The Utilization of E-Commerce by Traditional Supermarkets in the UK through Strategic Alliances with Internet Based Companies

Article excerpt

The objective of this paper is to examine the strategic utilization of electronic commerce by traditional supermarkets through strategic alliance with Internet based companies. The paper explores how a clicks and bricks alliance can transform the traditional marketplace; from re-engineering their business processes, to enhancing the bricks and mortar retailers business models, and further contributing to changes in the market structure. Thus by re-engineering their business process to allow enhanced business models, they will be able to improve their overall performance and thus gain competitive advantage. From the research undertaken, this paper draws conclusions on both bricks and clicks benefits and how these alliances fit into the broader context of the business strategy of the traditional supermarket.

INTRODUCTION

Electronic commerce (e-commerce) is the buying and selling of goods and services via the Internet. E-commerce supports an entire range of activities viz. product design, manufacturing, advertising, product support, commercial transactions (Schneider and Perry, 2000). Thus e-commerce has the potential and capability to transform the business process of retailers, by shaping their business models, thereby contributing to changes in their market structure and finally offering competitive advantage over major competitors. Given the opportunities offered by the Internet, major traditional supermarkets now provide on-line services to their customers. However, with future forecasts of increased use of online shopping, traditional supermarkets are considering ways by which they can meet the growing need for online shopping. This involves, strategic alliances with their newest competitors (Internet based retailers), who claim to be able to meet customer requirements, such as order and delivery fulfillment faster than traditional supermarkets. This new phase of the dotcom evolution, gives traditional supermarkets an easier inroad to the online world, as they can get into the e-market more quickly, take advantage of innovative technologies and create a new sales channel. Despite the obvious benefits of such alliances, traditional supermarkets still must sift through a variety of issues to ensure that their companies make a smooth transition from bricks and mortar to clicks and mortar. Thus, although traditional supermarkets have what Internet based retailers don't namely market share, market experience, capital physical facilities customer loyalty etc., which are critical to retail; Internet based retailers typically have lower overhead costs, web experience, on-line customer base and can survive on smaller profit margins in the long run.

OBJECTIVES

The research objectives of the paper were to provide an insight into the strategic utilization of the Internet by traditional supermarkets through strategic alliances with Internet based companies. This is done by looking at how they can gain competitive advantage, the process of change and, the advantages and opportunities offered by strategic alliances. The main objectives of this research include;

* Analysing the growth of online services provided by traditional supermarkets.

* The importance of strategic alliances for traditional supermarkets.

* Impact of clicks and bricks alliance on their existing business processes.

* Impact of clicks and bricks alliance on their traditional business models.

* Identifying the critical success factors of such alliances.

* Delineating advantages, problems and future forecast of such alliances.

E-commerce

The definition of e-commerce according to the Oxford English dictionary is, 'The buying and selling, and the exchange of merchandise or services especially on grand scale'. Another definition refers to ecommerce as the forms of transaction relating to commercial activities. including both organizations and individuals that are based upon the processing and transmission of digitized data, including text, sound and visual images (Single 2001). …