Matomera A Case Study

Sammanfattning: In 1998 Bergendahl & Son AB, as the sole owner alongside with BTL as a partner, created Matomera. Matomera was unique in Sweden in its concept of selling groceries only on the Internet with no supporting physical store. Instead they used a dedicated warehouse especially designed for this purpose. In B2C e-commerce the buying decisions and the face-to-face communication between consumers and companies are separated in time or excluded. Therefore the possibility to interact with and to influence consumers is often restrained to the website and call-centres. Along with this there is an added responsibility of picking and delivering the goods to consumers. When selling groceries on the Internet there is a lack of knowledge concerning consumer response to websites and consumer requirements on home deliveries. Therefore logistics concerning home deliveries is an important part in fulfilling consumer demands as the responsibility of picking and delivering has been transferred from the consumer to the grocer. In the case of Matomera, the idea was to deliver groceries home to consumers without any additional distribution fees. However, implementing home deliveries without additional distribution fees for the consumer failed, and despite award winning websites and marketing campaigns Matomera was taken out of business in March 2001. In logistical terms the activities that consumers perform when buying groceries in a traditional way, are picking and bringing the groceries home. In order to fulfil these activities there are many logistical solutions of distributing groceries to consumers and therefore meeting the consumer requirements. The purpose of this master thesis is to describe the chosen logistical solution of Matomera, the information, financial and physical flow, and how these elements relate to each other. The objective is also to analyse the logistical solution in the aspect of fulfilling the requirements of the consumers. The main questions to be answered in this thesis are therefore: How did Matomera consider the requirements of the consumers in order to create a logistical solution that would satisfy the chosen consumer segment and how did the logistical solution of Matomera fulfil these requirements? How did the logistical solution of Matomera look like and what kind of logistical problems did Matomera face? We have chosen to do a case study on Matomera for this master thesis. Since the company no longer exists all facts are based mainly on interviews as no first hand observations could be made. In the case description we begin with a brief presentation of the Swedish grocery industry, continuing with some theories about e-commerce, logistics, and different distribution models. Further, the description of Matomera is based on both the company's functions and the processes connected to the company. When analysing the case, eight aspects connected to the consumer demands put on e-grocery solutions serve as starting points. Matomera's consumers executed the orders through the website the day before delivery and the orders were sent to the warehouse to be picked. The fresh food was delivered daily to Matomera from the suppliers in consumer order sizes. The products were assembled and stored in boxes, which could maintain the preferred temperature. The boxes were picked up at Matomera by the drivers and delivered within allotted areas and certain delivery time windows. The groceries could be paid for with credit card similar to an ordinary store. After analysing the case we have identified several important aspects concerning consumer demands versus logistical efficiency. The logistical solution of Matomera provided an outstanding possibility to sell the freshest groceries. Consumers had the opportunity to buy groceries that were fresh in every delivery, unlike groceries bought in an ordinary store. In this case, the logistics enabled the company to serve their consumers with special qualities. Quality in having the groceries delivered home, and quality in receiving the freshest groceries. It might be possible to combine high quality products, ii i.e. daily deliveries with same day deliveries to consumers, but in order to get a simplified and cost efficient logistical solution, it is necessary to prioritise what aspect is the most important for the consumer. The attended deliveries had several advantages such as the possibility to actually meet consumers and offer the added service of paying directly with credit card. The logistical consequence was that delivery time windows had to be managed, and the economical consequence was higher variables costs of the deliveries compared to unattended deliveries. Regardless the use of unattended or attended deliveries the packaging system plays an important part in keeping the groceries in good condition. Therefore the e-grocer has to take the aspect of using an adequate packaging system under consideration. Matomera managed to develop both a cheap and efficient packaging system that supported the whole logistical solution of Matomera. The use of two-hour delivery time windows improved the efficiency in the logistical system compared to one-hour delivery time windows, but did not worsen the conditions of consumers to any great extent. The combination of home and company deliveries improved both the logistical efficiency and the conditions for consumers. By using both a delivery fee and a reached order sum before offering free deliveries gives the possibility to affect both buying behaviour and the delivery costs per order for the e-grocer. The difficulty is to find a balance that will not scare the consumers away. However, a good balance will keep the preferred consumer segment and decrease the delivery costs for the e-grocer. Offering payment methods that resemble the ones used in ordinary stores is probably necessary in the beginning, in order to attract consumers to the e-grocer. However, as consumers become more used to shop on the Internet, payment methods that do not affect the deliveries in a negative way should be used. The use of a dedicated warehouse is the preferred solution in terms of logistical efficiency, but requires a large consumer stock in order to compensate for the high fixed costs. This was also significant to Matomera, which obtained a high logistical efficiency within the dedicated warehouse, but had a problem reaching the break-even point regarding number of consumers. Therefore, the picking should have been performed in a store until a sufficient consumer stock was obtained. To have a high logistical efficiency within the warehouse is crucial in keeping the logistical costs on a low level. With the restraints of using an existing building, Matomera optimised the usage of the building by computer simulating different layout alternatives, and continuously improve the picking routines together with the picking staff. The aspects important for consumers are that the orders are accurate and that the assortment is fulfilling their needs. Maintaining high delivery accuracy is important as it builds up a confidence among consumers. As it is easier to blame someone else, the consumers probably has greater demands on the e-grocers than what would be the case if they forgot to pick the item or pick the wrong item themselves. Matomera created a website and a Service-centre that were very much appreciated by the consumers. Although the Service-centre was very much appreciated, the function could have been used for additional purposes such as offering services that could inspire consumers. This, similar to the website, was used to simplify the logistics, i.e. giving instructions to the driver. Matomera developed its concept all the time. Thorough pre-studies had been done in order to determine what segments that would use home shopping and what segments that would be most iii profitable. As the time passed, Matomera gained new knowledge in different areas. As they were one of the first e-grocers they lacked similar companies to compare themselves with, which led to that they learned much by trail and error. This is significant for pioneers. If Matomera had this knowledge from the beginning they could have avoided some of the difficulties that they later confronted.