Differentiation between ASDA Direct and Tesco Direct in the UK - Essay Example

? Family Alomran Given Hana SRN: 10248802 Programme: International Business Marketing Accounting and Finance Economics Human Resource Management Tourism Project Management Strategy Information Systems OR/Mgt Science Submission date 30th Jan Table of Contents Dissertation Question 8 Literature Review 8 1-Internet and online shopping 9 1-Tesco and Asda and UK’s customer 9 2-Elements affecting customers’ behaviour in regards to online shopping 10 Provisional Title Customer behaviour towards online shopping: How they trust "case study of differentiation between Asda direct and Tesco direct in UK”. Research Background Online shopping is a form of electronic commerce that effectively allows all consumers to directly purchase items or services from the vendors via the internet from anywhere and anytime of the day or night. The first application of the World Wide Web for the purposes of commercial transactions was in the year 1994, as a media for online banking, for opening of online pizza shops, Netscape’s SSL verses encryption standards for the purposes of securing data that were being transmitted from one terminal to the other. In the year 1995, Amazon.com launched its first online shopping site, while eBay did their web portal in 1996 (Palmer Kimberly, 2007). 1-1 The development of online shopping In this 21st century, the use of the Internet (World Wide Web) has been through a very dramatic growth of ensuring efficiency, proper connectivity, security, usability and cost effectiveness. These achievements have been realized by getting many of its benefits especially for commercial companies’ positions as was the case in 1993. The World Wide Web was initially developed to be used as a commercial tool, by the British scientist Tim Berners-Lee (Berners-Lee, 2000). Instead of using the Internet solely as a technological tool, it quickly became an effective channel used for the commercial outlet purposes by business vendors and customers who are world wide. By late 2000, the total number of immense internet users had risen to more than 450 million because of its conveniences (Nua, 2012). According to estimates done by Nua (2012), there were already more than 30 million hosted websites as reported by the various server organizations by 2012 (Web update, www.nua.ie/surveys). The estimated number of users have since its invention increased, signifying that online purchasing and transactions have been on the rise as well (Joines, Scherer & Scheufele, 2003). Online transactions such as purchasing of both goods and services have been cited by many of the web prototypes’ users as advantageous over the traditional techniques that were initially used since web portal applications do not commit consumers to shop at any specific times or specific locations .This advantage of web application has created a quantum leap from the traditional ways of shopping. According to (Joines et al. 2003), online shopping is classified as the most convenient method for customers since all commercial websites provide online visitors with advantages of easily browsing through the available goods and services, and effectively purchasing any of their products and or services at any time by just a click of the button. Equally important, online customers are provided with chat and call applications where they are able to discuss their needs with their product providers and get immediate responses at very low or no costs at all. Additionally, customers have been able to benefit profoundly by using the online transaction methods because of the products’ or services’ reduced prices. Online shoppers are therefore able to shop from any vendor who is offering the desired goods/ services around the world at very low prices. Besides purchasing, no transit charges are appended to small items (Oppenheim et al., 2006). Searching through the internet for products/ services and finding more information about them before doing purchases is always very important to avoid false buying/ purchases. Unlike for the traditional method of buying goods and services, online shopping provides goods and services with precise information about them to allow customers to be aware of what they actually need and also get more information regarding all products and services (Joines et al., 2003). Customers who are not able to access suppliers, products and services via the traditional methods of shopping, are efficiently considered in the online shopping portals (Smith and Rupp, 2003). In this respect, a very competitive market strategy has been developed by the internet exploration to reach as many customers as possible through the online applications. Inter-business competition has been intensified greatly over customers’ reach and the desire to win positive results and keep the customers. Great Britain, for instance, has experienced the fastest growth in Europe in terms of e-shopping. In 2011 alone, sales in Britain were estimated to be about ?68 billion (Wood, 2012). Online shopping accounts for around 16% of total sales in the UK. The highest remarkable share ever was during Christmas in 2010, when sales numbers reached ?8 billion (International Business Times, 2012). Statistical analysis shows that Tesco and Asda were listed among the top ten best performing and expanding companies in the UK in 2010, but have since then seen very different performances. According to the reports of late February 2011, it was indicated that Tesco was generating up to approximately 70 million pounds in the annual revenues, a 7% increase in profits over the previous year - 2010 (Datamonitor, 2012). In the same year - 2011, Asda achieved revenue collection of approximately forty million, representing an increase over revenues collected in 2010 by 1.9% (Datamonitor, 2012). Fluctuations in currency exchange resulted into negative impacts on Asda, causing them to lose up to about 130 million pounds from its total revenue collected. Since both Asda and Tesco had managed to achieve such high profits, it was an indication that proved their relative confidence from the British consumers, besides their special effects on their customers’ behaviour by leading consumers to buying continuously from them. Problems & Opportunities: Limitations Problem Around the world, there are millions of people who are capable of browsing and purchasing online presently, each of whom is a potential customer to some company with such services or required goods. A precision on the sample size do depends on accurate selection of representatives among the website customers. This has the meaning that false sample sizing has the likelihood of resulting into inaccurate results which are opposed to the main intensions of carrying out the research. Another difficulty faced by the researchers is the element of time limitation to effectively carry out each and every step of a research methodology within ample time frames. The UK’s contemporary online users are very aware of the technology they use and because of that, making a choice on a very large sample is considered unnecessary as a smaller sample size will likely deliver comparable results. In addition, a smaller sample size will reduce the marginal errors and increase the levels of confidence in analysis. Limitation There are a number of factors that influence online consumers. As a researcher, one will be able to try and identify the major factors that affect consumers who buy from the internet by making comparisons between what Tesco direct and Asda direct offer in relation to their prices, quality and any other additional values such as gifts. Anyone interested will have to limit these factors to some extent in order to explore their effects. The case study will be limited to the UK’s online customers because of the wide numbers of online customers aged between 18 – 45 years. Aims and Objectives Aims This research work is carried out with the intentions of exploring elements that influence online customers’ behaviour such as technological design, easy of accessibility, beautiful and well presentation of the graphical illustrations, security availability on the portals for those using credit/ smart card information, sufficient customer services, easier payment methods and delivery, availability of accurate information about products and services, up-to-date products to be similar to traditional market, ability to peruse through previews of products available on the website and using some of marketing features such as promotion. Moreover, more features are included in the development of these web interfaces to help in the investigation and follow up of the extent to which customers are attracted to the website in terms of visitors’ count, and to gather reports from the customers and product viewers on their expectations, views, important and major elements in what they perceive to be necessary in the achievement and measures to win their trust on it. Objectives The main objectives of this research work and analysis were two-fold as shortlisted below: i. To distinctively determine the factors that affect customers and the extent to which they get attracted to the online shopping websites which are used in the achievement of marketing aims, and provides benefits to the organizations’ concerned. ii. To identify and explore more on the British consumers’ attitudes toward online shopping within a frame of e-marketing and their expectations in the achievement of their confidence (security), interface feel and taste. Dissertation Question This dissertation was determined to explore, investigate, analyze and recommend on just a single issue that demands thorough and extensive research, with conclusive results and recommendations of the best way forward. The question is; 1. To define and explore the extent to which website visitors are attracted by or to the e-commerce business portals, and further explanations on the important and major features that can be applied to win customers’ trust on the web interfaces? Literature Review 1- Internet and online shopping According to the recent research findings, online sales in the UK exceeded fifty billion pounds or 12% of all UK retail trade in the year 2011 (Centre for Retail Research, 2012). As of 2011, it was estimated that almost 85% of the total UK population was online and used internet applications in one way or another in reaching solutions to their problems (Internet World Stats, 2012); and almost 60% of the 85% of the online applications’ user population in UK using the Internet to buy products such as clothing, food, music, or to buy services such as travel assistance or insurance (Hall, 2012). These figures demonstrated represent almost double the number of online buyers in other nations and proves the dramatic impact that can be felt when sellers connect with online buyers. To be most effective, corporations which are connected to the Internet are bound to meet customers' needs and wishes effectively in order to be profitable and successful in their developments. 1- Tesco and Asda and UK’s customer For the purpose of this study, Tesco direct and Asda direct were each selected because of the online stores which are characterized as prime examples of the multi-channel outlets that offer similar services within the United Kingdom. The economic stability of both Tesco and Asda had been discussed in the developments above, with a major observation being on the list of the top ten companies in the UK in 2010, although they have seen very different performances since then. In late February 2011, reports indicated that Tesco was generating approximately 70 million pounds in its annual revenues which was a 7% increase in profits generated over the previous year (Datamonitor, 2012). On the other hand, Asda achieved revenues of approximately forty million, a representation of an increase over the revenues of 2010 by 1.9% (Datamonitor, 2012). Because of the popularity of these 2 companies in UK business, they were chosen to be the centre of studies for this research work and the intended findings. 2- Elements affecting customers’ behaviour in regards to online shopping Most customers have shown the characteristics/ tendencies of being attracted to the routine of online shopping not just because of its high levels of conveniences, but rather for broader selection, competitive pricing, and enhanced access to any relevant information to the products being offered by either of the shops (Jarvenpaa S. L., & Todd P. A., 1997). It is worth noting that the two business organizations identified in this case analysis are not only investing on the online shopping technology because it is cheaper but because it also offers a wider range of access to the worldwide market population, increases customer values, and builds sustainable business operation capabilities (Stephen F. King and Juhn-Shiuan Liou, 2004). Online shopping accounts for around 16% of total sales in the UK. The highest share was during Christmas in 2010, which sales numbers reached ?8 billion (International Business Times, 2012). That is considered as an initial evidence of UK customers’ confidence in online shopping because if demand is high, confidence is efficiently achieved. However, the researcher will study the effects of online shopping in customer behaviour in relation to e-marketing products, prices, promotions, distributions, customer services and technological issues as internal aspects; demographic and social environment as external aspects in both companies Asda and Tesco. Hence, a reader is rightfully guided to the most important factors that influence consumer behaviours in the clear picture of the elements which are indeed the responsibility of marketing. All customers are usually not similar in their ways of adopting products, and they will not make purchases using the online store or for these types of products until a positive perception allows trust. In this regard, customers are characterized of not being able to make any decisions and completing purchases until they browse the products to their satisfaction. In the online environment, customers do browse through products’ details, availability, quality, display, ranking and prices. It is always very important for vendors to know what drives customers to their satisfaction or frustrations levels in the use of any particular product or service. In the online environment, this means the greater ability for customers to explore available products through zooming in or out of the images provided, viewing the pictures from different perspectives, or comparing any one product with another/ other products. Tesco has historically won in this regard, either based on customers’ point of view or according to journal announcements (Wan & Ramaprasad, 2007). Product descriptions must also provide accurate information about the availability of the product and a means of comparison between it and other similar products to find the best match for their needs. In all cases there should be precise information provided about the products’ sizes, physical features, and internal structures where appropriate, and the recommended functionality. Customers’ observed characteristics have also indicated that some customers may be interested or may prefer going through other people's comments about the product and the purchasing process as a factor of their decision-making process. Such comments always praise or criticize the products. Therefore, a client reading them is able to determine if the product or service will still meet his/ her needs, and either purchase or stop purchasing when already well informed. Customer purchasing behaviour often depends on the extent of emotional influence they experience towards the products as displayed on the web interfaces (Wan & Ramaprasad, 2007). The action of encouraging online customers to buy products involves introducing the provision of utility and enjoyment (Bauer et al., 2006).Product factors interfere with each other in the detailed literature as the researcher will develop and study in depths the products’ factors which give comparisons between Asda and Tesco. An item’s price is an important factor for customers other than the services, especially on the Internet where there is stiff price competition between companies, and for the purposes of decision making. One of the most crucial factors that immediately affect customers’ trust in shopping from any stores involves introducing low prices that will rapidly attract the largest number of customers to the company. However, statistics indicate that just about 8% of the total active online customers are aggressive shoppers for prices. In this context, meaning derived is that decision is driven strongly by comparison of price features between different brands on the same web portal. Unsurprisingly, there are several price wars which have occurred between Asda and Tesco since it is no longer how smart their portals are designed but rather how cheaply they sell their products. In 2011, the Daily Mail indicated significant fight for customers between Asda and Tesco. Using a low price blog, Asda announced to customers that it had cut prices further than other supermarkets in the UK. Tesco launched a campaign called ‘fact’, aimed at denying the Asda promotion of “lower prices" by arguing that this campaign was created just to attract and recover the largest number of consumers. On the other hand, comparison websites are important features that allow customers to search for alternative products or services which suit their needs and wants. Online shoppers have commonly made use of PayPal accounts and credit cards to make their payments for any items or services acquired. On the contrary, other methods such as cash on delivery methods have also been initiated to create variety and to intensify security levels. Payment method and payment security are related, payment security requires the greatest number of costly security features in any commercial website (Hoffman et al., 1999). For security issues of hacking and fraudulent activities, the internet environment has become very risky and customers always require secure page to complete their payment procedures. Promotion, as a marketing strategy, is one of the most important aspects of e-marketing. It is used by e-retailers to encourage customers to complete their purchasing processes and to gain new customers or maintain current customers and reminds them of their acknowledgement by the company so as to make the feel part and parcel of the organization. Customers are attracted usually by two promotion futures of advertising and sales promotion. Advertising at both Tesco and Asda direct is divided into two categories: personal (such as web advertisement) and impersonal (such as mobile, email, and catalogues). In most instances, there exists a positive relationship between advertising and customer responses to complete the purchasing process. For instance; in social situations, customers tend to look for the best offers available in the market. Advertisement herein plays an important role of attracting more customers, and thus benefits customers now in order to keep them permanently to the store (hard core customers). In their new strategy, both Asda and Tesco are competing in the introduction of the best catalogues as may be preferred by clients. The idea of a catalogue is to provide consumers with a complete product store, and, like websites, customers are choose any product that is unavailable in the store from the catalogue and place an order on it for a special delivery. However, in the current economy, customers tend to have an advantage card which offers them some free items, discounts, and other features. Tesco introduced club cards and has competed with Asda to solve its inability to offer a low price like Asda through this strategy. It is therefore important to know the most attractive tools to apply in the promotion process for customers to be able to achieve their satisfaction and confidence. Once payments have been done by the client and received at the stores, the goods or services are then delivered. Method of delivery means that some corporations allow customers to choose between free delivery and adding the cost of delivery to their order. Payment methods and delivery differ according to the company's strategy. However, errors or delays in delivery times can interfere with customer perceptions and loyalty. The products delivery means will include among other techniques; downloading, printing out, shipping, Phone calls, drop shipping, and in-store pick-ups. According to Hong (2010), Tesco claimed they are able to meet their clients’ services in addition to meeting their needs and strategies that come through the integrated and careful delivery services process design. It was announced in the year 2007 that Tesco had opened fire on their competitors by raising its delivery cost to ?6.65, whereas, Asda’s delivery price ranged from free to ?4.95, depending on items. Despite the rising costs of delivery, Tesco announced in 2012 that it continues to sit atop its competitors and was the most in-demand for delivery service. Its percentage was around 66% of UK customers whereas Asda was only 16% (International Business, 2012). To provide good service to customers, organizations need to establish a customer relationship marketing (CRM) program, which is a network responsible for tying the company’s systems to customers, suppliers, and employees. Electronic CRM (E-CRM) is an Internet-based CRM whose mission is to link commercial websites to both company staff in different departments and stores, as well. The attention to technological factors is one of the most important elements to the companies that have online stores. Liu et al. (2008) add that customer research has indicated that the main factors in commercial websites that affect customer satisfaction are web design and the ability to deal with it. McKnight et al. (2002) noted that to attract customers to commercial websites, corporation have to look at colour, design, and especially the website interface. Demographic and Social Aspects an Important link for all the elements mentioned that affects customer trust and the institution cannot blind eye to them. Alavi (2009) pointed out that workers purchase more from commercial websites than housewives because they do not have enough time to do shopping. Others limited purchasing via the Internet to women more than men because it was thought that women preferred the Internet because they enjoy it. Tesco aims to gain this sector (married couples) because they are usually busy and they do not have time to do shopping in the traditional store (Bold, 2003). However, the social environment refers to the extent to which Tesco and Asda share in social issues with UK society. Social responsibility is associated with introducing fresh foods and fruits and vegetables; and the researcher will be limited in this study to this elements. Research Method This research will be carried out through the use of primary and secondary sources of information based on the body of "descriptive research" i.e. books, journals and articles, to develop the hypotheses of the research. The researcher will next attempt to quantify the validity of the hypotheses by creating questionnaires and distributing them to customers at random. However, because of the sample size which seems to be very huge, the researcher will define a sample population to which questionnaires will be distributed via email using the web based technology. The researcher will perform a research presented on the previous studies as descriptive research, based on books, journals, previous studies about related subject matters, and articles in order to create a comprehensive research hypothesis that meets the academic standards required by the school. Next, the researcher will go through the hypothesis to verify its validity through writing questionnaires and distributing them to customers. References Alavi M. (2009) Men Buy, women shop: The sexes have different priorities when walking down the aisles, 12(17), 15. Bauer, Raymond A. (2006) 'Consumer behaviour as risk taking', in Robert Hancock (ed.), Dynamic marketing for a changing world, 389-398. Chicago: American. Marketing Association. Berners-Lee T. (2000). Weaving the Web: Original Design and Ultimate Destiny of the World Wide Web. New York: Harper Business. Bold B. (2003). 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