Morrisons, Finally Going Online
The economic downturn of 2008 has become an influential accelerator of e-commerce market in the modern globalised world. The UK supermarkets chains have not been immune to the effects of the financial crisis; in fact, they have transformed the essence of their strategies. Modifying their operations in accordance with needs and demands specific to customers, most retailers and distributors utilise the Internet as one of the key sales channels. Today, the extension of sales via the Internet has become an apparent trend in retailing and distribution. The expansion of the Internet-based services entails e-commerce, online stores, online marketing operations, multiple practices of SCM (Supply Chain Management), and other business procedures. The emergence of e-commerce and online stores was initially determined by the development of technologies of sale automation and implementation of automated control systems of enterprise resources. Online selling has become a remarkably powerful competitive advantage of organisations engaged in promoting, retailing, distributing, and selling diverse products in general and supermarkets in particular. The implementation of selling practices associated with e-commerce leads to enhancements in flexibility and responsiveness of such supermarket chains dominating in the UK market as Tesco, Asda, and Sainsbury’s.
Multifaceted online procedures include IT-oriented types of businesses based on remote maintenance and enabling both customers and sellers to negotiate and make transactions via the Internet. E-commerce is a constituent of the global economy, including financial and commercial transactions that are carried out by means of computer networks, as well as all types of business processes related to such transactions (Deans 2005). An online store is a type of electronic commerce. The augmentation of e-commerce has been observed over the last decades due to increasing rates of the Internet users, growing influence of social networking, and other interactive online platforms, dynamic development of electronic payment systems, and the transition of leading Web services from Web 1.0 technology platform to Web 2.0.
Research Aims and Objectives
Pursuing my research, I intend to investigate factors contributing to the decision of WM Morrison Supermarkets PLC to finally go online and analyse impacts made by economic environments on the UK’s fourth largest food retailer. This paper will argue that, being driven by the fall in profits and advantages associated with the Internet-based operations of its rivals, the supermarket chain has refocused its performance. The aims and objectives are as follows
- To outline and examine current scholarly grounds and theoretical frameworks pertaining to online business operations, specifically to online sales and e-commerce.
- To investigate and specify factors contributing to the transition of WM Morrison Supermarkets PLC, the UK’s fourth largest food retailer, to online sales.
- To examine trends inherent in contemporary online operations conducted by the UK supermarket chains.
- To recommend solutions based on my research that will help to ensure the efficiency of online operations of WM Morrison Supermarkets PLC.
In order to obtain reliable findings and comprehensively research triggers of WM Morrison Supermarkets PLC’s reorientation of business performance, I contemplate answering the following research questions:
- How do online sales influence revenues of supermarket chains?
- What trends are inherent in online operations conducted by the UK supermarket chains and other retailers?
- Are WM Morrison Supermarkets PLC’s diseconomies consequences of the global financial crisis or results of outdated methods of economic management?
Mandel and Johnson (2002), Deans (2005), Kazumori and McMillan (2005), Overby and Jap (2009), Khosrow-Pour (2009), Xia and Zhang (2010), Choi and Naylor (2011), Lamberton and West (2012), Stephen and Galak (2012), and other researchers state that benefits of the Internet-located business operations go far beyond the postulate that online sales are less costly than traditional (off-line) channels of distribution and retailing. Given the dynamics of the telecommunication sector, growing number of the Internet users, and the intensity of the "inclusion" of interactive technologies in everyday life of modern people, e-commerce becomes an effective complement to traditional channels of promotion of products and services. Interactions between manufacturers, retailers, and customers obtain new characteristics.
As noted by Overby and Jap (2009), the traditional business operations of trading companies faced serious difficulties during the recent period of unprecedented economic instability. While top management of companies seeks to maximize cost savings, people’s living standards have fallen and customers are forced to plan their personal expenses very carefully. Being a developing business, online sales are not devoid of points of tension. However, they should not be considered as barriers but as potential vectors of the development of a business.
The UK consumers are guided by multiple motives choosing online shopping instead of offline sales. They select online stores because of the possibility of making purchases at any time. Consumers switch to online shopping in the hope of saving. The other two main reasons include lower prices for goods sold online and the convenience of comparing offers and selecting products. Thus, preferences of customers for online shopping are stipulated by economic and social factors. However, a similar research study conducted by Xia and Zhang (2010) identifies other key factors of roughly equal importance in terms of lower prices, time-saving, convenient delivery, and opportunities to find products of favourite brands with less effort. Confidence of customers in the reliability of online stores is growing steadily. In addition, e-commerce has a significant impact on conventional sales. In the minds of the consumers, online and offline sales are gradually mixed ceasing to compete and becoming complementary elements in the process of shopping.
Some of the most progressive brands use online resources in order to increase sales, induce greater involvement of customers, and promote new products (Deans 2005). Entrepreneurs’ neglect of opportunities provided by the Internet-located stores and concomitant online marketing leads to business failures and earnings lag. In the long term, the absence of multichannel communications with customers can reduce the market share and trigger losses of sales.
The consumer activity indicator correlates with the level of unemployment, dynamics of fluctuations in real incomes, social stratification, and rates of inflation. The economic investigation conducted by Overby and Jap (2009) proves that consumers are experiencing serious problems in all of the directions. Supermarket chains are at the beginning of a new economic cycle, they are facing the necessity to implement innovative IT-oriented approaches to retailing and distribution. Online initiatives of traditional trading companies in general and Morrisons in particular are able to decelerate loyal customers’ transition to savvier entrepreneurs as well as to regain profits.
In accordance with comments of Kazumori and McMillan (2005), Overby and Jap (2009), Xia and Zhang (2010), Jansen(2010), and Khosrow-Pour (2009), customers’ initiatives and efforts in the field of online shopping directly depend on their earnings: the higher their income, the more they make purchases. “The internet has made markets more efficient by making it easier for buyers to learn what is available where for how much. The lowering of these search frictions has made pricing more competitive, as various empirical studies have found” (Kazumori & McMillan 2005, p. 544). Affluent customers usually have less time to visit traditional stores, while being characterised by a higher level of the Internet literacy and unlimited access to the web. Previous years of the economic downturn introduced significant corrections in the development of retail trade, both globally and within local markets. Retailers faced a fall in consumer activity caused by a decrease in real incomes and unstable socio-economic conditions. Today, supermarket chains literally fight for every buyer (Jansen 2010). In accordance with numerical evidence, food networks annually lose or acquire 10% of their customers. Therefore, currently, the UK supermarket chains are striving to design new strategies of customers’ attraction. Supermarket chains are severely limited in continuous retrenchment in prices and expansion of offerings due to their specific assortment, including multiple items. The given fact stipulate retailers’ constant search for new trends and novel technologies that will enable them to attract new customers and ensure stable sales. Online selling is one of such efficient technologies.
In legal terms, e-commerce is a virtual electronic conclusion of a number of agreements, such as sales, delivery, production sharing agreement, insurance, provision of services, payments, as well as other agreements and documents, enabling business and financial mutual settlements. In a broad sense, e-commerce is commonly understood not only the sale of tangible and intangible goods and services electronically (Mandel & Johnson 2002; Khosrow-Pour 2006; Khosrow-Pour 2009; Jansen 2010). E-commerce provides IT support of processes generating demand for products and services, ensures pre-contract study of deals, enables automated administration of functions related to sales, and order processing. It also provides electronic information and legal support for the variety of forms of economic and financial cooperation between parties involved in the bargain. Electronic commerce (e-commerce) has emerged in the modern market economy as a means of ensuring advantages in the fierce competition for consumers by reducing a significant part of material costs and time of conventional methods of conducting transactions. Reflecting the essence of market relations, e-commerce develops and implements in highly competitive contemporary society in order to improve forms and methods of trading and procurement operations. The emergence and practical application of methods and means of e-commerce have become possible due to significant development of electronic transmission technologies. E-commerce is integrated into the electronic payment systems with a complex of related information, marketing services, and transport infrastructure of product deliveries.
Khosrow-Pour (2006) states that the main types of e-commerce and online sales include different categories of participants of trade relations: 1) e-commerce that ensures public procurement, involving state executive authorities and legal entities - manufacturers and distributors (business-to-government or B2G); 2) volume and small-scale online wholesale between legal entities, including enterprises and organisations of different forms of ownership (business-to-business or B2B); 3) retail e-commerce, which meets individuals’ needs for goods and services (business-to-consumer or B2C). Different categories of trade relations, including electronic ones, require different toolkits, corresponding to the current laws and regulations of business turnover.
Existing toolkits of online sales in many respects replicate conventional trading methods. According to some experts, this trend does not allow using all benefits of IT to provide buyers and sellers with greater convenience. Today, the number of online stores using the mode of B2C does not correspond to requirements of an average virtual buyer. According to Khosrow-Pour (2006), in order “to achieve success in traditional retail operations in combination with business-to-consumer electronic commerce, it is desirable to achieve a synergy between what optimizes the costs and benefits of each channel” (Khosrow-Pour 2006, p. 103).
Multiple research studies emphasize the role of modern social media platforms in the effectiveness of online sales (Gurevych 2007; Overby 2009; Choi & Naylor 2011; Lamberton & West 2012; Stephen & Galak 2012). Today, social networks have created multicultural communities worldwide, connecting retailers and customers across geographical barriers. They are steadily ousting other means of communication because of the rapid growth of international online access today. Social media are specifically designed to create the Internet communities of people with similar interests and activities where they can communicate using services of internal mail or an instant exchange of messages. Stephen and Galak (2012) noted that “while social media was once the domain of younger, tech-savvy consumers who were faster to adopt new technologies, it is now generally considered to have entered the mainstream and covers a broad demographic spectrum” (p. 67). Thus, it is essential to communicate messages via such social media platforms as Facebook, LinkedIn, Twitter, MySpace, and so forth. These global Internet-located communities divide the target audience of consumers into informal groups of interests, age, gender, favourite activities, businesses, and other characteristics. Sharing their positive experiences of purchasing at online stores, customers contribute to the effectiveness of e-commerce.
As can be seen in research studies conducted by Gurevych (2007) and De, Hu and Rahman (2010), advanced development of digital information technology and online sales as a constituent of IT are the two of the most dynamic trends in the world economy in the last decade and one of the main resources of economic development in the long term. The utilisation of electronic information technologies in the sphere of trade, as the basis and essence of market commodity-money relations, can significantly improve the efficiency of the market. This can be achieved by reducing the number of intermediaries (trade extra charges) in the movement of goods (services) from manufacturers to consumers, accelerating capital turnover ratio, reducing transaction costs, and restructuring processes of activation of regional economic complex.
As indicated by Overby (2009), consumers have always preferred shopping online for two reasons: firstly, because of greater product assortment than in traditional stores, and, secondly, due to lower prices. Today, apart from the already mentioned main reasons complex criteria have arisen, such as the convenience of making a purchase, abilities to compare and select desirable products, and a convenient form of delivery. The necessity to build long-term relationships with customers and gain their loyalty implies that online stores should provide their clients with prompt regional deliveries. This fact requires major changes in the multilevel logistic infrastructure, which is used by online shops. A great number of factors, such as the right design of the website, constant IT support, management of all product data in the most convenient form, "provoking" a customer to acquire more goods, the choice of the right location, and convenient logistics services influence customers’ loyalty.
Traditional retail, especially in remote regions, cannot successfully compete against online sales, precisely because of its "physical limitations." Online stores are able to offer a much wider range of goods; there is no problem with filling out the assortment of stores in the network because goods are directly delivered from warehouses (Khosrow-Pour 2006; Khosrow-Pour 2009; Kotler & Keller 2011). In addition, the following benefits are achieved: the amount of working capital is reduced and costs of transportation and storage of goods are diminished. Due to the optimal design of the website, online stores automate operations performed by shop assistants in traditional stores, such as a comparison of goods and assistance in choosing. Not all sales consultants perfectly cope with this task, particularly in remote regions where sellers’ qualification is insufficient.
Research studies on approaches implemented by online stores highlight the effectiveness of communication the Internet-located stores with consumers. In accordance with conclusions provided by Khosrow-Pour (2009, p. 108), “Web-based shopping aims to personalize online shopping to provide global interactive business, customer convenience and global market efficiency, which implies that Web-based shopping belongs to the B2C e-commerce business model.” However, De, Hu and Rahman (2010) claimed that despite the fact that the Internet-located commerce was rapidly developing, not all strata of society were involved in it. This research is aimed at revealing demographic and behavioural patterns of the most active online shoppers. Although men and women make purchases with approximately equal regularity, their preferences for online shopping differ and reflect their diverging interests. While men often get technical goods (computers and software, mobile phones and smartphones, as well as videos and audio), women are more likely to buy beauty-oriented products (cosmetics, perfumes, clothing, footwear, and so forth) and children's products. “Consumers’ historical purchasing patterns that can act as effective controls for consumer heterogeneity, eliminating consumer heterogeneity as a confounding factor” (De, Hu & Rahman 2009, p.1943). Most customers become loyal to a particular online store because there are the lowest prices and a wide range of products. However, this trend completely changes while analysing the selection criteria specific to separate groups of consumers based on their activity in the field of online shopping. Senior and middle managers as well as entrepreneurs comprise the category of the most active online customers. They choose a particular online store because of low prices and a wide assortment of goods. In addition, they consider the presence of a convenient system of merchandise return and their trust to a specific store to be the essential factors.
In order for researchers to conduct detailed investigation, they rely on theories, frameworks, scholarly perspectives, and developed models, which operate as lenses. Theoretical concepts as well as other research instruments lead to either clarity or confusion about the issue or phenomenon at hand. Efficient research methodology requires a researcher to anticipate the progress of research, its basic directions, main trends, possible discrepancies, and their impacts on research findings. Solving issues arisen by research, conclusions should be objective, free from speculative judgments, precisely selected, comprehensively evaluated, and supported by valid facts (Neergaard & Ulhøi 2007). In addition, a researcher should critically assess findings in order to avoid irreversible mistakes and misinterpretation. Thus, positivist approaches and models will be dominant while investigating the decision of WM Morrison Supermarkets PLC to modify its performance in favour of online sales.
For the goals of this research, the theory of macroeconomics of supply and demand, economic theory, and the deductive model are all interconnected. They create a template for business performance of supermarket chains that leads to an increase in profitability while meeting needs inherent in consumers. The complexity of relevant theories leads the research to integrate the ideas into a framework by constructing an interviewing constituent, a tool of qualitative research studies.
The equilibrium of supply and demand, originating from macroeconomic theory, would seriously affect profit of WM Morrison Supermarkets PLC. Profit regulates macroeconomic processes, irrespective of businesses and industries (Shaikh 2004). Business makes investments with the goal of making more than they spend; in turn, the wages that they pay workers influence how much they have available to spend on products (Shaikh 2004). Meeting the law of supply and demand, prices and profit rates "constantly overshoot their centres of gravity and reverse their course and undershoot" (Shaikh 2004, p. 371). If macroeconomic growth causes the rise in consumers’ income, this serves to increase revenues of businesses in general and profits of supermarket chains in particular (Shaikh 2004).
This study explores the factors contributing to the decision of WM Morrison Supermarkets PLC, the UK’s fourth largest food retailer, to transform the arena of its performance and finally go online. Being applied in compliance with specific objectives and scholarly frameworks, research methodology substantiates the scope and design of research studies. Research methodology involves a set of objectives, approaches, guidelines, priorities, resources, and research methods. Methods encompass techniques or operations entailing practical or theoretical activities. A method can also be described as a form of theoretical and practical understanding of reality based on behaviour patterns of the object being studied. Scientific methods include so-called universal methods or ways of thinking, scientific methods, and techniques utilized by specific sciences. Methods can be classified in accordance with the ratio of empirical and theoretical knowledge.
While addressing a research problem, it is necessary to create and develop a number of interrelated focal points. A single method or approach cannot provide sufficient completeness of responses. Both contemporary business performance and “entrepreneurship can be studied using a variety of methods, including both quantitative and qualitative techniques” (Neergaard & Ulhøi 2007, p.1). Therefore, the application of multiple research methods is predetermined by the complexity, recency, topicality, and occurrence of the issue.
Modern macroeconomic theory is extremely complex and "expresses macroeconomic theory assumptions and propositions in arcane jargon and mathematical symbolism to avoid explaining what is meant in plain language" (Walker 2006, p. 59). However, macroeconomic theory makes it possible to unravel the mysteries of supply and demand as they affect profit of WM Morrison Supermarkets PLC. For the purpose of this research, I will implement both quantitative and qualitative designs. Qualitative research methods are based on inductive analysis while quantitative instruments rely on deductive analysis, because generated hypotheses will act as grounds upon which conclusions will be made.
Several qualitative research designs have been reviewed. The phenomenological method, which aims to explore the problem by understanding individuals’ perceptions and perspectives related to their experiences, is considered to be the most pertinent. The qualitative research design will adopt a phenomenological approach, using interviews. The phenomenological approach will be grounded on respondents’ telling the story of an experienceto understand how the latter affects their attitudes to online sales. The purpose of this is to help shed light on causes of losses and prospects related to a new business mode of online sales. Semi-structured interviews will be conducted with the participants of the research. This qualitative method will allow me to organize a rich, conscious, and open-ended discussion about the lived experiences of respondents. By obtaining stories from interviewees, this research will illuminate factors, triggers, and trends that may help in connecting the problem of previous financial losses of WM Morrison Supermarkets PLC with benefits associated with online selling. I will interview
- Managers of WM Morrison Supermarkets PLC;
- Representatives of other supermarket chains who utilise online sales in their regular operations (Tesco, Asda, and so forth);
- Customers of online stores.
In this research, the focus on the investigation is the perceptions of the interconnected economic theories and the factors contributing to customers’ preferences for online stores and managers involved in the Internet-based sales. For the purpose of the research, it is assumed that interviewees will respond honestly during the interviews and that the study will not be constrained by the veracity of their responses. The lived experiences of respondents will be recorded during the interviews in order to avoid misinterpretations and follow the principles of positivism. A systematic data analysis process will be performed to provide objective assessment and interpretation “Phenomenology can also be used more directly to explore what meaningful experiences and strategies are associated with different situations” (Neergaard & Ulhøi 2007, p.76). While conducting the interviews with the participants, notes will be taken about possible factors that may have impacts on the internal validity of the study, such as 1) the presence of other people, 2) the time of an interview, and 3) the quietness of a setting.
Thus, a phenomenological approach would provide a revealing insight into lived experiences of diverse groups of research participants. Triangulating data in accordance with theoretical foundations, I will maintain the credibility of the research. Incorporating the use of triangulation, I will be able to eliminate diverse explanations for findings obtained in this research study. Triangulation is the collection of multiple sources of data "with the hope that they all converge to support a particular hypothesis or theory" (Williamson 2005, p. 7).
However, the nature of this research requires the implementation of quantitative methods. Quantitative methods will help to objectively evaluate findings of the qualitative study, ensuring their credibility and validity. Secondary data will be utilised within the research investigations. Descriptive statistical data, numerical evidence, indicators of market efficiency, graphs, and pertaining calculations obtained from reliable sources will be used. Annual statistics of the supermarket chain under scrutiny will show trends in the profitability of its business performance, illuminating factors contributing to the decision to finally go online. Governmental publications, reports of the investigated organisation, and official documents will serve as the basis for the research validity. The research will be grounded on data available from relevant empirical studies, providing credible information. Data analysis will involve thematic and categorical analyses. Analysing obtained data, I aim to demonstrate that there are interconnections between online sales and increasing profit of supermarket chains, specifically WM Morrison Supermarkets PLC. Quantitative methods will help to conduct a case study of the supermarket chain. “Quantitative data in case studies quite often come in categories or can be put into them, usually to make comparisons between different groups” (Gillham 2000, p. 80).
Approaches to establish beneficial equilibrium between ethical and unethical research methods should take into considerations regulatory guidelines and moral principles as well as diverse preferences, creeds, and views of individuals involved in the research. I will adhere to social and legal norms developed by public policy makers. Informed consent is an obligatory condition of all research studies involving human participants in order to ensure that benefits of the research will surpass the potential harm. Obtaining written consent from participants is a minimum requirement for research. “The legal basis for informed consent arises largely from fundamental principles of medical ethics and human rights. These principles should inform and guide the goals we establish for a system of informed consent”. Prior to the start of each interview, respondents will be given an informed consent form. Each participant will be asked if he/she has any questions about the contents of the informed consent or the purpose of the research.
Respondents will be informed verbally and in writing about the following issues: the purpose and scope of the research, the questions that will be asked, the application of their answers, the scope of their anonymity, and the extent to which respondents’ utterances will be implemented in the research. Interviewees will be informed of their rights. Participation in this research will be on a voluntary basis, and it is assumed that respondents’ anonymity will be ensured by coding their responses. The lived experiences of respondents will be audio taped during the interviews and transcribed verbatim afterwards. The fact that the objectives of the research study will be explained, informed consent will be obtained, and participants will be requested to complete the informed consent form (ICF) prior to the interview date will ensure ethical grounds of the research.
Following ethical considerations, participants’ anonymity and confidentiality will be prerequisites in order to protect the identity of respondents. All identifying details will be altered. Each respondent will remain anonymous throughout the process of collecting and analysing data. In order to ensure that participants are treated with respect, they will be provided with convenient interview settings and suitable time. All collected materials and transcribed interviews will be kept in a locked filing cabinet for a period of 3 years.
This research will highlight factors contributing to the transition of WM Morrison Supermarkets PLC from traditional operations to online sales. Proposed solutions will help the organisation to redesign its current strategies in order to promote benefits associated with e-commerce and online stores.