A Strategic Analysis of Online Grocery and Its Future Outlook

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Massachusetts Institute of Technology, Engineering Systems Division, 2004 - 106 pages
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The e-commerce boom has led to a major shift in business paradigm from the traditional brick-and-mortar store to the direct sale click-and-mortar model across the business world. Amazon and Dell pioneered the direct sale concept and fundamentally changed the way of doing business in their industries. Since then, many traditional industries have experienced similar transformations. Online grocery business, for example, has seen many failed endeavors to emulate Amazon and Dell's success in the past few years. The most famous one was Webvan--a 7.8 billion dollar roller coaster ride that in two years burned through all its cash reserve and produced zero profits. Webvan epitomized one of the classic mistakes during the dotcom era--the "Get-big-fast" doctrine that infatuated the e-commerce world at that time. On the other hand, other online store such as Tesco and Peapod cautiously laid out their operations that strategically aligned with their original vision of the online grocery business--not as a revolutionary new business model but as a value-added convenience service provider that exists on top of the existing structure. That strategy not only helped them survive the turmoil of e-commerce downturn but also turned them into successful players in the markets they are serving. This thesis will analyze these three online grocers' business models and explore the underlying reasons that contributed to their failure and success, respectively. A recent trend in online grocery business is to positions online grocery store as a premium food and service provider that delivers high quality food products to the upper-income group. A representative case--FreshDirect--is analyzed to bring insights to this new niche market. From these findings, a list of recommendations.

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