Current Issues Faced by Online Groceries in Europe

Question

(1) Analyse the current issues faced by the online groceries in Europe. What areas of the product delivery, customer service and Supply Change Management are they handling well? What are the key issues and problems that they are currently faced with? What are the future trends in the online grocery business?

(2) Identify an Australian online store. Compare performance of this store with this store with the performance of the European Grocery Stores. What are the competitive advantages of the Australian seller? What are the areas where the Australian seller is falling behind? What e-commerce technologies and business processes would you advise the Australian company to adopt in order to improve its performance and increase its market share? 

(1) Over a period of time there has been significant change in the way organisations are doing business. Especially, due to increased penetration of internet, there has been rapid change in the existing business, and this is more evident in industries such as retail segment. Major retailers in Europe such as Asda, Tesco, Sainsbury’s etc. are rapidly adopting the hybrid model of grocery retailing (Rohm & Swaminathan, 2014, pp.748-757). On one hand, increase in use of internet based technologies has created a scenario where every shopper wants to fulfil most of his shopping requirements through online e-commerce websites, on other hand retail organisations are focusing hard to fulfil customer expectation by using smart and customer friendly strategies such as launching online grocery websites. Even though major part of Europe continues to buy grocery from brick and mortar shops, there are significant changes taking place in the buying behaviour. People are increasingly moving towards shopping their grocery from online grocery stores rather than visiting a brick and mortar based grocery retail store.

Despite of encouraging signals in growth of online grocery stores, there has been significant number of challenges and issues which the organisations into online grocery sector are facing. In UK 4.5 % of total grocery sale in 2010 came from online channel; however growth in other parts of Europe has been relatively low. For example in Germany, online grocery sale comprises of just 0.2% of total sale. In Europe, United Kingdom can be considered as one of the most developed grocery market, with organisations like Asda, Tesco, Sainsbury’s etc. However despite of tremendous potential, online grocery companies are facing numerous issues and challenges. These are as follows:

Demand side problem: One major reason behind slow growth of online grocery shopping is the demand related issue. For example, in click and cash model of online grocery shopping consumers do not like paying for delivery fees, neither they like waiting for deliveries, and at times items which they receive from their online store is not fresh. This has resulted into creation of situation where, there is only a small fraction of customer segment in Europe who wants to use online grocery shopping sites. Due to which organisations are finding it difficult to remain profitable and sustain their online operations (Bevan & Murphy, 2011).

Comparing an Australian Online Store with European Grocery Stores

Supply side problem: It has been observed that for most of the online grocery retailers, online grocery transactions are not generating profit. For them, online grocery shopping site is an extension to their existing brick and mortar business model of retailing. This doesn’t means that there are no pure online grocery shopping organisation, but they are relatively small in scale and do not have that amount of capital to invest as compared to large retailers (Huang & Oppewal , 2010). That is why; large or small online shopping organisations are finding it difficult to achieve profitability through their online grocery shopping model. Most of them are using it to increase their volume of sales, rather than improving their value of sales. Variable cost in the online environment is relatively high, as compared to the brick and mortar model, also due to maintenance of warehouse, website and a dedicated supply chain to handle delivery of the order, there has been significant increase in the operational expenses of the European organisations.

Despite of above mentioned challenges, organisations are trying to excel in areas such as product deliveries, customer servicing and supply chain management. In this regard it is important to mention the effort these online grocery shopping website are putting into customer services. In online grocery shopping environment, customer servicing the key essence, if due to any bad delivery of the grocery item which might have issues such freshness, or wrong item etc. then it has direct impact on the customer servicing quality, and in present business environment customer is one such stakeholder who is not forgiving at all. With so many competitors ready to poach the customer, there is no dearth of options for customer in retail segment, however companies are ensuring that there customer service remains of high quality. Many retailers have offered fixed delivery time for the ordered item, along with several discounts etc. Organisations are having dedicated customer servicing department which is handling all the issues being logged in through the online grocery shopping websites.

Product delivery is another aspect which organisations are increasingly focusing upon, this is one major reason behind improvement in the delivery time and other related aspect with the product delivery. In grocery shopping through online medium, and especially for food items, if the products are not delivered in time then possibility is high that customer might receive stale food item, which might create a major dent on customer trust. That is why; companies are working extensively in improvement of their supply chain. Product delivery is also from supply chain’s perspective. An efficient and timely delivery of the product is directly associated with the reduction in the operational expenses of the organisation and improvement in the customer experience (Schuster, A., & Sporn, 2008).

Overall it can be said that online grocery shopping is still in a nascent stage in major part of Europe, including United Kingdom. However, this also translates into the fact that there is tremendous scope of growth for companies existing in online grocery shopping business model. However to reap the benefit of this situation it is important for the retail organisations to have dedicated online retail strategy rather than mixing it up with their existing brick and mortar based business model.

Competitive Advantages of the Australian Seller

(2) Australian online store identified for this task is https://coles.com.au. In terms of performance, it can be said Coles is part of Coles supermarket, which is a supermarket chain owned by Wesfarmers, founded in 1914 in Victoria. Performance Coles.com.au is much better as compared to other online grocery shopping websites in Europe. There are multiple reasons behind better performance. Coles has total assets of A$19.08 billion, which is a big support for the online grocery shopping website of Cole. Due to profitability of its brick and mortal model business, Coles has been able to offer exciting discounts to its customers. It can be said that Coles is capable of offering hybrid services that means that Coles offers services in form of Store to home, click-and-collect along with its traditional brick and mortar model of business.  For an Australian seller like Cole, there are numerous competitive advantages such as:

Ease of business: Firstly unlike Europe, where European Union plays a major role in decisions related to retail business, apart from policies of EU, there are various policies at local level as well for each country. This has resulted into a highly fragmented environment in which these online shopping grocery websites have to do business, that is why at times reach of these business remains very restricted due to variation in various compliance related laws etc. Unlike Europe, Australia is free from such issue. It has its central and state government which takes decision in uniform manner. Due to uniformity and clarity on the policy front new as well as existing organisations are increasingly opening up to setup new online grocery websites. In nutshell it can be said that compared to Europe, Australia offers a higher ease of business factor, due to which more and more organisations are willing to start online grocery shopping websites (Hand et al, 2009).

Age factor of target customer segment: Age of its target customer base is one major advantage which Australian sellers have with them. On one hand Europe as a continent is suffering from issue of ageing population, where in Australia there is advantage that a major part of the population falls in the age group of 20-45 years which is most net-savvy and inclined towards using online grocery shopping websites for their grocery shopping requirements.  Customer in the age group of 45-65 years is already well tuned to shop from brick and mortar model of grocery shopping, and they are often reluctant to use internet to do their grocery shopping. That is why companies in Europe find it hard to increase their target customer base since there is already a saturation level in their ideal customer base.

However there are certain areas on which Australian sellers are falling behind. For example lack of quality in the product is one area which needs to be improved. It is not like that all online retailers have this issue, or they are intentionally offering low quality products, but this is issue is more due to the fact that Australian online grocery shopping scenario is still in nascent stage like Europe, due to which many times such issues unintentionally are taking place. With sudden emergence of internet based business model in retailing, many companies entered into this sector without proper business strategy, and vision of their supply chain management for specially catering to demand form online channel. This has resulted into a situation where companies are taking time to consolidate their business setup and overall logistical, in this process at times customers face issues related to quality of the product which is delivered to them.

Another area in which Australian sellers can improve upon is the marketing and customer servicing aspect. Unlike European sellers who are extremely cautious about their brand image, Australian sellers are yet to show that seriousness. These companies in Australia have grown more through organic route rather than growing through extensive marketing efforts. If these companies can put more effort in marketing field, then definitely there can be further boost to the overall profitability of the company.

Australian companies can focus more on improvement on their e-commerce technologies and existing business processes. For example, currently majority of people are shopping by using laptops and other devices and by accessing the website. However, consumer behaviour is fast changing towards use of smart phones and mobile devices to complete their shopping. That is why it is important for organisations such as Coles, to take proactive steps in that direction and launch mobile based application for mobile grocery shopping. This will ensure that more customers are encouraged towards use of mobile devices to do their grocery shopping. However it is also important for organisations to ensure that in a case like this where mobile based shopping application is being promoted, they needs to make sure that overall customer experience remains same and seamless in nature. Customer should not feel difference in the user experience when he website as compared to a situation when he does the same thing in mobile application.

Overall it can be said that despite of challenges and issues online grocery shopping has a tremendous future. Only important thing which will ensure that maximum benefit is extracted from this situation is proper business strategies of the organisations into this field.

References

Bevan, J., & Murphy, R. (2011). The nature of value created by UK online grocery retailers. International Journal of Consumer Studies, 25(4), 279-289.

Hand, C., Riley, F. D. O., Harris, P., Singh, J., & Rettie, R. (2009). Online grocery shopping: the influence of situational factors. European Journal of Marketing, 43(9/10), 1205-1219.

Huang, Y., & Oppewal, H. (2010). Why consumers hesitate to shop online: An experimental choice analysis of grocery shopping and the role of delivery fees.International Journal of Retail & Distribution Management, 34(4/5), 334-353.

Rohm, A. J., & Swaminathan, V. (2014). A typology of online shoppers based on shopping motivations. Journal of business research, 57(7), 748-757.

Schuster, A., & Sporn, B. (2008). Potential for online grocery shopping in the urban area of Vienna. Electronic Markets, 8(2), 13-16.