Critical Assessment of Morrisions - Case Study Example

? Critical Assessment of Morrisions Introduction Morrisons is one of the top four supermarket operators in UK. It has more than 500 stores and 132,000 employees working for the company. The supermarket chain serves more than 9 million consumers every year. According to the annual reports given in the company website, the revenues earned by the company were in excess of 16.5 billion Euros and profits earned were 875 million Euros (Morrisons, 2013). The food retail chain and its subsidiaries provide its consumers with a range private label and branded products including meat and fish, grocery items, gift cards, bakery items, vegetables, fruits, non-alcoholic and alcoholic beverages, garden furniture’s, pharmaceutical and food recipes. The company has a vertical supply chain consisting of manufacturing units, packaging and processing units, procurement units and distribution centers. All these units are integrated and managed by latest technological devices. The major areas where Morrison operates are Netherlands and UK. Headquarter of the company is located at Bradford, UK. Tesco, Asda and Sainsbury are the major competitors of Morrison. Traditional supermarkets have been a major destination for grocery shopping. However, because of the strict economic scenario, the competition in the UK grocery market has become intense and tough (Hackney, 2006). Hence the companies need more effective and sustainable tools to compete in this environment. Considering the present crisis which Morrisions is facing, excellently managed strategic operations and diversifications in the new market are needed by the company to retain its profitability and grow in the market. Morrision’s current operations consist of supermarket chains and convenience stores, dominated by supermarkets. The brand’s current distribution centre follows a vertical integration approach. The logistics and supply chain is privately monitored by the company. The major advantage of this model is that there are no middlemen in the distribution system and customers are provided with value for money products and fresh fruits at lower prices. This also helps in quicker response to changing customer trends. The major rationale behind choosing this model is operating in ownership. Morrisions is a family owned business and the company promoters expect an ownership in majority of operations executed in the Company. The brand claims cost leadership and reasonable turnaround from the current business operations. The company is involved in both production and retailing of food products. The supermarket chain has collaborated with Scottish Agriculture College to carry out research in the field of agriculture and farming. The company is engaged in two forms of production; just in time which includes preparing food products like sandwiches, burger or salads inside the store and readymade and fresh food products which are supplied on a daily basis. According to the recent report from Telegraph, 2013, the sale of Morrisions dropped continuously for six weeks till December 2012. This loss of sales was more than the loss accrued by its major competitors. The possible cause resulting in this loss was expected to be small number of convenient stores and no online presence. The supermarket is not into online food selling despite its biggest competitors, Tesco launching its online website in the year 2000. The company has only 12 convenience stores in the country. Apart from this, the majority of Morrisions’ supermarkets are positioned outside the affluent areas of London. Most of the revenue generated from the supermarket stores is from those areas which are less popular and sparsely inhabited. This shows a clear lack in the placement of strategies in the UK market. The company’s revenue from the affluent parts of UK such as London is only 6 percent, compared to 12 percent from the rest of the UK. A data from the British Retail Consortium throws some light on the significant changes in the operations of the food retail industry. There has been a significant rise in online sales compared to the traditional retail sales. This is accounted as the prominent reason behind the drastic drop in Christmas sales of the brand, despite the fact that it operated till the last working hour before Christmas. The grocery has seen drastic changes in years. Increasing number of customers is changing to online shopping (Ward, 2000). Internet has become the latest destination for food shopping leaving behind traditional supermarkets. Internet shopping is done either by click or collect method or by home delivery. There has been a rapid growth in the market of online grocery due to the huge penetration of the internet, entry of new online players, and time pressure of customers who find online purchasing as a convenient option. The three major challenges faced by Morrisions were identified as lack of convenience stores, lack of online presence and lowering of the prices. Analysing the current trends in consumer purchase and the changing environment of the business, it is suggested that the supermarket chain should introduce online grocery shopping in its current portfolio. Shopping has gone virtual. Out of the total sales made at the supermarket, e-commerce account for 1.2 of the sales (Rhodes, 2013). Even though the number is small, it is constantly increasing. Packaged goods like groceries and daily products are increasingly purchased in online format. Around 12 percent of the internet users have reported that they use online sites for grocery purchasing (Europe Commission, 2013). And this number is constantly increasing. Thus launching the company’s presence in the online media will be a strategic step at it will help the company gain market share through online presence. Purchase through online grocery sites is more profound in case of working couples. It was also found out that these customers did not mind paying extra while online grocery shopping because of the convenience (Hiser et al, 1999). It is very evident from the current social environment that more and more number of people is opting for working partner. This decreases the time for traditional cooking as well as purchasing fresh groceries from traditional supermarkets. Launching online shopping website will be a strategic move for developing sustainable growth for the company. Since the company has already a huge base of supermarket chain, it does not need to shift its entire operations into online food retailing. Especially products like Fresh food and vegetables can be kept in the traditional format. This is because these are essentially perishable goods and needs to be delivered in just in time process. This makes the purchase of fresh groceries difficult through online shopping. The customer can focus in food products such as dry fruits and other food products with a life span of minimum 3-4 days. The limitations with respect to shopper locations have decreased drastically. Previously, online shopping was limited to laptops and pc’s at home. With technological advancements, online shopping is now possible through various gadgets such as mobile, smartphones, tablets etc. This enables the shoppers to purchase groceries from practically anywhere like office, college, home etc. The company’s entry into online groceries retailing will help to capture this particular market of internet savvy and time pressured consumers Niche marketing can be referred as focussing the marketing mix on a particular target group. This strategy is effective in case of traditional markets having an affluent consumer base and high market share. By developing an online base for offering services to customers, Morison can create a marketing strategy which will act as a barrier against new entries in this sector. To create a strategic development in the market, online presence will be crucial for the company. By launching its presence in the online retail space, the company will be able to create a niche market. Apart from this, having a traditional space will facilitate the company to categorise their targets. The supermarket giants can cross-sell its retail opportunity to the existing clients and it can also source new clients based on different geographic locations. Having an already established customer base will help the company in extracting the target group from the base and promoting them with the new online space. For online grocery retailers like Morrisions, focussing on marginally rich products can be one of the biggest opportunities. According to many analysts from the e-commerce sector, consumers increasingly prefer to order their heavy and bulk purchases online and visit the traditional supermarket for rest of their needs in grocery items. Bulk purchases are made with an intention to avoid delivery fees. Apart from this, highly valuable food items such as wine and other alcoholic drinks are increasingly purchased through online sites. This creates an opportunity for the company to gain a competitive edge over others. The company’s distribution system is privately monitored which saves a large amount of cost. The company’s online presence will be another cost-effective move and the company can gain price advantage by lowering the prices of items in online shopping sites. This will also attract more number of shoppers towards online shopping. Communication and information distribution is a perfect medium for targeting different customers and stakeholders of the supermarket brand. In case of traditional advertising the messages are targeted at a specific profile of customer. By organising an online service the brand will be able to establish communication in two directions. Communicating with different consumers may focus on critical products like sugar free or low fat products. These are essentially different products but giving almost similar products. With the help of an online base, the brand will be able to gain attention of consumers, by explaining them with benefits and issues of different food products. Providing information such as allergy from specific food items will increase trust among consumers and will increase the brand loyalty towards the company. This will increase the traffic flow on customers into the website as well as build brand value of the company. To differentiate itself from an already established online grocery market, the supermarket chain can use various strategies. Every business should have a unique selling proposition to differentiate itself from competitors. In case on online grocery market, it is very essential to educate the customers about the importance of online grocery selling. The supermarket brand can make this strategy as its USP by educating customers about the various benefits they can get by using the company’s online grocery site for shopping such as convenience, discount offers etc. Online grocery shopping also helps consumers to browse for more products in lesser time compared to traditional shopping markets, where a customer needs to move from aisle to aisle to check for different products. This saves a lot of time for the customers and is beneficial for the company as more number of grocery products will be exposed per customer visiting online site. Conclusion Grocery retailing is a work that many customers perceive as more of a time-consuming task than something they are eager to do and enjoy. Consumers are constantly seeking efficiencies and time saving ways in its conduct (Kutz, 1998). Features such as ease of website functionality and convenient shopping lists are few of the time saving features that attract consumers to shop online. These features are increasingly essential to create a compelling offering in the online market. The slow and steady erosion of traditional grocery retailing to online food retailing has been dragging the performance of traditional supermarkets, and is likely to continue in future (Radice, 1999). With the advent of mobile technology and internet, more and more number of shoppers are opting for shopping through online retail sites. This has compelled the traditional retailers to respond, either by improving their in-store experience or by building a multichannel retail opportunity (Donegan, 2000). A perfect multichannel retail strategy integrates digital and online mobile offerings, high in-store experience to meet consumer’s ever changing needs. This will also remove unnecessary and unwanted expenses and will help retailers becoming more effective and efficient. It should be supported by efficient supply chain process and capable back-office operations. From the above analysis it is very clear that building o strong online presence, apart from traditional supermarkets is very critical for its sustainable growth in the future. Though online grocery shopping is still a niche market, it is growing at a steady phase and is likely to gain a larger market in the near future. This makes it very evident for the company to utilise of this future opportunity and remain competitive in the ever changing environment. References Donegan, P., 2000. 2000 Outlook and Industry Forecast. Grocery Headquarters, pp. 26-33. Europe Commission, 2013. Life Online. [pdf] Available at < https://ec.europa.eu/digital-agenda/sites/digital-agenda/files/scoreboard_life_online.pdf> [Accessed 11 April 2013]. Hackney, R., Grant, K. and Birtwistle, G., 2006. The UK grocery business: Towards a Sustainable Model for Virtual Markets, Emerald 34. Hiser, J., Rodolfo M. N. and Capps O., 1999. An Exploratory Analysis of Familiarity and Willingness to Use Online Food Shopping Services in a Local Area of Texas. Journal of Food Distribution Research. 30 pp. 78-90. Kutz, K., 1998. On-line Grocery Shopping on Track for Rapid Growth. [online] Available at . [Accessed 11 April 2013]. Morrisions, 2013. Financial reports. Available at < http://www.morrisons-corporate.com/Investor-centre/Financial-reports/> [Accessed 11 April 2013]. Radice, C., 1999. Web Wellness: What the Dot.Com is teaching Supermarkets. Grocery Headquarters, pp. 51-55. Rhodes, C., 2013. The retail industry. [pdf]. Available at < www.parliament.uk/briefing-papers/SN06186.pdf?> [Accessed 11 April 2013]. Telegraph, 2013. Morrisons' online dilemma becomes clear after Christmas turkey. [online] Available at < http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/9786486/Morrisons-online-dilemma-becomes-clear-after-Christmas-turkey.html> [Accessed 11 April 2013]. Ward, M. R., 2000. On Forecasting the Demand for E-Commerce in Forecasting the Internet: Understanding the Explosive Growth of Data Communications. Amsterdam: Kluwer Academic Publishers. Read More