'E-Retail Industry – The Uk Internet Grocery Market\r'

'This instruct aims to understand the warring environment of round of the briny retailers at bottom the UK commercialise and to demonst lay the several(predicate) elements of the e-environment that wedge on the retailers traffic and aliment mart placeing system. Further oftentimes than this airfield forget assess the impact of m any(prenominal) doers and constraints environ the e-retail diligence and specifically the fodderstuff arena of the retail manufacturing.\r\nIt is humpn globally that the UK has the most arriveed foodstuff e-tailing sector in the world and that is incr re primary(prenominal)derly advance into court specially after the failure of legion(predicate) crease models which apply adopted the network for distri only whening and selling at that place products\r\nThis study al suffering exclude B2B sector and forget focus on B2C sector in the retail market\r\nI entrust be snap on the online securities exertion market and the impo rtant(prenominal) British players leading this market.\r\nI surrender selected this industry because recently, it has caused a noise globally, and many interested people atomic progeny 18 wondering whether this industry has mictu rateed the mature level or it is still growing or it is only a noise which entrust lose its importance later.\r\nThe UK market place market\r\nit is estimated that �105 jillion of groceries atomic compute 18 ex transform in Britain each year, (MINTEL Nov, 2002) , that shows a noticeable devilion in gross sales over the full stop since 1999 until the intention of 2002.\r\nThe Total retail sales through specialist and non-specialist f argon retailers were worth both(prenominal) �90 billion in 1999 and many specialists predict this market to wrap up growing to reach 120 billion by 2005 (MINTEL, Nov. 2000)\r\nWithin the food market itself, fruit and vegetables embody the titanicst market, with in high spirits strike within the sector for warm produce. Convenience foods †fresh and frozen ready meals †argon also highly demanded, as ar products which in command fit well with the needs of the much maligned ‘cash rich and clipping poor consumer. rudimentary debates within the market surround the use of genetically modified (GM) produce, and this has helped to do niches in the retail market for suppliers of GM-free or complete ranges. The study supermarkets render been moving quickly into the constitutive(a) sector, in which higher margins erect be found. (Key note)\r\nThe UK grocery store market is driven by economic factors, nation structures, household size employment pattern and life style patterns whose impact is shown below as macroeconomic factors:\r\n sparing factors †Although consumer economic consumption is predicted to continue to grow by 12.6% to 2004, with individualised disposable income expected to also grow steadily, it is supposed(pren ominal) that this pull up stakes impact potently on expenditure on food for in- headquarters expenditure; As personal wealth has grown, spending on food has rock-bottom as a symmetry of total expenditure, with waste activities, including eating verboten, taking most of the surplus. Some agiotage categories of food, such as organic produce, will benefit. As a result the focus of promotional strategy is moving a musical mode from price competitiveness towards modern(prenominal)(a) aspects of the retail extend.\r\nThe population structure †Food expenditure and the overall market size is directly tie in to the size of the population drop the long-term brain antecedent for the British population is for very low growth, implying that the food sell sector is handlely to chance municipal profits hard to grow.\r\nHousehold structure †everyplace the period 1999-2004, an affix of 830,000 (3.4%) (MINTEL, Nov 2000) household is anticipated. This is due to factors other(a)(a) than an increase in population; the growth is coming from wholeness- and two-person households, due to rising divorce and separation rates, acquire married later or not at all and the elderly living longer These crusades collapse the economic logic of the superstore model which is designed to wish large families convenient means to buy large passels of food in whizz place, comparatively in browsely, during the day term, and to please that shop home by private car.\r\n thus far only 20% of adults corroborate children under 16 living at home with them. completely the major grocery retailers argon competing to grow their share of this pivotal segment of the population.\r\nSmaller households equate to to a greater extent than frequent shops for a few items at a time, lots at unsociable hours, a considerably more expensive retailing pro condition.\r\nChanging employment patterns and practices, with increasing frequency of part-time working, mean there are few er families in which one partner has the time to shop at relative lei true(p) during the day, and more for whom shopping is a shared duty, carried step up whenever crabbed schedules will allow. In turn, time-pressured shoppers will often privation to use a variety of shopping patterns fit to circumstance, with retailers being required to offer more take to market in order to compete. This nookynot be do without cost implications.\r\nChanges in consumer tastes and lifestyles pick up an influence on grocery demand patterns. wellnessy-food manners and food-safety scares cause people to castrate what they eat, while there is a strong front towards snacking and convenience eating †which involves an increasing proportion of food being bought through channels other than grocery retailers.(MINTEL)\r\n net income adoption in the UK retail empyrean\r\nretailers generally begin on-line activities by providing tuition and interactive communication. Their site whitethorn devel op into an electronic shop close to mirroring their offline activities\r\nA study by the department of trade and industry (DTI) called, ‘E-Commerce Impact survey: Retail Over debate (www.dti.gov.uk 29 July 2002) shows that:\r\nMore than 75% of retailers are adopting e-business technologies,\r\nNearly a quarter of retailers surveyed, and more than 56% of micro firms in the convenience store sector, throw off not thought about the benefits of the e-commerce.\r\nThis report cans a detailed look at a number of strike retail sector, and shows how UK retailers are getting to manage with e-commerce and that modern technologies are helping to change the elan they do business.\r\nThe report mentioned that:\r\n†77% of companies are adopting e-commerce technologies\r\n†71% of businesses use external e-mail\r\n†53% of firms conduct a website\r\nMore British food shoppers have converted to online grocery shopping than in any other country. However, meshing sales sti ll play a tiny, although growing, pctage of the overall UK grocery market. roughly people use the meshing as a way of gathering information on products and reservation price comparisons before visiting their local store.(Key Note)\r\n contempt these statistics are showing quite positive meter, some experts and specialists state that this field needs further inquiry to determine the extent to which the web is akinly to fight long term changes in the retail sector .\r\n remand 1\r\nA classification of online retail activit\r\n1 Food and consumables: Grocery, including supermarkets and hyper-markets\r\n2 Convenience stores\r\n3 Specialists food retailers, e.g. bakers and confectioners\r\n4 Alcohol retailers, including off-licences\r\n5 tog and irritateories: Clothing retailers, including female, male and children\r\n6 Footwear retailers, including fashion and work wear\r\n7 Jewellery retailers, including rileories\r\n8 Home: Furnishings retailers, including hard and soft fur nishings and\r\nTextiles\r\n9 electrical goods, including brown and white goods and\r\nComputers\r\n10 DIY, including gardening\r\n11 Leisure and entertainment: Sports retailers, including sportswear and equipment\r\n12 Toys retailers, including games, hobbies and crafts\r\n13 Books, music, stationery and video retailers\r\n14 News, including modernisticsagents and CTNs\r\n15 Health and beauty: Health and beauty, including chemists and opticians\r\n16 Home shopping: Home shopping, including catalogues and mail order\r\nDirectories\r\n17 manifold stores: Mixed stores, including department stores and variety\r\nretailers\r\n outset N.F. Doherty, F. Ellis-Chadwick and C.A. Hart. 1999 .Cyber retailing in the UK: the potential of the Internet as a retail channel\r\nOnline Grocery UK Market\r\nIn the UK online market there are four of import grocery retailers dominating the market those are (Tesco, J Sainsbury, Asda, and Iceland.co.uk)\r\nAccording to the researchers the UK leads the world in online grocery shopping. â€Å" durance like Tesco and Iceland have been much faster than their US counterparts in exploiting the immense potential of new practical(prenominal) shopping markets.” They estimate that the online grocery market is already worth �200m a year and will reach �1bn within two years.(Guardian Friday February 4, 2000 )\r\nThe online grocery market is characterised by many of the features of the traditionalistic grocery market. Big supermarkets have woken up to the Internet as a dispersion channel and are gearing up to drop the market. Smaller suppliers, using the net as another(prenominal) side of their portfolio, are sure to lose out in this area. Smaller niche suppliers unsex up a large element of the market in terms of numbers of firms. In fact, there are so many companies, many of which operate on a very local delivery basis, that it is almost impossible to calculate their actual number.\r\nMARKET sizing\r\nOnlin e shopping grew 19 times faster than traditional brick-and-mortar retailing in December 2002, and increased a further v percent in January 2003 to comprise six percent of all UK retail .(www.nua.com)\r\n confused report predictions suggest the online grocery market will be worth around up to 10 % of 120 billion which is the predicted grocery market size by 2005 (MINTEL Nov, 2000)\r\nThe current size of the UK online grocery market has been estimated to be worth �1.2bn. (Key Note 2001), while Tesco reported 446 billion sales during 2003.\r\nSainsburys the second market attracter announced annual sales of �110 billion during 2002 (MINTEL Mar 2003)\r\nMore than half the UK population will have bought something online by the end of 2003. Online shopping will represent 7% of all retail sales in the UK, accounting for �2 billion a month.(MINTEL Apr 2003)\r\nThe total size of the UK grocery market has been estimated at �100bn per year. To su pport the market, the UK has 5.9 zillion online shoppers, growing to a predicted 8.5 million over the next 5 years �500m of overturn, that suggests that honest spending per substance abuser in 2000 was in the voice of �83 per head, suggesting that the Majority of users are not symmetric consumers of online swear outs.(Key Note)\r\nMarket size is touchy to determine, as figures for turnover from Internet sales are often include in total sales figures. Companies that are assay to perform in the market may be taking a rather flexible view in how they present figures that may disappoint shareholders. However, Key Notes assessment is that the size of the true online market is soon �465m (lower than many estimates suggest). Within this, Tesco claims 64.5% of the market, Sainsburys 9%, ASDA 7.5%, Iceland 4.7%, , with the balance held by a range of independents, small suppliers and niche companies.\r\n plug-in:2\r\nThe UK Online Grocery Market by O nline gross sales by Supermarket (�m and %), 2000\r\nOnline Sales (�m) % of Total\r\nTesco ccc 64.5\r\nJ Sainsbury 42 9.0 ASDA Wal-Mart 35 7.5\r\nIceland.co.uk 22 4.7\r\nOthers 66 14.2\r\nTotal 465 100.0\r\n character reference: Key Note\r\nmacro Environment\r\nTo understand the macro-environment a technique called a PEST (Political, Economical, Socio-cultural, and Technological) abstract is usually undertaken.\r\nThe PEST epitome identifies all external factors that affect the way a business dirty dog operate. What follows is a PEST for the E-grocery industry\r\nPEST ANALYSIS\r\nPOLITICAL FACTORS\r\nThe UK government sets itself as the target of making the UK the worlds best place for e-commerce by developing reality profits access and e-commerce cognisance among UK businesses\r\nTo trade in the UK there are 40 different laws that a company may be subject to (chaffey)\r\nStephen Timms, e-commerce Minister, said:\r\nâ€Å"The UKs retailers are making ha nd in adopting e-commerce and\r\ndeveloping e-business solutions. besides there distinctly is room for\r\n alterment, and we cannot afford to be complacent.\r\nâ€Å"E-business technologies offer a wealth of benefits. In order to\r\nexploit these we moldiness help ca-ca the right culture throughout the\r\nbusiness community so that UK firms of all sizes can seize the\r\ncompetitive advantage.\r\nâ€Å"UK online for business is leading the way in getting business\r\nonline, and the disposals aim to take aim the UK the best place in the\r\nworld for e-commerce.”( http://www.gnn.gov.uk)\r\nThe graduation Annual Report on the strategy was launched in family 2000. The UK strategy for online development is laid go across in the UK Online Action Plan, which details 94 recommendations for bring through in 25 areas of priority. one(a) specific goal is to develop the UK as the worlds best environment for electronic trading by 2002. This, it is stated, will be achieved in four specific ways:\r\n* Encouraging opposition in Internet access markets\r\n* Establishing a new regulative framework for converging telecommunications and broadcasting markets\r\n* removing regulatory obstacles to electronic ways of working\r\n* Co-operating with inter home(a) partners to develop a ‘global framework for e-commerce.\r\nOftel (Office of Telecommunications) is one of the tools for achieving this strategy, and, as such, has been charged with driving competition in the areas of dial-up access and delivering high- travel rapidly access routes to the Internet , specifically the hike of adoption of wideband technology, and NPD (new product development) in the mobile-phone and fixed-wireless markets. Government strategy is to put as many UK consumers as possible online. Those responsible for driving this strategy are aware of consumer concerns about the Internet that moldiness be addressed if the Governments objective is to be secured.(Key Note)\r\nECONOMICAL FACTOR S\r\nThe installation in information technology (IT) and new business practices facilitated by IT are forming a â€Å"new” economy, electronic commerce and the IT insertions fuelling it are supposed to be fundamentally changing the logics of business practice, forming new social realities, and new business models. Traditional â€Å"old economy” firms and organizations are busy systema skeletaleing bridges to the new economy.\r\nA stable rate of economic growth is one way in which the Government hopes to guarantee macro-economic stability, which can assist firms when assessing the risks associated with innovative practices. This, combined with the factors outlined below, has an prestigious effect on the rate of growth of the online grocery market.\r\nLow Cost of Internet Access\r\n mavin of the main drivers encouraging the use of Internet access and e-grocery in the UK is the relatively low cost of time spent online.\r\nThe UK is the cheapest off-peak location in t he world from which to breakers the Internet, peak rates have has been dropped. This advantageous position benefits consumers, and the state of competition within the market is strong, with a large number of good quality Internet service providers (ISPs) available and eager to serve the public demand.\r\nLevels of Disposable Income\r\nThe vaster the levels of PDI consumers have, the more likely they are to be tempted towards higher margin products. Such high-margin products can make the difference between a lucrative online transaction and a loss-making one.\r\n knock back: 3\r\n baron of Personal Disposable Income (1995=100 and %), 1995-2001\r\n1995 1996 1997 1998 1999 2000 2001\r\nDisposable\r\nIncome proponent 100 106 113 116 122 127 132\r\n% change\r\nYear-on-year †6.0 6.6 2.7 5.2 4.1 3.9\r\nSource: subject Statistics\r\nTable 3 shows that levels of disposable income are rising, and have locomote by 32% since 1995. The indications are that the upward trend will continu e to apply, suggesting that this economic indicator will contribute to growth within the market in the short term.\r\nRate of Change of Prices\r\nThe change of prices refunds a good sign of the stability of the economy. The UK has a low rate of inflation, and this is confirmed by an assessment of the RPI in Table 4\r\nTable 4:\r\nRetail Price Index for All Items and Food(1995 =100 and %), 1995-2000\r\n1995 1996 1997 1998 1999 2000\r\nRPI (all items) 149.1 152.7 157.7 162.9 165.4 170.0\r\n% change\r\nYear-on-year _ 2.4 3.3 3.3 1.5 2.8\r\nRPI (food) 151.4 154.9 160.5 166.5 169.4 175.2\r\n% change\r\nYear-on-year †2.3 3.6 3.7 1.7 3.4\r\nRPI †retail price index\r\nSource: National Statistics\r\nIt can be seen from Table: 4 that the rate of change in the price of food between 1995 and 2000 has been roughly in line with the general rate of change in the RPI. Similarly\r\natomic number 63an Currency and Simplification O European trade Laws\r\nThe advance of the European currenc y and the simplification of European trading laws will mean that Consumers will find it increasingly easy to trade with European retailers. The Internet offers International retailers a great opportunity to attempt the UK marketplace.\r\nBritish shoppers are already prepared to go Euro to get what they want online.\r\nâ€Å"Big brand name are in the best position to flat exploit e-commerce but if they dont start moving curtly the terror from foreign competition is real.” (Jolanta Pilecka, E-commerce Marketing Manager, Hewlett-Packard).\r\nIn future a number of important factors capacity affect the economic state of the UK and inevitably supermarkets. The front is the possible introduction of the Euro. The Euro has been introduced in various European countries, but most notably France. The introduction of the Euro in France has pushed up weekly shopping bills for the average French household by 10 per cent. Could the same be expected to happen in Britain should the Euro\ r\nSOCIAL FACTORS\r\nTo k at present the barriers to consumer online purchasing adoption it is useful to understand the different factors that affect the level of internet access. Value marriage proposal ease, Security and fear of unknown are the main factors affecting the internet adoption (Chaffey)\r\nOver the period July to phratrytember 2002 an estimated 11.4 million households in the UK could access the internet from home, that amount 46 percent of all households. This is over twice the number three years originally and is an increase of 7 percent from 39 percent reported in the third quarter of 2001. (www.nua.com )\r\n proof suggests that household formation will continue to grow, but that the profile of home size as mentioned at the premier of this paper will stay strongly biased towards homes with one or two people.\r\nTable 5:\r\nChanging Household Numbers in the UK (million and %), 2000 and 2005\r\n2000 2005\r\nMillion % of Total Million % of Total\r\n nonpareil person 7.3 29.1 8.0 31.1\r\nTwo persons 8.9 35.5 9.0 35.0\r\nThree persons 3.7 14.7 3.5 13.6\r\nFour persons 3.5 13.9 3.5 13.6\r\n quintette or more persons 1.7 6.8 1.7 6.6\r\nAll households 25.1 100.0 25.7 100.0\r\nSource:National Statistics\r\nAn estimated 62 %of adult in the Great Britain have accessed the internet some time according to figures from the October 2002 national omnibus survey. This is equivalent to approximately 28.6 million adults in Britain having accessed the internet. In the month prior to the survey 52 per cent of adults had accessed the internet.\r\nDifferences between the countries and regions of the UK\r\nLevels of access vary greatly between different parts of the UK. In October 2001 to September 2002 the proportion of households with access was lowest in blue Ireland (30%), Wales (31%) and the westmost midlands (34%). It is noticeable that the proportions were highest in the east of England (52%), detonator of the United Kingdom (50%) and the South East (50% ) were around half of households had access to the internet.\r\nTable:6\r\nHouseholds with home access to the Internet by Government Office\r\nRegion & angstrom unit; UK country:\r\nOctober 2000 to September 2001 and October 2001 to September 2002\r\nOct 2000 Oct 2001\r\nto to\r\nSep 2001 Sep 2002\r\nPer cent\r\nNorth East 26 36\r\nNorth West 35 41\r\nYorkshire and the Humber 32 39\r\nEast Midlands 40 46\r\nWest Midlands 35 34\r\nEast 40 52\r\nLondon 46 50\r\nSouth East 46 50\r\nSouth West 38 41\r\nEngland 39 44\r\nWales 27 31\r\nScotland 30 40\r\nNorthern Ireland 26 30\r\nUnited Kingdom 37 43\r\nSource: national statistics\r\nAccording to International Telecommunication totality (ITU) (www.itu.int )\r\nit is shown that in the UK 36.62 per 100 own a PC\r\nTable 7:\r\nInternet\r\nEstimated PCs\r\nHosts\r\ntotal\r\n2002\r\nHosts per\r\n10`000 inhab.\r\n2002\r\nUsers\r\n(k)\r\n2002\r\nUsers per\r\n10`000 inhab.\r\n2002\r\nTotal\r\n(k)\r\n2002\r\nPer100\r\nInhab.\r\n2002\r\n2`865`930\r \n485.03\r\n24`000.0\r\n4`061.74\r\n22,00\r\n36.62\r\ntable 7 , shows that a large proportion of the UK population own a PC that makes accessing the internet easer than going to the work place or other places\r\nLegal and ethical concerns\r\nIt is argued that people do not change as quickly as may be believed. They still do not like parting with personal details, especially to those that they do not trust. Firms that request data from consumers need to make supplying information optional and allow users to change and take away the information provided. Crucially, they need to convince consumers that they will perform all information confidentially. Firms that are recognised as ‘good citizens and with a high reputation in this regard are well placed to ease the anxieties of consumers scared of fraudulent use of details. Smaller companies with an Internet-only carriage will find it hard to build up this trust.\r\nTECHNOLOGICAL FACTORS\r\nE-retailing can be seen as an innovat ion in retailing that in turn is strengthened around a technological innovation\r\n some reports have summarized technological problems as: The complexity of the user interface bandwidth restrictions and access connection speeds and security concerns\r\nA wide range of new technologies have enabled companies to cause\r\n collapse and more efficient relationships with consumers as e-retailers:\r\n†provide more information in the pre-shop experience;\r\n†increase the number of access points to meet nodes needs;\r\n†offer a wider choice of products than can be held in-store; and,\r\n†improve the overall service provision, for example through better stock management. www.gnn.gov.uk\r\nTechnological breakthroughs are some of the key drivers in twist the right conditions for online grocery to thrive.\r\nThe main technological factors influencing the market include:\r\n� The expansion of wideband Internet\r\n� The introduction and growth of DTV (digital television)\r\n� M-commerce (mobile-commerce) and WAP (wireless application protocol) phones\r\n� machine-driven reordering systems\r\n� Systems offering defence against fraud\r\n� automatise customer service.\r\n(Key Note 2001)\r\nBroadband Internet\r\n 1 of the problems many consumers have when dealing with the Internet is the speed of access. galore(postnominal) consumers connect using 56K modems, although the majority never achieve this speed, perhaps because they live a great distance from the central phone-exchange routes or because their phone lines are too old. Broadband connections can alleviate this problem.\r\nBroadband connections come in two basic types: digital subscriber line connections (DSL) and cable modem connections\r\nIn the first quarter of 2001, the number of DSL lines grew by 90% in the UK This market is likely to experience high growth in the coming years.(www.itu.int)\r\nDigital television Advanceme nts in television are running line of latitude to other Internet-enabled technologies 4.4 million households had DTV in 2000, and the figure is now probably in excess of 5 million. Not all DTV service are fully Internet-enabled, but there are plans to achieve this. The growth rate in subscription to DTV function is believed to be higher than the rate of new subscribers to ISPs. It has been suggested that more than 45% of homes will have digital satellite TV by 2008 (generating revenues for the communications companies of �2.4bn per year).\r\nOne of the major barriers to e-grocers is the high be charged to the suppliers by the DTV companies. Tesco reported to have found rotate Digitals charges too expensive to make a surmise worthwhile, however, the majority of the large supermarkets are signing up to the service may have very onerous consequences in the long term.\r\nM-Commerce and WAP Phones\r\nM-commerce for all markets in Europe is forecast to reach levels of aro und $38bn by 2004.(Key Note) with over half of European companies planning to offer some form of service via mobile phones (particularly in the banking and service sectors). Major multiples are increasingly active in the service sector, and their online successes in other areas could well vomit up over into m-commerce activities, Mobile communications company Ericsson has estimated that, by 2004, there will be more than 600 million people using mobile Internet go in Europe.\r\nIn 2000, the market for subscriptions to mobile-phone services grew by 67% and by 84% in 2002 .(www.itu.int ) However, WAP phones, currently the only method of accessing Internet via a mobile, have been relatively slow to catch on in Europe and make up only 15% of overall handset sales globally.\r\nAutomated Re-ordering Systems\r\nAll the technologies so far discussed require a intended effort on the behalf of the consumer. In the future, it is possible that automated re-ordering systems will mean that the retailer is automatically notified when products are being used up within the home and need replenishing. There are two enabling technologies currently under development that may make this less fictional and more everyday. Vendor managed size up (VMI) is one of these technologies.\r\nAnother enabling technology in the same area is radio frequency appointment technology, also known as RFID. This improves on VMI by using radio waves to scan all products in the fridge at any one time.\r\nThose kinds of technologies build and grow up the relationship between the consumer and the supplier learns more about the consumer behaviour to satisfy his demand\r\nAlso they can create a competitive advantage for the business\r\nSystems Offering Defence Against charade\r\nConcern over fraud continues to scare many consumers away from using the Internet as a route for purchasing items and services.\r\nCredit-card companies are already making changes to their services to ease these concerns, but l onger-term solutions may be found in encryption technology.\r\nTechnology is being developed that adds digital signatures to a purchasers Web browser which may help fight fraud.\r\nSuch services can only be developed and provided by strategic partnerships between online retailers and Web security corporations such as Inktomi, Ariba, Broadvision, Vignette and Verisign (all leaders in secure-payment bear on solutions).\r\nINDUSTRY ENVIRONMENT\r\nPorters 5 forces analysis\r\nMichael Porters five forces is The model that widely used for competition analysis in business strategy formulation, states that an organisation lasts within an industry. To succeed it must deal with the competitive forces that exist within that industry:\r\n(1) innovation of new competition.\r\n(2) bane of substitute products.\r\n(3) Bargaining position of buyers.\r\n(4) Bargaining power of suppliers.\r\n(5) Rivalry amongst existing competitors.\r\nTHE GROCERY E-TAILING MARRET\r\nAs an industry in the early stages of its life cycle, the online grocery market is currently very fragmented, with a growing number of competitors. The reasons for this fragmentation lie in several factors: relatively low innovation barriers, high transportation costs, the authorise ability of grocery items, nontradable goods and services industry, and the ability to determine in geographic regions and reap the benefits of economies of scale. Much like traditional bricks-and-mortar supermarkets, online grocers are highly localized except for a few that operate nationally or internationally by delivering only non-perishable goods. (Success factors)\r\nBarrier to entry\r\nCompared to building traditional supermarkets, the barriers to entry in the online grocery market are relatively low, since most online grocers are localized. Set-up costs include establishing the computer system, creating logistics and warehousing capabilities, building brand awareness, and having the necessary alliances with local grocers in place. Many online grocers have already established partnerships or alliances.\r\nEntry into the industry is currently relatively easy, because no one has inherent advantages.\r\nInnovation and competitive moves, which can be easily replicated, have not prevented new firms or substitutes from entering the market. However, entry barriers may rise in the future as consolidation likely occurs.\r\nMarket such as groceries, barriers must be reinforced on differentiation through brand intuition by achieving superior customer service and responsiveness. One attraction for the recent surge of Internet startups in the grocery business is that online grocers require less capital and have lower variable costs than bricks-and-mortar stores. pertinacious costs are high, but the potential for monolithic returns is great if a large sales volume can be generated.\r\nExit barriers can be moderate to high, depending on the amount invested in logistics and warehousing, the Web site, computer sys tems, and marketing.\r\nPPOWER OF SUPPLIERS\r\nRetailers have high bargaining power when they purchase a large volume of goods from their suppliers. inappropriate huge supermarket chains, the smaller online grocers typically possess a lower level of bargaining power than their suppliers. But traditional grocers that decide to branch out onto the interlock have the advantage in this regard, buying in bulk and enjoying established relationships with suppliers and customers. This allows them to price their goods competitively, deterring new entrants or forcing inefficient incumbents out.\r\nPOWER OF BUYERS\r\nThe bargaining power of buyers or consumers is very high in this industry. With many substitutes and competitors to demand from, dissatisfied customers can simply switch to a competitor. Groceries are commodities, so consumers can be sure to purchase the exact same products elsewhere.\r\nTHREAT OF transform PRODUCTS\r\nThe threat of substitutes is undoubtedly high for two reas ons:\r\nFirstly, the products and services offered online to customers are extremely similar. So similar in fact that supermarket often have to lower their prices to give them more appeal.\r\nSecondly although there is a certain degree of brand loyalty, it cant be relied on, as customer loyalties tend to change when they find they can attain better value for money elsewhere. E-grocers understand that the threat of substitutes is high, and this then is the main reason for supermarkets branching out and pursuing a broader product line, as a means of calming the intense competition with their competitors. However, in pursuing broader product line grocers open themselves up for further competition from experienced players in other non food retail markets.\r\nRIVALRY AMONGST EXISTING COMPETITORS\r\nCompetitors will do everything in their power to increase their market share. Supermarkets also have high fixed costs due to the sheer number of stores they have open. They must make a suffic ient amount of sales to cover their costs and generate profit.\r\nAs discussed antecedent there are a variety of substitute products and services that are becoming increasingly difficult to differentiate thus custom is very much determined by price. This situation is further exasperate because switching costs are difficult to impose, as food is an everyday necessity, many customers will happily forget any loyalties if they really need to endure it.\r\nConclusion\r\nThe environment in the online grocery industry is growing more and more competitive as new firms continue to enter.\r\nGrocers which established its online purchasing site first is gaining the benefits of the first-mover advantages such as Tesco.com\r\nE-grocery has become a considerable industry sector each main player in this industry is trying to create a competitive advantage to attract more numbers of spoiled customers trying to satisfy there demands.\r\nThe UK e-environment is one of the best e-environments globa lly that ease the catch to this industry and generate the potential for more and more customers to buy grocery on line.\r\nThis industry sector is a quite new industry that makes the melt down of information about its success and pitfall factors relatively not enough to know every factor influences this industry\r\nWe cant say that e-grocery sector has reached the mature level since there are more and more numbers of customers and rivals are entering this sector.\r\n'