Critical Assessment of Morrisons - Essay Example

?Critical Assessment of Morrisons Introduction Morrisons is considered as one of the top supermarket chain in United Kingdom. The organisation has around than 400 stores and more than 1.5 lakh people employed in the company. Every year, the organisation serves around 9 million customers. The company is involved in sourcing and processing of fresh food products and this helps in close monitoring of the quality and overall flow of the fresh food products from source to destination. The company started as an egg and butter stall, by a butter merchant named William Morrison. Since its establishment in 1899, Morrisons have come a long way to become one of the leading chains of fresh food retailer across United Kingdom. The company has been successful in generating enough revenues and profits for future growth and development, which explains the healthy statistics of the company. According to the latest annual reports provided in the website of the company, Morrison earned gross revenue of 16.5 billion Euros and the total profits generation by the retailer were more than 900 million Euros (Morrisons, 2013). The retailer differentiates itself in terms of providing fresh food, sustainable culture, excellent service delivery and vertical integration with the help of manufacturing business. The organisation is always involves in creating valuable offering and better opportunities for customers as compared to other retailers. The company also aims to remain profitable in the business by constantly upgrading their formats, categories and channels. The company has established itself as one of the favourite destination for traditional grocery shopping. Traditional grocery shopping has been the most preferred destination for grocery shopping. However, the current economic scenario is changing. As more and more companies are being launched in the market, the competition is become fierce than ever (Hackney, Grant and Birtwistle, 2006). Traditional groceries also suffer losses because of the local vendors. Especially in smaller cities where the number of grocery stores is less, these vendors eat a large chunk of the fresh food market. Apart from this, the opinion of consumer regarding purchase of fresh food is conservative. Consumers prefer purchasing from local vendors as they are perceived as fresh and healthier. Thus, there are many challenges which the present groceries are facing in the UK market. Hence, in the present business scenario, organisations need more sustainable and effective tools to gain advantage in this competitive environment. Looking at the current crisis which the company is facing, powerful strategic operations and new market diversifications are crucial for profitability and sustainable growth in the future. The current operations of the retail giant include convenience stores and supermarket chains. The company follows a vertical integration strategy for the current distribution system. The supermarket chain of Morrison is currently distributed into six major areas of United Kingdom. Except for its petrol stations, the company does not provide any loyalty schemes. Apart from that, the company does not provide any online shopping service, a strategy which they are looking seriously now. At present the company has three distribution centres based in UK. Other smaller operations of the organisations include kidscare, an online website selling wines and a clothing brand. The logistics and supply chain processes are monitored by the company itself. The biggest advantage of implementing this model is the cost advantage to the company. The company does not require middle men in their operations and thus they are able to provide their products and services at a lower price compared to their competitors. The company can also respond to any change in trends of customers purchasing. The organisation is family owned and works in a closed loop. Thus, ownership is an important aspect of their business. The current business scenario of the company is suffering because of volatility in the fresh foods market. The food and grocery market has seen a dramatic change, as a result of the change in strategies and logistics of the overall industry. Morrison’s have reported a continuous loss in sales for a period of six weeks from November till December 2012 (Telegraph, 2013). According to this report from telegraph, though the industry saw an overall decrease in sales, the loss incurred by Morrison was more compared to its competitors from the industry. Reports suggested two possible causes for the deep loss. Lack of sufficient number of convenient stores and no online presence unlike its competitors were considered as major contributors of the loss. So far, the company has established only 12 convenient stores in the nation. Looking at the increasing popularity and acceptance of convenience stores it can be said that the organisation is losing out a large chunk of sales on this format. Apart from this, the market penetration of the retail chain is scattered, with major stores based out of town. The organisation also lacks proper penetration in affluent and popular grocery places in London. According to recent reports, the overall operations of the food sectors have seen some significant changes. Online sales have seen a rise in the recent past, and the percentage of growth is more than those of traditional sales. Despite operating till last working hours before Christmas, Morrisons saw a loss in its overall sales. According to various reports from the UK retail industry, lack of online presence resulted in the recent downfall. There has been a drastic change in the grocery format and more and more customers are switching to online shopping, even for groceries and food products (Ward, 2000). Convenience of shopping, home delivery options and no wastage of time are few of the reasons that have resulted in the growing popularity of internet marketing. Apart from this, entry of new players and changing lifestyle of customers are also forcing big retail players to venture into the online retail space. Looking at the present situation of Morrisons and the issues faced by the company, three problems were identified. Lack of strategic online presence, lack of sufficient amount of convenience stores and product pricing were the issues which were responsible for the overall loss of revenue in the recent past. But the organisation can opt for only one strategy as of now. Looking at the current trends in grocery shopping and changing consumer perceptions, adding online marketing to its strategic portfolio will be the best option to tackle the present situation. The nature of the current grocery products and their purchase behaviour has changed. With the changing lifestyle of consumers and increasing pressure with time adjustability more and more consumers are switching to virtual shopping. E-commerce has started taking a large chunk of sales from the overalls grocery sales. According to recent reports, online sales accounted for more than 1.2 percent of the total sales (Rhodes, 2013). Daily use products and packaged foods are the major products purchased through online websites. The uses of online websites for shopping of grocery products have seen a 12 percent rise (Europe Commission, 2013). Reports have also suggested that this number will increase in coming future. Thus, establishing online presence will be a strategic plan for the organisation. The current market for grocery has also seen drastic changes. Research on consumers purchasing patterns revealed that consumers are now ready to pay extra for the convenience of home delivery (Hiser, Rodolfo and Capps, 2000). Preferences for partners have also changed among modern youths and more youngsters are looking for working partners. This has also changed the daily lifestyle of working couples and most of the time, individuals prefer ordering from outside. These changes have a direct impact on the grocery sales and fresh fruits and vegetable sales have gone down. For the sustainable growth and development of the organisation, establishing online websites will be a strategic step. However, the market placement of the new media should be strategic so that the overall objective of the organisation is not altered. Since the retail giant is already an established player in supermarkets, the company does not need to shift its entire portfolio to online media. In case of vegetables and fresh food, the organisation should prefer traditional format only. The reason being the perishable nature of the food products, the purchase of fresh food products becomes difficult through online sites. The company should instead focus on food products such as dry foods and packaged portfolio for online shopping. Niche marketing is implemented when an organisation is targeting a specific group of customers with similar taste and preferences. In case of the online marketing pg fresh food products, the company can implement niche marketing tactic to generate awareness and gain customer base. Establishing an online base will not only help Morrisons in achieving competitive advantage, it will also provide a new base of and time- pressured internet savvy consumers. Niche marketing will also help the company to cross-sell its products as well as keep a track on the sales and purchase of product categories, so that the management can make necessary changes in their marketing plan. Presence of an already established base of loyal customers will also decrease the pressure of new media as the organisation can target the present consumers. The organisation can focus on medium to high prices products for online sales. Majority of customers order bulk purchases with the intention of avoiding delivery fees and transportation costs in brick and mortar formats. The organisation can also target products like alcoholic beverages as more and more customers are opting for online purchase in these categories. The distribution system of the organisation is privately monitored which in turn will smoothen the delivery process. Information distribution and communication can be the strategic medium for targeting stakeholders and customers of the retail brand. In traditional advertising, the focus is on the availability and freshness of products. The message goes from the company to the customers but does not reach back effectively. With the launch of online media, the company will be able to open a two way communication process. Since online media provides an effective and easier platform for customer feedback, the organisation will be able to communicate about the products as well as the brand. The retail giant can utilise this platform to educate customers and provide information about healthy eating habits, diets and health foods. The company can then promote its products related to health and wellness such as low fat or sugar free products. To differentiate its media strategy from competitors’, the organisation can also opt for health and wellness option where the customers will be provided health tips from experts in the field. This will help in increasing the overall traffic flow into the website and will create brand loyalty in long term. In order to differentiate its product and well as medium of marketing, the organisation should concentrate on its USP (Unique selling Proposition). In case of Morrisons, the USPs for online marketing can be in terms of pricing as well as educating customers on health and wellness. The organisation can also tie up with other categories of food products such as non-alcoholic beverages and create opportunities for cross-selling. Conclusion Grocery selling has always been considered as a tough task. The amount of maintenance and manual labour required is huge and proper monitoring is critical all the time. Occurrences of shop-lifting and theft are other issues which increase the need for strict monitoring and security of these traditional stores (Kutz, 1998). Online shopping is convenient not only for the customer but for the employers also. For shoppers, features such as convenient shopping, ease on online functionality, and cost effectiveness have increased the popularity of online shopping. The food industry is observing a swift erosion of traditional shopping style and this change is likely to continue in future (Radice, 2000). Mobile technology and increasing use of new gadgets have made shopping possible from almost every location. These changes have forced most of the traditional markets to respond, either by modifying their present traditional formats according to the latest trends or foray into online marketing (Donegan, 2000). Most of the online food retailers are now focussing on a multichannel format, giving equal focus on online as well as traditional shopping formats, with the objective of increasing customer base as well as gain sustainability and growth in long term process. Reference List Donegan, P., 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 23 July 2013]. Hackney, R., Grant, K. and Birtwistle, G., 2006. The UK grocery business: Towards a sustainable model for virtual markets. International Journal of Retail & Distribution Management, 34(4/5), pp. 354 – 368. Hiser, J., Rodolfo M. N. and Capps O., 2000. 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(1), pp. 78-90. Morrisons, 2013. Financial reports. Available at < http://www.morrisons-corporate.com/Investor-centre/Financial-reports/> [Accessed 23 July 2013]. Radice, C., 2000. Web wellness: what the dot.com is teaching supermarkets. Grocery Headquarters, pp. 51-55. Rhodes, C., 2013. The retail industry. [pdf]. Available at [Accessed 23 July 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 23 July 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