In contemporary entrepreneurial environment based on customer retention, the growth of the internet has pushed the most dynamic businesses to compete in the electronic market. The recent evolvement of the Internet as a new major distribution channel has obtained much attention, as the online channel calls the viability of traditional stationary retailing into question. Today, since innovation is a key factor in the Digital Age, the presence in the digital marketplace is essential for retailers, also in the food retailing. The paper aims to analyze the online commerce for food groceries and compare the evolution from 2017 to 2019. The sample represents the 99% of Italian brands of brick and mortar supermarkets and hypermarket. The first study was conducted in 2017, after two years the paper has analyzed the same sample and reported how many groceries retailers have adopted the online selling. Through the visit of every Internet site and some interviews to managers, this paper proposes the reasons why only a limited number of grocery brands sell food over Internet. Moreover this paper calculates the cost (in Italy) to prepare the expense and satisfy the order of a customer. Characteristics of goods (freshness, perishability, cold chain warranty, etc.), expensive operations needed to prepare the delivery, the cost of delivery, and difficult reverse logistics are the main causes of low adoption of e-commerce. Online groceries retailers are concentrated around big cities in particular in the north Italy (Milan, Turin, Genoa, etc.). Expense is prepared inside the retail by the employees. Some shops use the drive-in model and only a limited number of cases deliver to home. The few cases of food e-commerce offer the delivery only in a limited area of big cities. At the end, this paper demonstrates the logistics cost (picking, packing and transport) in Italy is higher than the price of the service and this strategy isn't profitable for companies.

1. 7 th International Congress on Contemporary Marketing Issues
Online grocery brick and mortar
retailers. State of the art in Italy, but is it
a profitable strategy?
Andrea Payaro, PhD
Anna Rita Papa

2. Andrea Payaro
• 1999: Degree in Management Information System at University of Padua
• 2002: Ph.D. in Business Management at University of Padua
• 2004: Post Doc. in Business Management at University of Padua
• 2004-2011: Visiting Professor at University of Padua
• Today:
• Consultant certified by European Logistics Association
• CEO of P&P Consulting & Services
• Vice President of SCM Academy (Supply Chain Management Academy), Italian association of logistics and supply
chain management
• Lecturer at Transilvania University – Brasov ROMANIA
• Lecturer at Italian Trade Agency (ITA) Ministry of Economic Development
• Scientific supplier Ministry of Transports
• Marketing Researcher at "Largo Consumo", Italian magazine of marketing and economics and "Il Giornale della
Logistica", Italia magazine of Logistics and Supply Chain Management
• Author of 10 papers in International Scientific Reviews and more than 100 articles in Italian reviews.

3. Agenda
• E-commerce
• Online Purchases
• Goals
• Research
• Main results
• Conclusions

4. E-commerce
Internet users who bought or ordered goods or services for private use over the internet in the
previous 12 months by age groups, EU-28, 2008-2018 (% of internet users) (Source: Eurostat)

5. Ecommerce in Europe
Online purchases, EU-28, 2018 (% of individuals who bought or ordered goods or services over the internet
for private use in the previous 12 months) - Source: Eurostat

6. Logistics of goods
• An Internet transaction is the sale or purchase of goods, whether
between businesses, households, individuals, governments, and
other public or private organizations, conducted over the Internet.
• The goods and services are ordered over the Internet, but the
ultimate delivery of the good may be conducted off-line. [Source:
OECD. 2001. OECD science, technology, and industry scoreboard:
Towards a knowledge-based economy. Paris]
• Among the most purchased good online there are food and groceries.

7. Goals
• This paper aims to
1. Compare the state of the art between 2017 and 2019 for brick and click Italian
supermarkets.
2. Investigate the delivery models adopted by supermarkets
3. Evaluate the operations costs of an order
• Food Logistics is more complex:
• delivery within a maximum period of 24 hours.
• expiry dates is the factor which differentiates it from other
• cold chain
• large variety of products
• Companies adopt the “Brick and Click” model when they can operate dual
channels: traditional and on line (Gulati & Garino, 2000)

8. Research
• This paper use a qualitative method, based
on inductive multicase research. This
method has been adopted to understand
how groceries brands use Web to sell food
goods.
• The qualitative method help us to better
understand a still unknown phenomenon
and explore it in depth.
• The sample is composed on 132 Internet
sites (more then 99% of Italian PoS – source
Federdistribuzione)
• Sases represent the entire peninsula.

9. Results
2017 2019
Sample 131 132
Without Web site 9 8
Web site without online commerce 108 92
Web site with online commerce 14 30
Brands failed 2
New brands 1
1. Compare the state of the art between 2017 and 2019 for brick and click
Italian supermarkets..

10. Results
2. Investigate the delivery models adopted by supermarket
• All the e-commerce sites deliver their products over a narrow area, in particular near the
main metropolis in the North and Centre Italy (Rome, Genoa, Milan and Turin).
• In 5 cases supermarkets deliver only no-food goods.
• Discount stores do not make the service
• Only 1 supermarket gives to customers 3 different delivery models
Delivery Model 2017 2019
Home Delivery 0 5
Click and Collect and Drive Through 6 10
Home Delivery And Click & Collect (or drive through) 8 15
Home Delivery And Click & Collect (only no food) 5

11. Results
3. Evaluate the operations costs of an order
• This paper
• Analyses the distribution models
• Identifies a common process
• Calculates the cost of an order using ABC method
0
1
2
3
4
5
6
7
8
2.00 € 3.90 € 4.50 € 4.90 € 4.99 € 5.90 € 6.00 € 6.90 € 7.90 €
Home Delivery Prices
Distribution of prices for Home Delivery model

12. Results
• Distribution models
Picking
Shopping
Online Payment Packing Order
Ready
Order
Management
Click & Collect
Drive Through
Locker
Home Delivery
Customer Retailer
Locker DeliveryShipping

13. Results
• The common process
Picking
Shopping
Online Payment Packing Order
Ready
Order
Management
Customer
Common Process
Locker DeliveryShipping
Retailer

14. Results
• The analysis uses an Activity-Based Costing (ABC)
approach
• According to previous studies (Giuffrida et al, 2017) the
paper simulates the following order :
• 60 Euro average order value
• 30 pieces per order
• Only long life goods, pre-packed goods
• Picking realized in a supermarket (2500 sqm)
• Simulation repeats the picking process 20 times with different
lists
• Results:
• Process average time: 16 min
• Process average cost: 4,80 € (Corresponding to a Cost per min.
(Italy): 0,30 €/min - equivalent to annual personnel cost 29,000 €.
Picking
Packing
Sorting
Order Management

15. Conclusions
• Few food retailers offer online sales. One reason for this is the underdevelopment
of the Italian e-commerce market (Retailnet, 2011).
• The preference for physical store shopping is probably even higher and steady in
more “traditional” areas as Italy (Brown et al, 2015)
• The delivery to home average price is about 4,90 €.
• Home delivery and Click and Collect are the main delivery models.
• POS deliver goods, distribution centers are not ready to deliver parcels.
• Lockers are present only in one case.
• Warrant the cold chain is expensive
• Operations costs are about 4,80 € (Only long life goods, pre-packed goods)
• At moment, brick and mortar retailers loss 4,80€ per online order.

16. Further researches
• Should picking from the shelf cause the reduction of off line customer service
level?
• If demand grows, is online shopping sustainable for brick and mortar retailers?
• Should different picking models reduce process costs (i.e. from basic picking to
batch picking)?
• Should technology adoption reduce process costs (i.e. voice picking and / or
WMS)?
• Is it possible to pick and deliver products from distribution center instead
retailers?

17. Thanks for Your Attention
Andrea Payaro
andrea@payaro.it