IMAT5211: E-commerce Advantages in the UK Food Industry - Report

This report delves into the advantages of e-commerce within the UK food industry, examining its impact on market access, overhead reduction, and customer intelligence. The study addresses a research question regarding the benefits of e-commerce, highlighting the importance of online platforms for business growth. It provides an overview of the UK food industry, including its value, consumer expenditure, and reliance on imports, setting the stage for an analysis of e-commerce's potential. The report discusses the advantages of e-commerce, such as increased market reach and reduced costs, while acknowledging potential disadvantages like website costs and competition. The study employs a pure research method, analyzing existing market data and secondary research papers to provide a comprehensive understanding of e-commerce's role in the UK food sector. The report also includes figures that represent the gross value added of the agri-food sector and consumer expenditure in the UK. This analysis provides insights into the growth of the food industry and the benefits of e-commerce. The report also analyzes the current market trends in the UK food industry and provides a detailed discussion of e-commerce's impact on the industry.

E-COMMERCE
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Table of Contents
Introduction......................................................................................................................................3
Part A...............................................................................................................................................4
Part B...............................................................................................................................................6
Conclusion.....................................................................................................................................14
References......................................................................................................................................15
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Introduction
The term e-commerce is referred to as electronic or internet commerce which denotes selling and
buying of services and goods through the use of internet and transferring money along with data
for executing the respective transactions. It is considered as the process of doing business upon
large networks of electronic like internet. The website of e-commerce allows the customers for
posting the comments in relation with services and products. The development of e-commerce is
highly important within the recent competitive environment. Hence, the present study focuses
upon the concept of e-commerce within food industry of United Kingdom.
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Part A
Regarding the analysis of the problem, a research question has been synthesized for solving the
respective research problem.
Research question
What are the advantages of using e-commerce within the food industry of United Kingdom?
Purpose of the research
The main purpose of this assignment is to discuss the advantages of using e-commerce in the
food industry of UK. However, based on the analysis of the research papers, the gaps of the
literature have also been identified as well. These gaps denote that the industry of food within the
markets of UK are big whereas, are known to serve to their prospect customers as the food
organizations seems to operate in a physical format. Thus, the main aim of this study is to reach
to their potential customers through the use of e-commerce.
Rationale of the study
The study is mainly concerned with the advantages of using e-commerce business for the food
industry of UK market. 64% of the successful organizations within the whole world are known to
develop strategies related to e-commerce. Most of the customers want streamlined means of
browsing, ordering and selecting food items for themselves. Furthermore, connecting with the
customers through the use of social media platform may help in improving the accuracy,
increasing sales and boosting the satisfaction of buyers (Laudon and Traver, 2018). With the
recent changes in the world, some of the food organizations within UK have adopted the
particular service of using e-commerce regarding the demands of the customers but, on the other
hand, some of the companies are still seen serve to the local people as they operate physically.
Hence, this study can highlight the advantages of using social media platform or rather online
platform for food delivery to the customers that in turn, can benefit the food industry of UK.
Many food companies in the UK are not able to enjoy the rapid growth of the particular industry
as; most of the companies are unable to reach to their potential customers for the reason of not
utilising the online mode of their business (Hallikainen and Laukkanen, 2018). This in turn,
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results in being less profit for the organizations. There is a great importance of online business
that is the use of e-commerce for the organizational growth and profit. This also helps the
companies to be available to their customers and provide services at any place. E-commerce has
an important role to play within the food and beverage industry of UK. in the recent days,
customers want both immediacy and accuracy that eventually has helped in fuelling the trends
such as meal kit services as well as online ordering along with delivery through grocery stores
(Pei and Yan, 2019). According to the reports of Boston Business Journal, 36% of beverage sales
and speciality food are considered to come from the platforms of e-commerce. This helps in
producing fresh and packaged goods and also the ready-to-make meals are known to be delivered
in the front door of the customers. Through this process, industries can try to step up with
preferences as well as requirements of the customers.
Hence, the use of e-commerce and online platform in the food industry of UK may enable the the
respective industry to enjoy its overall revenue and can help in bringing the profit of the
organizations while serving well to the customers (Schniederjans et al., 2018). The present
research highlights various aspects based on e-commerce that might be used by the food
companies for providing service to the customers. Thus, the present study emphasizes upon a
research method that is pure research, where different literatures are to be studied for a critical
analysis of advantages and usage of online platform and e-commerce in business of food
industry. The factors that are involved in the particular research method are mentioned below:
 Collecting information through the research of existing market within the food industry of
UK in addition with the industrial report of UK food market
 Collecting information through the existing papers of secondary research to provide a
concrete discussion
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Part B
Food industry of United Kingdom
The food industry of UK is a complex and global collective of the diverse businesses, which
supplies food that are consumed by the population. This also involves agriculture, manufacturing
and suppliers as well. UK is termed as a growing country for its food industry as, the customers
of UK are known to spend 230 bn GBP for various food items (Allen et al., 2018). There are
strong demands regarding the new products of food in the UK market. 8500 numbers of new
products are known to be added within the supermarkets of UK in each year. 743 million
customers of Europe seem to be within the reach of UK for its location, distribution
infrastructure and strong supply chain as well. UK has developed opportunities for supply chain
of products involving dairy, pork and chicken. The catering industry of Uk offers growing
opportunities regarding drink and food businesses. It has also led to a rapid growth for the
international companies.
Figure 1: (Gross value added of agri-food sector of UK)
Source: (Kucukvar et al., 2019)
The agri-food sector based on UK has contributed 6.4% or rather 113 billion to the National
Gross Value Added in the year of 2016. GVA of UK food sector has been increased by 2.7%.
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Thus, the total productivity of the UK food chain is seen to rise by 1.9% within the year of 2015
and 2016. However, productivity for the wider economy is known to remain unchanged. TFP
within the food industry of UK is considered as the indicator of effectiveness and
competitiveness of food industry. Increasing in TFP denotes that the industry improves its
competitiveness. In the year of 2016, productivity of food wholesaling has been increased by
2.8% whereas; catering has been decreased by 1.1%. The respective calculation depends upon
the reliable data for costs and business sales, employment through on price and industry. 6700
small, micro and medium sized enterprises were found in the drink and food sector along with
the turnover of 18 billion and 120,000 numbers of employees in the year of 2017 (Zhou et al.,
2018).
Within the food industry, the SMEs have been accounted for 97% of the businesses, 19% of the
turnovers and 28% of employment as well. According to Gross Value Added, the other products
of food were termed as the largest category consisting of a value of 5.8 billion in 2016, that
contributed 20% of the total drink and food manufacturing GVA. the functional market of food
within UK creates products along with added health ingredients and is worth of 1.2 billion GBP
in the year of 2014. It has also been developed annually by 13% through 335 million GBP in the
year of 2000. Hence, the food industry of UK is developed and large sector consisting of annual
sales for GBP of 10.9 billion.
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Figure 2: (Consumer expenditure of UK)
Source: (Davis et al., 2018)
There is an expenditure of customers upon food industry of UK. The total expenditure of
customers in drinks, food and catering has been seen to continually rise through 6.1% in the year
of 2017. However, the food expenditure has increased by 5.1%. The expense of customers upon
food shopping is also known to increase by 32%. Furthermore, it has accounted 47% for
spending within this sector. On the other hand, customers have spent 28% on catering and it has
also increased by 34% as well (Lin et al., 2019). UK does not produce sufficient food and hence,
it imports food by 48% that are consumed by the population. Thus, based on the food industry of
UK, it depends upon both imports as well as thriving sector of agriculture for feeding itself and
to drive an economic growth. Hence, production of more and more food products can enable the
food industry of UK to make use of online platform or rather e-commerce to attract more and
more customers and provide them with the best service as well.
Thus, regarding the above discussion, a synopsis based on the food industry can be drawn that
enables the researcher for understanding the benefits and scopes for implementing e-commerce
in the respective industry. Therefore, the food companies that are located in the interior may
come up with new kinds of food and should use the online service to make the customers aware
of the particular company (Pagès‐Bernaus et al., 2019).
Advantages of using e-commerce within the food industry of UK
E-commerce has been known to reshape the modern place of market in the current days.
However, the respective form of trade brings its own advantages and disadvantages upon the
traditional methods. Thus, for businesses, it is termed to be important to develop one's own
perspective for true value of online business to customers. Based on the top benefits for starting
online business or e-commerce business can eliminate geographical limitations through attracting
new base of consumers with the use of search engine visibility (Lei et al., 2018). It also helps in
maintaining a lower cost for the maintenance along with rent as well as high capacity of goods
along with deliveries. However, there are certain core disadvantages of making use of online
business such as, loss of personal touch for physical retailers, delay of services or goods delivery
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along with limiting the availability of merchandise due to certain goods which may not be sold in
online business. The advantages of e-commerce are mentioned below:
Easy access for market: through the use of certain ways, market access for entrepreneurs can be
easier. The online market places allow people for setting up simple shops and sell their products
in minutes. For instance, the food companies that are located in the interior or outskirts of UK
market, the use of e-commerce can help the companies to make the customers aware of their
food items and can lead to profit as well.
Reduced overheads: Online marketing can help in removing the expensive need of retail
premises along with the staff of customer facing. This allows investing in a better customer
experience and marketing within the website of e-commerce. In case of UK market, small start-
up companies may reach to the volumes of viable sales. Regarding the smaller brands, it can be
challenge for making the customers know about the same whereas; with the use of e-commerce
the small companies can access their potential customers by providing them a best experience
and quality food. This can also help in getting access for diversified markets as well.
Customer intelligence: This denotes the ability for making use of certain tools for online
marketing for targeting new base of customers along with the tools of website analysis for
gaining insight about the needs of the potential customers (Lin et al., 2018). However, through
the use of e-commerce, food companies can also gather reviews about their services and food
quality along with the taste. This can help the companies to measure their performance and go
well in the market.
Apart from these, there are certain disadvantages and threats for the use of online marketing and
e-commerce within the food business. These disadvantages are mentioned below:
Cost of website: Opting for an online marketing can cost the companies for the websites. This
factor involves many costs such as designing, planning, hosting, creating, maintaining and
securing a professional website of e-commerce. Thus, when the companies expect a larger
volume of sales, the website of e-commerce does not result to be cheap. For instance, the
companies in UK that operates physically may not invest much for online websites which in turn
might decrease the profit of the respective companies.
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Legal issues: Maintaining the laws for e-commerce business can act as a challenge for the
companies especially for the small and medium sized organizations (Zhao et al., 2018). As there
are additional rights of customers that are attached with the online sales, companies need to plan
for coping up with the same. For instance, there are some types of customers such as, after the
delivery of food, they tend to make abrupt demands through giving a bad review about the food
and this makes the company to refund the money that was taken from the customers. Hence,
there must be an alternative solution for these types of issues.
Trust of customers: It may be difficult for gaining the trust of customers and also to establish a
brand name (Turban et al., 2018). This can be more difficult especially without operating a
physical business along with the track record and also without any face to face interaction within
the sales staff and customers. Thus, costs, and setting up of a good system of customer service
needs to be considered being as the part of online offering.
Based on the above analysis, it has been found that United Kingdom consists of an e-commerce
market but has not expanded yet. In case a start-up company wants a share within the retail
market, it needs to compete with other big organizations within the food industries. Using limited
space, most of the retailers tend to provide popular brands. E-commerce is known to change all
these respective factors. In the recent days, a new company can directly go for online outlet.
However, the customers are now known to take interest within online shopping (Dai et al.,
2018). For instance, as per the organisation of Mintel, the market of online grocery for Europe is
considered to be in infancy but, on the other hand, is growing at a faster rate. In the year of 2016,
40% of the Spanish customers brought online groceries. According to the recent survey through
KPMG, it has been found that many executives of retail companies and their customers provided
the information that competition through new market entrants has been an external threat for the
business whereas, 33% people cited the increase of customer preference regarding online
shopping.
The company of McKinsey has been found to predict that most of the grocery retailers in many
markets may invest within online retail in the future. It also states that other than UK, European
sector is also stuck into a vicious cycle that denotes poor supply is known to drive poor demand
that eventually drives the poor supply. Nevertheless, there has been a latent demand within the
shoppers and the French customers who never had bought groceries through online shopping.
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However, the population accepted that they can begin to access online shopping of groceries if
the services are made available to them. There is also an opportunity for some small and novelty
ingredients of food along with the online services of meal kits such as Marley Spoon, Hello
Fresh and similar other companies deliver the plans of meal as well as the recipe guidance with
ingredients to the customers directly. The customers of these respective companies enjoy
experimentation and create unusual meals; hence, ingredients that may not consist of enough
volume for their presence within the supermarket may find a place for nationwide delivery
service.
Apart from these advantages of e-commerce, there are certain more advantages that help the
customers, retailers and the food organizations to grow and develop. These advantages are
mentioned below:
Advantages for the organizations
With the use of e-commerce, companies have the possibility to expand their market into the
international and national markets along with less capital investment. This helps the
organizations in providing better services to the customers. It also helps in simplifying the
processes of business and in making them efficient and faster.
Figure 3: (E-commerce development)
Source: (Goolsbee and Klenow, 2018)
Based on the benefits of the organization, the companies are considered to attract and reach new
base of customers. Within the traditional market, retailers are seen to run most of the businesses
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along with the personal relations, references and branding. Availability is yet another advantage
for the organizational context to have an e-commerce website. The traders of e-commerce
generally keep an eye over their buyer’s behaviour and habits and also customize the offerings
for suiting the requirements of the buyers. Online stores are not at all restricted within the
geographical boundaries and provide a platform for selling the services and products of the
organizations across the globe along with targeting the potential customers instead of any
restriction and location limit (Hu et al., 2018). Hence, managing and creating an online store is
considered a cost effective rather than a physical store as, it is known to optimise the cost of rent,
land, electricity and water as well.
Advantages for the customers
Based on the market research report (2018), annual growth within the food industry of UK
market has been increased by 3% as compared with the other financial years. The food industry
of UK has achieved a strong performance on online shopping of food. Hence, through the above
discussion, it has been observed that the customers encourage online food services and prefers
the food at doorstep. Within the respective context of implementation of online platform for the
food companies of UK, the companies can avail the online services to the customers besides their
geographical location. It has certain advantages for the society as customers do not have to travel
for purchasing any product. E-commerce helps to reduce the product cost so that, less affluent
individuals can also afford such products.
Advantages for retailers
According to the e-commerce analytical report, online business not only provides a good service
to consumers, but also the online businesses indulge it with other organizations. One of the
advantages for the retailers is low cost of finance as e-commerce business consists of a lower
cost for start-up. The retailers also comprise of certain upfront costs like store design, store signs,
sales equipment, buying inventory and similar others that are minimised in online platforms for
food service (Hwangbo et al., 2018). Food industry of UK can benefit through the use of e-
commerce business as it allows reaching to the potential customers. However, it can also provide
services to the retailers as well like the small roadside shops of fast food and the food parlours
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