Ocado: An Alternative Way to Bridge the Last Mile in Grocery Home Delivery
Subject
Organisational Behaviour, Management Science and Operations
Publication Year
2002
Abstract
During the U.S. internet frenzy of 1998-2000, numerous new, pure play Internet grocers promised consumers that they could have groceries at prices equal to or lower than existing bricks and mortar grocery stores, while simultaneously enjoying unparalleled convenience without having to leave the house and battle the crowds at the stores themselves. The most prominent of these companies was Webvan, which reached a stock market value of $7.9 billion at the end of its IPO. Webvan, Home Grocer, PeaPod and several other Internet grocers made huge bets that selling groceries online was a growth market and represented a new way of doing business. Unfortunately, as has been illustrated by the widely publicized collapses of these high profile Internet grocers, there was a substantial gap between theory and practical application. What the grocers discovered was that covering the “last mile” to consumers’ homes to deliver groceries the their doorstep represented a substantial challenge with numerous operational and logistical difficulties. In contrast, there are currently several examples of grocery and other food delivery companies that appear to be making effective use of the Internet as a link with customers. In particular, both Tesco in Britain and Albertson’s in the U.S. currently have Internet channels for selling groceries that are profitable. Whereas many of the failed Internet grocers appeared to be hoping to capture a large portion of the overall grocery market, companies such as Tesco and Albertson’s view Internet ordering of groceries more as an additional sales channel. This channel in unlikely to ever represent a majority of grocer sales, but even a small portion of sales can be quite significant due to the huge size of the overall market. Are these new forays into the Internet likely to fare better than their earlier counterparts? Ultimately, only time will tell as to the degree of profitability attained, but it is possible to create useful comparisons between selected examples of the old (Webvan) and new attempts (Ocado, Sainsbury’s and Tesco in particular).
Topic List
Internet shopping
Location
US, UK
Project Funder
ESRC Research Innovation
Available on ECCH
No
