Fresh produce retailing: A comparison of replenish-to-order and replenish-to-stock modes

Abstract

Many fresh produce retailers in China apply a Replenish-to-order (RTO) selling mode when purchasing replacement produce. In a RTO mode, retailers replenish produce after receiving customers’ orders from the internet. In this paper, we first compare two solutions when retailers apply a RTO mode and face a lack of capacity in the physical store. Results show that retailers need to buy temporary space to fulfill customers’ orders. Then we compare two selling modes: RTO and Replenish-to-stock (RTS). In a RTS mode, retailers replenish and stock produce in advance and wait for customers to buy the produce. We find that produce spoilage and customer waiting cost are two significant differences between the two selling modes. Numerical analysis demonstrates that the RTS mode is more profitable in most cases. However, when customers get used to the RTO buying process, the RTO selling mode can be more profitable.

Keywords:

• Fresh produce
• Replenish-to-stock
• Replenish-to-order
• Selling mode
• E-Commerce