Feasibility of Online Grocery Shopping and Delivery in Feasibility of Online Grocery Shopping and Delivery in Manhattan Manhattan

A Geospatial Marketing AnalysisA Geospatial Marketing Analysis

Sarah DowBinghamton University

Mentor/Advisor: Professor Mark ReisingerHonor’s Thesis Committee: Norah Henry and Lucius Willis

Introduction

Discussion of Study Area

Problem Statement

Hypothesis

Literature Review

Analysis

Discussion of Results

Conclusions

Bibliography

Data and Methodology

Shopping for food is a vital part of our lives. Going to the supermarket to pick up the necessities such as bread, milk, and eggs to pushing a shopping cart through aisles containing a wide and overwhelming spectrum of produce and goods is a stressful task that takes preparation, planning, and time out of our busy schedules, even if its just once a week. The retail of food has changed in many ways since the early1800's. Retail has transformed and has been molded by the continuously changing lifestyles and the advancement of technology. The most recent and growing trend is electronic commerce. The internet has eliminated the need for consumers to travel to stores to purchase goods. The food industry has picked up on this movement and is taking advantage of this new concept of online grocery shopping and delivery. This market is viable in an area containing a population that earns above average income and who have ample expendable income allocated for food. The online grocery shopping and delivery service is successful among the working population and families who value time and convenience. This market is very appealing to consumers who have difficulty travelling to a grocery store to purchase food as a result of barriers such as lack of transportation or carrying bags of groceries from the store and to the home. 

Many online grocery shopping and delivery businesses have warehousing where the food is packaged for each order and loaded onto a truck to be delivered.  Transportation routes are very important to study. There may be shortcuts that may be taken, or more direct routes that save time. Analyzing cost effective routes makes delivery more efficient and will consume less gas as well as decreasing the travel time and increasing delivery output, benefiting both the business and the customer.

My area of study is the Upper West and East side in the borough of Manhattan. The Upper East Side covers land from 59th to 96th street along 5th Avenue and Central Park. It was once known as the "Silk Stocking District" and is now a the most affluent area of Manhattan and has some of the most expensive real estate in the country. These areas are distinguished wealthy areas. The 2000 census indicates 207,543 people residing in the Upper East Side. The racial makeup of the neighborhood was 88.25% White, 6.14% Asian, African American, 0.09%, and 1.74% from two or more races. 5.62% of the population was Hispanic of any race. The female-male ratio was very high with 125 females for 100 males. Given its very high population density and per capita income ($85,081 in 2000), the neighborhood is believed to contain the greatest concentration of individual wealth in the nation. As of 2000, 75.5% of adults ages 25 and older had attained a bachelor’s degree or higher. The Upper East Side maintains one of the highest pricing per square foot in the United States. Average cost per square foot is close to $1,200 per square foot as of 2006. Due to the high population density and land prices there are many luxury residential high rises and skyscrapers in the neighborhood. The Upper East Side is currently served by one subway line and local bus routes. 

The Upper West Side lies between Central Park and the Hudson River between West 58th Street and 110th or 125th street. Like the Upper East Side, the Upper West Side is primarily a residential and commercial area, with many of its residents working in more commercial areas in Midtown and Lower Manhattan. The neighborhood is upscale with the median household income above the Manhattan average. Two subway lines serve the Upper West Side. There are five different bus routes that go up and down the Upper West Side, as well as cross-town buses at every major intersection.

Grocery shopping has changed shape over time. Food retail started as a market area; stalls where butchers or farmers sold their produce. It then evolved into market houses, and then transitioned into the traditional grocery store. As newer technologies such as refrigeration, registers, inventory equipment, and the internet are introduced to the world, the ability to shop has become easier, faster, and certainly more efficient. Lifestyles have dramatically changed as a result of the changes in technology. The online grocery shopping and delivery service caters to the current lifestyle that includes internet savvy consumers and people who value time and convenience. New York City is a fast paced environment where most people who live in the area have careers, work late, have no need for vehicle ownership, may have families, and utilize the internet. Everyone must eat to live, therefore, my questions regarding online grocery shopping and delivery in Manhattan are: What area to Locate/Market Online Grocery Shopping and Delivery in the New York Metropolitan Area? What target group is the best population to market based on demographics? Where is the best place for warehousing based on criteria (square feet, lease/rent/selling price, address/area in relation to proximity to the target area)? From which warehousing area has the most cost effective route? 

My hypothesis is that the upper east side of the New York Metropolitan area will be the target area for an online grocery shopping and delivery company. The target customer is a middle aged women with a family who has an income of $75,000 and higher and has earned a bachelor's degree or further education. The Upper East and West side is a composed of financially successful people who will utilize the online grocery shopping and delivery because this group tends to work, do not drive because cars are not practical for the city lifestyle, and shopping online saves time. Women are the main consumers of groceries. consumers who have an income of $75,000 have enough disposable income allocated for food and additional cost of delivery. A higher educational attainment is usually correlated with income. The warehousing will be located in New Jersey where many low cost industrial parks and warehousing are found. New Jerseys proximity is also close to the city and will have the best cost effective routes to the target area. 

1) The total population gradually decreases as you travel north to south of Manhattan.

2) The female population is distributed throughout the island but is concentrated in small tracts in the target area as well as in northern Manhattan.

3) The white population resides in the Target area and Southern Manhattan.

4) The uneducated population is not large but they are found in northern Manhattan and south eastern Manhattan.

5) The population that has attained a Bachelor’s Degree is found in the target area.6) The employed population is evenly dispersed throughout the county. But the largest concentration of the employed are found in the target area.7) The unemployed population is even around New York City, but is heavily concentrated in northern Manhattan.8) The median household income in New York County is highest in the Upper West and Upper East Side down to lower west Manhattan. 9) Overall, the population with a household income of $75,000 and higher is prevalent in the target area.10) The Annual Expenditures on Food at Home per square mile tells us that the most purchases of food is made in the Upper East Side of Manhattan, and many are made in the target area.11) The Annual Expenditures on Food at Home by ZIP Code indicates that the most expenditures on food are found in the Target Area amongst all other ZIP Codes in New York City.12) Families reside mostly in the Upper East Side, Upper West Side, as well as Northern Manhattan.13) The disabled group ages 16 to 64 are found in the Northern area but are present in the target area as well.14) The disabled group older than age 65 are more prevalent than the disabled group ages less than 65. This disabled age group is again found in the northern part and are found in high numbers in the target area.15) People who do not own a vehicle heavily reside in the target area.16) The dispersal of grocery stores throughout most of Manhattan show that there is an abundant amount of grocery stores present. 17) A warehouse located in Astoria Queens is has the best cost effective route to the target area.

These results conclude the best area to cater to regarding the type of customer the online grocery shopping and delivery service aims to target, is the Upper East and Upper West Sides of Manhattan. The Upper East and Upper West Sides, is a region with a high concentration of the female population of all ages who do much of the grocery shopping and shopping in general. Also in this area is significant population of males over the age of sixty. A dense white population is found in the target area. This population group is most likely to have graduated with a Bachelor’s degree or higher and is also concentrated in the highest employment tract. The white population found in this target area possesses the highest median household income and the highest annual expenditures on food. Expendable income in a target area is vital for an online grocery and delivery company to succeed and become profitable. In order to decide if the market is viable, I had to take a closer look at the expendable income on food. The Expendable Income on Food map indicates that the target area is a viable market because there is enough money spent on food here. There are many families and married couples who reside in these areas. Many families in this area contain parents who both work full time jobs and children who don't traditionally shop for food for the family. This population is pressured for time, therefore, online grocery shopping and delivery saves time and is convenient for families that fit this criteria. Also found in this region is a large disabled population over the age of 65 as well as people who do not own a vehicle. These groups would have much difficulty shopping for groceries without transportation or their disability hinders their ability to walk, see, hear, or perform any activity on their own. 

After analyzing all the socio economic characteristics and variables of the Manhattan population, it is a clear indication that the online grocery shopping and delivery service has great potential there. The market is viable to support the service due to these characteristics.  A later analysis revealed the potential warehouse location along with mapping the most cost effective, timely, and safe delivery route would be based in Astoria Queens.

The research and map analysis I have done proved my hypothesis to be correct. A deep and thorough analysis of the Manhattan market, warehousing, and cost effective routing based on the results of the data indicates that an Online Grocer would strive and be feasible. The Upper West Side and Upper West Side of Manhattan is the target area for an online grocery shopping and delivery company. There is a very strong market present for the viability of an online grocery shopping and delivery business. This type of business will appeal to a specific target customer who is a white working woman with a family, whose median household income is $75,000 and higher and spends appropriately $125 of disposable income towards groceries.  This target population is educated and has earned a bachelor's degree or higher. Online Grocers will appeal to the disabled and those who do not earn a vehicle. Warehousing with the most cost effective route would locate around Astoria, Queens, where I discovered was the most logical area since leasing a large building is affordable and the route a delivery truck would take from the warehouse to the customer's door is the quickest and cheapest amongst the other warehousing locations.

1) Fresh Directhttp://www.freshdirect.com/about/index.jsp;jsessionid=KvxQL0LZg1QT60svhmhX5JsSZYyjSsllpL6NpF2dmLxGfkjKRN99!-1042284661!-305774102?siteAccessPage=aboutus&successPage=/index.jsp -An online grocery shopping and delivery website. They deliver to Manhattan, Brooklyn, Queens, Staten Island, Westchester, Nassau County, Riverdale, Jersey City, Hoboken, and other NJ towns along the Hudson River. Their food is fresh and includes popular brands for less than supermarket prices. It includes the value platform, goals, delivery information, a ‘tour’ of the food facility, and testimonials.2) “Internet-The World Wide Web. The Definition of E-Commerce” http://www.businesstown.com/internet/ecomm-definition.asp-Explains E-Commerce, the history and how it has transformed retail.3) Murphy, Andrew J. “Grounding the Virtual: The Material Effects of Grocery Shopping”. Department of Commerce, Massey University. 2006-Murphy explains the affects of online grocery shopping and how and who it appeals to.4) Reitebergen, Ton Van and Weltevreden, Jesse W.J. “E-Shopping Versus City Centre Shopping: The Role of Perceived City Centre Attractiveness”. Journal of Economic and Social Geography. Blackwell Publishing Ltd. 2007.-This article is very informative; it discusses how e-commerce compares and contrasts to physical shopping and what attracts customers to each form of retail.5) Alfano, Sean. “No Ordinary Trip to the Market: Grocery Stores Undergo Transformations to Appease Customers’ Needs” Nov. 20,2005. http://www.cbsnews.com/stories/2005/11/19/sunday/main1060317.shtml?tag=currentVideoInfo;videoMetaInfo-Discusses the history of grocery stores and how they are molded by consumer needs and by changes in time and technology.

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•Alfano, Sean. “No Ordinary Trip to the Market: Grocery Stores Undergo Transformations to Appease Customers’ Needs” Nov. 20,2005. http://www.cbsnews.com/stories/2005/11/19/sunday/main1060317.shtml?tag=currentVideoInfo;videoMetaInfo•“A Quick History of the Supermarket”http://www.groceteria.com/about/a-quick-history-of-the-supermarket/•Danto, Brandweek, Ginger. “Virtual Bounty: Groceries to Go”. Vol. 44, Issue 43 Academic Search Complete. 2/3/10•“ETI Purchasing Power, Business Activity, and Workforce Density Profiles for All Census Tracts in U.S.”. University of Wisconsin Milwaukeehttp://www4.uwm.edu/eti/etitract.cfm?which_state=36&which_county=36061•Faster Slow Foodhttp://www.nytimes.com/2009/10/11/magazine/11fob-wwln-t.html?_r=2&scp=3&sq=online%20grocery%20shopping%20and%20delivery&st=cse•Fresh Directhttp://www.freshdirect.com/about/index.jsp;jsessionid=KvxQL0LZg1QT60svhmhX5JsSZYyjSsllpL6NpF2dmLxGfkjKRN99!-1042284661!-305774102?siteAccessPage=aboutus&successPage=/index.jsp• “Fresh Direct Capitalizes on the Downturn”http://www.businessweek.com/managing/content/jun2009/ca20090630_154481_page_2.htm•Fairway Markethttp://fairwaymarket.com/location_and_hours.html•“Internet-The World Wide Web. The Definition of E-Commerce” http://www.businesstown.com/internet/ecomm-definition.asp •Labi, Aisha. “THE VIRTUAL GROCER”. Time Europe 2000, Vol. 156, Issue 18•Murphy, Andrew J. “Grounding the Virtual: The Material Effects of Grocery Shopping”. Department of Commerce, Massey University. 2006“History of Grocery Stores” CBS News. 6/14/06http://www.cbsnews.com/video/watch/?id=1060362n•“New York City- Visitors Network”. http://www.newyorkcityvisitorsnetwork.com/newyork/“Peapod Delivers ‘Express Line’ Service Through Superior Routing”. http://www.upslogisticstech.com/pub/case-studies/Peapod-Delivers-Express-Line-Service-Through-Superior-Routing/•“The Issue: FreshDirect Focuses on Customer Service”http://www.businessweek.com/managing/content/jun2009/ca20090630_154481.htm• “Undercover Shopper: Online Groceries” EBSCO Host 2/3/10•Reitebergen, Ton Van and Weltevreden, Jesse W.J. “E-Shopping Versus City Centre Shopping: The Role of Perceived City Centre Attractiveness”. Journal of Economic and Social Geography. Blackwell Publishing Ltd. 2007.