Amazon last year began offering some Prime members online grocery-shopping and delivery from Whole Foods, touting the service as another perk to customers after purchasing the organic grocery chain. But Whole Foods employees said Amazon workers routinely ask for help finding items on shelves or elsewhere, distracting them from their own duties. And technology that tracks Whole Foods’s inventory is old.
Amazon’s struggles aren’t unique, writes The Wall Street Journal (March 25, 2019). As supermarkets increasingly offer online grocery delivery to keep customers loyal, most services that fill orders from stores are struggling with execution. The challenges are numerous. Many grocers don’t have technology that can readily track inventory in real-time. That means items listed as available online often aren’t in the nearest stores filling a delivery order, leading employees to make their best guess or rely on computer recommendations that can suggest unsuitable substitutions.
Target recently introduced a new inventory-management system for stores and online to speed up replenishment. At Instacart, the largest third-party grocery-delivery service, incomplete orders were the second most frequent source of customer dissatisfaction, after price. Some 15% of consumer products listed on U.S. online ordering services are out of stock when it comes to fulfilling them, nearly double the rate in stores.
There are a number of reasons why many online grocery services struggle to offer substitutions customers want. Shoppers typically depend on suggestions from online tools, and algorithms can make mistakes or suggest inappropriate alternatives. Services that rely on gig-economy workers who pick items off store shelves can exacerbate the selection problem, since many aren’t food experts and juggle many orders a day. Mishandling substitutions is expensive for retailers, as it often leads to refunds or a replacement item that is pricier than the original. Refunding incorrect items decreases an online order’s profitability by 1% to 2% on average.
Classroom discussion questions:
- What are the inventory issues that online grocers face?
- What can be done to make the systems more efficient?