Academics have devised a new analytic approach to help supermarket chains to decide when to incentivise customers – e.g. lowering delivery fees in areas and time slots, all in real-time.
The operational strategy will make future food deliveries more efficient and more environmentally friendly with delivery vans using less fuel.
By mining big data to predict when online shoppers want their weekly food shop delivered, supermarkets can not only improve service to Internet customers, but also boost company profits by an estimated four per cent.
Academics from Warwick Business School, Lancaster University Management School and the University of Southampton tested the new approach using live shopping data from a leading UK online grocer over a period of six months.
Grocers offering home deliveries work on very tight profit margins as order delivery is a significant cost driver – this is especially noted when the retailer offers very tight delivery time windows in order to increase customer satisfaction while keeping failed delivery attempts to a minimum.
"Our model can outperform the static two-tier delivery pricing policies that are often found in practice by around four per cent in profit," said Arne Strauss, assistant professor of operational research at Warwick Business School. "In an industry that operates on very small margins, this profit potential is significant."
According to IGD, Internet food shopping is predicted to increase by 126% over the next five years, bringing sales to £14.6 billion.
@ 2014 ESM Magazine
