Efficiency of e-grocery: Challenges and suggestions

Abstract

Buying food online has been an emerging trend in the later years. There is a high demand from customers on this service. However, the e-grocers are losing money and goes out of business. The reason for that is low margins and customer's unwillingness to pay extra for this service. In this thesis we have mapped out the different factors (or challenges) that e-grocers face. In turn we have found optimization solutions for said challenges. Important factors are for example customer behavior and expectations, picking efficiency, packing, and final delivery.

Most of previous studies focuses only on analyzing each individual part of the supply chain of e-grocery. Therefore, in this thesis, we would like to bring a comprehensive view that covers the whole process of order fulfillment by pointing out major challenges in each step and suggesting some solutions based on both theoretical and practical analysis. Readers cannot have complete insight from the beginning to the end of the process, and to understand the work of improvements that is needed to contribute to the success of the e-grocery business.

Revising other researcher's works and carrying out some analysis, we find that there are rooms for improvement in each activity of e-grocers. For example, warehouse-based picking is most applicable in dealing with a growing market, as it can handle orders much more efficiently, handle more orders, bigger room for growth, and higher overall capacity. More detailed challenges and solutions will be presented in this thesis with the purpose of optimizing the efficiency of retailers in terms of costs, revenue and customers satisfaction.

The authors find that for e-grocers to be profitable, there needs to be major efficiency improvements made. The improvements must be made in every single step, synchronizing together, from the customer placing the order till final delivery. Those solutions suggest that investment in new methods, new technology and innovations is needed. It could increase the costs of e-grocers at first, however, it will result in an increasing sales and better customers services. Therefore, overall the business will be more efficient if right solutions could be implemented at the right time.