thesis/Graduate Project The Author of a thesis or project should complete one of the following statements and include this statement as the page following the title page. Title of Thesis/project: Strategies for Success in the e-Grocery Industry I, Tong Niu , (grant, deny) permission to the Wallace Memorial Library of R.I.T. to reproduce the document titled above in whole or part. Any reproduction will not be for commercial use or profit. OR I, , prefer to be contacted each time a request for reproduction is made. I can be reached at the following address: Date 11/18/2008 Signature 3 Acknowledgements The writing of this thesis has been an incredible learning process for me. Professor Bonalyn Nelsen’s invaluable experience and knowledge provided me with tremendous help and guided me through the completion of this thesis. I am also grateful to Professor James W. Jacobs Jr.’s continued support and encouragement. My family backed me up every step of the way. I wish to express my appreciation to all of them. 4 ROCHESTER INSTITUTE OF TECHNOLOGY Department of Hospitality and Service Management Graduate Studies M.S. Service Management Presentation of Thesis/Project Findings Name: Tong Niu Date: 11/26/08 UID# 26500 1701 Title of Research: Strategies for Success in the e-Grocery Industry Specific Recommendations: (use other side if necessary) Thesis Committee: (1) Bonalyn Nelsen (Chairperson) (2) James W. Jacobs Jr. OR (3) Faculty Advisor: James W. Jacobs Jr. Number of Credits Approved: 4 Date Committee Chairperson’s Signature Date Committee Signature Note: This form will not be signed by the Department Chairperson until all corrections, as suggested in the specific recommendations (above), are completed. cc. Department Student Record File – Original Student 5 Abstract US e-grocers have been testing different business models with varying results. This research conducted a meta-analysis of six online grocers (Peapod, Tesco, Safeway, FreshDirect, Webvan and Streamline) to identify the pattern of strategies that contribute to their performance. Each company's management capabilities, expansion and market selection strategy, order-picking method, delivery method, website design and Customer Relations Management (CRM) are explored and compared to identify the factors that provide these businesses with a greater chance of success. The findings suggest that knowledge of and experience in the grocery business play an important role in the success of an online grocer. Using a cautious and slow expansion strategy helps an e-grocer stay in the game. The store-pick model is suitable for most markets, while warehouse-pick may be used for markets with high customer demand. Each business model allows for strategic variations. 6 Table of Contents Chapter One .................................................................................................................. 10 1.1 Introduction and Background ............................................................................... 10 1.2 History of Home Grocery Delivery ....................................................................... 11 1.3 Factors Driving the Popularity of Online Grocery Shopping ................................. 14 1.4 Problem Statement .............................................................................................. 15 1.5 Purpose of This Study ......................................................................................... 16 1.6 Major Research Questions of the Study .............................................................. 16 1.7 Significance and Limitations ................................................................................ 17 1.8 Structure of the Thesis ......................................................................................... 18 Chapter Two .................................................................................................................. 20 2.1 Industry Overview ................................................................................................ 20 2.2 Customer Base/Target Market ............................................................................. 23 2.2.1 Demographic Characteristics ........................................................................ 23 2.2.2 Geographic Characteristics ........................................................................... 24 2.2.3 Psychographic Characteristics ...................................................................... 25 2.2.4 Technological Characteristics ....................................................................... 28 2.3 e-Grocery Shopping Process and Various Business Models ............................... 29 2.3.1 Online Ordering ............................................................................................. 29 2.3.2 Order Picking ................................................................................................ 30 7 2.3.3 Order Delivery/Pick Up .................................................................................. 31 2.3.4 Business Models ........................................................................................... 32 2.4 Opinions from Previous Studies........................................................................... 33 2.4.1 Factors for Success ...................................................................................... 34 2.4.2 Factors for Failure ......................................................................................... 36 2.5 Summary ............................................................................................................. 38 Chapter Three ............................................................................................................... 39 3.1 Research Approach and Method ......................................................................... 39 3.1.1 Case Study Method ....................................................................................... 39 3.1.2 Meta-Analysis ................................................................................................ 40 3.2 Cases/e-Grocers Examined ................................................................................. 41 3.3 Data Analysis ....................................................................................................... 43 3.4 Validity and Reliability .......................................................................................... 44 Chapter Four ................................................................................................................. 46 4.1 Management Core Competencies ....................................................................... 46 4.2 Expansion and Market Selection Strategies ........................................................ 51 4.3 Order Fulfillment Strategies ................................................................................. 56 4.3.1 Facilities and Technology .............................................................................. 56 4.3.2 Order-picking Method .................................................................................... 59 4.3.3 Inventory Control ........................................................................................... 62 8 4.3.4 Summary ....................................................................................................... 64 4.4 Order Delivery Strategies .................................................................................... 65 4.4.1 Order Delivery Options and Pricing ............................................................... 65 4.4.2 Strategies for Operational Efficiency ............................................................. 67 4.4.3 Summary ....................................................................................................... 70 4.5 Web Design and Customer Relations Management ............................................ 70 4.6 Cross-case Analysis and Findings ....................................................................... 75 4.6.1 Analysis ......................................................................................................... 75 4.6.2 Findings......................................................................................................... 78 Chapter Five .................................................................................................................. 83 5.1 Looking Back ....................................................................................................... 83 5.2 Looking Forward .................................................................................................
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