The Wareroom Model

Within an in-store model there are two different methods of picking. The first option is what is known as the "wareroom" approach where an area in the back of a store is split off from the the normal running of a store and is given over to storing products that are available on the website.

The designated wareroom area tends to house only a sub-set of the ambient produce (8,000 to 9,000 SKUs) with frozen and specialty goods (e.g. Deli) picked separately from within the actual store.  Due to the potential for more efficient product picking and the high investment in this version of the In-store model, a wareroom is geared to higher volumes and services a larger geographical area than the pure In-store model version where the all the existing store facilities are used for picking purposes.

Upsides of a Wareroom Model:
- Is more efficient picking for general grocery items as the goods are in a more confined space (24 minutes versus 36 minutes for in-store on a $150 order)
- Day to day in-store activity is not as heavily impacted
- a wareroom is run as a separate operation and hence can handle higher volumes
- At optimum capacity it will increase the net margin by 1%

Downsides of a Wareroom Model:
- The availability of suitable space from a logistics perspective
- Higher operational running costs (administration, management and physical maintenance of the segmented area for picking)
- Significant Capital Investment required to establish each facility ($500K versus $40k per store for in-store model)
- Break even of business is higher (estimated $7m revenue per wareroom operation)
- Geared to next day delivery (not 'same day') as the system is less flexible
- Often a limited range is a very prominent feature
- Higher stock losses
- More expensive vehicles and greater distances required to service larger geographical areas
- Extra driver costs because of larger vehicle size