Online Grocery Shopping Industry Analysis Paper Example

Introduction

The use of the internet has been on the rise to simplify business transactions between corporate entities and customers for different products and services. Online Grocery Shopping is one of the applications that have gotten much attention in the past years. It refers to the purchase of fresh and packaged food through internet platforms. Operators in this sector sell grocery items through the web. The industry consists of online companies and firms with the physical presence that sells grocery goods on the internet. These companies cover a wide range of products such as cereals, vegetables, and fruits, meat, fish, poultry as well as bakery and dairy products with their target market being internet users (Pozzi, 2012). Retailers connected to online grocery provide numerous services on a broad-spectrum beginning from delivery to click and collect option as well as subscription option (Nilsson, Garling, Marell, & Nordvall, 2015). The purpose of these services is to ease the experience of the consumers as far as online grocery shopping is concerned. This method has owed easy accessibility of grocery products as people buy them through stores and online platforms.

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Overview of Online Grocery Industry

Pozzi (2012) postulates that the online grocery shopping is a market niche, which is expected to grow in future due to technological advancement, and increased use of the internet. In this era of smart phones and constant access to the internet, many grocery retailers are diverting their services into online grocery shopping through mobile apps, home delivery, and click-and-collect means. According to Liao, Chen, & Lin (2011), more than 54% of grocery retailers have introduced a mobile app shopping for consumers.

Therefore, it can be noted that the motive behind the establishment of the online grocery market is the growing demand for internet shopping and the advancement of technology. Anesbury, NenyczThiel, Dawes, & Kennedy (2016) believe that the method is convenient since it offers a variety of products. Most importantly, the companies provide delivery services whereby they transport the products to the customers within the stipulated time. Millions of customers globally are becoming attracted top this mechanism because online grocery shopping is cost effective and saves time.

Although online grocery shopping utilizes modern technology, (Mortimer, Fazal e Hasan, Andrews, & Martin (2016) have found out that much grocery shopping still occurs in traditional brick-and-mortar stores. However, industry experts argue that this pattern is likely to change in the next decade. In the United States, for instance, more tech-savvy retailers now provide grocery delivery options, where they transport the items to the consumer's doorsteps (Jiang, Yang, & Jun 2013). This industry has a positive impact on the nation's economy. Currently, the US online grocery sales amount to approximately $ 17.5 billion. By 2021, experts anticipate the value to increase to about $ 30 billion (Nilsson, Garling, Marell, & Nordvall, 2015).

Customer Base/ Target Market

Statistics show that online grocery industry serves over 80% of internet grocery shoppers. According to Jiang, Yang, & Jun (2013), the primary users of online grocery services fall into three categories: -wealthy and busy shoppers who lack enough time, families with young children and individuals who cannot easily access the store. The first group involves people with high incomes and less time.

Studies have shown that most of them are heavy internet users who prefer shopping online. The second category is families with young children who also dominate in online grocery shopping. According to Jiang, Yang, & Jun (2013), a typical online grocery shopper in this class lies between twenty-nine and fifty years old with at least one child under the age of five. Such people prefer online grocery shopping because they expect to save time and do away with the bother of dragging children along to grocery stores.

The third group consists of elderly and the disabled people who cannot easily walk or drive into the grocery stores. Such people benefit from the online ordering and home deliveries of grocery products. All these three categories are the key target market for the industry. However, the business also welcomes other interested online users who wish to shop grocery items through the internet because many internet users like purchasing goods online.

Competitive Landscape and Key Vendors

The grocery industry is highly competitive and broad because of the presence of many vendors on a regional and international landscape. The available competitive strategies employed by the vendors include consumer involvement, digital channel mix by use of digital marketing, discounts, and sales (Anesbury, NenyczThiel, Dawes, & Kennedy, 2016). As noted, technology is the key driver to the creation of an online grocery industry. As such, vendors attached to this business are increasingly investing in technology to earn a competitive advantage by providing efficient and reliable information to the buyers and seller as well as optimizing product search capabilities. In so doing, the industry aims at attracting many customers across the globe and expanding its market size.

Major vendors in this business are Kroger, Walmart, Target, Carrefour and Tesco, Amazon, Alibaba, Big Bazaar, Schwarz, and Tengelmann (Mortimer, Fazal e Hasan, Andrews, & Martin, 2016). Among these vendors, Amazon is said to be the e-commerce giant with the largest market share. It is followed closely by Walmart and Kroger. Recently, Amazon introduced two online grocery services: - Prime Pantry and Amazon Fresh (Pozzi, 2012). With these services in place, the proceeds of Amazon is expected to increase in the next three years.

Online Grocery Business Model

The process of purchasing grocery items through the internet consists of steps such as ordering and payment, order picking and order delivery. Although nearly all online grocery transactions implement these activities, how they are carried out depends on the grocers controlling the process (Pozzi, 2012). A consumer who wants to buy groceries online must first access the grocer's website, pick the intended product, make an order and payment, enter the zip code or location then wait for the delivery. The industry uses two dominant business models to facilitate these activities: - warehouse based model and the market-based model.

Warehouse based Model

This model enables the online grocery shopping industry to procure the resources from manufacturers and store them in their warehouses. The firm then dispatches the grocery products from the store depending on the orders received from the customers (Liao, Chen, & Lin, 2011). The benefit of this model is that it enhances the effective delivery of the products, enables after sale services and has direct control over the inventory.

Market Place Model

This model has a unique characteristic in the sense that it gives the manufacturer of the product space in the company's website. In this case, the online grocery industry transfers ownership to the manufacturers by authorizing them to sell the products through the internet (Nilsson, Garling, Marell, & Nordvall, 2015). Most importantly, the marketplace model delegates the entire responsibility to the sellers. Online grocery industry benefits from this model because it saves money used in operating activities and other expenditures. Again, this model does not allow the online grocery industry to have full ownership of the products and services being promoted through the internet.

SWOT Analysis of the Online Grocery Shopping Industry

Strengths

The biggest strength that the online grocery shopping industry has is convenience. The firm saves the consumers from the hassle of going to the retail stores due by conducting home delivery services and providing payment options to the customer. Guaranteeing on-time delivery makes the firm the only choice for customers who are likely to be loyal to the industry (Chu, Arce-Urriza, Cebollada-Calvo, & Chintagunta, 2010). The company has also established a proper relationship with the consumers, and most of the customers are satisfied with the services beginning from the online ordering process to the delivery of the items.

When it comes to deliveries, customers do not like experimenting by hopping from one store to the other. Another considerable strength is that the company website is always active, thus, enabling customers to order grocery items any time they want. This implies that the consumers can reach delivery services of the industry any time. Another strength is that the industry offers a wide variety of product categories such as vegetables and fruits, cereals meat, fish, and poultry unlike.

Weaknesses

One of the weaknesses online grocery shopping industry has is delivery time. Due to a large number of customers making orders and the location of the consumers from the domain, the industry finds it difficult to deliver the products instantly. Sometimes, the customers must wait within 24 hours for delivery to take place. Another weakness is the minimum order quantity and price compulsion. The industry does not provide home-delivery services below the amount set or price limit (Chu, Arce-Urriza, Cebollada-Calvo, & Chintagunta, 2010). As such, the customers must reach the limit by purchasing more quantity to get the service.

Another weakness cancellations of ordered items. Since the industry relies on the established stores tied up to it to supply the products, there is a high chance that the firm will cancel order delivery if the items ordered are out of stock. This weakness lowers the satisfaction of the consumers, and if it happens continuously, the customer may lose loyalty to the organization.

Opportunity

The industry takes advantage of the advancement of technology to continually update its e-marketing strategy to meet the demands of the consumers. Besides, online grocery shopping firm has a significant market share. This encourages it to produce more grocery items and provide more services to sustain the consumers within its market share. Another opportunity is cross-selling and value packaging. Cross-selling is a primary benefit for online grocery because it enables the company to sell bulk products through product bundling

Threats

Competition has been a significant threat for online grocery shopping industry. Offline grocery stores, for instance, is currently striving to earn a competitive advantage over the online industry by offering fresh products to the customers. This is because the online sector may delay in delivering products; hence, the items reach the consumers when they have lost their freshness (Nilsson, Garling, Marell, & Nordvall, 2015). Another threat is customer retention. Sometimes, retaining the customers is hard for the industry because some consumers tend to shift their attention to the stores that offer great discounts and promotions. This may be a threat to the online grocery shopping industry.

Conclusion

Overall, online grocery shopping industry is a business sector that sells grocery items through the website. Companies associated with online grocery have taken advantage of technological advancement and a large number of internet users. Therefore, the industry mainly targets online users who feel comfortable ordering items from the internet and getting home delivery. The advantage of this business is that it saves consumer's time from queuing in the grocery stores. Experts have analyzed that the industry will expand due to the increasing number of internet users. As such, it will double the number of customers in the next years,...