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?
There is no doubt, that today internet has become the next big battleground for the supermarkets giants, as they see their revenue gradually increasing from online grocery shopping. In Australia, online grocery shopping is one of the fastest growing segments with profit of more than $2.45 billion. In terms of performance of Australian and European online grocery stores, it can be said that Australian online grocery stores are more profitable compared to their European counterpart.
This can be understood by example of Woolworths-Australian major retailer, for which online shopping increased in range of 50% taking its profit from $0.8 billion in 2013 to $1.2 billion in 2014. In which the organisation delivered more than 3 million items to homes.
Whereas on other hand, profitability of European online grocery retailers remain in range of 10-15%, this drops further in case of hybrid model offered by brick and mortar retailers who are managing both types of business model. In Europe brick and mortar model still dominates and accounts for more than 75% of the total revenue earned from the grocery shopping in 2013.
It doesn’t mean that European sellers are not competitive enough, but the amount of acceptance which Australian online grocery retailers have got is much ahead of what European grocery retailers are yet to achieve.
For example Australian online Grocery retailers have several competitive advantages:
Impact of demographics
Demographics have a major role in success of online grocery stores in Australia. For example, in Australia more than 40% of the total population in Australia comes in the age bracket of 25-45 years. This is one major target customer segment for the online grocery websites, as this is the age group which comprises of working professionals, students, young mothers etc. who forms the major customer segment of the online grocery. However, in case of Europe, demographic is one major issue. It is a proven fact that Europe is going through ageing problem, which means major part of European population is above 50 years of age. As already mentioned in the case study, online grocery retailer’s user base is from young segment of population. Due to this reason, Australian online grocery retailers are relatively more profitable and progressive as compared to their European counterpart.
In online grocery websites, home delivery is one major aspect. Whether it is click and picks model, or home delivery model, expansion of population plays a major role in ease of delivery. Europe as a continent has a vast geographical region with spread of population in a larger area. Due to this reason, setting up the logistics for facilitating the home delivery is a major issue for many retailers. That is why; online grocery retailers might be successful in a densely populated area, but their efficiency decreases when they enter into area where population density is less. In case of Australia, its geographical spread is far less as compared to European cities, due to which population density in each of the major cities is high which makes it a high potential market, and online grocery retailers find it much each to cater to the masses and provide services such as home delivery etc. without much increase in their operational cost.
In Europe online grocery sector is relatively less competitive, as it is mainly spearheaded by already existing players such as Tesco PLC, ASDA, Sainsbury’s etc. These organizations already have monopoly in the brick and mortar model, due to which there are less small online grocery organizations further resulting into decline in competition (Delaney-Klinger et al, 2013).
On other hand, Australian online grocery market is dominated startups, which means there is more scope of competition, which further results into competitive market. More competition in market helps in a better option for the end customer who gets benefitted from new offers, schemes, discounts etc.
Australian online grocery market however needs to catch up in terms of quality. As per report, in initial phase of the online grocery market there have been many issues reported related to quality of the product delivered to the customer. In case of Europe this is one major advantage; despite of less profitability companies are not taking chance with the quality of the product, especially since it might impact their brand name. Also, amount of capital which European company has to infuse in their business is huge, because many of the already established company have been running their retail business since many years. On other hand, Australian online grocery market has lack of investors and capitals, due to which they find it difficult to scale up their business. Overall it can be said that Australian company can become more efficient in their operations, but focusing on their supply chain management. They need to identify loop holes in their existing SCM processes, and accordingly take corrective actions to rectify it. They can also focus more on use of new technologies such as cloud computing to reduce their operational expenses.
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