Abstract
In this chapter, I seek the answer to a single question: is it possible to set up and operate a successful, profitable, online grocery business? The answer is sought and illustrated by reference to a single case study methodology to analyse the UK company, Ocado. It is recognised that the grocery retail sector is unusual in that customers invariably purchase multiple items at one time, that the product mix contains multiple items that are perishable within a defined time period, that the products demanded fluctuate widely according to seasonal factors, and that Ocado has a unique place within the UK retail sector. Nevertheless, the detailed examination of the practices of Ocado offered in this chapter illustrates a model whereby the focal point company proceeds via disintermediation of several of the conventional stages of the supply chain. Key is the allocation of time to the three main remaining processes: order taking, order picking or fulfilment, and order delivery. In so doing, Ocado has established a unique first-mover advantage in online grocery retail that will be difficult to supplant.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
References
Alderson, W. (1954). Factors governing the development of marketing channels. In R. M. Clewett (Ed.), Marketing channels for manufactured goods (pp. 5–34). Homewood, IL: Richard D. Irwin.
Belavina, E., Girotra, K., & Kabra, A. (2016). Online grocery retail: Revenue models and environmental impact. Management Science,63(6), 1781–1799.
Boyer, K. K., Hult, G. T., & Frohlich, M. (2003). An exploratory analysis of extended grocery supply chain operations and home delivery. Integrated Manufacturing Systems,14(8), 652–663.
Boyer, K. K., & Hult, G. T. (2005). Extending the supply chain: Integrating operations and marketing in the online grocery industry. Journal of Operations Management,23, 642–661.
Clarke, P. (2017, May 9). How an online grocery platform could reshape retail as we know it. Harvard Business Review. Accessed October 10, 2018. https://hbr.org/sponsored/2017/05/how-an-online-grocery-platform-could-reshape-retail-as-we-know-it.
Delaney-Klinger, K., Boyer, K. K., & Frohlich, M. (2003). The return of online grocery shopping: A comparative analysis of Webvan and Tesco’s operational methods. The TQM Magazine,5(3), 187–196.
IGD (Institute of Grocery Distribution). (2018). Ocado and Kruger announce exclusive US E-commerce deal. Accessed May 29, 2018. https://supplychainanalysis.igd.com/news/news-article/t/ocado-and-kroger-announce-exclusive-us-ecommerce-deal/i/18982?utm_campaign=1208604_180524.SCA.NL.NONSUBS&utm_medium=DMemail&utm_source=IGD%20Services%20Limited&dnnid=4763&dm_i=2Z8W,PWKC,3JMPLO,2N0HL,1.
IGD. (2016). Company reports—cited in Ocado (2017). Our platform is taking share—2014–2016 online grocery market share movement 5th July 2017. Accessed July 5, 2017. http://www.ocadogroup.com/~/media/Files/O/Ocado-Group/reports-and-presentations/2017/1h17-interim-results-presentation.pdf.
IGD. (2017, June 6). UK food and grocery forecast to grow by 15% by 2022. Accessed June 27, 2017. https://www.igd.com/about-us/media/press-releases/press-release/t/igd-uk-food-and-grocery-forecast-to-grow-by-15-by-2022/i/16927.
Instacart.com. (2017). Press resources. Accessed July 4, 2017. https://www.instacart.com/press.
Kornum, N., & Bjerre, M. (2005). Grocery e-commerce consumer behaviour and business strategies: An introduction. In N. Kornum & M. Bjerre (Eds.), Grocery e-commerce: Consumer behaviour and business strategies (pp. 1–6). Cheltenham: Edward Elgar.
Kozlenkova, I. V., Hult, T. G., Lund, D. J., Mena, J. A., & Kekec, P. (2015). The role of marketing channels in supply chain management. Journal of Retailing,91(4), 586–609.
McKevitt, J. (2017, June 2). UK online grocery sales reach 7.3% market share. Accessed June 27, 2017. https://www.kantarworldpanel.com/en/PR/UK-online-grocery-sales-reach-73-market-share.
Melis, K., Campo, K., Lamey, L., & Breugelmans, E. (2016). A bigger slice of the multinational grocery pie: When does consumers’ online channel use expand retailers’ share of wallet? Journal of Retailing,92(3), 268–286.
Meyer, C., & Schwager, A. (2007). Understanding customer experience. Harvard Business Review,85(2), 117–126.
Ocado*. (2017, June 5). Announcement of first international customer for the Ocado smart platform. Accessed July 23, 2017. http://otp.investis.com/clients/uk/ocado/rns1/regulatory-story.aspx?cid=371&newsid=879697.
Ocado**. (2017). Ocado group half year results. Accessed July 5, 2017. http://www.ocadogroup.com/~/media/Files/O/Ocado-Group/reports-and-presentations/2017/1h17-interim-results-presentation.pdf.
Ocado. (2018). Who we are: Ocado at a glance. Accessed March 5, 2018. https://ocadosolutions.com/.
Ocado Solutions. (2018). Morrison’s. Accessed March 6, 2018. https://ocadosolutions.com/.
Rigby, D. K. (2017). The Amazon-whole foods deal means that every other retailer’s three-year plan is obsolete. Harvard Business Review. Accessed October 10, 2018. https://hbr.org/2017/06/the-amazon-whole-foods-deal-means-every-other-retailers-three-year-plan-is-obsolete.
Roger, S., & Batty, E. (2017). The future of E-commerce in FMCG. Issue 4 November 2017 Kantar World Panel Report.
Rovnick, N. (2018, January 22). Ocado agrees tie up with Canada’s Sobey’s. Financial Times. Accessed March 5, 2018. https://www.ft.com/content/526143ac-ff46-11e7-9650-9c0ad2d7c5b5.
Shingo, S. (1981). Study of Toyota production system from Industrial Engineering Viewpoint. Tokyo: Japan Management Association.
Tanskanen, K., Yrjola, H., & Holmstrom, J. (2002). The way to profitable internet grocery retailing—Six lessons learned. International Journal of Retail and Distribution Management,30(2), 169–178.
Vanelslander, T., Deketel, L., & Van Howe, D. (2013). Commonly used e-commerce supply chains for fast moving consumer goods: Comparison and suggestions for improvement. International Journal of Logistics: Research and Applications,16(3), 243–256.
Yin, R. (2009). Applications of case study research. Newbury Park, CA: Sage.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2019 The Author(s)
About this chapter
Cite this chapter
Mason, R. (2019). Developing a Profitable Online Grocery Logistics Business: Exploring Innovations in Ordering, Fulfilment, and Distribution at Ocado. In: Wells, P. (eds) Contemporary Operations and Logistics. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-14493-7_19
Download citation
DOI: https://doi.org/10.1007/978-3-030-14493-7_19
Published:
Publisher Name: Palgrave Macmillan, Cham
Print ISBN: 978-3-030-14492-0
Online ISBN: 978-3-030-14493-7
eBook Packages: Business and ManagementBusiness and Management (R0)