A Santa Monica supermarket supplies customers with a mix of tangible products and intangible services that enables them to gather a large variety of foodstuffs (and often other goods) from a single retail location. There are numerous factors that affect customers’ choice of a store for buying groceries, but the classic definition of strategy suggests that the two fundamental methods companies can use to capture customers are offering a low price or differentiating their products and services.
Although grocers may have options when determining which strategy to pursue in an effort to capture market share, the prevailing strategy in the industry has been low prices. The low price strategy has manifested in several distinct ways. One approach is through warehouse clubs that compete by offering prices that can be up to 26% lower than conventional supermarkets but that requires customers to purchase in much larger than traditional quantities. Another low cost alternative for consumers is the ‘superstore’ that combines a grocery store and a large full-line discount store into a single facility. However, for customers who already do not enjoy trips through the store to get the goods they want, bigger is not always a better alternative. An alternative to the low price strategy emerged in the late 1990s with the advent of e-commerce, which allowed grocers to take advantage of a new technology that provided easy ordering of groceries for customers, via the Internet. This allows grocers to utilize an alternative to the low cost strategy by pursuing a differentiation strategy that competes on convenience for the customer by eliminating the need for the customer to physically move through the store selecting their desired items.
However, Internet Santa Monica supermarket sales represent an especially challenging form of e-commerce, for several reasons: groceries are tangibles that prevent the entire business transaction from occurring electronically; groceries are perishable so customers frequently wish to examine and select the products themselves, especially items such as meats or produce; and because of the tangible and perishable nature of the goods, the grocery supplier will most often be local, which may limit market size. Fortunately, despite these substantial barriers, some customers appear to have a strong desire for online ordering. Because grocery shopping is perceived by many to be an unpleasant, inconvenient or physically challenging chore, it provides the opportunity for grocers to create customer value by providing customers with greater convenience.
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