Binghamton University Thesis: Online Grocery Feasibility in Manhattan

This thesis, submitted to Binghamton University in Spring 2010, conducts a geospatial marketing analysis to determine the feasibility of online grocery shopping and delivery in Manhattan. The research delves into the history of grocery stores, the evolution of online grocery platforms, and the demographics of online shoppers. It examines variables affecting consumer behavior, including gender and income, and their impact on online purchasing decisions. The study utilizes census data and geospatial analysis techniques to assess market potential, considering factors like warehousing, truck routing, and the distribution of grocery stores in Manhattan. The thesis explores the challenges and opportunities of online grocery services, providing insights into consumer adoption, market segmentation, and the competitive landscape. The analysis includes detailed figures and tables, offering a comprehensive overview of the research methodology, data analysis, and key findings related to the viability and potential success of online grocery businesses in the urban environment of Manhattan.

Feasibility of Online Grocery Shopping and Delivery
in Manhattan:
A Geospatial Marketing Analysis
By
SARAH N. DOW
Binghamton University, Spring 2010
Geography: Urban: Economic/Retailing Emphasis
HONORS THESIS

Acknowledgements
I would like to express my acknowledgement to those who have guided me and
supported me throughout this research project.
I would like to convey my gratitude to my advisor, Professor Mark E. Reisinger,
Associate Professor/Undergraduate Director of the Geography Department, for his continuous
encouragement and faith in my work and my future endeavors. The graciousness and guidance
Professor Reisigner has shown me since the first of his many geography courses that I have had
the privilege of taking, makes him an amazing professor, mentor, and friend.
I could not have completed this thesis without the cooperation and advice from Dr. Norah
Henry and Professor Lucius Willis, who have helped me to complete a piece of work that I am
proud to present. I am also thankful for the support of the entire Geography Department at
Binghamton University.
Most importantly, I owe all of my gratitude to my Mother, Father and brothers who have
never doubted my ability to exceed in anything I pursue. Their absolute love, support, and
encouragement to be the best I could be have shaped me into the person I am today. I am truly
blessed.

Table of Contents
List of Tables…………………………………………………………………….....4
List Figures……………………………………………………………..………......4
Introduction................................................................................................................5
History of Grocery Stores…………………………………………………..………6
Variables that Affect Consumer Grocery Shopping Behavior and Experience.........9
Gender and Consumption in 19th Century New York City and Advancement in the
Internet…………………………………………………………………………..…11
Retail Location is Not Relevant and Does Not Fit the Model of Electronic
Consumption at Home……………………………………………………………..13
Evolution of Online Grocery Shopping and Delivery……………………………..15
Examples of Successful Online Grocer Companies……………………………….18
Value Platform and Competition…………………………………………………..19
Demographics of Online Shoppers……………………………………………..…22
Warehousing……………………………………………………………………….23
Truck Routing in New York City…………………………………………….……24
Problem Statement………………………………………………………………...27
Exploratory Research Problem on Location Analysis……………………….…....28
Study Area……………………………………………………………………...…29
Methodology………………………………………………………………...…….31
Data……………………………………………………………….……….……....32
Analysis and Discussion of Results……………………………….…….………...71
Conclusions………………………………………………………………………..73
Works Cited……………………………………………………….…..…………..74

List of Tables
Table 1. A Profile of Online Shoppers………………………………..………22
Table 2. Census Variables Used in Data and Analysis…………….…………32
List of Figures
Figure 1. Study Area…………………………………………………….……29
Figure 2. Female Population…………………………………...………..……33
Figure 3. Male Population…………………………………..………..….…...34
Figure 4. Female Population Age 22-59………………..………..………..…36
Figure 5.Female Population Age 60+………………..……..………………..37
Figure 6. Male Population Age 60+ ……………..………………………..…38
Figure 7. White Population…………………..………………………………39
Figure 8. Black Population………………………………..……….........……40
Figure 9. Asian Population…………………………………...………………41
Figure 10. Latino Population…………………………………………………42
Figure 11. Did Not Graduate High School…………………………...………43
Figure 12. High School Graduates………………………………...…………44
Figure 13. Associates Degree………………………………………...………45
Figure 14. Bachelors Degree and Higher…………………………….………46
Figure 15. Employed Population……………………………………..………47
Figure 16. Unemployed Population……………………………………..……48
Figure 17. Median Household Income…………………………………..……49
Figure 18. Household Income <$75,000…………………………………..…50
Figure 19. Household Income >$75,000……………………………………..51
Figure 20. Annual Expenditures on Food At Home……………………….…52
Figure 21. Total Households…………………………………………………53
Figure 22. Married Couple Families………………………………………….54
Figure 23. Disabled Ages 16-64……………………………………………...55
Figure 24. Disabled Ages 65+…………………………………………..……56
Figure 25. Vehicle Available……………………………………………….…57
Figure 26. No Vehicle Available……………………………………...………58
Figure 27. Distribution of Grocery stores….....................................................60
Figure 28. Distribution of Grocery Stores: West Side and East Side of
Manhattan…………………………………………………….…………….…61
Figure 29. Distribution of Grocery Stores: Central
Manhattan…………………………………………………….……………….62
Figure 30. Distribution of Grocery Stores: Southern
Manhattan…………………………………………………..…………………63
Figure 31. Cost Effective Route: Red Hook, Brooklyn, NY…………………65
Figure 32. Cost Effective Route: Mt. Vernon, NY……………………………66
Figure 33. Cost Effective Route: Prospect Heights, Brooklyn, NY……..……67
Figure 34. Cost Effective Route: Northeast Bronx, NY……………………...68
Figure 35. Cost Effective Route: Astoria, Queens, NY………………………69

Introduction
Whether one enjoys it or not, shopping for food is a vital part of our lives. Going to the
supermarket whether to pick up the necessities such as bread, milk, and eggs, or 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 it is just once a week. The retailing of food has changed in many ways since the
early1800's, 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 embraced this movement and is taking advantage of this new concept of
online grocery shopping and delivery. Although everyone eats and almost everyone shops online,
this concept is most viable in an area containing a working population and families who earn
above the average income, the population that has ample expendable income allocated for food,
and those who value time and convenience. This method also appeals to consumers who have
difficulty traveling to a grocery store, or who face barriers such as lack of transportation or
difficulty carrying bags of groceries from the store to the home. Online grocery shopping
appeals to various market segments, but spatial factors such as warehousing and transportation
options influence specific adopter groups and the likelihood of innovation adoption.

History of Grocery Stores
By necessity, all household units shop for food to sustain themselves. Grocery shopping
has changed shape over time. With the emergence of new technology such as refrigeration,
registers, inventory equipment, and the internet, 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 grocery store has a long history and is constantly changing as new forms of food
retailing appear and become part of everyday life. The earliest form of grocery shopping was the
public market. They were the main food markets for the nation, much longer than any other
establishment for food retailing in U.S. history. For about three hundred years, many cities and
towns depended on the public market as their main retail food source. Butcher, farmers and other
merchants sold their goods on the street without buildings. (Mayo)
For example, New York City's first marketplace was located near Broadway Street. In
1856, the city's first open public market was located near the shore in what is presently Battery
Park. Market houses were needed to replace the open market. Permanent structures enabled
butchers, farmers and customers to do business regularly in any type of weather. Modified
markets soon replaced market houses. The new market area was noticeably larger with floor
plans that could be rearranged as needed. The most important advancement in building
technology was refrigeration. Meat, fish, and dairy products needed to be refrigerated to prolong
freshness (Mayo). New York City's Grand Street Market contained an ice house as early as 1820,
yet, refrigeration in public markets was rare. By 1890, Mechanical refrigeration which used
chilled brine or liquid ammonia enabled all merchants who rented food stalls to keep their
products cold and to transport perishable foods over longer distances. By the mid 1800's, grocery
stores started to offer a wider variety of goods. Grocery stores were bigger, had larger inventory,

and had higher rents with a larger floor area than market stalls. Grocery stores offered a new
service: home delivery. (Marion)
Site location became a vital issue. Market analysts recommended areas near department
stores where the target customer would benefit by reducing their shopping trips and save time.
Competition for urban land was increasing and suburban growth where public markets would not
be viable became a barrier. The transformation of general stores to grocery stores was a result of
changes in the economy and settlement patterns. (Mayo)
Grocery shopping is a tradition that began in the early 1900’s and became more
prominent in the 1900's as cities grew larger. Large grocery stores offered specialty items such as
sugar, chocolate, cheese, coffee, tea, olive oil, and wine, all non perishable and imported items.
In 1930, Michael Cullen introduced one stop shopping and opened the nation’s first self service
grocery store, Piggly Wiggly, in Memphis Tennessee. Shorty after Piggly Wiggly, The Great
Atlantic and Pacific Tea Company, more commonly known as A&P, was established in Queens,
New York, and spread Cullen's concept. A&P became the fifth largest corporation in America
(History of Grocer Stores, CBS). Supermarkets became an essential part of life for generations;
people could not imagine life without supermarkets. Times have changed; today, people shop at
discount grocery stores and low price mega stores such as Target, Costco, and Walmart. It has
become a growing trend that threatens the traditional grocery store. Over the last two decades,
about 10,000 supermarkets claimed bankruptcy. "Today’s customers aren’t satisfied with just the
convenience of one stop shopping, they demand super saving and super service” (Alfano).
Traditional grocery stores must create excitement and attract customers which Whole Foods
grocery store was able to accomplish. Whole Foods tries to re-educate people about the art of
cooking and preparing food. At Whole Foods, you get what you pay for; there is an astonishing

selection but a bit on the pricey side (History of Grocery Stores, CBS). Surviving grocery chains
are taking notions from high and low end competitors. Money saving customers are attracted to
"big box" discounters. Mass in mass marketing is a thing of the past. "They are getting better
prices at Walmart, they are getting better offerings because of people like Whole Foods. The
world of retailing is always evolving (Alfano)". According to Alfano, Americans average 2.3
trips to the supermarket each week, spending $24.64 a visit.

Variables that Affect Consumer Grocery Shopping Behavior and Experience
Grocery shopping is an essential and routine type of customer behavior. The grocery
shopping experience is characterized by buying goals that must be achieved through the
processing of products, brands, and point-of-purchase information, and repetition at regular time
intervals, such as once a week. These experiences create a unique context in which purchase
intentions and outcomes often differ depending on a variety of situational factors. (Iyer, Park,
and Smith)
Store knowledge or the information consumers have about a specific store's layout and
aisle configurations, including locations of products and brands, based on familiarity and
repetitive shopping experiences in that store and time available for shopping (consumers'
perceptions of the time required to find and purchase goods relative to the actual time available
to find and purchase goods) have an impact on shopping behaviors. Failure to make intended
purchases, impulse buying, brand and product class switching, and the quantity of goods increase
time spent in a grocery store and require more decision making, causing grocery shopping to
become a stressful task. Information processing activities that reconcile these relationships are
different across shopping conditions (Iyer, Park and Smith). Research on in-store customer
behavior has mainly focused on the effects of in-store display arrangements on such purchase
outcomes as sales and brand switching. Unplanned or impulse buying can result from shelf
displays and configuration, the type of store and product, the amount and frequency of purchase,
and consumer demographic characteristics. Consumers are stressed by grocery shopping because
of time pressure, especially if the consumer is not familiar with the layout of the store. This
pressure results in the failure to make intended purchases of non staple items that are less
frequently bought than staple items such as milk and bread. Time pressure may limit the time

required for some customers to properly process in-store product information such as sales, new
products, ingredients, etc. Time pressure tends to delay retrieval of information that is not well
rehearsed but that, if retrieved, may cause changes in the distinctness of previously unrecognized
needs such as food and product at home, future family consumption needs, etc. (Iyer, Park, and
Smith)

Gender and Consumption in 19th Century New York City and Advancement in the
Internet
There was rapid expansion of New York's retail district in the 19th century which
reflected the growing economy. The economy was shaped by the shopping habits of the middle
class, particularly women. Producers and retailers are consumer oriented by marketing certain
goods and services to the demands of the specific groups of consumers.
Women earned about 76 percent of what men earn (U.S. Census Bureau) or about
$30,724 versus $40,668 as a median income. Despite a significant income gap between the
genders, but women control three-quarters of family finances. The International Dairy • Deli •
Bakery Association's report illustrates the influence women have on the grocery industry with
sales of food and beverages made for women increasing 80 percent annually between 2000 and
2004, totaling $4.6 billion by 2004. "Women will deliberate more about the decision. They take
more care in shopping and want to make wise decisions," said Sharon Franke, director food
appliances at Good Housekeeping Magazine. "Part of the appeal is being able to get everything
in one place. We know from our readers that time management and clutter are the two things that
come up over and over as problems”.
The internet is a great resource for women to research and shop for all categories of
goods from groceries to kitchen appliances and furniture. The Internet also saves invaluable
time. A December 2004 ACNielsen/NetRating study found that the average Internet-savvy
consumer spent 51.5 hours per month online, at home, or at work. For working mothers, it is the
convenience and time-saving measure of shopping at work or late at night after the kids are in
bed that makes this form of shopping so essential. "As broadband access picks up at home,
women will be shopping more online at home. The slowness of dial-up was an impediment. And

now the convenience of broadband is becoming overwhelming," Franke said. "Without a doubt,
it is the working woman who will gravitate to online shopping where they can shop in the middle
of the night or at work. It is the stay-at-home mom or the older woman who are likely to shop
during the day or going store to store.” (Moran)
The advancement of information and communication technology had a large impact on
retailing and consumption. Electronic commerce, home based consumption changed retail
completely. Retailing has changed radically since the 1950's due to rising incomes and
increasing mobility. The expansion and advancement of information and communication
technology that emerged in the late 1990's changed the economy. "One of the main effects of e-
commerce is to create increasingly frequent and rapid direct interaction between businesses and
other businesses and consumers, leading to an increased emphasis on connectivity, speed and
consumer service (Cumbers and Mackinnon, 187)". The internet eliminates the need for the
connection between buyers and sellers. Electronic technology transformed the structure of
markets and created opportunities for new or small firms. A new means of shopping is available
to consumers and shopping no longer needs to be a physical time-consuming task.

Retail Location is Not Relevant and Does Not Fit the Model of Electronic Consumption at
Home
The Internet has radically changed the way consumers shop. Online business has spurred
a revolution. The concept of e-commerce is about using the internet to do business better and
faster. Customers have controlled access to computer systems and are able serve themselves.
Shopping websites and E-commerce have no need for location analysis for a specific site.
However, many of the demographic variables used for location analysis and site location must be
evaluated by an online retailer to find the target customer and target region. In both regular
commerce and e-commerce you need to find a way to attract customers to your place of business.
Marketing strategy, advertising and word of mouth draws people into the firm. (Rietbergen and
Weltevreden)
In order to do business, orders are taken and payments are processed. In a retail store
there are no orders. Customers simply find the products they want, get in a line at the register,
and pay the cashier. In e-commerce, orders have to be placed and items shipped. Orders are
handled through interactive, online forms. Money is another issue easily handled in traditional
commerce. Customers in a retail store pay by check, cash, or credit or debit cards. Online
customers cannot pay by cash or check, only through electronic means. Also, there are issues of
security that surround online payment that do not come into play in the traditional retail store.
Online transactions are processed through secure electronic connections and special merchant
accounts for accepting payment. Once payment is processed, delivery of the product must take
place. Shopping in traditional stores is as easy as putting the item in a bag and handing it over to
the customer. Shopping in the world of e-commerce is more difficult, requiring shipping and
transportation similar to catalog and mail order businesses. For businesses that integrate e-

commerce into their existing business plan, fulfillment is as easy as hiring an extra employee to
ship online orders. In Internet startup businesses, fulfillment must often be outsourced to a
facility that can handle order processing and shipping in a more timely and professional manner.
(Definition of E-commerce).

Evolution of Online Grocery Shopping/Delivery
Supermarkets generally have strong, steady sales, even during times of recession. More
people today are eating at home, and are traveling less due to the current economic situation that
requires consumers to keep a close watch of their expenses. The range of a good is the maximum
distance a consumer is willing to travel to purchase a good or service. Many people would prefer
to travel a shorter distance to shop for groceries and non specialty items to save expenses on
transportation and gas. Local home delivery for a variety of products particularly milk,
newspapers, hot food and organic vegetables exist in many cities and eliminates the customer’s
need to leave the house to buy basic goods that are purchased often. (Rietbergen and
Weltevreden)
Online grocery shopping proved to be a failure when the last of the big internet grocery
shopping service, Webvan closed in 2001. In 2003, bigger grocery chains brought this feature
back to life. Companies such as Albertson's, Ahold USA, Safeway and other grocery chains took
a more cautious approach to the online market. Webvan made the mistake of assuming that a
great amount of customers would quickly adopt. The company invested heavily in warehouses,
transportation fleets and marketing but overestimated the number of customers. There were not
enough orders of goods flowing through the system to make up the carrying costs of the
equipment and buildings. The second wave of internet grocers involves the traditional chains
avoiding the mistake Webvan made by using their stores as the warehouses. (Tedeschi)
Through online shopping, customers register personal information on the site such as
their frequent shopper cards and are shown lists of items they have recently bought, to speed
selection of the basics. Prices offered on the websites match those in the stores. The customer
can view a schedule of delivery times and choose the day and time they want their groceries

delivered. Peapod, an online grocery service, uses Stop & Shop as its distribution center as well
as warehouses. In 2000, Peapod's revenue was growing at an annual rate of 40%. It is estimated
that 4.5 million of the nation's household bought groceries online in 2008. Forrester Research
estimated that 18% or 19 million of the nation's households utilize the online grocery shopping
service. The target customer has a household income of $70,000 and has a disposable income of
$125.00 allocated to groceries and has at least three people in the household. Online grocery
shopping and delivery is likely to be confined to big metropolitan areas. Albertson's marketing
strategy involves broadcasting and print advertising to introduce the concept but word of mouth
and seeing the delivery trucks on the road are the biggest marketing tools. (Tedeschi)
Many large food companies such as Kraft Foods, are focusing on their online business
(Online Grocers: Ready to Deliver?). As retailers improve their websites, usability and
incentives, marketers are beginning to place more resources behind those sites. Automated
warehouses are used for other complimentary services like banking or photo printing, along with
modern technology and devices such as handheld scanners, making the online experience more
efficient. Web grocers will benefit from the growing numbers of women shopping online.
"Women make the majority of food purchases and household decisions, so it's no surprise that
they are utilizing the Internet as a tool for daily living," said Kenneth Cassar, director of strategic
analysis for Nielsen//NetRatings. Consumers today have fewer security concerns and are willing
to process transactions over the Internet.
This transformation of grocery shopping is very convenient and fits the present culture of
E-shopping. The special features and applications included in some of these websites are geared
toward helping customers buy exactly what the want. A customer can be notified when an item is
available, or when an item goes on sale. In addition, customer may select precut or pre-seasoned

vegetables, meat, or fish. Even further, a customer can view recipes, nutritional facts, cooking
videos or build a shopping list. They can demand specific items such as unprocessed meat, fish,
poultry, fruits and vegetables, food grown or raised in the United States or wherever and
whatever they desire. The website acts as a means of communication that the physical store does
not provide. Grocery shopping is faster, more reliable, more individualized, and much more
convenient (Bittman and Murphy). Analysts say that the current group of Web grocers will earn
significant profits if they can utilize the latest technology and gear consumer attitudes toward the
Internet. "There's nowhere to go but up for the category," said Kate Del Hagen, retail analyst at
Forrester, Cambridge, Mass. The firm expects 4% growth in the online grocery business, to
$17.4 million, by 2008.

Examples of Successful Online Grocer Companies
Peapod successfully targets dual income couples and/or families. It is biased more
towards the age group 25-54 who have kids. Customers of Peapod include convenience-driven
people, the disabled, and the internet savvy. Busy families with kids order the most. An
estimated 65% of purchases consist of produce, meats, and dairy. Produce like bananas, apples
and vegetables sell more online than at retail stores. Popular items are natural/organic goods and
low carbohydrate items. (Online Grocers: Ready to Deliver?)
Safeway's typical customers are time-starved; they have no objections about someone
else selecting their food. Customers who prefer to pick their own meats and produce but order
shelf-stable and staples online. Drivers go through rigorous training on driver safety and how to
treat customers courteously and respectfully. (Online Grocers: Ready to Deliver?)
FreshDirect customers are families and single professionals who earn at least $75,000.
They are busy people involved in many activities and are Internet-oriented. FreshDirect
customers often are 'Foodies' who care about the quality and value of their food. The company
bakes its own breads and pies, roast coffee, and butchers meat they buy directly from suppliers.
An estimated 74% of company's sales are from perishables. Shoppers can specify how ripe they
want their fruits/veggies. (Online Grocers: Ready to Deliver?)
Impromptu Gourmet customers are connoisseurs who want to dine on fine restaurant-
quality food at home. (Online Grocers: Ready to Deliver?)

Value Platform and Competition
The basis of retail marketing strategy is the firm's value platform which differentiates one
business from its competitors. Retailers aspire to create and maintain a unique value platform
that allows it to achieve an advantage over its competitors. The value platform includes policies
regarding merchandising, pricing, advertising, promotion, store atmosphere, service, and
location. The business must understand its customer's needs and wants as well as the
competition. Consumers differ in needs, income, location, and ability to use retail services.
Socioeconomic status, age, education, and lifestyle are a few factors that influence a business's
value platform.
Peapod was established in 1989 and has since expanded and has become the nation's
leading internet grocer. It serves over 280,000 customers in Chicago, New England, and the Mid-
Atlantic metropolitan regions. It works with sister supermarket companies such as Stop and Shop
and Giant Food. Peapod stages its deliveries out of two free standing 75,000 square foot
warehouses and is supported by 17 additional "wareooms" of 7,000 square feet each that are
housed within partnering grocery stores. Peapod offers over 8,000 food items including meat,
seafood, produce, organic, kosher, and prepared foods, and non grocery items such as cosmetics,
school and office supplies usually found in a grocery store. Peapod is growing at a rate of 25% a
year in most areas. This internet grocery utilizes Roadnet Transportation Suite Web Services for
effective and efficient vehicle tracking GPS solutions and deliveries. Deliveries are always
within a two hour window or times the customer specifies. (Peapod)
Launched in the fall of 2002 by Joe Fedele, founder of New York's Fairway Uptown
specialty foods store, FreshDirect today boasts 160,000 customers and delivers 25,000 orders per

week from its 300,000-square-foot facility in Queens. The site offers about 5,000 perishable
items and 3,000 packaged foods.
Fresh Direct claims to be the smartest way to shop for food. It is easy to get the freshest
food and popular name brand groceries while still saving money and time. The food at
FreshDirect come directly from local farms, dairies, and fisheries, not middlemen like most
grocery stores. As a result, it is fresher and less expensive for the customer. Meals can be created
by top chefs to custom-cut meats and bakery fresh goods. The food is made to order in the
cleanest, most technologically advanced food facilities in the country. Customers can select from
thousands of organic, all natural, local and artisanal products, in addition to over 600 meals and
side dishes that are prepared fresh each day by chefs. FreshDirect's website provides free One-
click Recipes, which adds everything to your cart with one click, Nutrition Sort to scan
ingredient facts and many more applications. With FreshDirect, you can order up to a week in
advance and select the time-slot that is most convenient. This internet grocer delivers to many
neighborhoods in Manhattan, Brooklyn and Queens as well as selected areas of Staten Island,
Westchester, Southern Fairfield and Nassau Counties. They also deliver in Riverdale, Jersey
City, Hoboken and now more New Jersey areas along the Hudson River. The minimum order is
$30 in addition to delivery fee of $5.79 to $6.79, depending on the area of delivery.
(FreshDirect.com)
FreshDirect has succeeded where other online grocers such as Webvan failed. The cost of
delivering to an apartment in New York City is the same whether FreshDirect is delivering one
box or 10 boxes. The company has been able to create a database of customer orders that help
the company develop a better understanding of what individual people want and the quantities

they buy. The prices are fair and the incorporation of celebrity chefs appeal to many people.
(Bloomsburg Businessweek)
The Food Emporium currently has 16 stores throughout Manhattan. Its name exemplifies
gourmet food, exceptional quality, service, taste and style. It is also an online grocer that
provides pick-up or same day delivery. Free delivery on orders of $75.00 or more. (The Food
Emporium)
D'Agastino provides online shopping and delivery for orders of $50 or more plus $6.99
for delivery or within a two hour time span. This store provides catering, rewards and savings,
and shopping tips. (D’Agastino’s)

Demographics of Online Shoppers
The demography of certain retail entities differ depending on the business' value
platform, target customer, and target area. A profile of online shoppers reveals detailed
information about the population of people who shop online. Many are females close to the age
of 42, have a median household income of $65,000, less than half have a college degree, more
than half are married and have children younger than 18, and many are full time employees.
Forrester Research, Inc.’s profile of online shoppers consists of 36% of the North American
population, still a significant amount of the population for retailers to feel obligated to create
websites. (Forrester Research, Inc.)
Table 1.

Warehousing
The costs of warehousing are justified by savings in outbound shipping costs achieved
through volume loads. Online grocery shopping and delivery serves clusters of customers,
reducing costs and frequency of small shipments and transportation costs. The distribution
warehouse is located in a strategic area that is convenient to customers. Cost effective routes
from the warehouse location to the target area can aid in the cost tradeoffs of warehousing
operating costs and transportation savings. Finding a warehouse requires the evaluation of
several decisions; construct a new building or to buy or lease an existing one. The prerequisites
of a warehouse for a grocery business that must be considered include the maximum and
minimum size warehouse and the best location in regards to transportation and proximity to the
target area. The warehouse location should not really matter as long as the product can be
delivered in a timely fashion and at a reasonable price. (Ackerman)

Truck Routing in New York City
Since transportation is so closely linked with warehousing, the transportation
requirements for the warehouse are very important. All warehouses depend on trucks as their
source for shipment. Zones and transportation costs to specific sites must be considered. There
are almost 1,000 miles of roadway within New York City. These roads are one of the most
complex truck route systems in the country. The New York City Truck Route Network consists
of a series of roadway segments and follows the New York City Traffic Rules. The system
creates the routing requirements for all truck trips made on the New York City arterials which
are comprised of Local Truck Routes and Through Truck Routes. (Motorists: NYC Truck and
Commercial Vehicle Homepage)
A truck is defined as a vehicle with two axels and six tires, or three or more axels and
must follow the Truck Route Network. The type of truck route taken revolves around the origin
and destination of the trip. The Local Truck route is a network for trucks with an origin and
destination for the purpose of delivery, loading or servicing within a borough. Trucks should
only use non-designated routes to reach their destination. The Through or ‘Thru’ Truck Route is
a network largely composed of major urban arterials and highways and must be used by trucks
that have neither an origin or destination within the borough. (Motorists: NYC Truck and
Commercial Vehicle Homepage)
Trucks are excluded from traveling on certain parkways including: Belt Parkway
(Brooklyn and Queens), F.D.R Drive (Manhattan), Henry Hudson Parkway (North of 59 th Street
to the Bronx-Westchester county line), Cross Island Parkway (Brooklyn/Queens), Bronx River
Parkway (Bronx), Hutchinson River Parkway, Mosholu Parkway (Bronx), Pelham Parkway
(Bronx), Ocean Parkway (Brooklyn), Korean War Veterans Parkway (Staten Island), and Grand

Central Parkway. Certain segments of roadways throughout Manhattan exclude access to
commercial vehicles. These segments are located on Fifth Avenue, Park Avenue, and
the Brooklyn Bridge (Motorists: NYC Truck and Commercial Vehicle Homepage).
Urban freight transport is the transport of consumer goods, industrial goods, waste
materials, and construction materials. The constant steady stream of freight transportation
between its origin and destination within and outside of the urban area creates traffic and various
other problems within urban areas. Urban freight transport involves transportation planning,
environmental planning and economic planning. Transport policies, guidelines and regulations
are needed to prevent or minimize problems. Traffic within urban areas creates congestion, poor
accessibility, air pollution (greenhouse gasses, acidification and the use of natural resources),
noise, safety and intrusion. These are some of the main reasons policies are necessary and must
be enforced. (Binsbergen, Nemoto, and Visser)
The six areas of objectives for urban freight transport are: efficiency, economic, road
safety, environmental, infrastructure, and urban structure. Efficiency includes minimizing or
reducing transport costs as well as improving the quality of transport services; access, reliability,
travel time, flexibility or security of products within the vehicle (Binsbergen, Nemoto, and
Visser). Efficiency improvements influence the creation of economic opportunities because
urban transport serves the society and has an effect on income, price, market share, etc.
Environmental objectives and concerns involve the reduction of local air pollution from carbon
monoxide, nitrogen dioxide, ozone, aerosols, benzene and lead. It also includes the reduction of
traffic noise, improvement of general safety; reduction of number of accidents resulting from
traffic issues, reduction of other forms of any risk, physical hindrance and vibration (Binsbergen,
Nemoto, and Visser). The reduction of the consumption of urban space for transport

infrastructures and delivery points are also addressed. The reduction of emissions which
influence climate change and slowing down of the exhaustion of natural resources are other
major issues. Reduction of road maintenance costs is an example infrastructure objective while
preservation and revitalization of historic city centers, and maintaining the level of services
within urban areas are associated with urban structure objectives. Many of the transport flows
coming from outside the urban area can affect the effectiveness of certain local measures
(Binsbergen, Nemoto, and Visser). The government creates policies to mitigate and regulate
traffic. Freight transport policy and planning include network strategies; specific routes for use
by trucks, designation of routes that restrict certain vehicles that exceed specific weights, heights,
lengths, or loads. There are parking or loading strategies such as curbside use, off street facilities
and truck parking facilities. Location and land use may prohibit freight truck passage. Pricing
strategies solve congestion. (Binsbergen, Nemoto, and Visser)

Problem Statement
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? The best location for warehousing based on criteria (square feet,
lease/rent/selling price, and address/area in relation to proximity to the target area)? Which
warehouse provides the most cost effective route from to the target area?

Exploratory Research Problem on Location Analysis
Based on the consumer shopping and transportation literature, the adoption of online
grocery shopping likely will be influenced by several factors including age, income, residential
location, gender, and level of education. Specifically, adoption is most likely to occur on the
upper east side of the New York Metropolitan area. The target customer is a middle aged women
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 composed of financially successful people who will
utilize the online grocery shopping and delivery because this group tends to work many hours, 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 the 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 Jersey’s
proximity to the city will result in the best cost effective routes to the target area.

Figure 1.
Study Area
My area of study is the Upper East Side and the
Upper West Side of Manhattan, New York shown in Figure
1. These areas are affluent areas of a highly urban region.
The Upper East Side covers land from 59th to 96th street
along Fifth Avenue and Central Park. It was once known as
the "Silk Stocking District" and is now 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 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 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.

It holds the reputation of being an affluent cultural and artistic area, in contrast to the Upper East
Side, which is perceived to be traditionally home to affluent commercial and business types. The
neighborhood is upscale with the median household income above the Manhattan average.

Methodology
Information and data retrieved and observed for this thesis involved four phases. The first
phase entailed the collection of demographic, socioeconomic, and housing profiles of Manhattan
shown in Table 2. GIS was a vital tool to map the variables on a census tract level to show
spatial patterns and distributions. Included in this phase are the characteristics of people who
utilize the internet as a medium to shop. The second phase required gathering warehousing
information such as location, approximate pricing, and proximity to the target area. The third
phase required the use of GIS to map the routes from the various warehousing locations to the
target area to determine which location provided the most cost effective route. Lastly, the fourth
phase involved the study of existing online grocers in Manhattan and insight of their target area
and the statistics of its target customer.
The following maps were created using data gathered from the U.S Census Bureau using
the 2000 Census Tracts in New York County (Manhattan), NY. These variables show the spatial
patterns and population distributions and will ultimately help determine the characteristics of the
target customer. The data were mapped using various websites: U.S. Census Bureau, TIGER
Files, NYS Clearinghouse, ESRI, Select Phone- a marketing program created by a company
called ProCD that utilizes CFCC Codes to map retail stores, and the ArcGIS software. Using
GIS, I was able to map all the roads and major roads in New York City. I researched
warehousing locations and industrial parks around the perimeter of Manhattan to buy, lease, or
build a warehouse. Craigs List was the only option available that had information such as
approximates pricing and square footage of possible warehouses.

Data
Table 2. Census Variables Used in Analysis
Demographic
Total Population
Sex
Sex by Age
Ethnic Groups
Educational Attainment
Socioeconomic
Employment
Median Household Income
Household Income Levels
Annual Expenditure on
Food
Housing Total Households
Other
Families
Presence of a Spouse
Married Couple Families
Disabled Population
Vehicle Ownership
Dispersal of Grocery Stores
Cost Effective Routes