Make Money Online
Lessons from Trader Joe’s, Wegmans, and Walmart.
July 31, 2024
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During 2020-21 online grocery shopping soared from 3.4% to double digits as Covid-19 made customers reluctant to go into stores. Post Covid, online grocery shopping is still high, forecasted by Forrester (2021) to hit 10.4% in 2024. How will grocery retailers service this new demand stream? What they should not do is continue the common model of picking from their store shelves for free if the customer picks up the order. Compared to customers shopping in the store and going through checkout, the authors’ analysis shows that this more than doubles labor requirements and destroys all profit. Instead, they need to choose one of three models: 1) Double down on the traditional in-store model 2) Offer online services to those specific customers who are ready to pay extra for the convenience, either as service charges or higher product prices 3) Become more efficient at online by fulfilling from select store backrooms using automation.
Grocery retailers face a challenge: What to do with the online channel, which is growing and popular with a segment of their customers but is hugely unprofitable? Based on research we have conducted in the last three years, we offer three other options in this article.
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Marshall Fisher is the UPS Professor in the Operations, Information, and Decisions Department of the University of Pennsylvania’s Wharton School and a codirector of the school’s Fishman-Davidson Center for Service and Operations Management .
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Santiago Gallino is the Charles W. Evans Distinguished Faculty Scholar and an associate professor in the Operations, Information, and Decisions Department the University of Pennsylvania’s Wharton School and a codirector of the school’s Fishman-Davidson Center for Service and Operations Management.
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