Impact Of Online Grocery Sales To The Retail Sector
...1998). This fact suggests that it would be reasonable to expect consumers to eagerly embrace the convenience brought by online grocery retailing. Surprisingly, however, the uptake of online grocery services has been slower than anticipated. In the UK, online consumer expenditure accounted for only 0.4% of the whole £95 billion UK grocery market (Peppers and Rogers, 2001). Even for Tesco, the most successful online grocery retailer, the internet division represents only less than 2% of its total group sales (Rigby, 2005).
So why is this the case? This report will seek to evaluate the impact of online sales within the grocery sector, using examples of both successful and unsuccessful supermarkets to support the conclusions made. It will analyse the different fulfilment models of online supermarkets, the adoption models they can use, the barriers they face, the impact on employees, the advantages and disadvantages of adopting e-commerce, the change in supermarkets relationships with their customers and suppliers and finally, the industry wide effects on competition. It will then present some management recommendations, outlining what decisions a store needs to make when deciding whether to extend their business plan to cover electronic commerce.
1.1 Fulfilment models
A key element of online supermarkets is how fulfilment is handled. There are 3 models available (Boyer et al, 2003).:
1. ‘In-store picking’. This involves using stores owned by the online supermarket itself or its partner(s).
2. Serve the online supermarkets customers by building a dedicated picking centre. A company can serve a wider area and reduce the cost of picking, but this requires a significant upfront investment.
3. Hybrid model. This is an operational option between in-store picking and a dedicated fulfilment centre (Yrjola, H, 2001) which is created by incorporating local...
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