Retail Innovation - Tesco in the United Kingdom

Question: Discuss the impact which the growth and repositioning of UK traditional discount grocery retailers may have on their distribution tactics? Answer: Introduction One of the most competitive markets in the United Kingdom is the traditional discount grocery retailers. The regular discount grocery retails in UK offers their customers with the much-discounted price on their commodities. The primary objective is to provide their customers that are value for their money. The customers in UK demand the best quality products with the lowest price in the market. To survive the competition and provide their customers with quality products, the UK grocery retails adapted different quality tactics that are influenced by the growth and repositioning of the retailers. Analysis of discounted grocery retailers Shopping Habits and Reduction in the average order size The change in the technological, economic and financial condition in UK has forced to change the shopping habits and reduction in the average order size of the customers (Shabbir 2015). In the earlier days, customers used to buy the requirement from different stores, nowadays customers look for a place, where all the items can be available under the same roof. The changes in the customers dietary habits change the purchasing pattern of the customer. With the increase in some retails discounted stores in UK and their reliable network of stores, the customers preferred the stores that can provide them with all the variety of items in the same place. The location of the store is also a vital factor for attracting the customers, for example, retail stores having a nearby petrol station tends to have more regular customers. Figure 1: Factors for the Shopping Habits (Source: Zielke 2014, pp- 330) With the increase in the trend of online shopping from the e-stores, the customers tend to buy more product online rather than coming down to the nearby stores. The customers are acutely readjusting on the pattern of their shopping. The shoppers tend to buy more bulk products when the items are on sale or much-discounted price than the regular prices. The services provided to them in the retail shopping markets along with the discounted prices has promoted the frequent shopping experiences along with the less item in their shopping cart. Adjustment to the product offering The traditional discount grocery retails to target their customers with the customer value proposition. The customer value proposition is a tool that understands the customers to need and satisfactory requirement. The customer value proposition or the consumer proposition helps the shoppers to identify the value of the products and services offered in the retail stores. The traditional discount grocery retailers have made some adjustments and variations in the products and services given to the customers. The price of the discounted product is the key element of the retailers strategy. The product offered in a store need to be 5% to 30% discounted than their potent competitors (Gonzalez-Benito Martos-Partal 2014). Increasing the warehouse stock of the retail store and the widening the Stock Keeping Units (SKUs), sourcing more of the regional fresh food items, introducing more expensive brands with discounted value promised to increase the sale of leading discounted grocery retailers in UK. Significant reductions in shelf-space By reducing the Stock Keeping Units and the shelf-space of the various discounted grocery retails in UK the stores can maintain the supply chain efficiency. The traditional grocery stored in UK provides a wide range of daily, fast moving assortment of products in all categories. More than 80% of the total sales are accounted from the regional and local brand of products (Tseltsova Bohnert 2015). Reducing the shelf space in the SKUs in reduces the manufacturing cost with large stocks in the SKUs. Within the various retails it increases the productivity and efficiency of the workers in the retails shop through affecting the most efficient methods of the stocking. The different grocery retailers have developed a well connected and efficient network of resources in the previous decades. This, in turn, gives the advantage of stock replenishment within a shorter distance from the stores and warehouses. Wider promotion and product introductions There always remains a potent amount of risk in introducing new products in the retails shops. The launching of any new products in the UK market involves a lot of systemic investigation on the customer need and market status. The detailed investigation of the new product introduction includes developing and analyzing the product strategy; understands the demand of newly launched products and the competitive stance of various similar existing products in the UK market (Wrigley Lowe 2014). The success of newly launched products in the retails stores is affected greatly by the considerable promotion of the product in the targeted UK market. The price of the newly introduced product at the time of initial launch helps in targeting a large number of customers. The increase in promotions and the product introductions helps in increase the current market share and attracting more customers. By introducing various brands for the same items gives the customers a wide variety of ranges to ch oose from the shelf-space. Different Service Objectives The different leading grocery discount retails in UK like the Tesco, Aldi, Lidl, Netto have the almost same objectives for their services (Sogn Grundvag et al., 2014). All the grocery retails are service oriented and aims at dominating the supermarkets in UK. The primary aim of different grocery retails in UK is to reduce the cost of their products to survive the competitive environment. Various management approaches have been adopted to minimize the time and space in the grocery retails. The time and space reduction has in turn reduced the total production cost of the services and leads to the reduced cost of the items. Reducing the waste includes reducing the different power consumptions in the retails stores. The several retail stores have applied many strategies to lessen the waste including defining the opening time of the stores (Ododo et al., 2015). This approach has reduced the waste of power, electricity, and water waste and concentrated the customers in the peak hours. Figure 2: Different Service Objectives of the Grocery Retailers in UK (Source: Monios 2015, pp-15) The adequate staff support and store management in different retail stores helps in reducing the management cost increase the customer satisfaction in the retail grocery stores in UK. The efficient display in the retail stores with the scanning process within the customers trolley helps in enhancing the customers shopping experience. Potential impact on distribution network structures There are six different types of network structures with classifications; the researcher has discussed the potential impacts on them in this section. Impact on Manufacturer storage with direct shipping The main impact on the retailers is that drop shipping enables the centralization of inventories at the manufacturer. The manufacturer has the chance of aggregating the product demand and as well as the providing higher level of product supply to the lower levels of inventory (Businesscasestudies.co.uk, 2016). The individual retailers have added benefits of higher value recognition whereas the unpredictable demand can be identified. For instance, eBags sold the bags for having higher value and relatively low volume per SKU. The storage benefits are smaller for each items, known demands, and low value (Monios, 2015). In this manner, the drop shipping process would not provide important amount of inventory advantage to online grocery retailers while selling staple item as detergent. Impact of Storage with direct shipping and in-transit of products Unlike pure drop shipping process, the in-transit process addition provides lower transportation cost and better customer experience. The main disadvantage will be additional effort in the in-transit merging process (Zielke, 2014). Compared to drop shipping and merely fright system has lower volume for each manufacturer with effectiveness. Ododo, Mulholland Turner (2015) demonstrated that in case of more sources of products, the in-transit process may difficult to monitor and control. Therefore, Dell PC with Sony Monitor may be a variety but the storage locations being fewer, the in-transit process is difficult. Impact on Distributer storage with carrier The distributor storage with carrier delivery of products is well suited with medium to fast moving items. UK retailers feel distributer storage is efficient, as the customer requires faster delivery process, whereas the manufacturer storage may turn out to be slower delivery (Gonzalez-Benito Martos-Partal, 2014). However, the product variety is lower in distributor storage rather than manufacturer inventory for obvious reasons of supply chain handling. Impact on distributor inventory with last mile delivery The last mile delivery is out-of-place in high labour cost areas and the distributor storage with last mile delivery is unjustified. In case of large-scale customer requirement of last mile delivery, this network structure can be desired. For instance, the Albertsons existing grocery store serves two purposes simultaneously (Leal, 2014). One portion serves the order fulfilment and another part serves the replenishment purpose of the grocery store. The last mile delivery is based on customers willingness to pay for the service. Impact on Manufacturer or Distributor storage with customer pickup The customer pickup process minimizes the delivery cost with expanding the set of sold products with online services (Brandes Brandes, 2015). The severe impact is on the handling cost at the pickup site, the business growth is dependent over the sustained pickup process. Impact on the Retail Storage with customer pickup The advantage is on the local inventories as the minimizing of delivery cost with faster response services than the other network structures (Shabbir, 2015). Any retailer business will have better service offering with faster product delivery; however, the issues are the enhanced inventory management cost. Therefore, the faster and rapid response-loving customers have better impact on this network structure. Quick response and agile replenishment tactics for UK grocery retailers The Quick Response adoption has the centralized aim of cutting the inventory cost and as well as the improvement of product flows. The UK grocery retailers have installer sales based ordering (SBO) for sold and scanned items in any shop; the information is used for replenishment and re-ordering systems (Atkearney.co.uk, 2016). This information sharing helps the suppliers to react quickly balancing with the demand of customers. The Quick Response (QR) adoption has the following tactics. Alignment of organizational activity with the demand is the main and fundamental principle leading to QR. Connection between the demand and supply provides importance to the strategic alignment of the retailer organization. QR identifies the customer and product relationship with dynamic product flow and varying product attributes with types. QR includes the strategic decision over the partnership and alliances over retailing business. Replenishment tactics and principles are dependent over the above-mentioned QR tactics. As with the increased demand and demand supply relationship, the retailers are reliable with rapid replenishment of products (Van Baal, 2014). While the QR being agile, the replacement of products is dynamic with the customer demand. Alternative handling solutions The alternative handling solutions include the better marketing management, relentless profit optimization and strategic business process. The better online grocery retailing business comprises of suitable web design and functionality. The United Kingdom online grocery retailer websites provide richer viewing of products, labelling of brands, prices and packing sizes (www.mckinsey.com, 2013). Including the smart searching process with did you mean suggestions, makes the services consistent in Europe. The website must be providing the online profits and contextual benefits of basket selection. For instance, Tesco started the business venture with in-store picking then changed into a dedicated-warehouse model (Ododo, Mulholland Turner, 2015). The UK retailing giant now offers the customers with click and collect as well. The strategic business process includes both anticipation and adaptation to certain changes. Changes to warehouse procedures and supporting technologies The warehouse procedures include the new technologies as the Group Ordering System by ORACLE. For instance, Tesco implemented this system for maintaining fresh food forecasts and optimization of orders and safety stock level. The GOS is effective for reducing food waste in stores as well as the reducing lead times (Agr.gc.ca, 2015). The supporting technologies may be the surveillance system with saving energy saving of 75%, minimizing operational costs. For rapid replenishment, the video analytics may be important for getting better inventory data with Point of Sales (POS) data. The newly implemented technologies made the retailing business easier with product recognizing, minimization in replenishment time, one-touch replenishment, improved product presentation and removing process from the stores (Mason Evans, 2015). The new technologies provide Retail-Ready Packaging (RRP) with maintaining the QR and replenishment tactics. Conclusion The United Kingdom has a cosmopolitan retail market. The various retail markets face a massive competition from different European companies having fast production and low transportation cost. The detailed studies of the various impacts of the traditional discount grocery retailers in UK have been analyzed. The growth and repositioning of the retail have a substantial amount of impact on the diverse distribution tactics in the business. The changing shopping habits of the customers lead to various changes in the product offerings of the retailers. The remarkable reductions in the SKUs shelf space have improved the profitability of the retail stores in UK. Recommendation To overcome the pessimistic impact of the different distribution tactics the different discount grocery retails have on the growth and repositioning are recommended to adopt a quick and agile replenishment tactics with the alternative handling solutions in case of e-shopping. The grocery retail sin UK also recommended changing their warehousing procedure and techniques like implementing Oracle etc. The detailed study has analyzed the business positioned and different strategies to improve the services with more active services with replenishment tactics and technologically advanced strategies. The changes in the warehouse structure and procedure of the retailers need to be provided with alternative handling solutions in case of an emergency. Reflection The detailed study and analysis of the different discount grocery retailers in UK are done in this report. The study has helped us understand the complicated situation underlying the various grocery stores in UK. Improving the items services in the stores with the technologically improved services is the primary aim of to improve the services. 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