Grocery Store e-Commerce Grocery stores have made use of e-commerce since the early days of the Internet. While online-only grocery stores quickly proved to be a dismal failure as a whole, there remained some elements of that idea that have been adopted -- or could be adopted -- by conventional grocery retailers (Tedeschi, 2002). The failure of the online-only grocery retailers is that they made massive investments in startup costs, including warehouses and distribution networks, only to find that they could not generate enough income to pay for those investments (Ibid). Conventional grocery stores, however, have been able to offering some online shopping precisely because they did not need to make those investments. The online component was simply an adjunct to the existing bricks-and-mortar business.

Kornum and Bjerre (2005) point out that online stores need to have the same streamlined, efficient warehousing and distribution networks as their offline counterparts. Companies that already have most of these systems built in will invariably perform better in the space that those that...

They note that for the most part the answer lies in consumer behavior -- consumers are unwilling to eschew in-person grocery shopping in the kind of numbers that would make an e-commerce grocery business truly viable. Consumers not only prefer to see their food, they like the in-store shopping experience. In addition, they do not want to pay a delivery fee, and if building in the cost of delivery means raising prices, then online grocery shopping becomes inherently cost ineffective.
Overcoming these challenges is significant. E-commerce operations management relies on centralized warehouses as the point at which the goods are distributed to the consumer. Grocery stores are decentralized, appearing in every neighborhood. Groceries are perishable goods, so while the store can actively manage the condition in which the customer receives the goods, the online grocer has a challenge to do so -- eggs break, milk spoils and other groceries can arrive in rough condition as well. The problem becomes worse the further the warehouse is from the consumer.…