RE: UKNM: Re: Re: Re: Waitrose man in The Guardian

[Steven_Buckley]

Apologies in advance for a very long email but if you're interested in the

sector, this email covers the following topics...



1. Interesting Grocery eTailers to look out for and short summary of each

2. eFulfilment Centre vs Store Fulfilment - the differences

3. Challenges of Grocery e-Tail

4. A multi channel world

5. Lifestyle Collection Points





******

There are a growing number of interesting grocery e-tailers out there.

Three to

look out for are :



www.Sainsburystoyou.co.uk

Sainsburys is one of the UK's largest grocers and are finally rolling out an

e-tail strategy.    They've built the Europe's, and possibly THE, largest

eFulfilment Centre to serve the London populus and are using a mix of

smaller

fulfilment centres and direct pick from store to satisfy other regions.

Their

strategy is interesting in that it acknowledges there is no one correct way

to

do this.   The correct picking method relies entirely on density of

population

and socio-economic profile of each region.



www.GroceryWorks.com

GroceryWorks started as a pureplay internet retailer out of Dallas.  They

have

an extremely good virtual inventory system and an excellent way of keeping

produce fresh.    Such has been the success of the company Safeway Inc. have

invested millions in them and GroceryWorks is now the online presence of

Safeway



www.WellcomeHK.com

Wellcome is one of Asia's largest retailers, part of the Dairy Farm Group.

They

have a large number of stores across Hong Kong but are using a dedicated

fulfilment centre concept to fulfil orders sent in via the Internet,

interactive

TV and call centre.   Within 12 months of the picking centre going live they

turned a profit.



******

eFulfilment Centre vs Store Fulfilment



The fact that a retailer has an existing distribution infrastructures does

not

mean that they instantly have an infrastructure to enable e-commerce

fulfilment.

Just ask anyone who has opened an e-fulfilment centre how different it is

from a

traditional retail store-servicing distribution centre. Not only does the

Material Handling Equipment and facility layout tend to be different, but

the

culture of the team operating within it has to be very different.

Traditional

concepts and thoughts do have a place, but new thinking and practice are

required. In addition the IT systems supporting it are very different.



There are 2 models emerging in the grocery space. The pick ex-store model

being

used by Tesco in the UK has enabled them to gain the early high ground and

market share. It is a fast entry route to market and low risk from a cost

perspective. But, will it be the model that they stick with in the long

term?

Anyone who has been into a store where web orders are being picked by store

staff will know how at certain times they almost outnumber the shoppers.

Store

staff fighting shoppers for the freshest lettuce is a very real problem

$B!>(B who

gets there first wins!  This cannot be a good way to go long term.

Moreover,

Tesco cannot guarantee stock availability at the time the customer places

the

order as the store shoppers are taking the stock off the shelves all the

time -

consequently substitution becomes a real problem.



Alternatively, the dedicated fulfilment centre model allows for maximum

efficiencies to be realised in the fulfilment of orders albeit at a much

higher

initial capital cost. An efficient eFulfilment centre is designed to handle

high

order volume throughput. A store is not designed for large volumes of web

orders

to be picked. The speed at which they are assembled will be much faster than

in

store. Inventory efficiencies can be realised too without putting at risk

the

availability of product on the shelf in-store for shoppers. Not all the

inventory needs to be held in the centre but the GroceryWorks model of a mix

of

held and virtual inventory can ensure success.



It is far too early to call which model will emerge as the winner.  Most

likely

is that the experience gained from these $B!F(Bfirst-wave$B!G(B models

will lead major

retailers to a blend of dedicated fulfilment centre and store pick service

models, with the bias being towards fulfilment centres wherever a certain

level

of population density is found.   Store pick will flourish in areas of low

population density or difficult to reach areas.



Finally, it should be understood that the major stumbling block for e-tail

grocery is the demographic - it is not divorced and singles that are the

largest

users of grocery e-tail.  Its families with kids who are too pushed for

time.

A fact borne out by the high average SKU counts of Grocery e-tail orders.

This

group are not the traditional high-volume users of the Internet and whilst

there

have been early adopters, the single largest challenge fro Tesco, Sainsbury

et

al is to reach a critical mass of internet family shoppers quickly.



******

Challenges of Grocery eTail



The major customer facing challenges of Grocery e-tail besides the

technicalities of running a picking centre are generally



Managing wastage

Offering a store - equivalent range

Selling Fresh Produce

Keeping Items Chilled

Fulfilling Orders Correctly



*Managing Wastage / Offering a store-equivalent range*

Orders through grocery e-tail are very spiky.  People tend to bulk shop

through

the channel and don't necessarily buy to a pattern.  The challenge for

e-tailers

is to manage their stocks to minimise waste and to ensure high

availability -

more so than in a traditional store environment.    The solution is virtual

inventory and the GroceryWorks model is as follows....



The company employs a virtual warehousing approach to fresh and chilled

produce

- they go directly to the local distributor to get product, many of which

supply

local restaurants - thus ensuring excellent quality standards.  When a

customer

orders a steak, the cut actually comes pre-packaged directly from the best

distributor of meat products in the city with little or no handling by

GroceryWorks.    This allows the firm to offer a wide range and availability

of

fresh produce without any of the spoilage risk of stocking it themselves.



The delivery van structure ties into the virtual warehousing system.   As

vehicles finish a delivery sequence, they call at each of the suppliers

located

on the route to collect whatever additional orders are ready since the last

GroceryWorks truck stopped by.  This adds little cost to the operation but

offers significant savings to the firm.



*Selling Fresh Produce*

Virtual Inventory obviously manages the wastage issue but how does a store

picker differentiate between ripe bananas and green bananas.   How firm

should

the pepper be.  Should the Apples be large or small.  One way is to SKU

every

variation but that's pretty impossible.   Watch out for e-tailers allowing

you

to describe in your own words the type of produce you want and then

guaranteeing

accurate fulfilment.   In order to encourage shoppers to try fresh produce

many

e-tailers are now offering a free produce selection with every order.



*Keeping Items Chilled*

The solution is in fact pretty easy.  GroceryWorks use lo-tech 'dry-ice'

totes

which keep the produce at the right temperature for up to 8 hours.



*Fulfilling Orders Correctly*

This is the number #1 issue.  The old store fulfilment model of the past

said

that if you delivered to 99% accuracy that was OK.  In the modern world

that's

not good enough.   If an e-tail order has 50 line items (they average

between 40

and 70 dependent on region) then a 99% accuracy rate will mean every other

customer order fulfilled has an incorrect or missing item.   If that item is

a

critical recipe ingredient then the customer is unlikely to give you a

second

chance.   Therefore the quality procedures required of e-tailers are far

greater

than any other model.   It's another reason why the dedicated fulfilment

centre

is so much more beneficial.   Items can be distributed throughout the

warehouse

in a non-category way so that mispicks are minimised.   SKU scans and tote

weight check at departure then provide final confirmation of the order .



*****

A Multi-Channel World



e-tail will not close the big grocery stores, nor will it go away.   Rather,

those that are successful, such as the stores I've listed above, view e-tail

as

simply another route to market - another distribution channel.  The downside

is

that, in my opinion, the opportunities for small pureplay start-up's in the

Grocery sector are rapidly diminishing - the major opportunities in grocery

e-tail will be with existing bricks & mortar players - they have logistics

structure and buying strength to support dedicated fulfilment centres.

Nevertheless, it can work out for pureplay's with a strong USP just look at

groceryworks.com.



*** Lifestyle Collection Points ***



One of the often mentioned criticisms of grocery e-tail is that the customer

has

to be there to accept the order or you need to install very expensive

technology

to be able to deliver to an empty house.   This is not a valid critism.



Two developments are as follows :



GroceryWorks can already predict their drivers arrival time with customers

to

within 30 minutes and are able to offer a very wide range of delivery times

up

until 10pm at night.   Therefore their customers do not have to worry about

waiting in or missing the delivery.  Far more interesting though is the

Lifestyle Collection Point where groceries are delivered to your office as

you're about to leave for home, or you collect your grocery from a

refrigerated

delivery vehicle parked at your local train station or tube.    Very soon

companies will even be able to meet you en-route to picking the kids up from

school.  Home delivery is just one option of many.





That's it, I've had enough.  Hopefully you found this of interest.



Kind Regards



Steven Buckley

EMEA Marketing Manager - EXE Technologies

----------------------------------------------------------------------

www.exe.com











Amanda Quinn <

amanda [dot] quinnjav [dot] co [dot] uk

>@chinwag.com on 11/23/2000 09:46:45 AM



Please respond to

uk-netmarketingchinwag [dot] com

Sent by:

ownerchinwag [dot] com

To:

uknmchinwag [dot] com

cc:



Subject:  RE: UKNM: Re: Re: Re: Waitrose man in The Guardian





Tim thats a little unfair, was the unnamed person not talking about how to

optimise pick & pack with the current delivery options available rather than

the one hour delivery service where stores would be so useful? A central

warehouse would considerably reduce the pick & pack time, reduce congextion

in the stores, and reduce previously referred to substitutions.



-----Original Message-----

From: Tim Ireland [

timdesignercity [dot] com (mailto:timdesignercity [dot] com)

]

Sent: 22 November 2000 09:17

To:

uk-netmarketingchinwag [dot] com

Subject: UKNM: Re: Re: Re: Waitrose man in The Guardian





"Andy" <

andyshonky [dot] net

> said:

<snip>

> Anyway,  Jon Browett (Tesco.Com CEO) was asked, at a seminar last week if

> they (tesco.com) planned to do a  one hour delivery service. Sadly he

didn't

> answer it but he did talk about tesco's strategy and that I think gave the

> reason why Urbanfetch failed. Rather than delivering from a central

> warehouse they should have done it the tesco way, from local stores.



Unlike the Sainsburys way (ahem). I seem to recall arguing the point over

this with someone at the last Chinwag do. The unnamed party was convinced

that tesco should invest in a series of central warehouses.



<grin>



> Sadly

> urbanfetch didn't have any. Tesco do so I think they should offer a 1 hour

> service and sell the kind of FMCG that Urbanfetch were selling and that

made

> them so successful, even if they couldn't sustain it.  I just wish Tesco

> thought it too.



<deep intake of breath>



Tim Ireland

Director of Marketing

www.designercity.com





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