Subscription-Based Inventory Planning for E-Grocery Retailing

Abstract: The growing e-grocery sector faces challenges in becoming profitable due to heightened customer expectations and logistical complexities. This paper addresses the impact of uncertainty in customer demand on inventory planning for online grocery retailers. Given the perishable nature of grocery products and intense market competition, retailers must ensure product availability while minimising overstocking costs. We propose introducing subscription offers as a solution to mitigate these inventory challenges. Unlike existing literature focusing on uniform subscription models that may harm profitability, our approach considers the synergy between implementing product subscriptions and cost savings from improved inventory planning. We present a three-step procedure enabling retailers to understand uncertainty costs, quantify the value of gathering additional planning information, and implement profitability-enhancing subscription offers. This holistic approach ensures the development of sustainable subscription models in the e-grocery domain.