Comparative Analysis of Energy Intensity and Profitability in Emerging E-Grocery Retail Models

Abstract: The supermarkets account for approximately 3% - 4% of the electricity consumption in the industrialisedcountries which makes them one of the main contributors to climate change. Food retail, similarly toother energy intensive industries requires deep changes that would reduce its negative environmentalfootprint. Online grocery (e-grocery), recording three-digit growth globally in the times of COVID-19pandemic, has the potential to disrupt the market and bring opportunities for energy intensity reduction.Brick & mortar retailers adapting to this trend not only experience technical challenges with orderfulfilment and last-mile logistics, but also they struggle to achieve profitability of e-grocery. Therefore,there is a need for guidance in this transformation. This thesis aims to help retailers choose the leastenergy intensive and profitable e-grocery configuration by comparing the emerging fulfilment models(in-store, omni store, dark store) and last-mile delivery options (click & collect, home delivery).The scope of this thesis includes a literature and market review, where an overview of e-grocery market,logistics, technologies, energy intensity and economics is given. The review is followed by methodologyexplaining the tools and assumptions used for analyses. Then, energy intensity analysis is performed whereenergy intensity per order is calculated using CyberMart software for three fulfilment models and twodelivery options. After that, the operating costs and profitability of e-grocery models is analysed. Finally,the results from analyses are discussed, concluded and recommendations for the retailers are given.The results of this thesis suggest that e-grocery may indeed reduce energy intensity of food retail but theenergy consumption has little impact on the operational costs of the e-grocers. Labour fulfilment andorder delivery costs optimisation play the biggest role in achieving profitability of online retail. Thus, it isrecommended that the retailers, along with the growing penetration of e-grocery, develop automatedfulfilment and click & collect solutions that would reduce the operational costs and allow for anincremental, yet future-proof adaptation to the e-grocery revolution.