The Warehouse Model

The warehouse approach was the approach initially adopted in the US, but the large-scale investment (both initial and ongoing) required such a large volume of orders that this approach has only been successful in one or two huge urban areas (e.g. New York with Fresh Direct).

It is now widely recognized that for grocers with existing stores, the most effective eGrocery approach is to leverage the existing store infrastructure.

	The disadvantages of the warehouse-based approach have proven to be as follows: - Much higher cost of start-up - Slower deployment - Customers prefer an association with a physical store - Higher risk - Higher running costs - Breakeven point is harder to reach - Operation can not be scaled up in line with demand - No support and/or synergy between online and off-line business

The only companies who still use the warehouse based model are those ‘Pure-Play’ companies e.g. Simon Delivers or Fresh Direct that do not have stores to offer the In-store model from. Although Peapod use the warehouse model in Chicago and SE Wisconsin, they use the in-store picking approach along the Eastern seaboard, ‘piggy-backing’ on the Stop & Shop and Giant stores.