Introduction:-
The literature reviews the operational and strategic analysis of E-grocery systems. There are many business models in E-grocery business. To make E-business model a sustainable one they are using different strategies in different targeted markets. Each individual model varies from one other in various dimensions such as placing of order, assembling and delivering the goods. The first part of the literature provides statistical description of online grocery industry in various geographical and measures. The second part provides review of the E-grocery industry’s market and its customer base. The final part offers previous studies opinions and factors about various outcomes of e-grocery business.
Industry over view:-
Over last five decades grocery business has transformed into new sector of supermarkets in UK. Many of the supermarkets changed the grocery field dramatically. These champions of consumers brought vast choices in product and price to improve their business sector. Online grocery shopping and Home delivery system has became one of major aspects in grocery industries. The revolution of technology advancement in internet promoted grocery industries to embark on new methods in retailing industry. However, many grocers have been unsuccessful to consider the advantages of how it can support grocery business. These developments lead to dismissal of complete-online supermarkets such as webvan, homegrocer, shoplink and homeruns (Ramus and Nielsen, 2005). These results demonstrate the necessity of careful crafting of e-grocery strategies which exploits internet technology’s potential of increasing company profit and also customer service (porter, 2001).
On one hand, strategy conceptualisation is difficult for pure-play grocery stores since companies have not tried business models before. On the other hand, formulation of strategies for clicks and bricks grocery shops requires strategies which will combine both existing retail practice and internet based shopping processes ( Teo, 2002). Online shopping or e-grocery retailing service involves customer’s online buying behaviour and practices, order fulfilment and delivery of order, development and maintenance of online websites to facilitate customers to enter their orders (Hong and Kim, 2004). This literature provides insight of e-groceries and the strategic methods.
Development of home deliveries in the UK:-
In the United Kingdom, from centuries home delivery of goods has been taking place. During 20th century some local door to door field sales and home deliveries were go down due to rise large number of retail centres and also availability of cheap cars, however, some other home delivery business still in existence such as milk and catalogue distribution. The innovation of large consumer products such as washing machines, dishwashers, refrigerators, televisions etc results in certain type of delivery methods after mid-twentieth century. (Spufford, 1994)
The recent development of information technology has contributed many new methods to retailing sector over the internet which drastically increases the demand of home deliveries. Online shopping and home delivery became an ideal path or approach in a society where people themselves believe they are cash-rich and time-poor for grocery or household goods. E-commerce along with some other forms offers the opportunity for consumers to buy household goods from their homes and also to receive deliveries at their flexible timings rather than travelling to stores. (ibid)
Grocery and grocery industry:-
Groceries and other food retailers function each and every day, yet it is fundamental and permanent industry sectors in the business world. Everybody require food, thus everyone must and should purchase food from one or another retail outlet. Therefore, the grocery industry is a vast, fragmented and tremendously competitive environment ( Kelly Delaney et al, 2003 pp 187).
“In Great Britain, food retailing industry constitutes 36 percent of overall retail turnover annually (Central Statistical Office, 1990). In United Kingdom the largest individual category of family expenditure and along with some other groups, which are partially sold in supermarkets, like household goods, tobacco and alcohols, clothing and leisure goods for a considerably large share of customer shopping (Central Statistical Office, 1991).” (Russell Aylott et al, 1998,. Pp.363)
Home delivery shopping market and its characteristics:-
Home delivery is generally defined as delivering of all types of goods to customers’ homes (or any different location opted by customer – example workplace) regardless online or any other order forms such as traditional mailing, telephone-based ordering (phone order), internet, fax or order made in person by consumer in store premises. The study is carried out in business to customer order delivery system rather than business to business.
Home delivery system refers to all household goods delivered to consumer’s house (the destination may change such as work place on customer’s selection). Hence in online shopping and home delivery method the purchased physical household goods is carried out to customers’ destination by specialised home delivery unit or companies instead of customers themselves. There are some reasons for home deliveries like (i) may be the retail outlet itself provide an additional service to their customers or ( ii) may be customer do not like to carry the shopped goods at that instance or the required product may be out-of-stock at that moment or (iii) due to goods weight or size ( if it became difficulty to customer to transport by themselves) or (iv) because the seller itself does not have any physical store and may be its complete operation depends on the virtual online store. Thus customer may face impossible situation to collect the goods in store by themselves. (Farahmand and Young, 1998; Nielsen, 2000)
Customer base and market trends:-
According to kenith 18(2003) 80% of the online shoppers were of 29 to 50 age group in 2002. Majority of responded shoppers were female. There are three group of online shoppers: firstly rich and busy people who are pressed for time, secondly families with one or more young children and thirdly people who find difficulty to get into stores. The first group of people are those who have higher incomes and less time to shop. These people are normally high internet users, technology comprehend or family with dual income.These rich and busy people prefer someone to shop behalf of them. The second group are those who have got young children in their families. They constitute higher number of e-grocery shoppers. The age group of e-grocery shoppers is 29 to 50 years old with at least one young child under five years old. This group usually spend their time in cooking dinners for their family therefore they prefer shop online for regular household groceries. This category of people wants to avoid hassle situation at stores by dragging kids along with them for shopping. The final group is comparably small to other two categories. This group of people are those who find difficulty to access the store environment due to several reasons like age or physical disability. People average life span increased in recent decades comparing to 1950s and 1960s. People average life span increased from 67.8 to 77.2 in 2007 and they estimated life span is 82.4 for 2015.Aged people and physically challenged people may need little more extra help while doing shopping. They may found it as difficult to drive to supermarkets and to carry heavy household goods back to home. Online shopping will be the good alternative source for grocery shopping.
Estimation of home delivery shopping market and market share:-
In the year 1999 the total home shopping market worth was figured £12.36bn in UK market. The projected view for 2004 was £24.12bn. All sectors have been experienced by considerable growth and constant increase has been expected for following 5 years as customers accept different new channels for purchasing of goods. Traditional grocery shopping is matured market. However, recent development and growth predicts that, it has been generated by potential e-commerce and majority of grocers converted a part of their business into e-grocers. UK e-shopping was £581m worth in the year 1999 and estimated growth to �1.53bn in 2000. Verdict research predicted there will be huge growth of 3.36% of total sales in online market and it was estimated as £8.84bn by 2004(Nielsen, 2000).
Market trends in home shopping:-
E-commerce growth in recent decades (excluding some declined cases) transformed old traditional companies into technology implemented new companies. Moreover, now companies are in better position to exploit and implement new technologies to business models to grow their sales and profit. In the starting days of internet technology there were comments from academic commentators that most of incumbent businesses were unwilling to try internet for sales channel. There was lack of internet knowledge and also uneven distribution of amount for physical distribution. These companies distribution infrastructure have their brand names and customer base which will help to command and access the funding, and provide stronger position to embrace e-commerce (Anderson consulting, 2000).
If we consider present situation, majority of internet user are males compare to females. This socio-economic difference in internet profile user also affects online shopping. Along with these higher proportion of society contains children and youth who currently own their own computer systems and access internet more than older generation. However, research depicts that some of these variations may diminish over the growth of technology. For an example, the prediction of women internet user by the 2005 will increase by sixty percent of total UK online users. (Tesco, 2000).
Many more established retailers are likely to adopt a new approach, Multichannel retail sector implementation and development, in future. Already there are alternative channel development methods by many large retailers. It will also permit retailers to create alternative channels to draw supply chains and resources from their existence channels. For manufacturing companies it will provide good opportunity to access customers directly and to formulate new methods of delivering service or product. There is an expectation of launching of new niche catalogues from major drivers in UK as growth rate penetrates. (Webb, 2000).
Geographical characteristics:-
Sandoval (2002) mentioned analyst Robert Rubin said that average population density in UK is high compared to ones US. The US( 31 per sq.km) population density is one-eighth of the UK ( 248 per sq.km) in 2004 ( world population prospectus). Tesco and Sainsbury have become successful e-grocers in the UK. These grocers target highly populated urban areas for more potential consumers.
Urban areas are densely populated, people reside very close. In large cities there are less people who own cars. There are other factors which influence online grocery shopping in urban areas such as busy lifestyle, highly crowded shopping malls, public transport dependence for transportation and higher income.
According to Mclaughlin (2005) cities are highly populated with internet users and considerable residents with disposable income. It is difficult expand online shopping to system to all geographic areas instead it could be done from one urban area to another, expanding business like this will make company delivery truck to achieve high number of deliveries at every trip.
Psychographic characteristics:-
Fox and kempiak (2006) mentioned five major decision elements for online grocery shopping( price, convenience, product variety, ambiance and service). He also stated several reasons to increase online shopping chances such as changing family structure, busy work schedule with increased working hours, less free time and time consuming traditional shopping methods. This social system transformation result in search of alternative independent grocery shopping methods. Customer with different disability made their interest towards e-shopping rather than traditional one.
Morganosky and Cude mentioned that time and convenience are the two major factors for people to switch from traditional shopping methods to electronic shopping methods. Technology should provide complete product description to satisfy different types of customer base it may be depends on several criteria such as different food preferences such as organic, religious , ethnic origin etc
Technological characteristics:-
Fox and Kempiak (2006) states that, the food marketing institute indicates US consumers are highest internet users with eighty-six percent in that seventy percent will shop online daily. Whereas in the UK, broadband user are in fifth position in world and second position in Europe. E-commerce research 2007 shows 15.9 percent respondents brought groceries once in a week, 2.7 percent shops twice or thrice a month, largest group shops once or twice in a year. Increased internet users likely contribute the growth of online shopping. Online shoppers will make more shopping than in-store shoppers.
“As the economy and society have changed, so retailers have responded and shopping as an activity has altered enormously.” (Dawson and Broadbridge, 1988). Online shopping is comparatively recent phenomenon, which provides an opportunity to consumers to carry out at least one part of buying process online.
“Electronic grocery shopping has been defined as shopping when at least part of transaction is started electronically via third party services or the Internet, but paying and logistics are not necessarily performed digitally”. ( Carl Lewis, 2003-pp.207)
E-shop business model represents one class of e-commerce where buyers and sellers interact electronically with each other, except for deliveries. Burke suggests many reasons web marketing of food. As an example, everybody has to eat, and in store shopping consumes considerable time to purchase and majority people do not like grocery shopping.
Daily household goods are difficult to move physically from one place to another. Continuous growth of e-commerce enlightens many traditional grocery retailers to use internet channel to sell their goods. The development leads to many more conventional retails to enter into e-grocery field (Boedeker.M, 1997 ).
E-CRM:-
Smith believed that, customers thinking about the shopping are predetermined whether in means of preference to products, price and accessibility. Satisfying such conditions and preferences thorough online process is carried out through designing e-commerce website and online shopping store should focus on creating e-loyalty. Customer relationship management (CRM) programmes are the most effective way to incorporate loyalty. Customer service is one of the major aspects of business which includes customer assistant in sales, maintenance customer policies, providing customised services, after-sales maintenance etc. Due to the different type and nature of products which are purchased at e-grocery shops there should be complete product description. Some websites provide procedures for return of product or reporting problems as a part of after-sales service. Some stores allow unsatisfied customer to return their product, some websites provide vast description about their products such as ripeness of their tomatoes (smith, 2000). All online shopping websites provide some customer rules and policies. According to Australian legislation, all online websites should maintain privacy policy (Australian Federal Government, 2000).
Success and failure factors from previous studies:-
Guynn 2003 believed that e-grocery method is the best way to promote industry’s brand image. However , Fox and Kempiak(2006) and LeClaire (2002) stated conversely; brand image of company will help to promote online grocery business. They also believed that industry’s business experience and its infrastructure will be added advantage for promotion. One more factor is people ability to spend money for long duration household goods.
Regan 2002 stated that competition in e-grocery retail sector remains the same until company stay in game. If any child company’s online business started down falling then parental company may not let it to happen for longer duration because they are inter-related in means of profit sharing. Without the demand, services of online business company will lead to business failure.Retention of existing customer is one of the main aspects of business. To gain customer loyalty, companies should provide reward to regular shopper. Customers can also gain loyalty points for their spending and it will convert into reward coupons or vouchers. Brick and mortar stores utilises their existing business infrastructure to click and mortar stores to save on costs.
Delaney-Klinger, Boyer, and Frohlich (2003) mentioned Tesco’s success and Webvan failure because of its marketing strategy for online business. Webvan marketed its online sales with value-added service and extra delivery charges to cope up with online ordering cost. Tesco’s pricing strategy is little higher than the Webvan and its most suitable one for lower volume sales.
Sandoval(2002) stated that online-only business spent heavy money for their highly automated warehouses. The operating costs for these warehouses are high and order volumes for those companies are not more than half of their capacity. High initial start up cost for online division, although pricing strategy can able to reduce cost for internal order picking and delivery methods. However, Delaney-Klinger et al (2003) believed that the expenditure for short run will increase business cost for warehouse methods and decrease for existing store picking methods comparably. High initial start-up cost will results at higher risk for any organisation. Another aspect for failure will be lack of online business management knowledge and experience. Bill Anckar, Pirkko Walden, Tawfik Jelassi (2002) stated that, companies are not concentrating much on customer relation management for stabilising business consistently. Traditional grocers have more advantage over online grocers in this area.
Conclusion:-
Online shopping and home delivery service is one of the critical aspects of e-grocery business. E-grocery business should have to understand the variable cost affecting structures and service concepts in order to turn online grocery business into profitable one. The different strategies were discussed. Analysing and adopting best strategy for e-grocery business is mast important. This literature provided insight of e-groceries. In a service context, as with product marketing, getting and keeping customers is of utmost importance. With service, in particular, someone within the organization will interact with customers; hence they should be viewed as customer relationships not just customers. Customer relationships have to be built and a useful way of viewing these developments as a life cycle. The marketing objective will change as the customer proceeds through the cycle. Understanding service marketing is becoming increasingly important for all organizations as more firms seek to differentiate their product or services through their service offering.
Interaction and customer relationship concepts, two key areas of service marketing are set to be of even greater importance to all firms in the future.
References:-
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