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Introduction
This paper analyzes logistics network structures for grocery retailing via multiple channels, i.e., where retailers offer their products not only in bricks-and-mortar stores, but also online in a “bricks-and-clicks” approach. Focusing on the product flow, the products can be picked up at the store, at pick-up stations or delivered to the customer’s home. Enabling the different delivery and pick-up modes across channels is a recent phenomenon, particularly in grocery retailing. Retailers may operate all types of networks from isolated product flows – where direct-to-customer shipments and store supply are operated independently – to unified systems with comprehensively conflated front- and back-end logistics (Hübner, Wollenburg and Holzapfel, 2016). Bricks-and-clicks retailers therefore need to address the question of how to operate logistics networks to serve customers across channels.
Such logistics networks that enable bulk and single unit picking and delivery are more costly than traditional store fulfillment with bulk deliveries to stores, where customers themselves are responsible for order picking at the store. In grocery retailing, differing temperature zones, orders with multiple items, higher waste due to perishable inventories and rapid delivery requirements make logistics for grocery more complex than for non-food. Innovative logistics networks need to fulfill customer expectations particularly in terms of high-delivery speed, high-product availability and low-delivery costs, while retailers need to consider the upside potential of new market segments, but also manage their own costs and complexity arising from different channels and network options. Bricks-and-mortar grocers need to find answers to how product flows for the fulfillment of online orders can be organized within their existing network or in a separate distribution channel.
Investigating the different network design options is relevant from a practical and an academic perspective. In Europe, grocery retailing is predicted to surpass consumer electronics in online sales to become the second largest category after apparel by 2018 (Forrester, 2014). In the USA, a recent study shows that 41 percent of customers have already bought groceries online. A total of 21 percent had purchased groceries within the previous 30 days (Brick Meets Click, 2016). However the fulfillment options for grocery are very different across markets. For example, German bricks-and-mortar retailers mostly supply their currently small volume of online orders through their existing store outlets, whereas most Dutch and UK...