E-commerce - Coles - Case Study Example

E-commerce Name: Institution: Table of Contents Executive summary 3 Introduction 4 Business concept 5 Business models 7 Objective 9 Products and services 10 Service Delivery Strategy 12 Success factors 12 Recommendation 13 References 15 Executive summary E-commerce has taken root in the current economy all over the world. More transactions are happening online where an exchange of value is involved. Merchants have been forced to adopt some e-commerce models such as business to customer to eliminate the links to consumers and increase sales which in turn affect profits. Coles is one of the largest retail merchants in Australia. It has several large store all over the country that supply common day to day items such as food products and groceries. However, other retailers are growing at a constant pace and the competition is becoming tighter for Coles. They are force to come up with new strategies to maintain the market share and customers. On-line stores have proven to be sales boosters as end-consumers seek for shopping convenience as day to day activities continue to increase. Customers have become more used to doing online transactions and collecting goods at pick up store. However, merchants are forced to come up with delivery mechanisms to maintain a competitive edge. This report will try to give the current stand of Cole retail merchant and seek to explain why the company should adopt an e-commerce model that will be beneficial to its customers and to itself. Introduction Technology has become the center of most of human activities; this has introduced new possibilities in different industries over time. The internet was originally developed by a research commissioned by the United States government and adopted as military purpose communications channel that would allow communications behind enemy line. The development of the internet was however facilitated by the invention of the computers and its networking capability. This however did not last for long since the internet’s capability could be applied in myriad of concepts apart from providing communication during times of war. With more and more industries adopting the internet technologies, the business industry did not fall back. The concept of E-commerce was introduced and has caught on rapidly becoming one of the most dependable business innovations. This simple innovation has revolutionized the businesses helping to boost and promote sale and marketing in business that adopt this concept. This however would not have been possible without the internet thus a strong interdependency of E-commerce and the internet exists. Various business analysts have different definitions of e-commerce but the underlying concept remains as the use of the digital and internet technology to conduct commercial business transactions. In this case the transactions involve and exchange of value and that’s where the distinction between e-commerce and e-business exist. E-business is basically use of digital and internet to perform businesses processes not necessarily involving an exchange of value. We can however say that e-commerce is a subset of e-business since a business process may involve an exchange of value (Maamar, 2003). Business concept Coles is one of the biggest retailers in Australia providing commodities such as food, drinks, and all items that are used on a daily basis (Sampson, 2014). However, they do not entirely own the retail space since they are faced with competition from different sized retailers raging from companies as big as theirs to the local store selling the same commodities as they do. To be successful in the retail industry, a good business model has to be adopted to counter the competition. With the kind of goods that Cole stores provide, competition from other retailers would be the major hindrance of business growth. Coles deals with good that are used on a day to day basis. Survey shows that milk is the most purchased grocery item on a day to day basis. This is a commodity that is available all around the other retail store and since it is likely to be processed by a few companies, its quality is guaranteed to be the similar. This means, customers will opt to go to a retail store and not the other for other reason other than quality. By correctly answering the question why a customer will opt to visit a retail store and not the other on a level playing field to buy the same commodity will determine the success of the business. If quality is not an issue, customers generally fall back to a comparison of the price of goods from one retail store to the next. A retailer who is able to provide a good of similar quality to the competing retailer at a lower price will most likely win the customer. Service during purchase and packaging of the goods play an important role after the price is right. If all this aspects are kept constant it means that competitors in the market will have an equal share of customers. This however is not true since there is the aspect of proximity to the customer. Customers have a preference of getting their goods from a local store especially if they are not buying in bulk. Most consumers are aware of the cost of transport to purchase a good from a store that is further away from them even if the price of the good in the store further away is more expensive. At the end of the day, it remains cheaper to purchase goods from a store near you especially if the purchase is not in bulk (Palacio and Theis, 2005). With this in mind, a retailer who expects customers to purchase items from their fairly priced items, quality assured items and proper service store need to bring the store closer to the customer. Coles has done this fairly well, it has stores all over Australia and it has become a household name among many consumers. However, other retail chain stores are giving them a race for their money by embedding themselves into the consumer market. Competitors such as Aldi, Costco and Farmers’ Markets are adopting similar models of availability to the consumer thus that is reducing the competitive edge of Coles (Sampson, 2014). The online market has however provided a new channel in which retailers in Australia and around the world can push their goods to the market and make more sales (Nakache, 2010). According to Nakache (2010) e-commerce has help retailers who were otherwise stuck in a rut to boost their sales and make substantial profits once again. She continues to emphasize that e-commerce sales have grown on average 19% per year in the last decade unlike off-line sales. This growth in online sales was also evident during the economic dive of 2009 where online vendors whereas retail sales shrank 2%. Coles needs to adopt ecommerce model that will differentiate it from its competitors in terms of service and product delivery to its consumers. This way they will be able to maintain a high market share which translates to more sales and eventually more sales. Coming up with a strategic model suitable to accomplish this goal will require a combination excellent ordering mechanisms, online payment solution and a delivery mechanism. Business models Currently, Coles relies on offline retailing with a large number of stores around the country to sell their commodities. By having large stores of close to an average 5000 square meters compared to its competitors such as Aldi with 1200 square meters per store, Coles is capable of maintaining higher customer traffic on a daily basis (Sampson, 2014). This also means they have enough space to stock up goods at a go thus stock maintenance is simpler. However, perishable goods require faster sales otherwise they may end up being a loss to the retailers. As mentioned earlier, e-commerce can generally be used to drive up sales and thus an online business model should be introduced. According to Tutorials Points (n.d), there are many e-commerce models but one that specifically applies to e-retailers is the business to consumer (B2C) model. As the word depicts this is a direct relation of the business to the consumer where no middle party is required. Other e-commerce models include the business to business, consumer to consumer and so on. With all this models, communication has to be over the internet meaning a website has to be present to assist in this. The figure below shows a B2C model that is adopted by most online merchants. The three key aspects are ordering which is enabled by the website as a communication tool; order processing which involves customer payment of ordered goods accompanied with validation of payment, finally supply or delivery of the goods to the customer. Of all the three activities, taking orders might be considered the simplest. Order processing where a third party payment solution is involved might have security concerns to be addressed. Delivering to the consumer requires time and location logistics to be address (Ratnasingam, 2008). Coles’ retail chain needs to adopt this model to efficiently bring the goods closer to the customer and maintain the market share. There are several techniques in the three main activities of ordering, processing orders and delivering (Kale, 2014). Choosing the most efficient is a priority and yet quite a hard task. Some techniques may seem more appropriate but are discredited by attributes tagged to them thus making a choice on the best technique very hard. Objective Given the information above the end goal is to come up with an online store that will be used in sale of the commodities in Coles’ retail store. The commodities in mind are mainly grocery items which may be highly perishable and require faster sale and delivery time. A breakdown of the objectives amounting to the goal is therefore: Build an online store that will be will enable consumers to pick out products, make payments for the goods and provide delivery instructions and details. Make delivery policy that will determines which customers are viable for a delivery service; time and charges related to the delivery service and compensation procedures in case of failure in delivery or delivery of damaged commodities. Building the first online store with a one to two day delivery for guaranteed fresh food ensuring quality for both online and offline customers. Building a store picking network for consumers who are not viable for the delivery service or do not want the delivery service to help them saving purchase time by pre-packaging ordered goods and getting them ready for instant pick-up. The objectives above will help guide the strategy in which Coles will adopt to develop an e-commerce framework suitable for them to reach a wider consumer base and in turn boost their sales. The strategy will therefore bear in mind the use of a proper technology for ordering and purchase, consumer coverage and service charges on delivery. Strategy The underlying strategy to meet the objectives entails building a store front website for Coles’ retailer which will have a virtual shopping cart. The shopping cart will be personalized to a logged in individual allowing it to collect data on the preference of the customer thus improving experience using context aware selection. The website is also used as a marketing tool which will try and promote other items that may interest the consumer given the purchase data collected on them. It will also be used to push special offer products during certain season, for example nationwide celebrated holidays. Coles will need to partner with payment gateway companies such as Visa, Mastercard, Paypal or a local payment solution company to allow customers to securely pre-pay for the ordered goods. Without a trusted payments solutions company, few consumers will be willing to put their money on the line with the risk of loosing it. The coverage of the solution provider also matters since more consumers with the ability to pay. Companies like Mastercard and Visa span worldwide and have made a name in terms of reliability. The last thing to strategize on is the delivery of items to the consumer. The addressing system in Australia is very reliable meaning a delivery messenger can easily deliver goods with accuracy. The delivery system may also be enhanced by current technology like online maps. Customers may be asked to pinpoint their locations making it easier to deliver goods and estimate time of delivery. Delivery vehicles can be used to accomplish this where one vehicle is used to supply a certain region. However, not all customers will be entitled to delivery due to several factors such as distance limitation or delivery price limit not set. Such customers may have an option of giving instructions for goods to be pre-packed and they only come to pick up the goods. This may require more storage capacity for the goods to be stored before pick up and a service charge for the extra convenience. Products and services Coles deal with different types of items but mainly daily use items. Groceries are a major moving commodity which generates quite some sale numbers. Consumers prefer to purchase these goods in the retail chain stores for their quality and accessibility. The goods may be categorized as high, medium and low perishable which is an important factor to consider when choosing what to deliver and the time implications. High perishable goods are mainly fresh foods which may loose value within a day or two, for example vegetables. Medium perishable goods are goods that have a longer duration of existence mostly 5 to 30 days in controlled environments but eventually loose their value or perish. This are mainly processed foods which have preservative ingredients and can be kept fresh in a controlled environments such as cold rooms. Service Delivery Strategy Delivering perishable goods requires speed and accuracy of location. This will help reduce losses incurred when customers declare that goods are damaged or spoilt. Customers may also dictate when goods need to be delivered or collected from the stores. To allow faster delivery of goods, an increased number of storage facilities closer to the consumers may be required. These facilities may be not be used as an outlet for offline customers to shoppers to shop but just a collection point for goods or a dispatch for delivery. A reduction of proximity to the customer is achieved thus deliveries are much faster. Reliability of delivery transport mode is essential, a balance between the size of goods delivered at a go and the number of parallel deliveries should be reached. This implies that having a few big trucks to deliver goods may be disadvantageous unlike having several small vehicles delivering at a go. Customers also like having an assurance of service delivery. Having a special team of customer representatives available to assist in questions about the consumer’s delivery or claim settlement is necessary. On the other hand the company may decide to embrace technology more and invest in a delivery tracking system which will allow customers to know the status of their deliveries. If the information provided is correct and reliable, customers will feel more comfortable in using the delivery service next time. This may also apply to the store collection orders. Success factors To succeed in coming up with the largest online purchase and delivery network, there are several factors to consider which will set the company apart from its competitors. These factors may be tied to economic principles or may be normal business principles which have to be followed by any organization. Reliability is not an option. If a group of customers complain of poor delivery service, Coles will loose a chuck of the online customer base it has. With the presence of social media technology, a bad report is likely to travel fast. Online orders and deliveries have to be promptly and effectively executed at all times to maintain a certain standard of efficiency. This will help promote the service and more word of mouth advertisement will take place in favor of the company reducing marketing cost. Consumer protection is necessary and this may be implemented using proper policies that protect a customer in the even an undesirable outcome is realized. However, these policies should also protect the company against unnecessary losses initiated by customer ignorance or mistakes. The payment solution in use should also protect the customer from fraud and loss of money by providing secure payment channels. The store network should be strategic in order to reach a wider market. The pick up kiosks and storage facilities should be placed strategically to ensure maximum utilization and at the same time provide better coverage on the consumer area. Failure to do this will impact on reliability of the delivery service which is a key success factor. Recommendation Given the discussion provided above, the Coles retail merchant should set up an e-store which allows customers to purchase goods, give delivery instructions and deliver the goods. To do this they need to have an online ordering website which is rich is user experience and with the ability to identify consumer preferences. The website should have a robust location identification feature to allow customer to provide their delivery location or select the pick up kiosks they want to collect goods from. Coles should also develop a good network of stores to bring goods and services closer to the consumers. This will promote the brand and it will become a household name attracting more customers with the complementary feature which is quality goods delivery and convenience. Other than that, Coles should partner with payment companies such as Mastercards and Visa to provide secure payment solutions and a loyalty program to the customer (Park, 2013). A good delivery policy should be developed which will be beneficial to the customer and the company. The delivery policy should entail the charges to of the delivery services, the coverage of delivery and any special exceptions in delivery. E-commerce is a growing trend and it may soon be replace by another thus it is good to capitalize on it now. Investing in the technology required to accomplish this may be a good choice to boost company sales. Furthermore, it is becoming cheaper every day to implement online store. For merchants who are more receptive to currently technology, they have already harnessed the benefits of e-commerce and online stores. Coles should follow the same path to maintain its lead in the market. References Hardy, K. G. (1986). Key Success Factors for Manufacturers' Sales Promotions in Package Goods. Journal of Marketing. [Online] 50(3). P.13. Retrieved April 4, 2014, from Available from: http://dx.doi.org/10.2307/1251582 [Accessed: 4th April 2014] Maamar, Z. (2003). Commerce, E-commerce, And M-commerce. Communications of the ACM. [Online] 46(12). p.251-257. Available from: http://dx.doi.org/10.1145/953460.953508 [Accessed: 3rd April 2014] Nakache, P. (2010). Why E-Commerce Is Flourishing. Forbes. [Online] Available from: http://www.forbes.com/2010/08/02/groupon-facebook-shopstyle-technology-ecommerce-social-media.html. [Accessed: 1st April 2014] Palacio, J. & Theis, M. (2005). Introduction to foodservice (10th ed.). Upper Saddle River: Pearson/Prentice Hall. Park, M. (2013). The Effect of Reward Channel and Reward Time of Customer Loyalty Programs for On-offline Channels. Journal of the Korean Society of Clothing and Textiles, 37(4). p.467-481. Ratnasingam, P. (2008). The Impact of E-Commerce Customer Relationship Management in Business-to-Consumer E-Commerce. Journal of Electronic Commerce in Organizations. 6(4). P.30-46. Retrieved April 5, 2014, from http://dx.doi.org/10.4018/jeco.2008100103 Sampson, A. (2014) Technology changes grocery market. [Online] Available from: http://www.weeklytimesnow.com.au/commodities/technology-changes-grocery-market/story-fnkeqfxg-1226796405817. [Accessed: 1st April 2014] Tutorials Point - Simply Easy Learning. (n.d.). E-Commerce Business Models Available from: http://www.tutorialspoint.com/e_commerce/e_comm [Accessed: 5th April 2014] Kale, N. (2014). Coles Sees Major Surge in Online Sales. Power Retail Coles Sees Major Surge in Online Sales Comments. [Online] Available from: http://www.powerretail.com.au/news/coles-sees-major-surge-in-online-sales/ [Accessed: 5th April 2014] Read More