We live in an exciting age as retail consumers, with technological advances driving how retailers deliver products through varying distribution channels growing everyday. The internet has been the main driver, along with the accessibility of touch screen phone and tablets, in this new age of retail shopping providing the consumer with purchasing options aimed at providing a service which is efficient and convenient. IBISWorld released statistic in March of 2016 stating that the online retail industry in Australia alone had a revenue of $15.6bn at and annual growth rate from 2011-2016 of 14.6%. This evolution of retail consumerism was seen by the ‘Bricks and Mortar’ retailers of Australia as being a distribution method that would not be sustainable, but they were clearly in a state of denial.
“And Australians retailers show all the signs of following the same template of denial that we’ve seen from other industries whose business models have been smashed by new media: first ignore the internet as irrelevant, then fail to grasp its potential because you’re too comfortable with your pre-digital business model, then realise it’s a threat, then demand governments make the threat go away by forcing consumers back into your old business model, then watch as new entrants with whom you’ve never had to compete before – who indeed may not even be in your industry — arrive to offer the innovation you could have offered if you’d been smart enough from the get-go.” Bernard Keane, Politics Editor, July 27 2011.
So yes, online retailing may be growing at an astounding rate, 14.6% (Online) vs 0.8% (Total Market), but this is still quite modest in comparison of revenue to the total consumer goods market, $15.6bn (Online) vs $166.8bn (Total Market). Some Australian businesses opened their eyes to the omni-channel distribution opportunity presented to them in the growth of online retail purchasing and how it could assist in them in advancing their strangle hold on the consumer goods market.
If you can’t beat them…join them!
Companies, such as Woolworths and Wesfarmers who both hold substantial market share in both the online and ‘Bricks and Mortar’ retail sectors, both companies are involved in many different retail sectors but are probably most notably recognised for the fierce competition in the grocery/supermarket sector. These companies saw the opportunity and have successfully integrating online shopping into their distribution strategy but both would have had to have taken into consideration the customers needs and establishing the distribution channels objectives.
A study contacted by Kim Ramus and Niels Asger Nielson in 2005 surveyed potential and current online grocery customers to see what common beliefs are held by the consumer. The key results from the survey were that almost everyone found the process of online shopping convenient stating that “The store is always open, and it is easy, relaxing and time-saving to shop from home” as well as the breadth of range and purchasing options offered by the online services, but not all responses were positive. Although the consumer believed that prices were lower online some expressed worry of missed end-of-aisle bargain opportunities from shopping in-store. Also the risk associated with having to accept or return items which may not be in the best of condition or more simply did not match what had been order online.
“This drawback of internet grocery shopping was seen across groups as the negative side of the coin when consumers entrusted the selection, packaging and transportation of grocery shopping to an internet supermarket. Consumers were particularly worried about the selection and handling of perishables like vegetables, eggs and meat products, and such reservations about internet grocery shopping were apparently important determinants of consumers’ intentions to buy groceries through the internet.” Kim Ramus & Niels Asger Nielson, 2005.
Options A and B
There have been two dominant forms of online distribution channels utilized by the companies across their supermarket chains with some similarities being the use of an intensive distribution pull strategy advertising directly to customers, offering low everyday pricing and incentivising with reward programs.
A) Online Order and Home Delivery
This form of online distribution ticks many of the consumers requests with the experience being convenient with the ability to conduct your shopping without the worries of crowds and long cues while still having a wide range of product to select from online. The negatives previously mentioned have not been addressed in this distribution method with the risk of poor selection of perishable goods or the chance of wrong products being provided. The result being the customer having to accept the mistake as a trade-off of home delivery or the customer having to return the goods which reverses the convenience of the online shopping experience.
B) Click and Collect
Click and Collect offers a distribution method which Betsy Morris’s article for The Wall Street Journal supports as being a prefered option by consumers. Betsy states that 44% of the 3000 consumers surveyed said that they would prefer to purchase from online stores which allow them to pick up in-store saving them money in shipping. The other advantage of this distribution method is the 33% of these consumer also admitted to purchasing additional items will collecting their pre-order goods, a win for the retailer also. Although there are still risks involved with wrong products being provided or product quality issues, the customer can resolve these issue by checking their goods while collecting them from the retailer.
So is Click and Collect the answer for ‘Bricks and Mortar’ retailers? It may be. There is still a heavy reliance on supplier fill rates and correct inventory stock files to make the distribution channel efficient and effective but it offers the consumer the convenience of browsing, selecting, purchasing and collecting their desired products at a time that suits their busy lifestyle.
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