Problems facing e-tailers when they choose to enter the market of e-commerce Essay Example

Tesco's.

Despite not offering an internet home shopping service, Morrisons saw a 14% boost in turnover between 2002 and 2003, demonstrating that traditional brick-and-mortar stores can still hold their own against e-tailers in the competitive market. However, with the global reach of the internet, e-tailers face competition from both other online businesses and foreign companies. This has led many organizations to struggle as they enter into the highly competitive global market for the first time. A prime example is K-mart in the USA which failed to successfully transition into an e-business, ultimately resulting in bankruptcy.

After a year of successful trading, Webvan Group Inc, a well-known e-grocer in America, has filed for bankruptcy. This emphasizes the limited knowledge and uncertainty surrounding the future of e-tailers. Delivery poses a significant challenge for online retailers as it can harm customer relationships if not executed as promised. Moreover, outsourcing or contracting delivery requires complex information systems involving both business-to-business and business-to-consumer channels. In addition to this, unless the company wants to suffer losses, it must provide customers with additional delivery costs.

E-tailers face a challenge in building customer loyalty since the physical location of a store no longer influences buyer decisions. According to http//:www.kamcity.com/library/articles/shopping, 80% of users do not revisit a website.

According to statistics from Clickz.com (accessed on 19/04/2004), many online shoppers abandon their purchases before completing them. It is believed that abandoned purchases on the internet amount to $63 billion. This information is supported by the website html (accessed on 19/04/2004).

Reliable information systems are essential for setting up and maintaining websites that operate 24/7. To avoid missed orders and crashes due to heavy traffic, thorough testing must be conducted

prior to launch. Digitally transforming an organization can also entail restructuring and a search for a successful internet business model. E-tailers face greater challenges with product returns, and must prioritize customer satisfaction despite less frequent interactions. Tesco's stands out as an internet success story in the retail industry.

According to the recent annual report, Tesco's accounts for one in every eight UK pounds sterling spent. They have established a dominant presence in online sales, particularly in the top five selling products: books, compact discs, videos, electrical equipment, and flowers. Tesco has four out of the five top selling products and is actively pursuing new markets. It is uncertain if they will expand into the electrical goods market. As a well-established giant in the retail industry and the second largest employer in the United Kingdom, Tesco was able to easily finance the creation, establishment, and maintenance of a reliable website.

Tesco integrated internet operations with its core retail business by implementing a system where customers place orders online. These orders are electronically input into a picking machine, which is handled by an internet shopper within the store. The shopper selects the required items as indicated by the machine, adding substitute products if necessary. The order is then packed and delivered to the customer during their chosen time slot.

Tesco's substitution policy can disappoint customers when a product is out of stock, but it prevents delays in part picked orders. Pickers can avoid collisions by collecting during off-peak hours. Integrating the internet resource saves time and money by avoiding the need for a new inventory system.

Tesco has its own delivery fleet with two or three vehicles per store to deliver

freshly picked shopping to customers, eliminating the need to contract out deliveries and addressing delivery concerns.

Tesco has effectively created their own complete internet shopping empire with all the essential components to operate as a stand-alone system alongside their physical stores. Additionally, Tesco has constructed a separate warehouse to house non-food items, including DVDs, CDs, books, and videos. By expanding into these sectors with their internet operations, Tesco has established a safety net for their food services and reduced the risk of business failure. As a result, Tesco's internet operations are widely recognized as the most popular among major supermarket chains.

Tesco's successful coverage of virtually the whole country is thanks to a clever marketing strategy and its established internet operations, which Morrisons has yet to complete. Unlike the competitive e-commerce market, the oligopolistic market for supermarket e-tailing has allowed Tesco to avoid common problems faced by non-specialist internet shopping services. Further, Tesco's expansion plans into markets in the far east and beyond have allowed them to avoid foreign competition. It is unlikely that any British citizen would choose to buy groceries from a French or American organisation due to potential spoilage during transportation.

Tesco has achieved customer loyalty through their clubcard, a loyalty card scheme launched in 1995 which other retailers struggle to replicate. The card's data is stored in a massive database divided into 800 lifestyle groups, as reported by MMR (2002, V19, I10, P28). The card records a customer's spending and items purchased, which is reflected in their receipts.

Using customer spending information, Tesco creates reward vouchers that can be redeemed in-store or with partner companies such as Air Miles, promoting customer loyalty and relationships.

Additionally, Tesco uses data gathered through loyalty cards for targeted marketing, sending coupons for more profitable products based on customers' purchasing history. By using these coupons, Tesco increases revenue and sales. Loyalty card data also allows Tesco to assess the value of supplying certain product lines to customers.

Tesco can utilize its loyalty card data to answer questions about profitability, alternative product options, customer preferences for branded or non-branded and expensive or cheaper products. The loyalty card data can also inform store layout by identifying the most popular products, whether they are on the middle, top or bottom shelf. This allows Tesco to plan the store with easy access to the most frequently purchased products. Furthermore, Tesco can determine which products to supply based on profitability data. The use of Clubcard data can also reduce direct marketing costs through targeted vouchers based on individual shopping habits rather than printing numerous coupons. Finally, the analysis of supply chain data combined with loyalty card data can inform what stock to carry, particularly for perishable items such as fresh produce.