This section has discussed the choices a retailer wishing to operate online might con-
sider and how some established characteristics of a business might affect decisions of
which format to adopt for current and future online operations.E-RETAIL ACTIVITIESlast mile. A UK government Foresight (2001) report gives estimates that by 2005 home delivery
will be worth £34.5 billion. However, they also predict: ‘As customer demand [for remote
purchasing] increases, the likelihood of their being at home to receive their purchases
decreases’ (Foresight, 2001).
There have been a number of possible solutions to the delivery problem, including unattended
delivery points in the form of secure purpose-built boxes or collection points at a local store
where customers could collect their goods when convenient, but none have been particularly
well received by the consumers. Whatever the solution at the customer end there are wider
implications; at the company level they must resolve warehousing and distribution and the
cost associated with providing a service which involves many deliveries of small quantities; at
a societal level any increase in the number of small vans required to deliver online orders as in
the case of online grocery retailer tesco.com is likely to cause further local traffic congestion.Task
1 List five physical products that you or one of your neighbours might purchase via the
Internet and require delivering to your home. Try to choose products from different
categories, e.g. an item of clothing, fresh food, furniture, drink and computer equipment.
2 State the times of day you are available at home to receive delivery of these goods.
3 Describe the difficulties that an online retailer attempting to deliver the goods to you might
encounter.
4 Suggest a solution for the last mileproblem that will encourage consumers to increase the
amount of goods they purchase via the Internet.According to Verdict (2005) almost 10% of books sold in the UK are now bought over the Internet, with
close to 11% of CDs and DVDs now bought online. Furthermore, white goods are becoming increasingly
popular to buy online, with Internet sales now accounting for 6.6% of the market and online shopping
continues to grow. UK retailers are expecting online shopping to rise by between 23% and 40% for
Christmas 2005. Independent Media in Retail Group, a body that represents online stores, estimates that
this will be overall 9% of retail sales at Christmas, as consumers increasingly order from home to avoid
trudging around the shops. The winners in the online product categories are electrical goods. IMRG
estimates that 20% of electrical goods will be sold online at Christmas compared to zero five years ago.
The reason is thought to be that electrical goods are bought by brand name and model number, with little
differentiation between stores other than price. Major high-street chains such as Dixons, Argos and
Comet, which operate e-retail sites, are forced to keep prices low if they want to compete online with
e-retail specialists such as Dabs, Empire Direct and Dell, which have no shops to support and therefore
can often undercut their high-street rivals. However, online specialists, whilst developing their market
share are struggling to sustain levels of profitability because although the volume of sales continues to
rise, prices of new technologies such as digital cameras and flat-screen televisions are falling. At this
point high-street retailers are able to fight back by offering greater levels of customer service, peace of
mind through being well-known brand names and greater levels of after-sales support.
Source: Adapted from Butler (2005)Mini Case Study 10.4 Online goods for sale in the UK