A Comparison Of Brick & Mortar Business ‘Food Town’ With Brick and Click Model Business Expert Answer

Executive summary

The distinctive characteristics of merchandise management, operating systems, and services delivered by brick & mortar businesses like Food Town will be compared with the new retail business who adopt e-commerce platforms. Food town is a traditional supermarket that sells a limited assortment of products over the past 20 years. The new supermarket is a multi-channel retailer run by a brick and click model. The benefits & challenges for food-town into adopting a business online will be discussed in the report. And then I will be analyzed about the use of new technologies that might affect the service quality of Food Town. Based on these factors, I advise Food Town to implement effective technologies in their supply chain management & going online for better customer service.

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Introduction

Food Town is a traditional brick and mortar supermarket and strategically situated in an inner suburb of Melbourne. David Cheng founded the food town independently and it has been opened over the past 20 years. Food Town sells the different kinds of food from the country’s top and private label brands as well as offers organic nourishment foods for both vegan and non-vegetarians. The retail strategies and e-commerce implementation for food town will be discussed in this report.

Q1. Overview: Describe the characteristics of Food-Town retail in terms of SKUs, variety, assortment, and services and compare with a Singaporean supermarket such as Fair Price.

The characteristic between food town and Fair Price is that food-town is the limited assortment supermarket while Fair price is the conventional supermarket. Food Town offers superior brand organic food, and they only carry around 2,000 SKU. On the other hand, Fair price has a large variety of products with a wide range of brands selection and the stock is over 30000-40000SKU. Thus, in terms of product variety, Fair Price can offer deeper assortment while food-Town offers limited or shallow assortments. As the space is limited, the product variety of food-town is 30-40 percent lower than conventional supermarkets like fair price. Moreover, Fair price has many outlets (traditional stores) across Singapore and practice multi-retail channels, so its service is modest. When food towns provide limited services there are no other outlet stores or online platforms.

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Q2. Service output: On the basis of generic supply chain service outputs (spatial convenience, lot size, waiting time and product variety) discuss how the competing retailers (Food-Town and the new supermarket chain) perform/will perform in the level of each service output provide to customers?

Since Food-town is a traditional retail store, it has a lower spatial when compared to new supermarket chains who will serve as one stop shopping & operate 24 hours. There is no waiting time for both supermarkets as customers can grab the items they need immediately. In terms of lot size, food towns have smaller inventory & lesser product variety compared to new supermarkets. Food-town only offers one variety of each item with 40-60% lower prices than supermarket chains which will have more varieties of single items with higher prices. The products from food town are sourced ethically while the new supermarket won’t trace if the products are sourced ethically or not.

Q3 Bullwhip effect: What is Bullwhip effect in supply chain? Why does it happen in supply chain? How does Food-Town supply chain deal with the bullwhip effect due to customer’s panic buying? What else could they have done?

The bullwhip effect is the built-up in inventory in an uncoordinated channel where retailers and vendors do not coordinate information about their supply chain activities. It is caused by delays in stores transmitting the orders and delays in receiving them, panic Buying or Overreacting to shortages, and ordering in batches rather than ordering in a number of small orders. To dampen the sudden spike in demand, Food Town has placed a purchase limit of panic buying items on certain items such as toilet paper. In addition, on introducing quota buying, Food Town can keep safety inventory to satisfy some part of the demand. This is only recommended under some conditions. The retailer can adjust its selling price, which is hiking up the retail price to discourage consumers. Food Town can also have a stricter return policy in order for customers to discourage hoarding and returning the items due to overstocking.

Q4. Return: Why are customers usually returns products?

Customers return products for a variety of reasons and it is different according to corresponding. It has become a great burden for retailers in the past decade and it has only increased so. Product returns in brick-and-mortar stores like Food Town can be as high as 10 percent of sales.

The following might be the main reasons for product returns at Food-Town.

Defective product

-Mismatch with customer’s need

-The product does not match its description

Expired produces
Change of mind
Vague product information
Misusing Liberal Return Policies
The competitor has the product at a cheaper price
Customers do not understand how to properly use the product

Q5. Merchandise management: How are merchandise management processes different for staple and fashion merchandise? Suggest to David how to manage staple and fashion merchandise.

there are two types of merchandise in food-town which David needs to manage according to the customers’ demand. David understands that it is a different process to manage staple & fashion merchandise. David needs to prioritize proper adjustments of staple & fashion merchandise with their prices & inventory levels so that he can offer the right quantity of merchandise, at the right display & right time to his customers. Staple merchandise normally includes regularly purchased products & daily essentials such as bread, butter, eggs, tissues, etc. Because of the nature of the staple products which have regular demand by the customers for a long period of time & also allow to monitor the buffer stock list easily to prevent the out of stock situation (Agarwal, 2018).

In terms of Fashion merchandise, where the demand for products such as electronic devices, appeals & accessories are unstable. It’s also difficult for a store to keep certain new fashion items with no sales record for a long period of time as they become outdated quickly according to the customers’ preferences.

The reason behind predicting demand for staple merchandise easily is that most of the items are basic needs throughout the extended period of time & aren’t defined by the seasonal or any other circumstances. Since Fashion items demand are unpredictable & unstable & only allow a short period of time to attract customers, David should manage by following the streamline of the fashion merchandise market.

Q6. Retail Channel: What will be the benefits and challenges for Food-Town to run the business online as well as through traditional brick-and-mortar channel?

Selling online becomes the fastest-growing grocery channel in Australia as the industry revenue has gradually been rising over the past five years. A traditional supermarket like a food town can attract more customers by offering a variety of retail channels. As purchasing online, customers don’t have to wait in -line to check out their products & they can easily access the information of the products & its availability online. As there are many options to provide customer demand from both online & physical stores, we need to make consideration upon which options will give the most benefits in return & fewer limitations. Firstly, adapting to online stores, Food Town will be able to offer larger assortments of merchandise than physical stores. Food town online can track down each customer’s preferences & collect data for marketing purposes. Moreover, they will have more time to consolidate inventory lists between order receiving & delivering.

But there are some challenges of going inline as some of the customers who order online might complain about the wrong items or false quantity of products or damage goods during transportation. As for the store inventory, David used to estimate the demanded quantity for each SKU & handed the orders by himself. With the new plan of online stores, I suggest to David that the food town needs to update the effective use of loT & bar-coding systems in its inventory & supply chain management. With the new online platform, we can add a wide variety of merchandise which are only exclusive for online purchases with the option of either picking up at stores or delivering to their places.

Q7. Omni and multi-channel: What are the benefits of omni-channel over multi-channel. Explain David the pros and cons of going for omni-channel through ‘click and collect’ or ‘click and receive’ for some of products and customers?

Omnichannel and multichannel retailing are two different retailing strategies but both channels are using multiple channels retailing. The difference between omni and multi-channel is that omni channel allows consumers to explore brands across multiple channels with various touch points and this whole experience is consistent & unified (Becker, 2016). One of the pros of going Omni-channel is that retailers have benefits of fulfilling their customers’ demand through physical & digital channels at any time. By integrating the inventory of physical store & online channels, allow the consumers to make in-store purchases for items that are only online exclusive as well as making in-store stock available on the web (Orendorff, 2018). But there is some barrier to having driven Omni channel throughout the entire business. Cost & complexity is another con of going omni-channel for brick & mortar retailers. (Moffat, 2016). A physical store like David might already have its customized in-store POS system & management plans in accordance with its internal business systems. Thus, the implementation of Omni-channel might interfere with some of its systems & require intensive investment in its technology.

However, David can implement some of the elements of omni-channel within their business such as service like click- collect for customers who want to check availability of the products online & purchase at the store & click & receive service especially for senior customers who can buy online & have groceries delivered to their place.

Q8. Location: Comment on this statement: “A poor location may be such a liability that even superior retailers cannot overcome the issue.” Based on the case information do you think Food-Town location is in a strategic location? Discuss.

Location is one of the major influential considerations in a consumer’s store choice decision. For example, the consumers are mostly shopping at the nearest supermarket from their homes. Location decisions have strategic importance as it can be helped to improve a sustainable competitive advantage (Levy et al, 2012). The retailers have to make extensive decision making in order to consider many factors and criteria when they select the store location. These factors include size, characteristics of the surrounding population, access to transportation, the availability of parking, property costs, and the length of a lease agreement as well as legal consideration such as zoning, sign, and license. The location needs sizable financial investment and it can also impact the retailer’s short and long-run planning (Berman,1995). The shop with the best location that can attract mostly to its customers and demote the competitor to occupy the second-best location. A good location may enable a retailer to succeed even if its strategy mix is mediocre. However, a poor location can be such a liability that even the most able retailers may be unable to overcome it.

I think Food-Town location is in a strategic location as the store is well-located in the inner suburb of Melbourne. Food-Town has its own buildings with its warehouse which isn’t attached to the mall or other stores. Food-Town has greater visibility and there are only a few restrictions of no sign and long trading hours. The rent price is moderate and the perfect car-parking space which allows to park up to 30 cars and is the only reserve for their customers. Since the lease is up for renewal, I would suggest David to renew the lease because of its strategic location.

Q9. Corporate social responsibility: How has Food-Town incorporated Corporate Social Responsibility (CSR) into their activities? Give two examples.

Corporate social responsibility is becoming a popular concert and widely used in the retail world. CSR in retail defines as the company takes responsibility in the voluntary actions which are ethical, social, and environmental impacts of its business operation. David participates in CSR and always consider the ethical and legal implications in his business decision making

(Nicasio, 2018). David grantee that his store only sells fair trade products at a reasonable price. David connects with his suppliers to make sure that foods are obtained from ethically responsible firms or producers who meet with the government policies like pay minimum salary or more than the prevailing minimum wage and provide other benefits for the workers such as onsite medical treatment. Moreover, Food town also uses environmentally friendly and biodegradable packaging and David supports charity and makes donations. For example- David donates Perishable unsold products to the nearest charity organization and he connects with suppliers by using applications and traces their products starting from farms.

Q10. Use of technology in service: What are different ways to reduce the wait time at checkouts? Discuss how the use of technology or self-service option can help David in some aspects?

Use of technology in service as a traditional store like food town is having complaints from regular customers mainly concerned with service quality such as the long lines at POS /check out areas. Nowadays, big retailers like Amazon introduce their new technology (Amazon go) as a cashier-less store where customers can just grab items & walk out without waiting in line at the cashier counter. According to (Pezzini,2020), the retail stores like David aren’t ready to implement cashier-free system, but there are some systems he can implement to cut queuing times such as get new reliable technology or set an Express lane for customers who have less than 10 items to checkout or add special counters for complex processes like products exchange or return. Huge supermarket chains like Fair-price are using self-service technologies in which customers can shop easily by scanning the barcode of the product & add to card as they shop & make payment in their mobile apps. The self- service option can help retailers like David in some aspects such as cost-cutting, rapid flow of customers, and improved service quality. It can also increase the customers’ shopping experience, satisfaction & loyalty. (Demirci,2013)

Q11. Competitiveness: How to make Food-Town more competitive with the new supermarket? What must Food-Town operations process be able to do particularly well in terms of cost, quick response, quality, flexibility and sustainability?

Cost

Food Town should regularly monitor its competitor’s strategy on pricing and should adjust accordingly without losing profit. Food Town should buy products in bulk and break the items down for smaller quantities for those who do not need the items in bulk. Food Town should also implement regular clearance sales to attract regular and non-regular customers and also to clear stocks that are withering nearing their expiry or unpopularity.

Food Town should open a customer service counter to quickly respond to customer complaints.

Quality

Food Town should maintain selling items which are natural, organic, vegetarian. They also source more locally produced items and create awareness for the community to buy local and shop locally.

Flexibility

Being a smaller shop, Food Town has the ability to be more flexible than larger grocery chains. Instead of conducting customer surveys yearly, Food Town should conduct surveys as quickly as possible and implement changes as quickly as possible to both catch up with the current trends and also satisfy customer needs immediately.

Sustainability

To have a sustainable and long-lasting business, Food Town should deep dive into what the customers really need. Personalization makes customers more welcomed. When marketing his store, he should create content more catered to his desired customer rather than a generalized. They should slowly open up an omnichannel approach, including online sales so that in the age where COVID-19 is happening and people fear going out, the store can make deliveries, satisfy customers and maintain cash flow.

Conclusion

In Conclusion, Food Town had been able to maintain a high-profits margin from its physical store. But it’s less technology investment, lesser product varieties & its bespoke operational management could be a huge issue in evolving retail business. They might also be losing out on market coverage of online channels as compared to its competitor who operates multiple channel retailing. However, Food-town gives major attention to its customers demand, for example, food-town offers superior products selection & ensures fair trade foods as food-town only purchase from ethical factories. Additionally, Food Town should adopt new technologies as in recent years, e-commerce & customer service will control retail business.

Reference

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[Accessed 23 April 2020].

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Levy, M., Weitz, B.A., and Beitelspacher, L.S., 2012. Retailing Management. (8th Edition), McGraw Hill, Irwin.

Moffat, B., 2016. Omnichannel vs. multichannel: What’s the difference and who is doing it?. [Online]

Available at: https://www.the-future-of-commerce.com/2017/09/13/omnichannel-vs-multichannel/ [Accessed 20 April 2020].

Nicasio, F., 2018. A Retailer’s Guide to Corporate Social Responsibility: 7 Tips and Examples of CSR in Retail. [Online]

Available at: https://www.vendhq.com/blog/corporate-social-responsibility-retail/

[Accessed 22 April 2019].

Orendorff, A., 2018. Omni-Channel Retail Strategy: The What, Why, and How of “In-Store” Shopping. [Online]

Available at: https://www.shopify.com/enterprise/omni-channel-retail-strategy