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Archive for the ‘Grocery’ Category

Has Wal-Mart figured out how to do same day delivery? The Wall Street Journal seems to think so — at least within their Mexican operations (Mexico Delivers for Wal-Mart, Feb 20).

Has Wal-Mart really figured this all out? I have my doubts. (more…)

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I love self-service checkout, but it is again under attack. Here in Chicago, Jewel-Osco (one of the major local supermarket chains) is pulling self-service checkout lanes from some of its stores (Jewel scrapping self-checkout at some stores, Chicago Tribune, Sep 25). Their stated goal is to “reconnect personally with all of its customers.” Now the Wall Street Journal is piling on with an article declaring that computers just aren’t up for the job of letting people buy green beans (Humans 1, Robots 0, Oct 6).

The human supermarket checker is superior to the self-checkout machine in almost every way. The human is faster. The human has a more pleasing, less buggy interface. The human doesn’t expect me to remember or look up codes for produce, she bags my groceries, and unlike the machine, she isn’t on hair-trigger alert for any sign that I might be trying to steal toilet paper. Best of all, the human does all the work while I’m allowed to stand there and stupidly stare at my phone, which is my natural state of being. …

In a recent research paper called “Dancing With Robots,” the economists Frank Levy and Richard Murnane point out that computers replace human workers only when machines meet two key conditions. First, the information necessary to carry out the task must be put in a form that computers can understand, and second, the job must be routine enough that it can be expressed in a series of rules.

Supermarket checkout machines meet the second of these conditions, but they fail on the first. They lack proper information to do the job a human would do. To put it another way: They can’t tell shiitakes from Shinola. Instead of identifying your produce, the machine asks you, the customer, to type in a code for every leafy green in your cart. Many times you’ll have to look up the code in an on-screen directory. If a human checker asked you to remind him what that bunch of the oblong yellow fruit in your basket was, you’d ask to see his boss.

Let’s take this in two parts. First, if people prefer a conventional check out experience because that allows them to zone out then I have to wonder how Jewel’s plan to reconnect with its customers is going to work. I remember as a kid my mom having what seemed like endless conversations with cashiers. Of course, we were in a relatively small town and most of the women (they were virtually all woman) working the registers had either gone to high school with my mom or had a sibling who did. Now we live in a more class divided society. I suspect that none of the cashiers at my local Jewel are actually from the neighborhood or that the store’s staffing policies actually build in time for cashiers and customers to catch up on how their respective in-laws are doing.

But what of the claim that the information needed to run checkouts cannot be simply encoded for computers? (more…)

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In our Operations Strategy MBA class, Gad and I teach and discuss the operations and economics of Internet grocer pioneer Peapod.  Two interesting e-grocer articles appeared this week:

The first, written in Forbes by Tom Ryan, is about AmazonFresh, the grocery overnight delivery service founded by Amazon in 2007, but still only serving the greater Seattle area.  Why?  In class we show the difficulty of this business and I praise the operational focus of Amazon.  If Amazon is using this as a testbed for future expansion, it confirms our findings that this is a slow business where one must build density household by household.  It simply takes a long time to arrive at profitable density: even for Amazon, it’s taking more than 6 years.

In his article, Tom proposes a second raison d’etre of AmazonFresh:

AmazonFresh isn’t about “competing with a small market with razor-thin margins and a checkered history.” It’s all about helping Amazon.com attain the scale to support its ambition to build a national same-day delivery shipping model.

(more…)

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Online retail is exploding with Amazon leading the charge in the long tail, items consumers buy irregularly.  Online shopping and delivery of fast movers like groceries, however, is available to few areas in the US: FreshDirect in NYC and Peapod in Chicago and some east coast cities are the big exception.

An Operations Audit gives the explanation: the costs of covering the last mile are strongly influenced by delivery density which makes large sprawl areas prohibitively costly to serve (as dotcom busts like Webvan quickly learned).   In our operations strategy class, we study Peapod by linking its financial performance to its operational structure and execution.  Such analysis highlights the importance of operational metrics such as stops per hour and pick&pack per hour and revenue metrics such as basket size ($ per order).  Students always suggest to replace the expensive delivery process by a pick-up model.  For companies with a large investment in delivery assets and processes such as FreshDirect and Peapod, however, embracing pickup (which Peapod is experimenting with) then necessitates a hybrid model.  In contrast, pure-play pick-up models such as the French ChronoDrive never invested in delivery assets.

This brings us to Relay Foods which seems to differentiate itself on 3 dimensions:

  1. Emphasize local suppliers, and hence satisfy the “local food movement”.
  2. Local supply allows daily deliveries which minimizes inventory risk.
  3. Focus on pickup approach. (They also offer home delivery at a premium of $10/order.)

Relay foods is based in Charlottesville, Virginia, and also serves Richmond.  It can show nice growth trajectories (see video below) in those two markets and earlier this month announced it raised $1.2 million to expand in to the greater Washington, Baltimore, and Philadelphia areas. (more…)

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Way back in the early days of this blog, Gady had a post about queuing innovations at Hannaford Supermarkets, a regional chain of markets serving the Northeast. One of things Gady mentioned was that they were experimenting with having a single line for those waiting to checkout. Having now visited Hannaford’s relatively new store in West Lebanon, NH, I can show you what that looks like:

As Gad’s original post notes, a single checkout line is not a completely new idea for supermarkets. Indeed, Wholefoods’ Columbus Circle store has gotten all sorts of press for its single queue system. I would argue that this is a little bit different. At Wholefoods, a single queue is as much about packing many, many registers into a tight space as it is about efficiently moving customers through. That’s not really true in West Lebanon; this is pretty much your standard, large, suburban American grocery store. In West Leb, a single queue is — as the signs suggest — all about reducing customer waiting times.

(more…)

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I have previously stated that I love self-service checkouts. It may just be that I hate making eye contact (ask anyone who has had to sit through me teaching). I consequently worry every time there is a story suggesting that supermarket chains are eliminating them. Gady had a post on this trend this summer and now the Associated Press is piling on with an article that was picked up by several newspapers (Supermarkets start bagging self-serve checkouts, Sep 26). Here is what the AP says:

Big Y Foods, which has 61 locations in Connecticut and Massachusetts, recently became one of the latest to announce it was phasing out the self-serve lanes. Some other regional chains and major players, including some Albertsons locations, have also reduced their unstaffed lanes and added more clerks to traditional lanes.

Market studies cited by the Arlington, Va.-based Food Marketing Institute found only 16 percent of supermarket transactions in 2010 were done at self-checkout lanes in stores that provided the option. That’s down from a high of 22 percent three years ago.

Overall, people reported being much more satisfied with their supermarket experience when they used traditional cashier-staffed lanes. …

An internal study by Big Y found delays in its self-service lines caused by customer confusion over coupons, payments and other problems; intentional and accidental theft, including misidentifying produce and baked goods as less-expensive varieties; and other problems that helped guide its decision to bag the self-serve lanes.

So one interpretation of this is that the systems are too hard to use and thus unappealing to the average shopper. The counter argument to that is in the United Kingdom. Tesco, the heavyweight champion among British supermarkets, racks up 10 million transactions per week on its self-service tills, fully one third of all its transactions (Tesco Deploys NCR Self-checkouts in Central, Eastern Europe, Sep 16, Progressive Grocer). Perhaps the Brits are more willing to adopt new technology or maybe Tesco aggressively understaffs it regular registers so that customers have no choice but to use the self-service option. In any event, it should be possible to have a decent level of adoption in the US.

The question then is what’s in it for the customer? (more…)

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The world can be broadly divided into those who love self-checkout and those who hate them. (We already discussed it here: “Love or loathe: Self-service checkout” where my colleague confessed his love to self-checkouts).

I am of the (rare) indifferent type. I rarely, if ever, use them and find their main utility in taking people off the main checkout lanes. I found the new development reported in a recent article at the Seattle Times( “Some supermarkets replacing self-checkout lanes” h/t to Niraj Patel) somewhat surprising: both Kroger and Albertsons have started designing stores that no longer include self-checkouts lanes:

For Boise-based Albertsons, self-checkout no longer fits with the customer-service experience it wants, spokeswoman Christine Wilcox said. “Our customers are our highest priority, and we want to provide them with an excellent experience from the time they park their car to when they leave,” Wilcox said.

I am not 100% convinced about replacing self-checkout lanes. I do agree that self-checkouts are a bad idea during peak times since they divert the wrong customers to the wrong resource at the wrong time. During peak times, customers who are not used to self-checkouts tend to choose these, since the regular lanes are longer. Yet, since these customers are not used to self-checkout themselves, it take them longer to process their baskets, exacerbating the congestion in the store, exactly at the time where more customers are exposed to the quality of the service.  But self-checkouts have their places: they are about providing good and quick service in a very cheap way during off peak time, when customers appropriately self-select their preferred service.

(more…)

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