Last-Mile Capacity Constraints in Online Grocery Fulfilment in Great Britain

Abstract

Forecast growth in e-commerce home-delivery demand provides retailers with opportunities for expansion and increased levels of investment. To maximise these growth opportunities, retailers face operational and logistical challenges related to order fulfilment and the last mile. In contrast to other sectors, many grocers operate a store-based delivery model rather than a separate distribution channel. Under this model, orders are picked from store shelves and store-based fleets of delivery vehicles are used for last-mile fulfilment (delivery to the consumers’ home). With very rare access to commercial data from Sainsbury’s, the second largest grocer in Great Britain, we analyse the geographical variations of online groceries fulfilment capacity at store, region, and rural–urban geography levels, exploring the interrelated impact of capacity constraints related to storage and delivery in limiting the further growth of these services. The spatial extent of delivery service areas are found to considerably vary between stores and the existing store network presents barriers to further capacity expansion in some regions. We argue factors associated with the last mile are an important capacity constraint/enabler in the e-groceries sector and suggest that the effective expansion of these services requires further research into online service area delineation to maximise delivery efficiency and capacity. The approach used here is readily transferable to other online service delivery providers in both GB and elsewhere.