This assignment has been prepared on the topic “Online Grocery Business of Woolworth and its Challenges”. Different challenges are being faced by an organization while operating the business online. These challenges create an impact on the performance of the organization at large. Competition in the business environment has risen due to which businesses are searching for new and innovative approaches for reaching the customers. For the purpose of catering services to the growing customer base, there has been a rise in the number of grocery businesses operating online. Shift towards the online medium for offering products has created an impact on the businesses operating offline. The focus of the grocery industry is on offering quality services to the customers by reducing the time involved in providing the service (Galante, et. al., 2013).
The discussion will be made regarding the concept of the online grocery business. Woolworths is offering the grocery products through its website. Background information of the Woolworths will be provided for developing knowledge of the manner in which Woolworths is operating. The discussion will be made regarding the online grocery business of Woolworths along with challenges faced by it while operating the grocery business through online mode. Impact of these challenges will be analyzed on the online grocery business of Woolworths.
Background of Woolworths
Woolworths is an Australian chain of grocery store/supermarket which is operating in the retail industry and is a subsidiary. It was founded in the year 1924 and its headquarter is located in Bella Vista, New South Wales, Australia. It is operating stores around the globe with the help of more than 995 locations. It has strong employee base of more than 111,000 employees who are performing the operations of Woolworths for the attainment of the targets. Objective of Woolworths is to enhance the satisfaction level of the customers by providing quality services. Woolworths has gained specialization in offering grocery items to its customers. Woolworths have understood the need of the customers and for meeting these needs of the customers, a dedicated business support team has been created. Objectives of Woolworths are to offer extensive range of products at great prices, easy access to the services by the customer and developing a dedicated business support team (Woolworths, 2017).
The secret behind the success of Woolworths is the quality of the products which are being provided at affordable prices. Objectives set by Woolworths are to enhance the stock turns and optimizing the network efficiency by serving a large number of the customer base in a better manner. Priorities of Woolworths is to build a customer and store-led culture along with a team, attaining lead over the others in the industry and attaining system excellence. Regular feedbacks are collected from the customers so as to provide support to them. Simple strategy has been adopted by Woolworths and this strategy includes development of the team, refreshing the stores, updating the product offering, developing a cohesive brand and reducing the costs improve processes. The focus of Woolworths is on developing the future of shopping as the use of mobile technology has increased (Woolworths Group, 2018).
Online Grocery Business of Woolworths
In the past years, Woolworths has made an investment for the development of the online grocery business and its infrastructure. Woolworths Online grocery stores have been opened which are offering services through internet or online mode. Products are picked from the supermarkets which are close to the home of the online shoppers. With the increasing need for the online store, Woolworths has opened dark stores named as shadow warehouses in the major markets. Objectives behind the initiation of the online grocery stores are to reduce the time involved in providing service, enhancing the satisfaction level and reducing the efforts of the customers (Galante, et. al., 2013). An application has been developed by Woolworths for offering the products in a more convenient way and saving the time and efforts. Notifications are provided to the customers regarding the order through the application. Regular alerts are sent to the customers for making them aware of the stage where the product is in the delivery process. These alerts update the customers regarding the products they have ordered online (Fahad, 2016).
Different challenges are being faced by an organization while operating the business online. These challenges create an impact on the performance of the organization at large. Different challenges are being faced by an organization while operating the business online. These challenges create an impact on the performance of the organization at large. Dedicated online stores have been opened by Woolworths for meeting the online orders placed by the customers. Online grocery business of Woolworths is growing at a very fast speed. Help is being provided by the Descartes solution for addressing the complex delivery requirements which contribute towards the satisfaction level of customers and enhancing the experience gained by the customers from online ordering. One of the reasons behind the selection of an online mode for offering grocery products to the customers is the changing expectations and needs of the customers. Desires and needs of the customers are changing with the change in the technology and the manner technology is used (Huang, et. al., 2010).
Woolworths focuses on meeting the routine needs of the customers with the online grocery stores and grabbing the opportunities available for the expansion of the business. It has been seen that the online grocery section of Woolworths is one of the fastest growing segments which has provided profits of $ 2.45 billion. There are various reasons behind the selection of the online grocery business as an effective approach for meeting the needs of the customers and expansion of the area of operation (Hand, et. al., 2009). These reasons include developing a future of shopping, performing better for the customers of the business, listening to the customer needs in a better manner, rewarding the customers and using an innovative approach for grabbing the opportunities available. Online services are available to the customers at a feasible or flexible time and the delivery time is reduced (Galante, et. al., 2013).
Different small and medium enterprises are purchasing the grocery products offered by Woolworths through online mode. Online grocery business of Woolworths is considered as business grocery supplier of these small and medium enterprises. Pick-up points have been established by Woolworths for the online grocery orders in every supermarket of Woolworths. Woolworths is focusing on putting more investment in the online grocery business for enhancing the performance and covering the large area by serving a large number of customers. Different services or features are being offered in the application of Woolworths for the online grocery business. These features include creating shopping lists, sharing of the list with family and friends and ordering the groceries for pick-up or delivery. For coping with the competition, different strategies have been used by Woolworths while operating the online grocery business (Fahad, 2016).
Challenges faced by Woolworths while operating grocery business online
With the use of advanced technology, business is using online platforms for offering their products or services to the customers. Woolworths has initiated the online grocery business for meeting the needs and expectations of the customers. Different opportunities are available to the business while conducting online grocery business. Despite of these opportunities, various challenges are being faced by the online grocery business. These challenges create an impact on the capability of business in grabbing the opportunities available in the business environment. These challenges are discussed below:
Stock and storage cost: grocery items are perishable goods and for the storage of perishable goods huge investment is required. The arrangement has to be done of the special warehouses, containers and equipment for managing the products. Different grocery products need to be made available by Woolworths are the time in the stock so as to meet the orders placed by the customers. It is quite tough for the business to arrange a huge number of items and maintain their stock all the time. Due to lack of availability of the different products at the online grocery store, customers or potential customers visit local grocery stores (FatBit Chef, 2017).
Low-profit margins: thin margin is there for the online grocery business which affects the profitability of the business. Online grocery businesses are operating at a very low-profit margin due to which profitability of the business gets affected. Online grocery businesses suffer a loss when they offer free delivery to the customers. Customers are not ready to pay for the convenience charges and expect to receive the product in less time and high in quality (Daga, 2016).
Habits of the consumers: change in the technology and trend affects the habits of the consumers. People are still in the habit of purchasing grocery products from the offline stores. This habit of the people has acted as a hurdle in the growth of the online grocery store. People prefer buying from the offline stores so as to check the quality of the products. Perception of the people regarding the online grocery shopping needs to be changed so as to enhance the customer base of Woolworths (Plasch, et. al., 2014).
The unwillingness of the customers to pay delivery charges: free delivery is offered by the online grocery stores for enhancing the satisfaction level of the customers and attracting them for developing a strong customer base. Due to the levy of delivery charges on the orders of small amount, customers prefer to buy from the local grocery store. For eliminating the delivery charges on the order, customers switch from one online grocery store to other (PWC, 2016).
Difficulty in delivering the products in small towns or locations: Woolworths is facing issues in delivering the products or orders in small towns or remote locations. There is lack of access to proper transportation facilities or entertainment facilities in those small towns and remote locations. Bargaining habits also affect their decision of buying from the online grocery store (Ocado group, 2015).
Lack of knowledge of technology: technological advancements have provided growth opportunities to the online grocery stores. But due to the lack of knowledge of technology, customers prefer offline grocery stores. For the people who are not techno savvy, it is tough to compare the products, access the applications or websites of the online grocery store and placing orders online. These customers prefer going to offline stores and asking for discounts (Mulpuru, et. al., 2010).
Increasing competition: competition in the online business is increasing. There are various organisations which are operating online for offering grocery products to the customers through online mode. For coping with the competition, discounts or offers are offered to the customers which result in loss to the companies (Osman, et. al., 2010).
Wastage and marketing cost: huge stocks need to be maintained by the online grocery stores for offering variety to the customers, attracting them and retaining the customers. This has resulted in wastage of the grocery products which affects the financial performance of the online grocery businesses. Cost of marketing is also high as effective marketing strategies need to be used for the promotion and advertisement of the store (?elik, 2011).
Loyalty among the customers: loyalty among the customers needs to be developed so as to enhance the customer base and operating in an effective Customer loyalty is a major challenge in the online grocery business as discounts or offers are being provided by online grocery businesses to the customers. These offers or discounts affect the loyalty among the customers. Woolworths need to offer discounts and offers to the customers for developing strong employee base (Muhammad, et. al., 2016).
Recommended strategies for dealing with the challenges
For the purpose of coping with these challenges, there is a need to adopt few solutions or strategies. These strategies are discussed below:
- Use of Just-in-time supply system: this system will help in the management of the inventories in a better manner. This approach will reduce the cost of the online grocery business. Inventory cost of the online grocery business will get reduced with the use of just-in-time supply system (Mulky, 2013).
- Implementation of asset-light business model: a logistics company can be hired by Woolworths for offering fast delivery and reducing the burden on the employees of the company. This will reduce the cost of the company by reducing the need for delivery staff and vehicles for delivering the orders.
- Entering into a partnership with the local transportation or delivery service providers: Woolworths can enter into a contract with the local delivery service providers as to ensure that the quick delivery of the orders placed by the customers is
- Merging the offline business with an online business: offline businesses can be merged with the online business for shifting the choice of customers from offline stores to online stores (Ravikiran, 2013).
- Easy to use interface: the interface of the website or application of the online grocery store needs to be easy and attractive. Customers who are not techno savvy will be able to use the application properly and this will contribute towards the enhancement of the customer base of Woolworths. Every company operating online grocery business need to develop effective mediums for attracting the customers.
- Setting up online stores in the main markets: online stores can be set up or warehouses can be set up in the main markets so as to deliver the products or orders well on time and enhancing the satisfaction level of the customers (Soler, 2010).
Thus, from the above conclusion, it can be mentioned that the trend of online grocery business has increased with the change in technology and business environment. Woolworths is performing well in the online grocery industry and focusing on the expansion of the area of operation of the online grocery business. There are various challenges creating an impact on the performance of the online grocery businesses. These challenges have been discussed in this assignment along with the various solutions or strategies which can be applied for dealing with these challenges.
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