Retail Business: Waitrose - Case Study Example

Retail Business: Waitrose Introduction Waitrose is a retail business in the United Kingdom. It was created in 1904 by Wallace Waite, David Taylor, and Arthur Rose. The company together with 10 other grocery stores and 160 employees was acquired by John Lewis partnership. John Lewis partnership is among the top retail business in the UK and has been owned by its employees since 1937. The first Waitrose supermarket was established in 1955 . Today Waitrose is considered to be the sixth largest supermarket in the UK. It has a total of 241 branches, 18,000 stock lines and its grocery market share in the UK is estimated to be 4.3%. The retail business has fresh, quality, and safe products, quality customer service, and proper home delivery services. Through this, the grocery is known for its good reputation and image. The grocery has new and loyal customers (John Lewis Partnership, 2010). Waitrose is known to be a luxurious supermarket because of its provision of high quality goods and excellent services to the customers. The grocery’s employees have remained loyal hence, low turnover of staff. They are committed to meeting the various needs of customers. Through all this, the company has continued to thrive. The major competitors of Waitrose include, Tesco, ASDA, Sainsbury’s, and Morrison’s. The pricing of goods in Waitrose supermarket is higher compared to that of its competitors. International retailing International retailing involves expansion of retail operations; concepts, management expertise, technology, and buying function beyond the domestic market. Retailers are faced with several operational challenges as they seek to expand their business beyond their borders. These challenges are; demand for products that are new and trendy, diversity and brands, retailers have to ensure their products remain exclusive. There is also increased competition, rapid globalization, E-commerce and complexity in terms of technology. The impact of these challenges increases as the rate of change accelerates and global markets become more volatile and turbulent. For survival in international markets, retail enterprises will have to embrace the new realities. Simpson and Thorpe’s PLIN Model is appropriate in the assessment of Waitrose international viability. In this model four main factors helps to differentiate Waitrose domestic market. These factors provide the basis to consider international expansion as a possible growth strategy. They include product, lifestyle, image and niche, which are reflected in the various strategies adopted by Waitrose. Waitrose has segmented its products. In terms of lifestyle, Waitrose is considered a luxurious company dealing with quality and safe products. The image of the Waitrose is reflected in high price perception of the company, specialty in fresh and quality food products. Niche on the other hand is reflected through Waitrose specialization on fresh food products that are of high quality. Strategies of Waitrose Waitrose supermarket has specific strategies in place which help to attract more customers, expand its market share and increase its profits. These strategies are useful in the assessment of Waitrose international viability. They include; online shopping, home delivery service, specializing in products of wide range, maintaining the freshness and the quality of products, setting aside vital products that are low priced, better customer service and market segmentation. Waitrose has also introduced meaningful ideas which help in cost control and reduction. Its image and reputation has also been boosted by the grocery participation in corporate social responsibility (John Lewis partnership annual report, 2010). The value chain of Waitrose is important, Michael (1985) and Johnson et al (2005) highlights the basic activities of value chain. It includes the following; the first is inbound logistics. Leckford estate which is located in Hampshire was purchased by John Spedan Lewis in 1928. Today the farm supplies a large percentage of products to Waitrose grocery. The products include vegetables, crops, fruit, and milk. Waitrose competitors namely, Tesco, ASDA, Sainsbury’s and Morrison do not own their own farms; instead they have established agreements with the other farms (Waitrose Leckford Estate, 2010). Waitrose has also established long-term relationships with majority of the British suppliers. Among the top suppliers in the country is Mellow Yellow. In 2006, it won the Waitrose small producers supreme champions award. Customers are well versed with mellow- yellow cold pressed rapeseed oil (Waitrose Our British suppliers, 2010). Waitrose suppliers are regional and local. The grocery is supplied with adequate stock for sale hence, the company is not faced with shortage problems (Waitrose Regional and local sourcing, 2010). Through dealing with many suppliers Waitrose has been identified as a unique supermarket in the UK which specializes in all kinds of British vegetables, fruits and flowers. To overcome its competitors in the supply chain management, Waitrose apply the concept of Just in time. This is possible as the grocery’s suppliers are near to the grocery hence, convenient to the retail business. Suppliers are requested to deliver stocks when it reduces in the grocery. Waitrose benefits through JIT in that; it does not incur storage costs, the products remain fresh, of high quality and in appropriate condition (Harrison and Van 2008). Waitrose has the following competitive advantages from inbound logistics. First, Waitrose supermarket is certain to obtain adequate fresh and quality products for sale from the farm. This is not the case with its competitors like Tesco, ASDA, Sainsbury’s and Morrison’s. Secondly, Waitrose needs is attained through British suppliers delivering high quality products. This helps the grocery to maintain its uniqueness of selling quality goods which is its differentiation strategy. In addition, Waitrose supermarket is not faced with stock shortages. Waitrose has overcome this with the help of both regional and the local suppliers. Waitrose also unlike its competitors utilizes the JIT concept and this help the grocery to reduce the costs incurred. The competitive advantage of a company can be enhanced through total quality management (TQM) (Bank 1992). Quality control is central in Waitrose unlike its competitors. Waitrose ensures its suppliers are keen in observing the various requirements when processing products. The ingredients of the products have to be determined. Waitrose utilizes the Hazard Analysis Critical Control Points (HACCP) system in identifying the occurrence of food safety hazards. This applies to all the stages right from production through sale. With the help of this system, Waitrose is considered to have appropriate measures in place which helps in the maintenance of quality (Trusting our products, 2010). In the case of ASDA, products quality is examined using non-sophisticated machines. This results in inappropriate quality and bad stock control (Willow 2008). Waitrose has also conducted redesigning process. Its aim is to simplify the product package, to reduce the costs incurred and the packaging waste. During 2002-2003 and 2003-2004, Waitrose managed to reduce the following percentage; 11% of the product package, 37% of waste and 10% of water consumption (Jones, et al 2005). The purchasing team in Waitrose has a key role to implement category leadership programme on the fruit purchasing (O’Keeffe and Fearne, 2002). The competitive advantages of Waitrose with regard to operations include; established total quality management, and HACCP system unlike that of ASDA. Secondly, Waitrose is also in a position to save costs. In addition, the grocery reputation can be improved through reduction of waste. Thirdly, the close relationship between the grocery and the suppliers and cost reduction can be attained through cost leadership program. Waitrose has 241 subsidiary supermarkets in the UK; the majority is located near London and towards the south east in the UK. There is flexibility in the customers’ shopping in Waitrose. They can shop in the various stores, online, or even request for home delivery services. Customers are not charged the delivery fee, it known as the first supermarket to cancel the charges, this took effect from May 2009 (321 books, 2010). However, in ASDA the delivery charges ranges from £2.00 to £5.50 (ASDA Delivery slots, 2010). In Sainsbury’s customers delivery fee ranges from £ 3.50 to £ 6 for goods below £100 (Sainsbury’s Book delivery, 2010).Waitrose competitive advantages from outbound logistics is that customers benefit from free delivery services, this is not the case in ASDA and Sainsbury’s as customers have to pay for it. Through this the grocery attracts more customers. As a high end supermarket, Waitrose popularity is common among customers who are middle- high class. Majority of the Waitrose supermarkets are located in the south east in the UK, expansion to the northwest is challenging as most of its competitors have widespread subsidiaries in the UK. In order to advertise, Waitrose have had to publish a magazine known as Waitrose Food Illustrated. This magazine is available in all the Waitrose branches and the newsagents (Waitrose advertise with us, 2010). In addition Waitrose has different kind of sales promotions to attract customers, this include buy one get one free, half price, and discounts. An estimate of 1400 stocks of waitrose essential products has been launched. They are of high quality and the pricing is low. These products are similar to that of Sainsbury; however, customers will be attracted as they associate Waitrose with high quality. Waitrose has competitive advantages from marketing and sales. Through its expansion to the northwest Waitrose has a new market to develop. The essential products help Waitrose to win more customers who prefer to buy products with low prices. Fifth, are the services offered which are of great benefit to the retail store. Waitrose has the will to replace or refund products which have not been tampered with. These include products purchased by mistake or those which the customers are not satisfied with. Waitrose also extends the guarantees of their products in the audio and television departments. The televisions have 5 years guarantee and the DVD players guarantee is 2 years. This is in addition to the manufacturer guarantee period. In ASDA and Sainsbury’s customer are not given an extension (Waitrose shopping with us, 2010). It is stated in the supermarket news (6th July 2009), that concerning the customer’s service, Waitrose has been voted as the British favorite supermarket. Waitrose value its customers, thus it is keen to listen to them and gives feedback as soon as possible. Waitrose also provides good environment in their stores, excellent shopping experience and appropriate location with convenient parking for the targeted market. Unlike ASDA, it does not focus on sale promotion (West, 2008) Waitrose gains the following competitive advantages from its services; customers are well informed about good customer service they receive in Waitrose which is not comparable to that of its competitors. Waitrose also go an extra mile to ensure the customer services offered are satisfactory. This justify why customers prefer to shop in the retail store. The various support activities of value chain include; Procurement, Waitrose stocks the best regional and local products. From its own farm the supermarket is supplied with vegetables, crops, fruit, chicken and milk. In addition Waitrose has well established partnership with several British dairy farmers who supply different kinds of products. In order to maintain the special relationship, Waitrose pay high prices to its suppliers who include the dairy farmers, organic growers and the pig farmers. On the other hand suppliers maintain the products quality. Waitrose competitors try to cut on the supply cost which may affect the quality of products (West 2008).Waitrose has a competitive advantage from procurement in that it spends a lot of money on its suppliers in order to ensure quality is maintained and to have sufficient stock for sale. This is not the case in Tesco, ASDA, Morrison’s as they are focused on cost reduction. The second is the Human resource management, Waitrose are always keen to hire staff with integrity and potential; those committed to work in team works and are focused to support the company. The grocery also offers wide range of management courses to the workforce which includes Retail Management Training Scheme (RMT). The turnover in the supermarket is low and workers are responsible in their daily activities as they are partners of the retail business. They receive an annual bonus of approximately 15% of their salary. They have a great responsibility to the profits and losses of Waitrose and this boosts the workforce productivity (Waitrose management team, 2010). On the other hand, Tesco, Morrison’s, ASDA, and Sainsbury’s employees are less motivated because these retail businesses are owned by shareholders (321 books, 2010). Waitrose gains competitive advantage from its human resource management. It comprises of loyal and competent staff that are provided with RMT course and are co-owners in the business. They are always committed to meet the various needs of customers and to provide appropriate customer service. Thirdly is technology development. Waitrose uses Quick Check service where customers scan their own products using handheld scanners. They are also able to make payment at the Quick Check. Through this unpacking and repacking is avoided hence, saving on the customer’s time (321 books, 2010). According to Roberts (2004), Waitrose has been able to purchase Microsoft windows server 2003 with Microsoft XP Embedded Supporting Wincor Nixdorf Pos devices in their retail stores. This is not the case with Tesco, ASDA, Sainsbury’s and Morrison’s. They utilize the self service checkout system. Waitrose competitive advantages from technology are that its mode of payment is appropriate. It is quick and offers the desired experience while shopping hence more customers is attracted. Waitrose also have accurate sales information through the updated POS systems. Fourth is the retail store infrastructure. Waitrose established culture is to become an appropriate place for shopping and for employees to work. The supermarket is known for its honesty with customers and fairness to all the suppliers. Gains are also distributed among all the employees. According to Stephens 2010, Waitrose has improved the infrastructure that supports technology through the established electric vehicle charging points. Waitrose is owned by john Lewis partnership, a popular private company in the UK. Between 2009 and 2010 John Lewis partnership had an outstanding financial performance; its revenue was £7.42 billion (John Lewis partnership, 2010). Through infrastructure Waitrose prioritizes on its customers and employees. This clearly portrays why employees in Waitrose are motivated to give their best service and why the retail store is preferred by customers. In addition, the sophisticated infrastructure enables the retail store to offer good services to customers and be able to cut on costs it incurs. The above actions and strategies that Waitrose is using will help the business to situate itself competitively in the global market. Waitrose SWOT analysis framework SWOT analysis framework helps in the evaluation of Waitrose strengths, weakness opportunities and threats as shown in the above diagram. Through evaluation the viability of Waitrose is determined. Strengths of Waitrose Waitrose has strong and balanced label. Its products are well known because of its freshness and high quality. The workforces are also committed to their work and the turnover of the employees remains to be low. The workforce productivity is high. The products of the grocery are of different varieties, it is estimated to have stock lines that total to18, 000. It also offers free deliver services to all the customers. Weakness of Waitrose Waitrose have difficulty in expansion of its retail stores. This is because majority of the store are located in the south east in the UK. Waitrose will have to extend to the northwest in the UK. The stores of Waitrose stores have remained popular because of its luxurious state, their products are known because of its quality and the freshness, and through this the retail store is associated high prices by most individuals. In comparison to ASDA, the delivery services of Waitrose are slower and conditional in that customers are required to spend a minimum of £5o groceries (Waitrose, 2010). This is not the case in ASDA; customers are offered delivery services when they purchase products worth £25 (ASDA Delivery slots, 2010). Opportunities Waitrose capital is supported by its strong partnership. The retail business also exploits various sectors which include food, flowers, kitchen, bed and bath, garden, toys and nursery. According to Just-food (2009), the UK market of food and grocery in 2008 was estimated to be £124.1 billion. Through this Waitrose had space to expand and develop its market share. Threats Waitrose faces stiff competition from Tesco, ASDA, Sainsbury’s and Morrison’s. Another threat is the increase of the Value Added Tax (VAT) in the UK. It was increased on 4th January 2011 from the initial 17.5% up to 20%. Waitrose is also challenged by the climate in the UK. It is not conducive; it causes delays in the delivery process because of the existence of heavy rain, fog, wind and snow. Conclusion Waitrose is owned by John Lewis partnership. It is considered to be the 6th largest supermarket in the UK. Waitrose has a smaller market share of 4.3%. Regardless of this, it has many prospects than Tesco, ASDA, Sainsbury’s, and Morrison’s who its major competitors are. Its good reputation places it in a better position over its competitors, and its brand provides better ability for development. Waitrose has also managed to maintain the freshness and quality of its products, and to put in place good customer service. Waitrose competitive advantage is gained from the following; high quality products, appropriate customer services, committed suppliers, good reputation, cost leadership, loyal and qualified workforce, sophisticated technology, well planned home delivery services. Recommendation Waitrose has the capacity to enter international markets and offer competitive product and services to customers. However, with regard to international retail marketing in the future, Waitrose will have to observe the following; first, it should increase its expansion by establishing more branches in the UK, before going beyond its national borders. Through this, Waitrose will be able to increase its market share. Secondly, Waitrose should remain focused to its differentiation strategy. This is possible through enhancing and maintaining products of high quality and good customer service. Through this strategy the retail store has managed to satisfy its customers. Thirdly, Waitrose should increase products which are of high quality with fair pricing in order retain and attract more customers. Finally, Waitrose should be keen in enhancing the existing technological skills to be able to deliver excellent services to customers and to reduce the costs incurred. Bibliography 321 books ,2010, Waitrose, free online books, [online] Available from: http// www.321books.co.uk/ catalog/ waitrose/ [Accessed on 22nd April 2011] Akehurst, G, & Alexander, N 1996, the internationalization of retailing Routledge, UK. ASDA (2010) Delivery slots [online] available from:http:// groceries.asda.com/asda-estore/delivery/deliveryslotcontainer.jsp [Accessed on 22nd April 2011] Bank 1992, The Essence of Total Quality Management , prentice hall Hertfordshire. Bruce, M, Moore, C, & Birtwistle, G 2004, International retail marketing: a case study approach, Butterworth-Heinemann, UK. 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