Who will benefit in the online shopping marketplace?

By | February 15, 2016

Online shoppingThe traditional independent grocery store may be almost consigned to history, but the notion of independent suppliers is kept alive in the virtual world. The established supermarkets that once brought us convenient one-stop shopping in the form of large out of town super stores now have to compete with a growing number of small, independent online retailers. So what is happening in retail and how is the market developing?

Results over the 2015/16 festive period showed online shopping generating bigger sales than ever and real struggles for well-known grocery retailers in the UK such as Tesco and Waitrose. Does this mark the demise of the dominant supermarkets; are we all going online – maybe not? Certain goods that you find in many shopping baskets such as  bread, fruit, vegetables maybe even wine and beer  are ‘inspection goods’; we like to touch, smell and even taste these goods before we buy them. In addition to this, many of these goods are perishable and so need to reach the consumer quickly and in perfect condition. To date these characteristics have, for the most part, protected grocery retailers from alternative purely online formats; but things are changing. In the UK companies such as Riverford Organic are providing fruit and veg online. Similar organizations can be found in China with the attractive offer of same day delivery. Improved logistics and sophisticated technologies are seeing the rise of the independent online retailer.

Should we rejoice or mourn this potential change? Now that it is no longer necessary to have a physical presence, suppliers can find it far easier to set up their own stores, and small independents can once again find a market using trading platforms like eBay, Amazon or Taobao in China. As such the internet could potentially send retail full circle with the easily joined market place creating local cloud based grocery retailers.

There is a need to be cautious though. When the traditional local grocery stores closed, for many households the purchase of healthy food required a trip in the car to out of town supermarkets. Fine for those who had a car, not so great for those without. Similarly a shift online serves only those who have access to computing facilities and an internet connection. Further, policies to promote healthy diets are premised on making options available, but where it is easy to click only on the less healthy options the presence of more nutritious alternatives could be negated.

What is certain is that within the UK, and beyond, the retail landscape is changing. What was unimaginable ten years ago, namely the rise of small, independent companies selling fresh produce, is now happening. This will cause concern not only for the established grocery retailers but also for the competition authorities as they try to understand who exactly will benefit from the more open market place.

About Simon Rudkin

Dr Simon Rudkin is a lecturer in Finance and Economics at the University of Bradford School of Management. He previously held posts at Xi’an Jiaotong-Liverpool University in China and at the University of Manchester. He completed his PhD in ‘The Impact of Supermarkets: Theoretical and Empirical Issues’ at the University of Manchester.