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Research Associate Rebecca Chung prepared this case under the supervision of Professor Nirmalya Kumar as a basis for class discussion rather than to illustrate either effective or ineffective handling of a business situation.
Since its April 1998 launch, LeShop, the first virtual supermarket in Switzerland, had established itself as the leading online grocery service in the country. It had managed to survive where many more famous and better-funded pure play online grocers in the US like Streamline and Webvan had gone bankrupt. LeShop had outperformed the online operations of all the major supermarkets in Switzerland. However, despite the impressive 63% share of the online Swiss grocery market and anticipated net sales of CHF 13 million in 2002 (refer to Exhibit 1), the operations had not yet managed to break even. Relative to other European countries, online grocery sales were underdeveloped in Switzerland by a factor of 18. Only 0.05% of the total grocery market was online (€12 million) (refer to Exhibit 2), compared to 0.88% in the United Kingdom (€934 million) and 0.76% in Paris (€171 million). Only 35% of Swiss adults were aware of the existence of online grocery services, compared to 96% in the UK and 94% in Paris. An impatient Christian Wanner, CEO of LeShop, observed:
Unfortunately, unlike the UK or Paris markets where key traditional players like Tesco and Carrefour heavily advertise their online service, the dominant brick and mortar supermarkets in Switzerland like Migros and Coop are not actively pushing online sales. Instead, we are fighting a lonely battle as “pure play” in trying to get the Swiss people to change their habits and shop online for groceries. If the online grocery market in Switzerland had just one-third of the development of the UK or Paris, we would already be at breakeven.
LeShop faced several challenges in its fight for profitability. How to make a greater number of potential customers aware of the benefits of online shopping and encourage them to try LeShop? How to increase retention and share of wallet of existing customers? And, finally, how to improve distribution efficiency and customer satisfaction?
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LAUSANNE – SWITZERLAND
Industry and Company Background
Brick-and-mortar grocery stores in Switzerland had limited opening hours. Typically, they were only open from 8:00 to 19:00 from Monday through Friday and from 9:00 to 17:00 on Saturday. Parking was often a problem. Stores were typically small, having narrow aisles and carrying a limited assortment. Moreover, grocery clerks did not bag groceries for customers. According to Wanner, as an average family household spent between 150 and 200 hours a year doing grocery shopping--equivalent to one month’s work--there was a growing need for a hasslefree and convenient grocery shopping solution. In response to this need, Alain Nicod (Chairman of the Board), Rémi Walbaum Jesus Martin Garcia and Christian Wanner founded LeShop in 1997, when ecommerce was just beginning. LeShop was located in Chavannes-de-Bogis, close to Geneva. Nicod led the operation until mid-2000, when Wanner took over as CEO. The company employed 55 people (refer to Exhibit 3 for organization chart). In 1999, Bon Appétit Group, Switzerland’s leading listed food trade company offering retailing, catering and logistics services, bought a 33.3% stake in LeShop. In 2001, it raised its shareholding to 54% to become the majority shareholder. This allowed LeShop to take advantage of the bulk purchasing power of the Bon Appétit Group. In February 2003, ShoppingNet Holding SA, owned by private investors, took over shareholding of the Bon Appétit Group. When www.LeShop.ch was launched (refer to Exhibit 4), it generated an overwhelming response--more than 800 users logged on simultaneously and even crashed the servers after less than two hours. LeShop primarily targeted working women with young children who wanted to free themselves from stressful and tedious household replenishment duties. By 2002, LeShop served 16,000 regular customers (population in Switzerland was 7.2 million). The average shopping basket size had increased to CHF 185 (vs. CHF 34 in a regular supermarket), with a gross margin of 28%. Typically, the number of orders per day ranged from 300 to 400, with Mondays and Fridays being the peak days with up to 700 orders. LeShop’s key competitors were the online operations of the two leading brickand-mortar grocery chains in Switzerland, Migros and Coop. Although LeShop had the highest market share, Migros-shop.ch had the highest national awareness (refer to Exhibit 1). This was probably because the latter benefited from the halo effect of its mother brand, Migros, which had more than a 40% share of the Swiss grocery retail market. The amount spent on increasing awareness of online grocery shopping was relatively low in Switzerland--about €4 million since 1998--and LeShop was responsible for more than half of this marketing investment. In contrast, in the UK and Paris, these figures were estimated at €35 million and €24 million respectively (refer to Exhibit 2).
However. noted: We see ourselves in a service industry. meat. pasta. for example. they would trust LeShop more. baby items. Our strategy is to establish a regular and trust-based relationship with our customers through the basic food assortment. laundry items and diapers. You only have one chance to get it right. For destination categories. and to expand the basket size and margin by pushing higher-value complementary categories such as wellness products. dairy products. . Rebecca Meurer. fruits and vegetables because these items were a critical driver of basket size and purchase frequency. exclusive gourmet products. household goods and wellness products (refer to Exhibit 5). bread. The change in purchasing habit is massive--instead of selecting fresh food items from the shelves themselves. LeShop worked closely with leading manufacturers that were experts in category management. toys and books. Locher indicated: We systematically benchmark prices of Coop. such as Procter & Gamble. if you do not fulfill their high expectations. Among its 700 fresh products. and a slight premium for our higher quality fresh products. we offer Everyday Low Price on diapers at a price significantly below that of Coop.-3INTERNATIONAL IMD-5-0615 LAUSANNE – SWITZERLAND Product Assortment and Pricing LeShop offered more than 5. our prices are lower than our competitors’. Marketing Director. We charge the same prices for our branded dry grocery articles and branded dairy foods. Dominique Locher. personalized promotional campaigns. branded food and beverages. In addition. Bestfoods and Nestlé. LeShop had a very strong focus on fresh products such as meat. pricing and promotions. and tobacco to beauty products. such as baby items. knowing that pregnancy and birth are typical entry points in e-grocery.500 food and non-food products ranging from fresh fruits and vegetables. To offer customers lower prices. such as “Swiss Prime” meat which had a bar code allowing it to be tracked online back to the farmer. Given the richness of LeShop’s customer information. the Swiss population was used to a much smaller assortment. and were priced 20% to 30% below their primary brand substitutes. Compared with the British and French. mothers are now delegating this important task to a third party. wines and spirits. Henkel. For example. to make decisions on product assortment. in 2002 the company introduced a Family Line-bigger-size packs--and a Value Line--100 products of secondary brands. they will never buy fresh from you again. Although low price was not the primary benefit of e-grocery. noted: Fresh is a tough one. Value Line products were highly price sensitive. LeShop had to rely on branded manufacturers because its low volumes did not allow for an efficient private label offering. organic items. However. LeShop believed that fresh produce offered an opportunity to build strong relationships with customers because if these mothers were satisfied with the products. LeShop realized that value was critical to customers. they could jointly develop approaches that were quite different from those in traditional retailing--for example. Store Director. Migros and drug stores. LeShop even offered premium items that other grocery chains did not stock.
Unlike physical stores. since putting together grocery orders was highly demanding for several reasons. working mothers could obtain ideas on how to hold a successful party for their kids. Because LeShop’s website was operated in three languages--English. there were no flashing banners or “pop-up” messages to distract customers from completing the transaction. LeShop also offered a “LeShop’s Extras” corner with value-added information. A user-friendly online catalogue was critical to fast and easy shopping. French and German-additional efforts were required to develop and validate product categorization to take into account the cultural differences. This was not the optimal solution. Procter & Gamble benchmarked the websites of online grocers worldwide and ranked LeShop’s website in the top three in terms of customer usability. fruits and vegetables. Third. the site stored the customer’s last shopping basket to allow him or her to check what had been ordered and to make it easier to reorder. the guiding principle for LeShop’s website design was absolute simplicity. the warehouse had to have three temperature zones. ranging from –18oC to +20oC. even for Internet novices.auchandirect. LeShop regularly videotaped consumers shopping at their PCs to identify how to make it easy for them to find what they were looking for. LeShop had the ability to experiment and increase product visibility and sales by having the same product appear in different categories. The Fulfillment and Delivery Challenges Order Fulfillment Investing in Its Own Logistic Center In its first few years of operation. According to Wanner. as opposed to entire cartons or pallets which could be machine loaded. games and recipes. and its know-how to Auchan. which meant that optimal categorization of products was particularly important.es). LeShop also proposed a list of party merchandise so that working mothers did not have to compile their own detailed list and search for the items individually in the online catalogue (refer to Exhibit 6). The site also allowed customers to store different lists of products that they would purchase again. The aim was to make online grocery shopping fast and easy. For example. fulfilling a grocery order was a process that involved picking single items. . fragile beverage bottles and health-related products required careful handling. a leading French-based international retail group.alcampo. The company licensed its technology. To encourage its primary targets to visit the website. Second.fr) and in Spain (www. LeShop used a logistics company for order fulfillment. For example.-4INTERNATIONAL IMD-5-0615 LAUSANNE – SWITZERLAND Website As online grocery shoppers had to select and drop as many as 50 items into their shopping basket with minimum time and hassle. To speed up the process. which was developed in-house. including invitations. First. to help the latter successfully implement the front-end technology in France (www.
Because the amount of walking each packer had to do was reduced. instead of assigning an order to one packer and having him or her walk through the aisles with the shopping trolley. The new center was not highly automated but had a modular design. Employees printed the picking list and customer labels and put them. simultaneously packed items for the same order. In each zone. LeShop could reject as much as 20% of fresh merchandise at entry. slow-moving items and bulk items (refer to Exhibits 7 and 8 for layout and interior). Picking combined both manual and automated processes and started in the refrigerated section. Construction of the logistics center. together with two grocery bags. which was the first e-commerce fulfillment center in Switzerland. the system routed the order to a computer located in the logistics center. the shipping box was sent to the appropriate packing zones via a 700-meter conveyor belt system. The logistics center employed 30 full-time employees. LeShop opened its own 7. together with cool “packs”--frozen bottles of water--in insulated bags to ensure that they remained cold and fresh for 24 hours. packers fulfilled all the orders placed the day before. when it received fresh produce. The company integrated the resulting know-how into the new center to achieve better control over quality and cost reduction. which allowed it to be expanded at any time at low cost. products could be boxed more efficiently. Thus several packers. the center started operations at 4:00. concept and software development. LeShop’s management team had visited leading logistics centers in various industries throughout the world to observe best practices. plus 10 part-timers to help out if order volume was abnormally high. about 25 km southwest of Zurich. Typically. On the left side of the center. For the other packing zones. three refrigerated sections took up a total space of 1. LeShop required local suppliers to prepackage fresh products before sending them to the center. Between 5:00 and 11:00. The packer placed all perishable goods. in a 50-liter shipping box (refer to Exhibit 9 for fulfillment process). all the shipping boxes left the center and reached customers the same evening.6 million. In the logistics center.000 m2 logistics center (warehouse) in Bremgarten. each at different aisles. products were organized according to storage requirements. To ensure high quality. picking sequence and shelf turnover. and staff recruiting and training were completed in a record time of just four months at a cost of CHF 2. The Picking Process and Efficiency When LeShop received an order on its website.600 m2. Employees then performed other tasks such as replenishment and cleaning.-5INTERNATIONAL IMD-5-0615 LAUSANNE – SWITZERLAND In 2001. Immediately after 11:00. LeShop charged a deposit of CHF 5 per order for the bags and credited the customer’s account with the corresponding deposit when the bags were returned. The rest of the center was divided into different packing zones for fast-moving items. A packer picked all the items from that section according to the customer order. . more frequently picked items were placed at the front to reduce walking/picking time.
at the end of the fast-moving item zone. thus immediately updating the database via radio waves. regardless of the number of items or the weight of the order. On average. An open box moved onto the stationary belt for other products. which was the highest in the industry worldwide (50% in the UK and 60% to 70% in Paris). to be packed into it. Orders placed between Friday after 16:30 and Sunday before midnight were delivered on Monday between 17:30 and 20:00. electronically controlled process that would minimize human error. If LeShop implemented its plan to further increase its picking efficiency. No deliveries were made on Sunday or official holidays. they were delivered to the cross-docks at the logistics center when the customer placed an order. LeShop achieved an order fulfillment rate of 95% (i. Third. it could reduce the fulfillment cost to below CHF 20. it took an average of 33 minutes to fulfill an order.500 products. For example.) LeShop used a fleet of 10 trucks to deliver the packed shipping boxes to different transfer points to hand them over to its delivery partner. This meant that of the 5. the packer scanned it to ensure it matched the order and to capture price information. LeShop could increase efficiency by up to 30% in the logistics center by implementing the following initiatives: First. According to Christoph Kay. if bulk items were picked first and put at the bottom of the shipping box. LeShop did not stock health-related products and cosmetics. The company needed to pre-code the layout of the store into the system and equip the packers with shelf identifier screens and price scanners. the average availability of each product at picking was 99. Before placing the picked product in the shipping box. Second. 95% of orders were delivered as ordered). the cost of fulfilling an order was CHF 24. LeShop could invest in automation to convert picking into a paperless. it was more efficient to let these fulfilled orders leave the center as soon as possible to avoid blocking the conveyor belt. they could choose to . Orders placed on Friday before 16:30 were delivered on Saturday between 7:00 and 9:00. Orders placed from Monday through Thursday before midnight were delivered the next day between 17:30 and 20:00. one moving and one stationary. The conveyor system detected whether a box was closed or open (the latter had a plastic strip sticking out) and directed its movements accordingly. Currently. (To ensure high quality. including health-related products and cosmetics. Delivery LeShop delivered to 80% of the Swiss population geographically for a flat fee of CHF 12. Logistics Director. fresh products could be picked later and put on top of the bulk items. Therefore. thus saving one box per order (currently. A closed box went onto the moving belt to be sent directly to the truck.8%.-6INTERNATIONAL IMD-5-0615 LAUSANNE – SWITZERLAND Since a greater proportion of orders contained only fresh and fast-moving items.e. the company could decrease fulfillment time if it streamlined its product assortment and made further minor process enhancements. there was a splitting point leading to two parallel conveyor belts. If customers knew in advance that they would not be at home to take delivery. an average order had three boxes). LeShop could increase picking efficiency by reorganizing the center and changing the picking sequence.
LeShop sent e-mails to customers regularly--at least every two weeks--to inform them about new products or services and promotions. Spring Cleaning. it could use its excess capacity to deliver LeShop’s orders in the afternoons and on Saturday mornings. To stimulate purchases. LeShop’s customers could be classified into nine segments according to their basket size. LeShop was able to negotiate a discounted delivery charge and did not have to make a capital investment in its own delivery fleet (refer to Exhibit 10 for the fulfillment and delivery models of USA’s Streamline and UK’s Tesco). quality fresh food. purchase frequency and product mix (refer to Exhibit 11). timely delivery and great customer care. especially since LeShop’s competitors did not invest much in increasing awareness and adoption of online grocery. Since only 8% of households in Switzerland shopped online. The Customer Management Challenge Segmentation According to the latest study.3 purchases over six weeks and their average basket size was CHF 248. LeShop had been using themed merchandise promotions. print ads (refer to Exhibit 12) and partnerships with women’s magazines. assortment satisfying his or her needs. Promotions and Retaining Existing Customers The first condition for retaining a customer was meeting expectations: easy and secure online transaction. with the sponsorship of suppliers. Therefore. making people aware of online grocery shopping and converting them into LeShop’s customers was expensive and difficult. direct mailing. Acquiring New Customers Customer acquisition cost varied according to the method used. for delivering orders to customers. To nurture customer relationships. These campaigns proved to be effective in increasing the average gross profit per order (refer to Exhibit 13). These methods could cost as much as CHF 400 to acquire one new customer. LeShop started experimenting with general price promotions to enlarge basket size. and Fondue and Raclette. increase fresh penetration and promote convenience. Under the “Member Gets Member” Program. CHF 50 credit was given to the customer who invited a friend to place a first order. Examples of general themes included Halloween. LaPoste Express. The company also used special themes for certain segments. careful picking and packing. Starting from February 2002.-7INTERNATIONAL IMD-5-0615 LAUSANNE – SWITZERLAND have the order left at their front door or with a neighbor. Since peak hours for LaPoste Express were in the mornings on working days. which was unique to Switzerland. About 70% of orders were left unattended--a particularly high level. The best customers (segment H) made 5. . such as Baby Care. LeShop also used telemarketing. LeShop formed a strategic partnership with the Swiss national post office.
to these customers to reassure them that the Coca-Cola they had bought was safe to consume. the item would be stored in his or her “My Last Shopping Basket” to trigger repurchase in a future order. a list of wine selections would appear on the screen to stimulate purchases of these complementary goods (refer to Exhibit 14). LeShop monitored customers’ purchasing . LeShop immediately sent an e-mail. LeShop offered each customer his or her own shopping environment. together with a certificate from Coca-Cola. Customer Services Wanner believed that LeShop was the first to move toward “transforming traditional grocery retailing into a service industry. in 1999 there was an incident concerning contaminated Coca-Cola from a plant in Belgium. to resolve complaints such as. Then from its database it identified customers who had bought Coca-Cola in the previous three months. For example. If a customer clicked on the corkscrew. LeShop immediately traced its records and confirmed that none of its Coca-Cola products were from that plant. dairy/meat/bread. But it would be a challenge to implement personalization programs in a systematic and cost efficient manner. thereby developing stronger customer relationships. The company also assigned account managers to follow up with new customers on their first three orders to answer any questions or resolve problems in order to secure full satisfaction. The Internet also allowed LeShop to implement certain promotional ideas that were not possible in a physical store. In addition. LeShop offered customers a free corkscrew on the website. and others. It did this for each of the following three categories-fruit and vegetables. “My bananas were too green. To trigger repurchase. it provided a great level of confidence. shopping lists and personalized price promotion campaigns. Once a customer chose a free sample. LeShop offered that customer price promotions on the selected items. Prompt handling and communication of quality issues was also critical for achieving a high level of customer confidence. For example.-8INTERNATIONAL IMD-5-0615 LAUSANNE – SWITZERLAND In mid-2002.” For example. LeShop automatically monitored each customer’s previous purchases to identify his or her most frequently purchased items that had not been bought in the previous two purchases. To maintain personalized relationships with customers. LeShop offered free product samples in full-size packs. a customer would go directly to his or her personal shopping webpage to find information such as last purchase. LeShop started experimenting with personalized price promotion campaigns. the more information about individual shopping patterns could be collected for personalized promotions. it offered a 100% moneyback guarantee on all deliveries with no questions asked. The more a customer had shopped with LeShop.” Although the guarantee was rarely used. After typing in the login name and password. In addition. Wanner knew that more effectively utilizing data on customers’ online purchasing behaviors and understanding each customer’s profitability would be helpful for increasing sales and retaining customers.
-9INTERNATIONAL IMD-5-0615 LAUSANNE – SWITZERLAND activities. Of the customers who left the service after their first trial. Enhance Gross Margin: The company could shift the product mix of a basket by increasing penetration of higher-margin categories. LeShop could turn its contribution margin into a positive one. which were difficult to reduce. an account manager called them to identify the reasons and try to encourage them to buy more. Wanner’s executive team had been working hard to find further ways to improve profitability. If they decreased their purchases. software development and general and administrative costs. What else could Wanner and his team do to break even? . and provide performance-based incentives to pickers. It could also develop more effective personalized promotional campaigns. It could also improve purchasing conditions with manufacturers. the challenge. Therefore. Decrease Delivery Cost: LeShop could lower the cost by generating higher delivery volume and focusing its marketing efforts on established routes of high delivery density. including. according to Wanner. But even so. the company still needed to quadruple the number of orders and increase its annual turnover to CHF 50 million--equivalent to the turnover volume of a medium-sized Swiss supermarket--in order to cover the huge fixed costs. was not fixing service problems but rather how to keep early adopters shopping online. LeShop was operating with a slim negative contribution margin. payroll. including marketing. more than 90% claimed that the company had kept its promise. for example: • Increase Basket Size and Purchase Frequency: LeShop could discourage low-value baskets by charging a higher service fee if the basket size did not meet the minimum amount. • • • By doing all these. Improve Fulfillment Efficiency: It could automate and improve the picking process in the logistics center. The Big Challenge: Quadruple the Number of Orders Currently.
5 3% N/A 11.53 63% 12.0 27% 16.25 3.67 / €0.65 10.24 1..ch 0.ch Sales 2001 (CHF million) Market share National Awareness 2002 – Top of Mind Source: Company information Migros-shop.ch 1. 2002 Including delivery and licensing fees 2 3 .ch 5.5% Coop.10 INTERNATIONAL IMD-5-0615 LAUSANNE – SWITZERLAND Exhibit 1 LeShop – Annual Growth of Sales Net Sales1 (CHF million2) 1998 1999 2000 2001 2002 (projected) 0.1% 1 Excluding delivery and licensing fees Swiss Franc (CHF) 1 = US$0.9% Spar.00 + 431% + 192% + 180% + 27% Growth Industry Performance LeShop.22 13.68 (euro) on November 27.2 7% 3.
2 7 24% 31% 20% n/a Paris only >24 4 94% 26% 8% >35 5 96% 4 3 35% 934 0.6 90% 241 55% 58% 59. UK (factor of underdevelopment) UK France Switzerland 59.000 1. the relevant market to consider in terms of development should be Paris vs.76% (0.13% divided by 17% national coverage).900 6. France. of km2 per supermarket Internet usage % of households with Internet access % of households that shopped online Marketing and awareness Historic marketing investment (€ million)4 No.2 80% 41 61% 27% n/a n/a n/a 8.7 61 6. of players ACTIVE on the market Awareness of e-grocery E-grocery development 2001 E-grocery sales in 2001 (€ million) E-grocery as a % of retail sales Underdevelopment vs.3 17% 544 57% 36% 7.. And the market development in Paris is in fact 0.88% 171 0. 2002 4 .13%* 7 12 0. Source: Company information Excluding any in-store promotions in their brick-and-mortar operations Swiss Franc (CHF) 1 = €0. e-grocers deliver only to Paris. of supermarkets and hypermarkets No.11 INTERNATIONAL IMD-5-0615 LAUSANNE – SWITZERLAND Exhibit 2 E-grocery in Europe Key e-grocery market drivers in Europe Socio-demographics Population (million) Population coverage Surface (thousand km2) % Working women with kids < 5 years % Females employed part-time Dissatisfaction with grocery shopping No. of inhabitants per supermarket (thousand) No.68 (euro) on November 27.05% 18 (7 times under) (18 times under) * In France. Therefore.
F. Accountant IT Prod (BV/Sun) Cat Mgr/Quality Fresh (CC) Webdesigner / Content Data Mining / Analysis IT Prod (NT/Network) Store Assistant Customer Care Mgr Product Reception Programmer CS Agent 1 CS Agent 2 CRM Agent 1 CRM Agent 2 3 Product Reception Admin Assistant Source: Company information . Crevoisier Finance & Business Process J. Meurer Marketing Director C. Kay Logistics Director P. Locher Store Director R.12 INTERNATIONAL IMD-5-0615 LAUSANNE – SWITZERLAND Exhibit 3 Organization Chart C.. Blachon IT Director Cat Mgr Food Customer Communication Operations Mgr Accountant IT Prod (DBA/Sun) Cat Mgr Near Food Webdevelopment / Usability 20 Pickers Supply Agent Ass. Wanner CEO Admin Assistant Receptionist D.
.LeShop.ch Source: Company website .13 INTERNATIONAL IMD-5-0615 LAUSANNE – SWITZERLAND Exhibit 4 www.
14 INTERNATIONAL IMD-5-0615 LAUSANNE – SWITZERLAND Exhibit 5 Product Assortment Source: Company website ..
.15 INTERNATIONAL IMD-5-0615 LAUSANNE – SWITZERLAND Exhibit 5 (continued) Source: Company website .
16 INTERNATIONAL IMD-5-0615 LAUSANNE – SWITZERLAND Exhibit 6 Value-added Information Source: Company website ..
.17 INTERNATIONAL IMD-5-0615 LAUSANNE – SWITZERLAND Exhibit 7 Layout of the Logistics Center Areas 4. 5 & 6: Refrigerated Sections Areas 2 & 7: Slow-moving Items Zone Area 1: Fast-moving Items Zone Area 3: Bulk Items Zone Source: Company information .
18 INTERNATIONAL IMD-5-0615 LAUSANNE – SWITZERLAND Exhibit 8 Inside the Logistics Center Source: Company information ..
leshop.ch Order Order Customer generates order online Order routed to logistics center for picking Sent to customer on the next delivery day Packed shipping boxes delivered to LaPoste Express LaPoste Express Source: Company information ..19 INTERNATIONAL IMD-5-0615 LAUSANNE – SWITZERLAND Exhibit 9 Order Fulfillment Process www.
Delivery Tesco would deliver in a two-hour window that the customer had specified. The company assigned a delivery day (one day of the week) to each customer. which was far less than the cost of employing all the pickers and drivers..streamline. Delivery Streamline served about 8. a US pure play online grocer. A store employee.500 homes in Boston. The order was first assigned to the van that would deliver the goods. DC and Chicago.tesco. An order received on the website was sent to the server computer at the store nearest the customer’s home. Washington. It charged customers a fee of £5 per delivery5. contracts or minimum orders. It used a fleet of more than 20 refrigerated trucks to make deliveries within a 20.20 INTERNATIONAL IMD-5-0615 LAUSANNE – SWITZERLAND Exhibit 10 Fulfillment and Delivery Models of Other Online Grocers USA’s Streamline (www. until 23:00 the night before the assigned delivery day.3 / US$1.com) Fulfillment Instead of building new highly automated distribution centers dedicated to fulfilling online orders. Streamline installed an entry-access keypad on each customer’s garage so that its drivers could enter and leave orders in the temperature-controlled cabinets installed by the company. had four distribution centers where expert shoppers hand-picked items. who had to compete with in-store shoppers.to 25-mile radius of its distribution centers. Customers could place orders any time and day of the week. UK’s Tesco (www. and then sent on to a “picking trolley”--a shopping cart with a shelf identifier screen and a price scanner. 2002 . Streamline charged customers a fixed fee per month for the delivery service (US$30 in 2000).55 on November 27. loaded the trolley and sent it straight to the van for delivery. one of Britain’s leading food retailers. In 2000. opted to exploit its existing network of stores to gain speed in entering the online grocery market as a first mover. Tesco.com) Fulfillment Streamline. There were no additional set-up charges. Streamline claimed that it could get the delivery cost down to about US$3 per order. 5 £1 = CHF 2.
6 H Lapsed 5% 0% 60% (E: 45%) 60 1.9 Similar 12 2 22 16 36 47 41 Source: Company information .5 90 1.3 187.0 90 239 1.8 244 1..21 INTERNATIONAL IMD-5-0615 LAUSANNE – SWITZERLAND Exhibit 11 LeShop: Customer Segmentation A % of population % of revenue Total spend over 6 weeks (CHF) Number of transactions Spend per transaction during the 6-week period (CHF) Margin Average number of SKUs per transaction 6 54 1.0 56 C D E 60% F G 10% 30% 575 2.1 49 B 25% 10% 56 1.7 1.4 239.314 5.3 247.8 132.1 54.
.22 INTERNATIONAL IMD-5-0615 LAUSANNE – SWITZERLAND Exhibit 12 Print Ad Source: Company information .
3 % points 23 Average 24 Source: Company information .0 18..3 Average .4 % points 24 29.23 INTERNATIONAL IMD-5-0615 LAUSANNE – SWITZERLAND Exhibit 13 Effectiveness of Promotions (January – September 2002) All orders Orders penetration Average basket size (CHF) Average basket size (number of lines) Margin Average lapse (number of days between orders) Orders without promotional items 35% 150 Orders with promotional items 65% 190 100% 171 24.4 Average + 0.0.
24 INTERNATIONAL IMD-5-0615 LAUSANNE – SWITZERLAND Exhibit 14 Promotions Source: Company website ..
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