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2924. Navigating Omnichannel Grocery Retailing: Bridging Customer Insights for Strategic Decisions

Invited abstract in session TD-50: Omni-Channel Retailing , stream Retail Operations.

Tuesday, 14:30-16:00
Room: M2 (building: 101)

Authors (first author is the speaker)

1. Daniela Fernandes
INESC TEC
2. Pedro Amorim
Industrial Engineering and Management, Faculty of Engineering of University of Porto
3. Jan C. Fransoo
Tilburg University
4. Fábio Moreira
INESC TEC, INEGI, Faculty of Engineering, University of Porto

Abstract

In response to the growth tendency of online sales, grocery retailers have embraced e-commerce, and committed to the required investments. It is a recognized fact that profitability is hard to attain given the costs associated with order fulfillment and last-mile distribution, aggravated by customers' unwillingness to pay additional fees for these services. We consider the case of an omnichannel grocery retailer, that provides home deliveries for a delivery fee, leveraging its Brick-and-Mortar network. Improving the operational efficiency of online order fulfillment is important, but larger opportunities lie in effectively managing demand within and across channels. We use customer-level activity over time to infer the influence of online channel features, such as delivery fees and assortment size, and of the store network on customer behavior. Our findings reveal that customers strategically adjust their shopping habits based on factors like fees, product variety, household needs, and proximity to physical stores. Building on these insights, we model customer behavior regarding store selection, shopping frequency, and expenditure patterns. By considering the cost to serve online orders and the value customers present to the retailer across channels, we prescribe solutions that optimize the retailer’s profits. In a series of numerical studies, we draw managerial insights on the path to omnichannel profitability.

Keywords

Status: accepted

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