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Fmcg sector, retail and ecommerce, social business, digital economy report
 

Fmcg sector, retail and ecommerce, social business, digital economy report

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Online shopping is growing inexorably. Maximising the online business potential and optimising the consumer’s online shopping experience are two separate issues, but are both of major importance to ...

Online shopping is growing inexorably. Maximising the online business potential and optimising the consumer’s online shopping experience are two separate issues, but are both of major importance to any retailer seeking to take advantage of the increased spending by consumers online.

Irish shoppers spent €2.96bn online in 2010, an increase of 39% on 2009; This growth rate has not been seen in the online grocery market, however, which accounts for approximately 1% of this, or some €29.6 million.

The value of the total grocery market in Ireland increased from €6.0bn in 2001 to a peak of €9.3bn in 2008; it fell to €8.8bn in 2010, and has since risen slightly. It is currently valued at just under €8.9bn.

In 2010, the total grocery market in the UK was £150.8bn; the online proportion of which is some 8%. Retailers benefited hugely during the economic boom. However, as a result of the recession, shoppers are making more regular shopping trips for smaller amounts of groceries.

Store loyalty has decreased hugely, consumers now visiting more stores, shopping around for the best deals. Shoppers have a much greater choice of grocery products but are purchasing the same number of products.

Shoppers are much more accepting of non-branded or private label (PL) goods. They are responding to price increases by either purchasing more items on promotion or trading down to cheaper products. Savings, convenience and the opportunity to purchase items which are not available from Irish stores are influencing factors in online purchasing behaviour.

The survey carried out by The Ahain Group, showed a significantly higher number of consumers shopping online for groceries than industry statistics from 2010 would suggest. Half of our respondents said they have bought groceries online. The results suggest that there is a ready market for the service, with 50% of those surveyed saying they had bought groceries online already.

For more information, contact The Ahain Group:

Email: info@ahaingroup.com

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    Fmcg sector, retail and ecommerce, social business, digital economy report Fmcg sector, retail and ecommerce, social business, digital economy report Document Transcript

    • Social Business FMCG - Retail and Ecommerce By Eileen McCabe, Brendan Hallahan & Christina Giliberti
    • Social Business - FMCG – Retail and Ecommerce www.digitalmarketinginstitute.ie www.ahaingroup.com Page | 2 Table of Contents Executive Summary …………………………………………………………………………………………………………………………..… 3 Consumer Behaviour ……………………………………………………………………………………………………………..…………... 5 The Survey ………………………………………………………………………………………………………………..………………………… 6 Market Analysis ……………………………………………………………………………………………..………………………………..… 9 Website Analysis – Features and Functionality ………………………………………..………………………………………… 10 Key Recommendations for New Entrants …………………………………………………..……………………………………… 15 Further Factors for Consideration ………………………………………………………..…………………………………………... 17 Tesco Case Study ……………………………………………………………………………………………………………………………… 18 Appendix 1 - Survey Responses ……………………………………………………………………..………………………………… 20
    • Social Business - FMCG – Retail and Ecommerce www.digitalmarketinginstitute.ie www.ahaingroup.com Page | 3 Executive Summary Online shopping is growing inexorably. Maximising the online business potential and optimising the consumer’s online shopping experience are two separate issues, but are both of major importance to any retailer seeking to take advantage of the increased spending by consumers online. Irish shoppers spent €2.96bn online in 2010, an increase of 39% on 2009; this growth rate has not been seen in the online grocery market, however, which accounts for approximately 1% of this, or some €29.6 million. The value of the total grocery market in Ireland increased from €6.0bn in 2001 to a peak of €9.3bn in 2008; it fell to €8.8bn in 2010, and has since risen slightly. It is currently valued at just under €8.9bn. In 2010, the total grocery market in the UK was £150.8bn; the online proportion of which is some 8%. Retailers benefited hugely during the economic boom. However, as a result of the recession, shoppers are making more regular shopping trips for smaller amounts of groceries. Store loyalty has decreased hugely, consumers now visiting more stores, shopping around for the best deals. Shoppers have a much greater choice of grocery products but are purchasing the same number of products. Shoppers are much more accepting of non-branded or private label (PL) goods. They are responding to price increases by either purchasing more items on promotion or trading down to cheaper products. Savings, convenience and the opportunity to purchase items which are not available from Irish stores are influencing factors in online purchasing behaviour.
    • Social Business - FMCG – Retail and Ecommerce www.digitalmarketinginstitute.ie www.ahaingroup.com Page | 4 The survey carried out by The Ahain Group, showed a significantly higher number of consumers shopping online for groceries than industry statistics from 2010 would suggest. Half of our respondents said they have bought groceries online. Despite the limited choice of suppliers, the majority of purchasers were satisfied with their experience of grocery shopping online. Price is the top consideration for consumers both offline and online. Convenience, security, discounts, peer reviews, fast, reliable delivery and easy website navigation, all rated highly as influencing factors. The survey revealed that the Irish online Fast Moving Consumer Goods (FMCG) sector is under-developed by the existing vendors in the market compared to elsewhere - 1% of the sector’s sales in Ireland are purchased online against 8% in the UK. The results suggest that there is a ready market for the service, with 50% of those surveyed saying they had bought groceries online already. The Irish grocery consumer has been conditioned by purchasing of other goods and services online. High-cost items, such as electronics and flat screen TV’s, are now bought online as a normal purchasing experience - the FMCG sector should be no different. The retailers have to overcome some issues (outlined herein) and need easy- to-use websites, community building and leveraging of social media by developing an online strategy, which would operate in tandem with their existing offline marketing strategies. Developing an efficient delivery service, with high national penetration, is a challenge which has to be addressed as a matter of importance; only Tesco has come close in this regard. Ireland has embraced the Internet and social platforms in very large numbers. It is up to the Ireland-based retailers to expand their online marketing budgets so they can take advantage of the digital and social revolutions.
    • Social Business - FMCG – Retail and Ecommerce www.digitalmarketinginstitute.ie www.ahaingroup.com Page | 5 Consumer Behaviour The Ahain Group’s survey shows that shoppers are now 1 :  Compensating for reduced levels of disposable income  More price aware  More deal aware  Willing to buy cheaper alternatives A VISA 2010 survey found that:  The average spend per Irish online shopper was €1,550  Half the respondents indicated that they save between 11% and 30% by shopping online; 25% of survey participants believed it was more convenient as there was better choice and shoppers could make purchases any time of day  Shoppers are also more inclined to purchase items online that they cannot find in Irish stores  96% of shoppers are confident that the online retailers from whom they are purchasing, are secure - 86% saying that they know what to look for on a site to confirm this The 2010 European Consumer Barometer 2 also offers some interesting insights into Irish consumer behaviour when shopping online:  56% of Irish consumers will research retail purchases online and value online shopping for its convenience  19% will make a purchase after their research, which represents a conversion ratio of approximately 30% as against the conversion ratio of 20% in the grocery sector  75% of shoppers use search engines for online research  5% of Irish shoppers research their groceries online however only 1% purchase groceries online The Ahain Group survey was carried out over two weeks in late November and early December 2011. The online survey generated 643 responses. A target group comprising members of MyKidsTime (which provides online local listings of kids’ activities, classes, events and services) contributed 614 responses and the remaining 29 were from members of the general public. The industry data was correlated with the survey results and the findings analysed. The methodology employed in the survey included a combination of: (a) Sourcing and analysing data from the grocery industry (b) An online survey of grocery consumers The analysis provides valuable insights into the market and potential customers. 1 Kantar Worldpanel, November 2011 2 http://www.iabeurope.eu/media/41911/consumer%20commerce%20barometer%20-%20ireland.pdf
    • Social Business - FMCG – Retail and Ecommerce www.digitalmarketinginstitute.ie www.ahaingroup.com Page | 6 The Survey Industry statistics 3 state that only 1% of the Irish online community shopped online for their groceries in 2010 and a further 4% researched their grocery shopping online but did not place an order. The response from our survey group showed that 50% of the respondents had bought their groceries online, suggesting that a tech-aware online group will avail of online retailers’ offerings despite a certain lack of support infrastructure, such as nationwide delivery - presently none of the retailers offer this service. Tesco comes closest, with its claim of 85% penetration countrywide. Of the 50% respondents that do shop for groceries; 70% purchase from Tesco with Supervalu and Superquinn combined accounting for 11%. The delivery capability may be the main driver behind the Tesco statistic. No other company has managed to match their coverage of the country. With its purchase of Superquinn, Musgrave has significantly increased their online market and delivery capability. Tesco’s dominance of the online trade may 3 http://www.iabeurope.eu/media/41911/consumer%20commerce%20barometer%20-%20ireland.pdf
    • Social Business - FMCG – Retail and Ecommerce www.digitalmarketinginstitute.ie www.ahaingroup.com Page | 7 create a potential issue for new entrants if they plan to source some of its grey market products from the same importers as Tesco. The high percentage figures for Travel and DVD / Books are predictable given the nature of the goods. The good news for the FMCG sector is that 27% of respondents said that they have bought food and drink online, 28% have bought cosmetics and toiletries and 23% have bought other non-perishables. This supports the belief that there is a strong online market for such products - once the broadband and infrastructure for these kinds of purchases is in place. Price (64%) and tangible incentives (47%) were the main factors that influence the decision to start shopping online. Delivery to the purchaser’s home (37%) and speed of delivery (41%) also featured significantly. 10% said nothing would make them shop online. Delivery to work addresses received the lowest rating for shopping online for groceries - a mere 3%. That price is important is not surprising, the tangible incentives are more so however. It is a reflection of the current reality that Irish consumers are now interested in vouchers and coupons, something unheard of in the
    • Social Business - FMCG – Retail and Ecommerce www.digitalmarketinginstitute.ie www.ahaingroup.com Page | 8 ‘Celtic Tiger’ era. The fact that work delivery did not rate well as an incentive suggests that seeking facilitation of delivery and storage of bulky goods could create tension or discomfort at one’s workplace. The cost of weekly grocery shopping is between €100 and €200 for 62% of respondents; just over a fifth (21%) of respondents spend between €76 and €100. This includes food, drink (alcoholic and non-alcoholic), cleaning products, toiletries, and household goods. Industry statistics show that an increasing number of consumers are seeking discounted goods and are willing to buy non-branded products. 4 This indicates that an effective, competitive, online service with a national reach for delivery has strong potential to secure a percentage of the market. The potential for success will depend on how effectively the online community is managed from the outset, since the product listing will be small to start with. Price and incentives will play a major part in building the community and offsetting the start-up limitations in product range. Consumers are now shopping around in multiple stores for their groceries, so capturing some of that revenue through an online grocery service seems highly achievable. Despite the limited choice of online grocery services in Ireland, 61% of respondents described the experience of buying groceries online as either ‘good’ or ‘very good’. The challenge for new entrants is to create such a high- quality service that it will become Irish consumers’ online grocery service of choice. 4 Come On Ireland: winning with shoppers at home and abroad in 2011’, David Berry, Kantar Worldpanel 2011
    • Social Business - FMCG – Retail and Ecommerce www.digitalmarketinginstitute.ie www.ahaingroup.com Page | 9 Market Analysis How Much Is The Market Worth? Tesco is the largest in both the Irish online and offline retail markets and it tops the UK grocery market, pushing Asda (owned by Walmart) into second place. Since retailers release broad statistics and keep their specific sales figures confidential, the best estimate for the value of the Irish grocery market is €29.6 million. The UK market provides a good model for comparison, allowing one to see where the trends are heading and where the Irish market may go over the forthcoming years. British shoppers spent £58.8bn online in 2010 5 - 8% of this on buying groceries online - £4.8bn. 6 Will The Market Grow? So why is the gap between the Irish and UK markets so large? Bigger choice, better delivery infrastructure and broadband penetration are contributing factors. The value of the UK online grocery market is predicted to nearly double in size by 2014 7 , which is three times the growth rate predicted for the traditional grocery trade. This growth will be reflected in the Irish market as well. Tesco UK had plans to launch a revised website 8 , with increased functionality, by June 2012 and is currently upgrading its delivery van fleet by adding 350 vans nationwide in the UK. They have also introduced a commuter inspired website, which highlights a strong emphasis on lifestyle trends and the modern shopper 19 . Why would Tesco be investing in such a manner? Simply because of projected growth of the UK online grocery market. And it is reasonable to assume that, if Tesco is analysing market trends and customer behaviour in the UK, it is very likely to be doing the same in its Irish operation. The research suggests that Tesco is doing just enough to be better than the opposition here in Ireland - which is not difficult - but it is also in a position to upscale very quickly when consumer demand for a high quality online grocery service increases and its competitors elevate their services. Maximising Online Business Potential as a Retailer There is a growing e-commerce market in Ireland for the grocery sector, with consumers that are both value- conscious and online-aware. New entrants can benefit from having early-mover advantage in a traditional retail sector that (so far) appears either unwilling or unprepared to offer a comprehensive, high-quality online service. The successful online retailers have attached importance to addressing areas such as site design, usability, social and mobile integration, and clearly the results are some of the more significant reasons for their success. It is critical that significant attention to detail is given to these areas and that they are developed and resourced accordingly. Our survey leads us to conclude that the incumbent most likely to react to competition from new entrants is Tesco. Tesco is recognised and respected internationally as a business that leverages the digital world effectively. While the online offering in Ireland remains poor, it has demonstrated elsewhere that it has both the acumen and the capability to leverage technology. The size of the available market is very encouraging and the predictions that it will continue to grow, creates a significant opportunity for new entrants. If the growing number of Irish producers and suppliers who can’t access the bigger retailers is also considered, it becomes apparent that new entrants could quickly grow to become a significant player in the Irish online grocery sector. 5 http://www.guardian.co.uk/business/2011/jan/21/online-shopping-monthly-record-december 6 http://www.igd.com/index.asp?id=1&fid=1&sid=7&tid=26&cid=94 7 http://www.igd.com/index.asp?id=1&fid=2&sid=2&cid=634 8 http://www.tescoplc.com/media/197025/statement_of_results_-_26_weeks_ended_27_august_2011.pdf 19 http://www.tesco.com/groceries/zones/default.aspx?name=working-week&icid=Working_Week_Nav_Home
    • Social Business - FMCG – Retail and Ecommerce www.digitalmarketinginstitute.ie www.ahaingroup.com Page | 10 Website Analysis – Features and Functionality After comparing and contrasting the features and functionality on the websites of the leaders in Irish and International e-Commerce, we identified actions required to optimise online business potential, as outlined here. Sign-up Process A significant difference in the sign-up process is evident across the sites analysed. Many were unnecessarily complex and badly designed. Traditional retailers scored poorly whereas retailers, who sell exclusively online, performed much better. Key recommendations would include –  Give users more options when signing up/logging in, the most effective sites allowed new users to sign- up/log in using: o E-mail o Facebook o Twitter  Create an intelligent and user-focused sign-up process An example of a good sign-up process is that offered by Groupon, which has created an intelligent sign-up with some smart additional calls to action. It requires new users to do more while ensuring that the experience remains natural, streamlined and incentivised.  Include additional calls to action when signing up, so users can opt in as they are interacting As part of signing up, for instance, a pre-formatted invitation is presented that can be edited and sent to the users’ friends via: o E-mail o E-mail address book o Facebook o Twitter  Incentivise the sign-up process and the introduction of friends
    • Social Business - FMCG – Retail and Ecommerce www.digitalmarketinginstitute.ie www.ahaingroup.com Page | 11 The online retailers who performed better were those pro-actively encouraging new users by providing them with a gift on sign-up. In many cases, users were further incentivised to introduce friends. Product Layout  Create an enhanced product layout While Walmart’s online grocery presentation of individual products was the best; both Groupon and Living Social’s layouts were impressive too.  Leverage customer reviews and social actions The most successful sites leveraged customer reviews. Walmart and Amazon Food are particularly impressive. Walmart has a slider feature of top-reviewed products and allows users to share their reviews to Twitter and Facebook.  Create a specialist diet rating system Because specialist dietary requirements are now widespread, a visual rating feature is recommended where users can quickly identify whether or not certain products match their individual requirements.  Use ‘deals’ to manage stock and build loyalty Outside of the deal-specific sites, Amazon food is also including a deals section. 120,000 consumers in Ireland purchased online deals in July 2011 9 from the sites such as Living Social, Groupon (CityDeal) and GrabOne. These deals were worth an estimated €3.9 million-worth of sales in July - more than double what they generated in May 2011. Having a ‘deals’ functionality may facilitate better management of stock, increasing the value for money offering and rewarding the user community.  Create an ‘Add To Shopping List’ feature One way to leverage the potential of the reverse Groupon model would be to create an ‘Add To Shopping List’ feature, where users can add products that they would like to see carried. This would provide an evidence-based mechanism to manage the growth of a popular product range and ensure optimal sales levels.  Introduce a dynamic account with information that matches the user’s needs Amazon is a great example of how dynamic content based on previous purchases and similar products can instigate sales, plus it doubles as sticky content – increases time on site and pages viewed per visit.  Research the market and discover lifestyle changes or trends that can be adapted for targeting Tescos ‘Commuter Zone’ 19 website uses this approach to tap into a growing market segment. The layout is split between grouped product choices based on convenience shopping. Building Your Community  Include social sharing Include social sharing through Facebook, Twitter, Digg, Reddit, StumbleUpon, etc. Inclusion of social media features on e-Commerce sites has several advantages, not least the integration of social media marketing with on-site content and promotions. 10 In addition to integrating social capabilities throughout 9 www.sift.ie / Irish Internet Association, 2011 10 Irish Internet Association, AMAS, 2011
    • Social Business - FMCG – Retail and Ecommerce www.digitalmarketinginstitute.ie www.ahaingroup.com Page | 12 the website, it is important to have and utilise social channels to engage with Irish consumers. These channels should monitor the brand online and amplify the brand message.  Allow users to send vouchers or products to their friends as a gift Groupon allows users to send vouchers to friends and Living Social allows users to send products to friends as a gift. Gifts is also a new feature to Facebook and this association makes it more desirable.  Use competitions to encourage new members and to reward existing ones Many of the sites were using competitions to drive membership and reward members. Pigsback, in particular, has an impressive and active competition section.  Use monthly user league table(s) Sinirgy uses an ‘active local’ league table to highlight and reward its most active users, top users win prizes. Highlighting Your Suppliers  Create a supplier spotlight section Some sites have a section where they highlight and provide information about their suppliers, thus providing a good way to nurture supplier relationships and to appeal to new ones.  Use coupons to encourage new members and reward existing ones A feature of the Pigsback site that stood out was the ‘coupons’ section. Users can avail of coupons that are redeemable in stores. This could be effective to drive community footfall to supplier’s physical locations.  Share values, ethics and community projects undertaken by suppliers Statistics show that food retailers, who invest in ethical practices and community-based projects, gain on average a more positive sentiment. Sharing these activities will boost public opinion and serve as a way of off-setting carbon (usually during air travel). Using Mobile
    • Social Business - FMCG – Retail and Ecommerce www.digitalmarketinginstitute.ie www.ahaingroup.com Page | 13 Mobile is the future. 54% of our respondents use their mobile phone to access the Internet and 20% have made an online purchase through their phone. Amárach is predicting that the acceleration in smartphone use will stimulate demand for mobile commerce in Ireland and forecasts that €800 million worth of transactions will be conducted through mobile devices in 2012.  Create a friendly mobile site for users to transact (M-commerce) All the successful online retailers had invested in ensuring that their sites were mobile-ready, through having: o Mobile versions of their website and o Smartphone applications Smartphone ownership is 49% in Ireland 11 and location-based marketing for retail stores like Macys and Walmart is an excellent way to entice shoppers to the store. Virtual Currency  Reward community members with virtual currency (online store credit) for participation/adding value Smarter retailers (offline and online) leverage virtual currency and consumer database management e.g. Tesco Club points. An extension of this would be to reward community members with virtual currency for participation/adding value. Promoters could incentivise membership to spread the message through rewarding those members that carry out tasks i.e. get friends to join/create a video review. Video  Use video as a marketing tool and to create “how-to” videos YouTube is now the second biggest search engine in the world, after its owner, Google. So having a presence on YouTube is a great way of elevating a site’s SEO (search engine optimisation) and ensuring that it secures a high page rank in search results.  Video is also one of the most popular types of content that people engage with and share online, so it creates an incentive for internet users to promote a site through online ‘word of mouth’. Below are examples of how Groupon and Boards.ie are using video marketing: o Groupon Marketing Video 12 o Boards.ie Ad 1 13 o Boards.ie Ad 2 14  Use video to personalize the brand and add personality  Video has value for searches (SEO)  Video is deemed as more interactive and carries greater weight on search engines  Video – if delivered correctly – can go viral and amplify your message(s) 11 http://amas.ie/online-research/state-of-the-net/state-of-the-net-issue-25-summer-2012/ 12 http://www.youtube.com/watch?v=QhkecE3-VRs 13 http://www.youtube.com/watch?v=a-v4gaD7K9Q 14 http://www.youtube.com/watch?feature=endscreen&v=1sFJFFfFIJk&NR=1
    • Social Business - FMCG – Retail and Ecommerce www.digitalmarketinginstitute.ie www.ahaingroup.com Page | 14  Videos can be produced to align with campaigns, but many videos (either planned or unplanned) can go viral. Popular examples would include humorous videos like Bodyform’s spoof marketing video 15 . Opportunities  There is now a growing online grocery market in Ireland  Consumers are both value-conscious and online-aware  Sites which prioritise design, usability, social and mobile integration achieve success Predictions for the next 5 years  4% growth in grocery market  3.6% increase in population growth rate  Aldi & Lidl will grow their market share to 14%  Sales of non-branded goods will increase by 11% to 48% 15 http://www.youtube.com/watch?v=Bpy75q2DDow
    • Social Business - FMCG – Retail and Ecommerce www.digitalmarketinginstitute.ie www.ahaingroup.com Page | 15 Key Recommendations for New Entrants “Invest resources in setting the best price and running the best promotions. Also invest in activities that encourage consumers to return to your brand rather than in activities that work at recruiting new shoppers.” - Tom Harper The Ahain Group recommendations that emerge from consideration of the survey results include the following:  As trust and safety are paramount create a pop-up/page to reassure people that their credit card data is safe  Focus on home delivery, rather than delivery to the workplace plus keep delivery costs low  Create incentives for people to order more, recommend to friends and become a returning customer  Be innovative to gain attention  Put technology in place to connect with suppliers who are being ignored/side-lined by large multiples, to extend access to products  Consider establishing a minimum purchase threshold to ensure every delivery is financially viable  Create personal and preference-based functionality  Establish the role of Community Manager and provide training, if required  Assign one (or more) individual(s) responsibility for IT, creating online databases, changing prices on the website and internet security Distribution and Pricing Models Two common food retailer pricing strategies would be EDLP and Hi-Lo pricing. Both offer considerable benefits and are linking to brand positioning as much as price. A retailer using Hi-Lo pricing, could utilise introduction of a private label as a supplement. Private Label (PL) Private (Own Label brands) are designed to absorb costs for consumers by allowing production to be achieved in- house, decreasing added costs that contribute to the final retail price. Musgrave is beginning to focus strongly on Private Label, an avenue that Tesco and Asda have both taken. While this approach is cost-effective for retailer and consumer, it can impact negatively on established brands. These brands may then recoup losses from decreased supply by utilising online channels. Central Distribution and Distribution Centres (CD / DCs) Dunnes Stores is moving towards the 'central distribution' (CD) model via Distribution Centres (DCs) i.e. instead of delivering to individual stores, a manufacturer such as Proctor & Gamble would deliver into a central warehouse and transportation vehicles will then deliver to the stores. Any supply/transport charges are applied to the retail selling prices in store. This elevates the cost to the brand of dealing with Dunnes, which might increase the appeal of selling through an online retailer. The benefits of DCs are that they:
    • Social Business - FMCG – Retail and Ecommerce www.digitalmarketinginstitute.ie www.ahaingroup.com Page | 16 • Improve productivity and efficiency • Lower production costs • Improve product availability • Break down bulk for retail chains • Are an additional (larger) storage area • Improve scale economies by combining individual orders Distribution Centres alleviate the strain on stock and labour of alternative forms of shopping i.e. online, and act as an intermediary between the suppliers and the retail outlet. Examples of businesses using distribution centres are John Lewis, Asda and Costco. For the multiple retailer, DCs are perfect for distribution as they stream-line the supply chain operation (see diagram below). The structure of distribution including ecommerce channel Producers Regional distribution The Internet Regional outlets Consumers Centre
    • Social Business - FMCG – Retail and Ecommerce www.digitalmarketinginstitute.ie www.ahaingroup.com Page | 17 Further Factors for Consideration Further factors that require consideration are:  Quick Response systems and Efficient Consumer Response (ECS)  Supply Chain Management (SCM) Market Opportunity for Entrants There is a growing e-commerce market in Ireland for the food retail sector, with consumers that are both value- conscious and online-aware. New entrants can benefit from having early-mover advantage in a traditional retail sector that appears either unwilling or unprepared to offer a comprehensive, high-quality online service. The successful online retailers have prioritised areas such as site design, usability, social and mobile integration and clearly these are some of the significant reasons for their success. It is critical that these areas are given special attention to detail and will need to be developed and resourced accordingly. Our survey leads us to conclude that the competitor most likely to react to competition from new entrants is Tesco. Tesco is recognised and respected internationally as a business that leverages the digital world effectively. While the Tesco online offering in Ireland remains poor, it has demonstrated elsewhere that it has both the acumen and the capability to leverage technology. The size of the available market is encouraging and the predictions that it will continue to grow creates a significant opportunity for new entrants. If the growing number of Irish producers and suppliers who can’t access the bigger retailers is also considered, it becomes apparent that new entrants could quickly grow to become a significant player in the Irish online grocery sector.
    • Social Business - FMCG – Retail and Ecommerce www.digitalmarketinginstitute.ie www.ahaingroup.com Page | 18 Tesco Case Study Tesco has been leading the way in digital usage, global expansion and ethical practices. On the digital side a notable campaign would be: Tesco expanded into South Korea and researched the market to compete against E-Mart Co20. The results of their research showed that a high number of people work long hours and commute via the subway. Tesco responded by setting up virtual stores within subway stations, that commuters could simply scan their goods by smartphone. 16 Being green and conscious of CSR is as much to do with carbon taxing as it is to do with consumer perception – according to a recent Mori poll 17 , 28% of shoppers look to buy locally-sourced foods. As consumers are supermarket customers, being green may have started out as a way to gain a commercial edge over competitors, however it is now a way of being sustainable – for the environment and in business. This chart titled the ‘Main/joint household shopper’ 17 shows that, since 2006, consumers have progressively been buying foods that are locally sourced, which means that supermarkets can look to source locally-produced items in line with consumer demands and decrease food miles and high carbon. Retailers seeking to continue to improve their carbon footprint, will need to make changes in line with Tesco: • Carbon offsetting • Pollution control – Less air travel, rotting food methane fuel for lorries • Climate change - Rainwater for toilets, gas in freezers • Energy - Building a sustainable store, more natural light in stores and improving how trucks are driven • Food – more environmentally-friendly products, cutting prices for these products, carbon labelling on products • Recycling - vegetable oil recycled to generate energy to run ovens in the in-store bakery 16 http://www.adverblog.com/2011/06/23/tescos-subway-virtual-store 17 http://www.retailresearch.org/retailethics.php
    • Social Business - FMCG – Retail and Ecommerce www.digitalmarketinginstitute.ie www.ahaingroup.com Page | 19 Contact the Ahain Group: info@ahaingroup.com Unit B1 | Fota Point Enterprise Park | Carrigtwohill | Cork http://www.facebook.com/AhainGroup https://twitter.com/AhainGroup http://www.linkedin.com/company/Ahain-Group Contact the Digital Marketing Institute www.digitalmarketinginstitute.ie/contact-us 93 Upper Georges St | Dun Laoghaire| Dublin http://www.facebook.com/DigitalMarketingInstitute https://twitter.com/dmigroup http://www.linkedin.com/company/digital-marketing-institute
    • Social Business - FMCG – Retail and Ecommerce www.digitalmarketinginstitute.ie www.ahaingroup.com Page | 20 Appendix 1 - Survey Responses
    • Social Business - FMCG – Retail and Ecommerce www.digitalmarketinginstitute.ie www.ahaingroup.com Page | 21
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