Conference Agenda

The growing e-grocery sector faces challenges in becoming profitable due to heightened customer expectations and logistical complexities. This paper addresses the impact of uncertainty in customer demand on inventory planning for online grocery retailers. Given the perishable nature of grocery products and intense market competition, retailers must ensure product availability while minimising overstocking costs. We propose introducing subscription offers as a solution to mitigate these inventory challenges. Unlike existing literature focusing on uniform subscription models that may harm profitability, our approach considers the synergy between implementing product subscriptions and cost savings from improved inventory planning. We present a three-step procedure enabling retailers to understand uncertainty costs, quantify the value of gathering additional planning information, and implement profitability-enhancing subscription offers. This holistic approach ensures the development of sustainable subscription models in the e-grocery domain.

E-grocers struggle to create profitable business models, and careful planning is needed to balance tight margins with high customer expectations. Although numerous studies emphasize optimizing customer acceptance and efficient delivery, the costs and resources required for picking orders are less examined despite their significant influence on profitability.

In this presentation, we delve into in-store picking costs within the e-grocery context and introduce a cost evaluation function designed to give retailers a precise assessment of the resources needed for picking orders, thereby assessing feasibility and maximizing the number of accepted orders. For e-grocers, the time taken to pick items is a critical determinant of costs and use of resources, as longer picking times directly translate to increased labor expenses and fewer orders that can be picked.

We are conducting a comprehensive assessment of the proposed cost evaluation function, utilizing real-world data to ensure accuracy and relevance for different order picking strategies. Our assessment employs a detailed analysis of store layouts like those of REWE in Germany, combined with historical data from a former German e-grocer involving over 400,000 order baskets. This data provides insights into typical order compositions and the resources needed for various basket types, enhancing our understanding of critical costs in e-grocery picking. The insights from this study will provide valuable input for a comprehensive analysis of both picking and delivery processes in the e-grocery sector.