Ocado

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1. As a customer, what do you want from an online grocery store? How does consumers’ behaviour differ when shopping for groceries on-line vs. off-line? What are the implications of these differences on the operations of an on-line vs. off-line store? 2. Ocado delivers from a central warehouse straight to the customer, while Tesco uses its existing stores to deliver to nearby customers. What are the pros and cons of each model? Which is a better business model to serve the UK market? Why?

Consumers demonstrate different behaviors when shopping online and offline. These differences affect not only the strategy but also how that strategy is finally implemented from an operationally. Because the experiences considered online and offline are different, the customer must ponder the pros and cons of each model. When pondering, the consumer considers the three C’s: convenience, cost, and conscientiousness within the context of both experiences.

The customer judges the online providers differently than the typical grocery stories. Therefore, online grocery stores must take this into consideration in order to convince customers to switch to online purchasing. Every minor change implicates many operational challenges that must be successfully overcome.

Convenience:

Convenience is the main force that lures customers to purchase their groceries online. As a result, the customer needs the beginning of this process to be alluring and simple. Thus, the actual website needs to be both aesthetically appealing and user friendly. The website needs to be good enough to pull the consumers out of their comfort zone and into the world of online grocery shopping. Once in, the process that is set up must be user friendly. This contrasts with retail stores in which location plays a major role with consumers. A customer might return to a store that has a monopoly on location, even if the store itself is not arranged perfectly. The online store, however, must be flawless.

Knowing that the customer is purchasing online in an attempt to save time, the online retailer that offers the smallest delivery window would be the most appealing to the customer. These customers, who clearly value their time, not only want a small delivery window, but also demand punctuality; broken promises will not be rewarded. In order to meet these demands, the online suppliers must have not only a state-of-the-art IT system in place, but also the fleet and manpower to keep up with the varying demands. (Although this too might seem quite doable, one should take into consideration the chances of accidents or poor weather etc.). The billing process for the order and delivery must be flawless. Customers will not accept errors at all. The physical grocery store can smooth out any errors in person. This is a luxury that the online retailer does not have.

The final aspect of convenience that the online stores need to address is the availability and freshness of their products. Knowing that their customers could choose to go to right back to the physical store if the online one does not have what they want, the online provider must stock a sufficient variety of products in order to be sure that they can accommodate all. The difference between the store and the online provider is that in the store, the customers are making the decisions themselves; they take responsibility for their actions. Again this minor difference actually has a substantial impact. This means that if a store is out of stock on an item, the customer will probably be forgiving and just choose a different one. That same customer, however, would be displeased if the online providers took the liberty of choosing the replacement item themselves when they were out of stock. (This is a practice that does actually happen with online providers). Not only are the online retailers responsible for making sure that the product delivered is the correct one, but also they must be sure the...
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