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Question One

Consumer Benefits of
Physically Shopping

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Reason for benefit

Certainty of product quality

When shopping in person, consumers can inspect the product closely,
so they can select the product most suited to their needs, maximising form

Time Utility – immediate access to products

As soon as a consumer has bought a product, they are able to use it.
This can be particularly useful when an item is required straight away, such
as milk for one’s morning cereal.


Store layout guides shoppers logically through the store, making it
hard to miss anything

Consumers must physically walk through each section, giving them
visual cues to what they need to buy. At the end of the shop, it is easy to
remember if you considered buying bread, for example, because you will
remember the place you would have been standing at the time.


 Choice – Able to choose when you
get products

Although somewhat restricted by a shop’s opening hours, consumers are
able to get products at any time, for example, going in every night after
work to pick up fresh ingredients for a meal. No advance warning is required
for the store, meaning a decision can be made in the spur of the moment.


Consumer Benefits of Online

Reason for benefit


Time Utility – Ability to shop any time of day convenient to you

Online, consumers are not restricted by the shop’s opening hours, so
can make their virtual shopping trip at a time most convenient to them, even
early in the morning or late at night. Furthermore, consumers can shop from
anywhere, so do not have to spend time travelling to a store, or organising
their shopping time around when they will be near a store


Personalisation of experience

Consumers log in to begin shopping, so the store can remember aspects
of their previous shops to make it easier for them. A previous list can be added
straight to their trolley providing many benefits: overall time spent
shopping is reduced, providing time utility; the store can make product
suggestions based on past purchases; consumers can also ask the store to stop
showing certain types of products that aren’t useful to them, increasing the relevancy
of future products to be shown.


Ease of reviewing items and changing one’s mind

Customers can check their trolley at any time, with products shown in
a list and grouped by category. They can choose to remove any item with a
click of a button.


Products are sorted and packed for you

Consumers don’t have to do their own work packing their products and
carrying them about the store. This is an additional service provided by
online shops free of charge.


Limitations of Physical

Reason for Limitations


Losses of time utility if a trip is cut short

Sometimes consumers may find themselves interrupted by circumstances
outside of their control, having to finish the trip early. If there is no
time to pay for what is already in the trolley, pack it up, and go home, then
all of that consumer’s time will be wasted. Even if they can take home part
of their shopping, consumers had invested time travelling to and from the
store, and making the trip twice as frequently means they have to spend even
more time to complete their shopping.


Difficulty of going back to get missed products once at the checkout

At the checkout, consumers may suddenly remember another item which
they must buy. In order to get this item, they have to go all the way back
through the store (with their full trolley). This can be frustrating for
consumers, especially because they had thought they were basically finished.


Greater susceptibility to buying junk food

Shopping in person can be tiring and stressful, and when a person is
surrounded by appealing junk food, especially things they could eat as soon
as they leave the store, it is a lot harder to resist buying them than when online,
where one is usually in a more rational, forward-thinking mindset.


Need to bring goods home right away

Items such as meats or frozen goods do not survive well sitting in a
person’s car. This can limit a person’s choices as to when to shop, or what
to do afterwards. A consumer may be unable to do their shopping before going
to work, or may have to turn down an invitation to meet up with friends while
in town, because they need to take their groceries straight home. This is an
example of a lack of place utility, as the consumer’s products are not where
the consumer wants them to be


Customers getting in each other’s way.

There is only a limited amount of space to move about in supermarket
aisles. This can be annoying both for consumers who want to spend time making
a decision, and consumers who need to quickly get through their shop. This is
often worse during where stores get very full
such as after 5:00pm when jobs finish. There is no easy way for physical
stores to manage capacity.


Limitation of Online Shopping

Reason for Limitation


Uncertainty of quantities bought

Consumers often judge how much of a product they need based on sight,
or by feeling how heavy it is. As neither of these are possible when buying
online, it can be hard to judge exact quantities needed, especially when
buying a product for the first time


Consumers won’t know a product is out of stock until too late.

As the products are not collected at the same time as the order is
made, a product may become unavailable in between these two times. Shops may try
to substitute another product, but this is not always possible. This would be
a significant loss of form utility for consumers


Items are delivered or made ready to pick up when convenient to the
store, not when convenient to the consumer.

Consumers are not given a choice when their products will be ready or
delivered. This may be problematic if they are not ready to receive the products
at this time. For example, products could be left sitting outside someone’s
house all day, causing some items to spoil.


Major ordering errors are easier to go unnoticed

A simple slip of the keyboard could cause someone to order ten times
the amount of a product that they intended. Because they do not physically
see their order, it would be a lot easier for a consumer to miss such a
mistake. This would be another large loss of form utility for consumers, who
do not get the product they wanted.


anything different or
out of the ordinary on your virtual shopping list as a result of visiting the
virtual supermarket

Homebrand Toast Bread
– Immediately after logging in, I was directed to “Smart Trolley”, which suggested
products based on what is popular with other shoppers. The very first option was
Homebrand Toast Bread, which immediately reminded me that I would need bread. I
clicked “add to trolley” without bothering to consider other brands.
Furthermore, the default quantity was four, and I didn’t bother to change this,
meaning I may have bought more than I would have normally.

Fish Fillets –
These were the very first item in the ‘meat’ section. They were on a ‘price lock-down’  of $10/kg. This seemed
like a good deal, as they were next to an extremely expensive fish, priced at
$32.99/kg. This convinced me to buy fish when I may not otherwise have

Hubbards “light and
right” berry cereal – I clicked on the “healthy cereals” section, trying to
find my usual brand of “light ‘n’ tasty berry”. However, I didn’t see it on the
first page, and the light and right cereal seemed like a good substitute, so I
chose that rather than bothering to look for my usual brand.

Maggi 3 minute pasta Cheese
and Bacon dish – While looking for plain pasta (which was only on the
second page of results), I saw a large variety of these bright yellow packages.
This led me to pausing to take a look at them, and then making a snap decision to buy them to use as a snack.

Act II Sweet and
Salty Microwave Popcorn – After I clicked “checkout”, I was shown an array
of items under a banner saying “Have you forgotten?”. I didn’t bother scrolling
very far along it, but this was one of the first items, and I thought it would
make a good snack. This felt like a treat for avoiding many unhealthy sections
during the ‘main shop’ and didn’t seem too unhealthy. This product may have
been chosen based on algorithms that looked at the other items in my trolley.   


Question Two

 A Major Branded-Goods
Manufacturer would be feeling positive about the development of virtual supermarkets, because
brands remain one of the easiest pieces of information to show online, and
consumers will rely on them more. Furthermore, firms can take advantage of
their size to overcome challenges from substitutes which will attempt to
compete on price.

Positives for Major Branded
Goods Manufacturers

Reasons for positives

Existing consumer trust

When consumers have less physical cues as to the quality of a
product, a brand name can be used as a proxy for quality. This can lead
consumers to choose a branded item over an unknown one, as they will have
more trust in the brand to deliver a quality product.

Greater importance of product placement – taking advantage of size
and existing relationships

In online shopping, having a product appear of the first page of
results is crucial to good sales. Major manufacturers have traditionally held
an advantage in gaining this type of placement due to the importance of their
relationship with stores, and ability to pay for that privilege.

Positive Consumer Response Brands

Grocery Shopping is a good example of routine problem solving. Consumers
often don’t bother seeking information on products, so their initial thoughts
on a brand can be crucial when making a snap judgement. Companies which have spent
time building their brand will enjoy more sales to consumers whose immediate
response to a brand is positive.

Consumer Familiarity with products

Online consumers find it hard to be certain of exactly what they are
buying as they don’t get to see the product. However, advertising and frequent
usage make many branded goods familiar to all consumers, meaning they have
less guesswork required when considering if the product is right for them


Question Three

Startup Virtual Store – Pros

Reason for Pro

Able to choose a brand name relevant to online shopping

A more relevant brand name will suggest the consumer benefits the
company will provide, and can be more distinctive than traditional stores.
This will mean consumers are more likely to remember it when deciding to
engage in online shopping, and more certain that it will do everything they

Can design infrastructure to maximise

Without any need to serve physical customers, new start-ups can design
their warehouses and other systems around the ability to quickly and
effectively fulfil customers orders. This is a significant advantage over physical
stores, where it takes personal shoppers a much longer time, as they are
slowed by layouts designed for customer needs rather than for workers.



Start-up Virtual Store – Cons

Reason for Con

Inability to fulfil all consumer needs

Only having online services will not work at all times for all
consumers. This will mean that even frequent users will still often use the
physical services of their competitors. Because of this, a virtual brand will
be unable to have an exclusive relationship with its consumers, making it
harder to create personal identification with the brand and intense loyalty,
and giving competitors easy opportunities to entice consumers back.

May seem less consumer-oriented

While taking advantage of economies of scale, and space- and time-saving
designs of warehouses, Virtual start-ups could potentially lose the human
touch, by having “packers”, who quickly fulfil orders rather than “personal
shoppers”, who wander the store for consumers to find the best product. Furthermore,
Virtual start-ups are more likely to centralise their processes for efficiency,
making them feel less local, and removing the option of picking up your order
from the store.

A fickle target market

Virtual Online stores would most likely choose to target the “generation
Y” and “millennials” demographics, as they are younger, progressive and open
age groups most likely to accept this business model. However the very
reasons these groups are likely to support a virtual store lead them to
leaving it. These groups are quick to change their minds, moving from one big
idea to the next, leaving older businesses high and dry. They also have
fierce tempers in response to mistakes, and are willing to ruthlessly drop a
brand to punish it if necessary. This could result in large investments going
to waste, as consumers quickly move on to other services.

Existing Physical Chain – Pros

Reasons for Pro

Industry Knowledge and Data Market Research

Existing chains have large amounts of knowledge of consumer needs, and
methods of selling. Furthermore, having physical customers is one of the best
ways to collect data on consumer behaviour. This gives existing chains an
advantage when designing their websites, and all aspects of the consumer

Long-Established Brand Equity

Because they have existed for much longer than virtual shopping,
physical chains have been able to spend much longer building their brand,
moving through the steps towards intense loyalty. Some of the value of the
brand can be transferred directly to online services, as consumers will have
the same level of trust, and desire to associate with
this brand regardless of the service being offered.

Community presence

Having a physical building gives these chains a much larger presence
in the community, making them a natural part of peoples’ day-to-day lives.
This means consumers will have to make less of an effort to change their own
routines when shopping with these chains Even when shopping online, people
will associate the products with those found at their local store, allowing
them to have a better sense of the product.

Existing Physical Chain – Cons

Reason for Con

Conflict between needs of physical shop and online shop.

The two aspects of shopping – physical and online – could be though
of as two entirely separate Strategic Business Units. However, they are somewhat
interdependent, as online shopping uses the resources of the physical stores,
and physical stores can be supported by revenue and customers brought in by
online shopping. This can make it difficult to make decisions about either SBU,
because it could have a large impact on the other.

Difficult to adapt infrastructure to changing consumer tastes. Supply Chain Relationships

Physical chains have invested huge amounts of money in their physical
stores, which weren’t designed with the needs of online shopping in mind. In
order to improve on the online shopping experience, they would need to make
further investments, which would be costly, especially because they would
have to be made on such a large scale. In contrast, virtual start-ups have
the opportunity to start small, allowing them to quickly adapt to changes.

No second chance for an established brand.

It is possible that a physical chain makes a large mistake in their
early years in online retail. The impact of such a mistake would be
devastating for their online image, because they are unable to hide as a
well-known brand. Furthermore, they are unable to have a second chance under
a different name, as consumers will still associate this new brand with the old
one, because of its links to the online store.

Possibility of spoiling physical brand

In trying to establish itself as an online brand, a firm may need to
make changes to its image to make it more amenable to a different target
market. However, this may result in a store distancing itself from its more
traditional physical consumers. This may mean that while online shopping was
a successful venture, it was only achieved at the cost of success in physical
shopping, minimising any overall benefits.