Kenneth K. Boyer, Michigan State University Tomas Hult, Michigan State University
During the eBusiness frenzy of 1998-2000, numerous new, pure-play Internet grocers promised consumers they could buy groceries at prices equal to or lower than from bricks-and-mortar stores, while enjoying unparalleled convenience without having to leave the house. 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 grocers made huge bets that selling groceries online was both a growth market and a new way of doing business. Unfortunately, the widely publicized collapses of these high profile Internet grocers have illustrated the substantial gap between theory and practical application bridging the last mile to grocery consumers' homes represents a substantial challenge. At the outset, many difficulties experienced by online grocers can be fundamentally attributed to a lack of alignment between marketing and operations strategies. In contrast, several examples also exist of grocery and other food delivery companies that appear to be making effective use of the Internet as a link to customers. In particular, both Tesco (a British grocer) and Albertson's (a U.S. grocer) currently have Internet channels for selling groceries that are profitable. Whereas many of the failed Internet grocers seemed to be hoping for a large market share, Tesco and Albertson's view Internet ordering of groceries more as a value-added complementary marketing channel.
Our research project examines four cutting edge companies via case studies of their marketing and operations strategies, and via cross-sectional surveys of their Internet customers. Approximately 1,000 Internet customers of each of the four organizations are to be surveyed to assess their experiences with online-based grocery home delivery. Field studies of each organization will also be conducted via structured interviews and analysis of on-site data to assess operational components of food delivery. As an outcome of the study, the project scope is to document best-practice marketing and operations strategies and activities in applying Internet ordering to food delivery. As such, the data generated will provide important guidance to other companies regarding the best ways to match proactive and responsive marketing and operations strategies. The benchmark data should be generalizable to a wide range of companies with characteristics similar to the grocery industry.