Background
Woolworth limited is a retail company, and it is one of the leading retail outlets in Australia. It comprises of several brands within the retailing industry that supply various products to consumers in Australia. The main brands include Woolworths, Caltex, Powerhouse, BWS, Safeway, Tandy, BIG W, Dan Murphy’s and Dick Smith Electronics (Randall, 2003). The retail outlets distribute food and grocery, petrol, electronics, liquor and general merchandise (Randall, 2003). It serves large customer base of approximately seven million every day since it offers high quality products at low prices. It has employed about 180,000 people within more than 3000 stores in Australia and New Zealand countries (McMillian, 2007). In Australia, it is among the leading private employers.
The company upholds safety of the products that it offers to customers in order to maintain competitiveness of all brands in the market. There has been observable increase in online retailing with many businesses shifting to online retailing (McMillian, 2007). Customers are ordering goods from overseas over the internet since they are sold at lower prices compared to local sales. In Australia, online shoppers from the rural areas constitute about 73 percent compared to their counterparts in the urban areas who constitute 69 percent. In the year 2011, the estimated number was about 72 percent, and it increased to 76 percent in the year 2012 (Randall, 2003).
Woolworth improved its online shopping by introducing software to allow online shopping using smartphone in the year 2012. This aimed at increasing the multichannel distribution throughout Australia. At Woolworth like many other businesses in the country, increase in online shopping caused a decline in the number of physical customers who go to shop at the stores. This has been enhanced by the lower prices of goods purchased online and convenience in obtaining the goods (Randall, 2003). Customers are able to save extra costs incurred during physical shopping such as transport costs because online shopping includes delivery of goods to customers.
The company sales doubled after the period of installation of the sales chain management system was over. This resulted from the increasing number of online shopping customers. The company CEO came up with plans to expand the sales of the company through online portal to African countries. According to Randall (2003), this is now the way to go for the companies that have not adopted online selling. People are getting busier and online shopping proves to be more convenient way to shop and thus saving time used for the traditional physical shopping.
Issues at Woolworth
Woolworth limited has been facing a lot of issues in its business operations in the country. The issues have affected Woolworth operations in the business environment for a long time. They need to be addressed in order to maintain its business operations smoothly. One of the key issues in Woolworth limited was the adoption online shopping by consumers. Initially, online shopping limited the company’s sales volume and competition capacity. They perceived that consumers of various products especially groceries want to have a feel of the product before paying (McMillian, 2007). Management also felt that moving on to online shopping would reduce their competitive ability in physical grocery stores. This is because of the high costs required to initiate online shopping and costs of offering services such labor, packaging and delivery. They argue that these costs are not present in the current system of physical retailing, and this result to low prices for goods (McMillian, 2007).
However, the large retail shop was experiencing a lot of problems in acquiring space for retail stores. The number of customers also increased considerably that even the stores required expansion to increase space for more goods. For example, there was an increase in full-line supermarkets of Woolworth over the last 20 years from 2400m2 to 3200m2 (Randall, 2003). Apart from this, there is observed need for increased online shopping in Australia. The rural sector records the highest number since goods sold over the internet are cheaper.
This and other issues should make the company adopt online shopping. The management should understand that online shopping requires high initial capital for establishment, but brings considerable savings in the long run. Consumers have a high adoption of current technology and will move to the area that proves convenient to them in terms of costs and time saving. Therefore, they are shifting to online shopping (Pitrone, 2007). This will reduce the number of customers doing physical shopping which will reduce the need for more stores and expansion of existing ones. Reduction of transaction costs by adopting online shopping will lead to low prices and form a solid base for competition with both price and technology.
One of the issues is based on the regulatory procedures outlined by the government. Some of the regulatory procedures are duplicated, and they bring no benefit from the sales made (McMillian, 2007). Various states in the country have been developing their own laws which have resulted to this duplication. This results to law inconsistency between the different states. For example, Queensland refused to adopt the new Model Food Act (Pitrone, 2007). The act covered the hygiene and food safety in the food industry, and it was a requirement that all industries and retailers were to act according to the law. In some of the states that have adopted the law, some do not enforce it leading to other variations (Randall, 2003).
Customers of Woolworth expect identical rules and regulations across all company outlets in the country, but how can this be done? The inconsistencies of the laws cause all the trouble and affect the quality of customers’ final product. This has also caused disparity in the products across the different outlets of Woolworth located in different states (Pitrone, 2007). The regulation acts should be formulated nationally, implemented and enforced from the national level to cover all the areas uniformly. This will bring uniformity of products offered by Woolworth across all outlets in all the states. It will allow offering of uniform products at almost uniform prices both in physical and online shopping.
Another issue facing Woolworth limited is on supply chain management. Woolworth is adopting the supply chain management with an aim reducing cost of supply of products. The supply chain management is about supply of physical goods and flow of information between various branches of the company. Adoption of supply chain in a company automatically makes it adopt information management as it helps in faster flow of information from one outlet to another (Bidgoli, 2010). According to Reidenbach and Goeke (2006), supply chain management using electronic means uses various forms of transactions such as Electronic Data Interchange (EDI), Bar Code Technology and Radio Frequency Identification (RFID). Bar code technology and RFID are used in identifying items electronically using codes called bar code (Bidgoli, 2010). They are advantageous in saving time in identifying and tracing of items in a store.
Woolworth has adopted the EDI system in its operations which links vendors, stores and distribution centers. The EDI system adopted by Woolworth has helped in improving online shopping within the various stores. According to (Mahadevan, 2009), EDI helps link production, order processing, transport, finance and inventory management departments in a firm. This allows sharing of information between these departments. EDI helps in reduction of costs especially when conducted online through the internet. The adoption of new technology of supply chain management by Woolworth will connect vendors and stores to one point. This will reduce distribution centers to 9 down from 31 operating with only 2 national distribution centers (Randall, 2003). Some of the costs saved include handling costs, transport, storage costs among others. Furthermore, in order to make the SPM more efficient, Woolworth is seeking collaboration with Wal-Mart and BIG W. These retailers use Every Day Low Prices system (EDLP) which enables them to sell their products at low prices (Pitrone, 2007). Woolworth wants to adopt this system which will improve the efficiency of supply chain management.
Transport management system (TMS) has also been adopted by Woolworth under the supply chain management to help in reduction of costs. This will provide better grounds for bargaining in various stores leading to lower prices while maintaining the quality. TMS also help in reducing delivery time for products in different stores. Other supporting systems to supply chain management include AutostockR computerized system used in managing stocks in the shelf to avoid excess stocks. StockSmart used in forecasting and inventory replacement at distribution centers (Mahadevan, 2009). It is connected to AutoStockR. Another one is WOWlink used to provide EDI though the website to allow online shopping. Generally, supply chain management will offer enormous savings in the company in sections covered by the system leading to an approximated $501 billion savings after full implementation (Pitrone, 2007). Implementation period is over a period of eight years. Shareholders benefit from increased dividends per share while customers benefit from low prices of products in the store.
Challenges Facing Woolworth in their Current Online Operations
Since the launch of the online channel system by Woolworth, a number of challenges have been faced. These challenges arise from both the supply side and the demand side of the chain of distribution. One of the challenges that have faced the company is the slow rate of up take of the online offers to retailers by the company (Coughlan, Anderson and Stern 2006). Therefore, the number of customers who have been involved in the online purchase in the company’s e-commerce portal has been quite below what the management had anticipated before the launch of the system.
Another challenge that the company faces in its online operations is the reluctance of most of its customers to embrace the idea of online operations. The number of Australians involved in this form of transaction is low as compared to the number of customers who use similar systems in other countries (Cohen 2005). A number of reasons can explain this behavior. Most Australians still prefer to use the traditional mortar and brick shopping over online shopping due to their need to test the quality of any given product by touching and feeling it.
There is also the challenge of delivery of items acquired through online operations due to lack of a mail order that is strong enough to support the system. The mail order system is one of the factors that are required to enhance online systems. Therefore the lack of it can lead to low development of the system (Rolnicki 1998). Another challenge of online system that has faced Woolworth in its online operations is the availability of other retailers who are located conveniently close to customers. These retailers provide adequate packing space for the customers and therefore, make shopping to be convenient to these shoppers. The proximity of the retailers to customers and the fact that the mail order system in Australia is not well developed, poses a challenge to online operations for Woolworth and especially in e-commerce section.
Another challenge that has faced Woolworth in the implementation of their online channel system involves the tradition of the Australians who regards a visit to a shopping mall as an enjoyable experience.
For this reason, most of them prefer to visit the brick and mortar shopping malls instead of the virtual shopping malls in the internet, as a way of getting a social experience from this activity (Dent 2011). Another challenge that Woolworth has faced in the implementation of the online channel system arises from the geographical factors in Australia which makes the cost of shipment of goods purchased online to be high.
Until recently, the country delivery systems have been behind as compared to other countries where online channel systems are well developed. Therefore, it was not possible for a customer to track down the movement of his goods purchased online. However, this challenge has been solved by application of advanced communication technology in Australia (Cohen 2005). The costs of implementing an online facility to serve customers efficiently are high. Therefore, a given minimum number of customers using online portal is required in order to justify the costs incurred in the development of necessary infrastructures. This has been a challenge to Woolworth since the number of Australians willing to participate in the online channel system has been low for a long time. The meaning of this is that, the company has incurred a lot of costs compared to the benefits it has recouped from the project.
Another challenge that has been facing Woolworth in the implementation of the online channel system is the problem of channel conflict or disintermediation. Some of the wholesalers that supply Woolworth with retail items have been involved in a direct trade between customers and themselves (Sheppard 2012). This therefore has led to a low number of overseas customers transacting online business with Woolworth stores in Australia. In term of channel conflict, Woolworth in Australia has faced challenges from other stores elsewhere in the world in its online channel system. This has resulted into a competition between Woolworth in Australia and other subsidiaries of Woolworth across the globe. This competition is considered unhealthy since it has the capacity to cause conflict and a strained relationship among members of the chain company.
Addressing Issues and Challenges
To successfully implement online channel system, a company must look for ways to address issues and challenges that are bound to arise. The major issues that arise in the implementation of online channel system include privacy, ethical and security issues. These issues need to be addressed before a company can go online in its business operations. In order to address the issue of privacy, it is appropriate to develop an online shopping portal that requires all participants in the online channel system to register before they can be allowed to participate. This will reduce chances of an order by a given person from being made available to a different person and therefore, compromising the privacy of a person (Aaker 2011). This has been the case with the Woolworth stores in Australia which require a person to register and then proceed with the transaction. Once a person has registered, an account should be created for the person. Through this account, a customer can keep record of his orders which will make it easy for him in future transactions with the company.
The information provided by a given customers should only be used for the purpose of shopping. This information should never be made available to the third party for any purpose without the consent of the customer. To address the issue of security, the online channel should provide secure means through which payments can be made. Storage of critical information such as credit card number on the online system should not be allowed (Dent 2011). This will make it hard for that information to fall in the wrong hands in case of unexpected information leakage happens. Customer service line should be put in place to handle promptly any security issue that customers may raise.
To address ethical issues that may arise in the transaction of online business, all information provided by customers should be used for the intended purpose only. It should not be used for purposes that may result in detrimental effects on the customers. At no time should this information be made available to the third party without the consent of the owner. To address the issue of delivery of product purchased online, specific areas should be established where all deliveries should be made (Rolnicki 1998). A customer in this case should provide the name of the most convenient place where his delivery should be collected.
All delivery charges should be included in the purchase price of items. This is necessary in order to avoid confusion on the party that should meet such costs. To increase the number of customers involved in the online channel system, a business needs to show its client how they stand a better chance of improving their position by taking part in online activities, rather than the brick and mortar shopping (Dent 2011). To counter the problem of the culture of the people, a business should come up with a way that is able to convince customers that doing their business online can also enhance their way of life. For example, Woolworth can also show customers in Australia that they can still have a great experience by transacting their business online. All customers should be assured of their safety and convenience in product delivery. Woolworth in Australia has been able to address most of these issues.
Reference List
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