Improving Substitutions in Online Ordering.
By Daniel Corsten, Luigi Laporte, and Srikanth Jagabathula
“I ordered raspberries. They send me cauliflowers.” That’s how a Californian shopper described their online grocery experience buying groceries from Walmart using the Instacart app. Our fieldwork has revealed similar mishaps. These mismatched substitutions have become a symbol of a deeper problem—one that quietly erodes profitability, damages customer trust, and impedes the growth of online ordering in retail.
As e-commerce grows, more retailers are turning to in-store fulfillment models, using their existing stores and staff to pick online orders. We recently conducted a survey in partnership with the ECR Retail Loss Community. Of the 25 international retailers that responded and whose annual revenues represent more than $1 trillion, 61% of them now pick online orders from physical stores, and in those stores, online sales account for roughly 15% of total sales. Picking online orders in stores offers a way to avoid the high fixed costs of dedicated fulfillment centers or dark stores, retail locations that are not open to the public and exclusively used for fulfilling online orders, but it comes with serious trade-offs—especially when it comes to substitutions.
Unlike retailers that fulfill orders from centralized warehouses or dark stores with tightly controlled inventory and process accuracy for immediate shipping, in-store picking introduces a critical time lag. A customer may place and pay for their order hours before a store employee starts assembling it. By then, the shelf inventory may have changed. An item marked as “in-stock” on the website might be gone—sold, misplaced, or never there to begin with. When that happens, the picker faces a choice: Substitute something else, contact the customer, or skip the item altogether. None of these options are ideal. Each comes with cost, delay, or risk of customer dissatisfaction.
Read the full Harvard Business Review article.
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Srikanth Jagabathula is Professor of Technology, Operations, and Statistics, the Robert Stansky Research Faculty Fellow, and the Academic Director of the Anand Khubani BS in Business, Technology, and Entrepreneurship at NYU Stern.