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Posted on May 9th, 2012, by

The basic purpose of this research was to analyze the perspectives and possible obstacles of a company entering grocery market in the UK, focusing on on-line sales. In fact, this is the market research which provides a profound analysis of the industry at large and the position of the company in particular. At the beginning the product the company is entering the market with is analyzed, i.e. grocery. Than the market situation is analyzed, including the analysis of customers’ lifestyle and behaviour. Furthermore, the research of the process of entering the market includes the analysis of pricing, placement the product and its promotion in the UK market. Also the external environment and future trends are taken into consideration and on the basis of the results received in the result of the research the further suggestion as for the research are made.

As for the results, the research revealed the fact that the grocery market and online sales are rapidly growing. This is why it is considered to be quite perspective and, taking into consideration the innovative nature of the market and the stable external environment, the opportunities of a new company entering this segment of the market are quite high, though the further research is essential for the competition is constantly growing and larger companies could increase their presence in this market.

The product

In order to better understand the perspectives of a company entering the market as well as to conduct a proper research with reliable results, it is primarily necessary to dwell upon the product that is supposed to be sold. In this respect, grocery actually represents a variety of products which are essential element of the food market of the UK.

At the same time, it is necessary to point out that, as a rule, grocery provides customers with products which are traditional for the local market while innovations are quite seldom. On the one hand, the product, being perfectly known by customers, is quite reliable or, in other words, customers will surely buy grocery to which they get used to.

Moreover, the grocery market supplies essential products from which customers simply cannot refuse as grocery constitutes a constituent part of the traditional British food culture. On the other hand, the market is characterized by a certain degree of rigidity that leaves little room for radical experiments and introduction of new types of groceries which are totally new for customers. This is why it is possible to recommend to the company entering the grocery market of the UK oriented on online sales to concentrate on the supplying of traditional grocery for the local market, though it does not necessarily mean that it is necessary to totally refuse from any sort of innovations, but their perspectives need to be carefully researched or even tested by selling small amounts of new product to customers and, on receiving a positive feedback, it will be possible to introduce this product at larger scale.

The market conditions

Obviously, in the current situation the development of the online segment of the grocery market seems to be quite perspective. It should be pointed out that at the present moment the online sales of grocery are quite high. In fact, many specialists underline that at the present moment the online grocery market continues to boom with many of leading suppliers reporting record sales and orders at the end of 2005 (NEMS market research in April 2006). It is also worthy of mention that, according to recent researches (NEMS market research in April 2006), at least 11,7% of respondents have purchased groceries via the Internet at least once, of whom 2,5% make online purchases at least once a week and 1,4% two or three times a month, while the largest proportion 3,4% purchase groceries online once a month.

Moreover, the recent economic and technological trends reveal the fact that the share of online purchases of grocery will grow in the future even more and this growth will be rapid. At the same time, it is necessary to point out that the market is still not really saturated since many companies, including the largest ones either have just started their online business or simply have not entered online market yet. Nonetheless, there are some major players in the market which are mainly represented by supermarket chains such as Tesco, Sainsburry, ASDA and Waitrose.

Obviously, the recent trends basically result from customers’ lifestyle and behaviour for it is not a secret that in recent years the e-commerce is booming while technologies, especially IT constantly progress, as the result customers prefer to purchase grocery online in order not to waste time and out of sheer convenience as they can purchase the product via computer without even leaving their homes or working places.

The price

Speaking about pricing of grocery, it is necessary to underline that it should not differ dramatically from conventional prices or, what is more, it is highly recommended to make prices even a bit lower since it will attract customers even more. At the same time, it is also extremely important to notice that grocery prices tend to decrease in real terms. To put it more precisely, Alastair Jamieson (2006) remarks that regardless the fact that inflation reached 2% in 2005, the cost of the most popular supermarket items had risen by only 0,5%. On analyzing the grocery baskets consisting of one hundred products, it is getting to be obvious that they tend to decrease, for instance, ASDA was cheapest at an average of 169,46 (167,60 last year), followed by Tesco at 170,66 (170,64 last year), Sainsbury’s 174,93 (177,91), and Waitrose 194, 69 (192,14) (Jamieson). It should be pointed out that, regardless the growth of nominal prices at the majority of cases, prices in real terms have decreased within the last year. In such a way, it is possible to estimate that entering the online grocery market implies that this trend has to be taken into consideration and the company entering the market should be ready to further lowering of prices in real terms.

Placement

The placement of the product is also of a paramount importance. Taking into consideration that grocery is supposed to be sold online, it is necessary to develop the concept of the placement of the product respectively. Practically it means that grocery should be sold online, i.e. via Internet, and customers should have wide access to the product. At the same time, it is important to underline that customers need feel secured while using the services since there exist a possibility of fraud while purchasing online as well as the problem of security of private information of customers.

In order to prevent all these problems, firstly it is necessary to implement an efficient IS which could guarantee high level of security of the purchase and private information of customers. Secondly, it is possible to recommend providing the possibility for customers to track the order at all stages. What is meant here is that a potential customer should be amply informed about security conditions, he/she must have an opportunity to chose the most convenient shipping and trace the whole process from the ordering till the moment of the delivery of the ordered product. As a result, such openness of the company to customers will contribute to high confidence of customers in company’s reliability and high quality of its services.

Promotion

In the modern market promotion is one of the key conditions of the success. This is why it should be said that online promotion seems to be the most efficient for the company entering grocery online market with its own products. It should be pointed out that specialists (Lucas and Baroudi 2002) are very skeptical about the traditional media promotion and leading companies operating in the market do not rely on the main media advertising, instead Internet is growing to be more and more popular media that is widely used to promote the product. At the same time, it seems to be quite logical to focus on online promotion instead of television or press since the company and its product is oriented on online sales. Consequently, it is quite natural that the vast majority of its potential clients are Internet users who receive more information from Internet than other media, though the conventional media should not be totally excluded since they may be still contribute to certain growth of the number of customers in the result of the successful advertising campaign.

The external environment

On analyzing the perspectives and opportunities of a company entering the online grocery market, it is hardly possible to ignore external environmental factors such as politics, economic trends, social and technological development. First of all, it should be said that politically the UK is quite stable and characterized by the domestic and foreign economic policy that is predictable and, as a rule, it is easy to forecast its effect on economy, if there is any. At the same time, British economy does not booming at large scale but online business is progressing rapidly that makes the entering of online grocery market quite perspective in the current situation when the entering of the conventional market will be substantially more difficult, especially because of the high level of competition.

Furthermore, the choice in favour of online market is quite natural because of the technological progress which stimulates the wide implementation of IT and IS in practically all spheres of life and the use of Internet and computers to purchase essential products is getting to be as natural as any other purchases people do regularly at the present moment. On the other hand, such a technological progress influenced society dramatically to the extent that traditional lifestyle of British consumers is changing. As a result, the online purchases are getting to be traditional while people are getting to be more involved in the virtual world to the extent that it is possible to speak about such a phenomenon as ”˜virtual community’ which grows and benefits from IT achievements including online business.

Future trends

Obviously, it is necessary to take into consideration possible future trends in the market. In this respect, SWOT analysis provide ample information about perspectives of the company. It should be said that among strengths of the company entering grocery market and its product may be named the relative openness of the market since such serious players as Morrison’s Somerfield, the Co-operative Group, the Musgrave Group, and some others are still considering over the entering online grocery market. This is why it is important to enter the market at the present moment that will open new opportunities, notably it will be possible to gain certain share of the market before these large companies have entered the market. Furthermore, the successful promotional campaign can contribute to the high confidence of customers and popularity of company’s brand.

As for weaknesses and potential threats, it is necessary to point out that there is still serious competition in the market from the part of such large supermarket chains as Tesco, ASDA, and others, while in the future the threat of increasing the pressure from the part of major supermarket chains entering online business will increase influencing the competition dramatically. Furthermore, it is necessary to underline that regardless technological progress online grocery market is still new and it is necessary to constantly attract customers to online services and purchases that is quite difficult in the situation when the risk of frauds and lack of security of private information increases.

Suggestions for the further research

Obviously, the current research is not sufficient for the profound evaluation of all pros and contras of entering the online grocery market. This is why the further researches will be needed. Basically, it is necessary to thoroughly research the problem of security of online purchases and development of customer experience management which could contribute to the increasing customers’ confidence and loyalty to the brand of the company and its products.

At the same time, it is also worthy to provide a more thorough research on the popularity of certain types of grocery in order to define what is more popular among online customers and what is not and needs further improvement or correction.

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