Opportunities and Drawbacks of Extended Opening Hours versus Online Shopping in the German Food Trade

Schäfer, Martina

Opportunities and Drawbacks of Extended Opening Hours versus Online Shopping in the German Food Trade

On the Basis of a Consumer Behaviour Analysis

von Martina Schäfer (Autor:in)

BWL - Handel und Distribution

Zusammenfassung

Inhaltsangabe:Abstract:
This report analyses whether the German market is ripe for online grocery shopping or whether German food retailers should continue fighting for their right to extend the opening hours. The research question of this project is:
Opportunities and drawbacks of extended opening hours versus online shopping in the German food trade on the basis of a consumer behaviour analysis
Both secondary and primary data have been collected. Secondary data has been essential in providing background information for this project. The literature mainly gives information about research methods, concepts of market analysis and consumer behaviour, the German market and e-business.
Primary quantitative data has been collected implementing the concept of judgement sampling to give indications of trends and attitudes in the German population. 152 German supermarket customers have been interviewed face to face. In addition primary qualitative research has been undertaken with the help of four in-depth interviews with experts from the supermarket industry.

Inhaltsverzeichnis:Table of Contents:
1.Introduction6
1.1Objectives8
2.Research Methodology10
2.1Primary Data10
2.2Secondary Data11
3.Scenario Analysis12
4.The German Market15
4.1The German Law of Opening Hours15
4.2Definitions16
4.3Extension of Opening Hours17
4.4Porters Five Forces Analysis19
4.4.1Threat of Entry19
4.4.2Bargaining Power of Suppliers20
4.4.3Bargaining Power of Buyers20
4.4.4Threat of Substitutes21
4.4.5Rivalry among Participants21
4.5SWOT Analysis of German Market for E-grocers22
4.5.1Strengths22
4.5.2Weaknesses24
4.5.3Opportunities26
4.5.4Threats27
5.Online Issues28
5.1General Advantages and Disadvantages of Online Shopping28
5.1.1Benefits of e-commerce28
5.1.2Problems of e-commerce28
5.2Factors influencing Online Shopping in Germany29
5.2.1Internet Familiarity30
5.2.2Credit Card Use31
5.2.3At Home Access31
5.2.4Convenience32
5.3Requirements for becoming an e-grocer33
6.Primary Research Findings36
6.1Quantitative Survey36
6.1.1Frequency of Grocery shopping37
6.1.2Preferred Shopping Time37
6.1.3Frequency of Internet Usage38
6.1.4Amount of Internet Usage38
6.1.5Types of Internet Usage39
6.1.6Items Bought Online39
6.1.7Non-Online Groceries40
6.1.8Major Reasons for and against the Extension of Opening Hours41
6.1.9Major Reasons for and against Online Grocery Shopping41
6.2In-depth Interviews42
7.Consumer Behaviour […]

Leseprobe

Inhaltsverzeichnis

ID 8360

Schäfer, Martina: Opportunities and Drawbacks of Extended Opening Hours versus

Online Shopping in the German Food Trade - On the Basis of a Consumer Behaviour

Analysis

Hamburg: Diplomica GmbH, 2004

Zugl.: Hochschule Bremen (FH), Diplomarbeit, 2003

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Abstract

This report analyses whether the German market is ripe for online grocery

shopping or whether German food retailers should continue fighting for their

right to extend the opening hours. The research question of this project is:

Opportunities and drawbacks of extended opening hours versus online

shopping in the German food trade on the basis of a consumer

behaviour analysis

Both secondary and primary data have been collected. Secondary data has

been essential in providing background information for this project. The

literature mainly gives information about research methods, concepts of market

analysis and consumer behaviour, the German market and e-business.

Primary quantitative data has been collected implementing the concept of

judgement sampling to give indications of trends and attitudes in the German

population. 152 German supermarket customers have been interviewed face to

face. In addition primary qualitative research has been undertaken with the help

of four in-depth interviews with experts from the supermarket industry.

The findings suggest that German consumers are not ready for online grocery

shopping yet. However, secondary and primary data indicate that online grocery

shopping has a strong potential to develop in Germany during the next years.

Nevertheless, retail trade is ripe for the first step towards progress the

extension of opening hours. In June 2003 the first extension of opening hours

on Saturdays was already implemented.

TABLE OF CONTENTS

1. Introduction ... 6

1.1. Objectives... 8

2. Research Methodology... 10

2.1. Primary Data... 10

2.2. Secondary Data... 11

3. Scenario Analysis ... 12

4. The German Market... 15

4.1. The German Law of Opening Hours... 15

4.2. Definitions ... 16

4.3. Extension of Opening Hours ... 17

4.4. Porter's Five Forces Analysis... 19

4.4.1. Threat of Entry ... 19

4.4.2. Bargaining Power of Suppliers ... 20

4.4.3. Bargaining Power of Buyers... 20

4.4.4. Threat of Substitutes ... 21

4.4.5. Rivalry among Participants... 21

4.5. SWOT Analysis of German Market for E-grocers ... 22

4.5.1. Strengths... 22

4.5.2. Weaknesses... 24

4.5.3. Opportunities... 26

4.5.4. Threats... 27

5. Online Issues... 28

5.1. General Advantages and Disadvantages of Online Shopping... 28

5.1.1. Benefits of e-commerce ... 28

5.1.2. Problems of e-commerce ... 28

5.2. Factors influencing Online Shopping in Germany ... 29

5.2.1. Internet Familiarity... 30

5.2.2. Credit Card Use ... 31

5.2.3. At Home Access... 31

5.2.4. Convenience ... 32

5.3. Requirements for becoming an e-grocer... 33

6. Primary Research Findings... 36

6.1. Quantitative Survey ... 36

6.1.1. Frequency of Grocery shopping ... 37

6.1.2. Preferred Shopping Time ... 37

6.1.3. Frequency of Internet Usage... 38

6.1.4. Amount of Internet Usage ... 38

6.1.5. Types of Internet Usage... 39

6.1.6. Items Bought Online... 39

6.1.7. Non-Online Groceries ... 40

6.1.8. Major Reasons for and against the Extension of Opening Hours... 41

6.1.9. Major Reasons for and against Online Grocery Shopping ... 41

6.2. In-depth Interviews ... 42

7. Consumer Behaviour Analysis ... 45

7.1. Decision Making Process ... 45

7.2. Sociocultural Environment ... 48

7.2.1. Reference Groups and Family Influences ... 48

7.2.2. Social class ... 50

7.2.3. Culture ... 54

7.2.4. Subcultures ... 58

7.3. Psychological Field ... 60

7.3.1. Consumer Motivation ... 60

7.3.2. Consumer Perception ... 66

7.3.3. Consumer Learning... 70

7.3.4. Consumer Personality... 75

7.3.5. Consumer Attitude Formation and Change... 78

7.3.6. Communication and Consumer Behaviour... 81

7.4. Involvement... 86

8. Conclusion... 88

8.1. Strategic Implications ... 92

8.2. Limitations... 94

9. Reference List ... 96

10. Bibliography ... 103

11. Appendix... 105

11.1. Appendix 1: Shopping on Saturday ... 105

11.2.a) Appendix 2a: Questionnaire in English... 106

11.2.b) Appendix 2b: Questionnaire in German... 107

11.3.a) Appendix 3a: Discussion Guide in English... 108

11.3.b) Appendix 3b: Discussion Guide in German... 109

11.4. Appendix 4: Porter's Five Forces Model ... 110

11.5. Appendix 5: Potential of Products Being Bought Online... 111

11.6. Appendix 6: Analysis of Questionnaire according to Age... 112

11.7. Appendix 7: Analysis of Questionnaire according to Profession ... 116

11.8.a) Appendix 8a: Reasons For The Extension Of Opening Hours ... 120

11.8.b) Appendix 8b: Reasons Against The Extension Of Opening Hours . 120

11.8.c) Appendix 8c: Reasons For Online Shopping... 121

11.8.d) Appendix 8d: Reasons Against Online Shopping ... 121

List of Figures

Page

Figure 1: Scenario Analysis

Figure 2: Scenario Analysis Applied

Figure 3: German Internet Users' Stage in Online Buying Process

Figure 4: Actual Internet Usage and Potential Usage

Figure 5: A model to understand eCommerce trust

Figure 6: Age Distribution

Figure 7: Groups of Occupation

Figure 8: Frequency of Grocery Shopping

Figure 9: Preferred Shopping Time

Figure 10: Frequency of Internet Usage

Figure 11: Time spend on the Internet

Figure 12: Types of Internet Usage

Figure 13: Items Bought Online

Figure 14: Online-Potential of Groceries

Figure 15: A Simple Model of Consumer Decision Making

Figure 16: Reference groups' influence on purchase decisions

Figure 17: American Status Structure

Figure 18: Hofstede's dimensions scale

Figure 19: Maslow's Hierarchy of Needs

Figure 20: Customer Expectations From Retail Services

Figure 21: Customer Relationship Exchange Model (CREM)

Figure 22: Learning is a Key to Consumer Behaviour

Figure 23: Pavlovian Model of Classical Conditioning

Figure 24: Instrumental Conditioning

Figure 25: Cognitive Information Processing Model (CIP)

Figure 26: Basic Communication Model

Figure 27: Comparison between High Involvement and Low

Involvement Decision Making Process

1. Introduction

The law of opening hours in Germany has changed for the first time after 40

years on 1. November 1996 (yahoo news, 12.12.02). Since then, the discussion

between retailers and trade unions continued as retailers demand a further

liberalisation of the law while trade unions are against this measure.

Especially ver.di, one of the biggest trade unions in Germany, announced to

offer strong resistance as they are of the opinion that an extension of the

opening hours will neither result in a higher turnover for retailers nor in

employment creation (yahoo news, 1.12.02; 20.12.02). Ver.di's director Frank

Bsirske tried to convince the federal government not to change the existing law

by taking a strong opposition in collective negotiations and organising a

demonstration of 20,000 people in Berlin on 9 March 2003 (yahoo news,

9.03.2003).

On the other hand politicians, in particular the Federal Minister of Economics

and Secretary of State for Employment Wolfgang Clement (SPD), holds the

view that a liberalisation of the law will create mini-jobs (yahoo news, 1.12.02).

Besides retailers believe that longer shop-hours have the potential to stimulate

consumption and therefore have a positive influence on the turnover and retail

trade on the whole.

Petrol stations as well as shops at train stations, for which the law of opening

hours is not valid, discovered this gap in the market. They are offering a small

assortment of groceries twenty-four hours a day.

Consumers demand an extension of shop-hours as well. In an opinion poll

undertaken by the Institut für Demoskopie Allenbach 55% of 2081 respondents

argued for a complete liberalisation of the closing time. Only one third voted for

a regulation by law.

On 13 March 2003 the Lower House of German Parliament finally decided to

extend the opening hours on Saturdays from 4pm to 8pm. The law became

effective on 1. June 2003 (yahoo news, 13.3.2003). So far the extension

appears to be a success. Especially younger people seem to increasingly

spend their free time in city centres (yahoo news, 25.7.2003). The president of

the BAG (Präsident der Bundesarbeitsgemeinschaft der Mittel- und

Großbetriebe des Einzelhandels (BAG)), Walter Deuss, stated that two thirds of

shops that were open later than 4pm on Saturdays increased sales by

averagely 12%. He also underlines that this increase was no transfer from other

weekdays (yahoo news, 7.8.2003).

However, Pellengahr, the speaker of the ,,German Retail Association"

(Hauptverband des Deutschen Einzelhandels - HDE) warns not to expect too

much from the extension. In his opinion, extended opening hours do not

guarantee a higher turnover. First, consumers have to possess more financial

resources. The high taxes, weak economy and the high unemployment rate

influences German consumer behaviour (yahoo news, 8.6.2003).

To circumvent the strict law of opening hours German retailers such as Spar,

Karstadt and the organic food chain Tegut entered the e-business. However,

none of them was successful in online grocery retailing and therefore they

closed their online operations. In lieu thereof, the mail-order company Otto

entered the online food retailing business. The online supermarket otto-

supermarkt.de outperformed the other and was operating nationwide (Die Welt,

6.11.02). But despite high investments in the industry, online grocery sales

achieved only a share of 0.5% of total food sales in Germany (Die Welt,

6.11.02). In June 2003, even Otto gave up its online business in food trade (Die

Welt, 12.06.03).

1.1. Objectives

The law of opening hours - in most European countries such a regulation is

unfamiliar (Appendix 1). In Germany retailers can only open their stores on

Mondays to Fridays from 6am to 8pm, on Saturdays from 6am to 4pm, and

since June 2003 until 8pm and on Sundays never. For some the extension on

Saturdays up to 8pm represents pure shopping frenzy, while for others, namely

those who are employed in the retail trade, it is a torture.

The extension of opening hours was and still is - a big public issue in

Germany. The retail industry aims to satisfy customer needs and overcome

legal restrictions about Sunday trading and opening shops late at night, while

the trade unions are strictly against it. But instead of circumventing the law by

offering online shopping, retailers continue to fight for liberalisation of the law.

This leads to the research question of this project:

Opportunities and drawbacks of extended opening hours versus online

shopping in the German food trade on the basis of a consumer

behaviour analysis

The research question aims to find out whether supermarkets in Germany

should continue to fight for the legal right to extend the opening hours or

whether online shopping could represent an appropriate alternative method.

Several factors have to be considered to come to a conclusion:

Political and legal situation in the German retail industry

Potential success of online shopping and extended opening hours by

analysing the German market

General advantages and disadvantages of online shopping compared

to extended opening hours and Sunday trading

Behaviour of German consumers

Future perspectives of supermarket industry in Germany

The key question as well as the sub-objectives will be approached from different

viewpoints. The scenario analysis introduces the subject and potential

developments. Then the German market concerning the potential it offers for e-

grocers to become successful is analysed. The most important factors

influencing the German supermarket industry are identified with the help of the

SWOT Analysis (Strengths, Weaknesses, Opportunities and Threats) of the

German market as well as the Porter's Five Forces Analysis.

Furthermore the online business will be analysed. Therefore the development in

Germany as well as several considerations one has to take into account before

opening an online business are examined.

The analysis of consumer behaviour applied to German consumers helps to

determine further opportunities and drawbacks of both online shopping and

extended opening hours. In addition, the results of the quantitative primary

research undertaken are analysed. A summary of the qualitative primary

research illustrates the expert's view of the German supermarket industry, its

development and its future perspectives.

The consumer behaviour analysis gives an insight in aspects marketers have to

consider by clarifying consumers viewpoints and perceptions. It emphasises

important aspects for investigating, targeting and segmenting the market.

As there is no literature directly relevant to answer the research question, I will

refer to relevant literature selectively as appropriate throughout the project

instead of providing a literature review.

2. Research Methodology

Both primary and secondary data have been collected in order to obtain all

relevant information needed to answer the research question.

2.1. Primary Data

The primary research was essential as there is a lack of quantitative and

qualitative research concerning German consumer's attitudes towards the

extension of opening hours and online grocery shopping in the literature.

Research on online grocery shopping has been limited since this is a relatively

new retail channel. Most of the research was conducted in the context of the US

market.

Consequently a quantitative survey was undertaken using interviewer-

administered questionnaires (Appendix 2) to find out about German consumer

attitudes. The questions were asked face to face in structured interviews

employing the concept of judgment sampling. The screening questions was: `Do

you do the main shopping for your household?'

Employed persons are crucial for answering the research questions as for them

the extension of opening hours or online grocery shopping is most important

due to time constraints. As employed persons are most likely to go grocery

shopping on Friday afternoons or Saturday mornings, the survey was

undertaken on those days in a supermarket's foyer in Germany. In so doing a

representative composition of people of different occupations, sex and ages has

been collected. The sample size consists of 152 supermarket customers. It was

difficult to estimate how many female and male customers to include in the

survey. In the US for instance 71% of grocery shoppers are women (Weinstein,

1998), but 71% of online shoppers are men (McPhee, 1998). Accordingly 77

women have been asked, who are more likely to do the grocery shopping for

their household, and 75 men have been interviewed, who are more likely to be

open towards online grocery shopping to obtain a relatively balanced ratio.

In addition, qualitative research tools were chosen to find out about opinions

from the retail industry. With the help of a discussion guide (Appendix 3) I

conducted in-depth interviews with experts from the food retail industry. The

latter included two telephone interviews, one with a branch manager and one

with a member of the executive committee of a grocery chain, as well as two

face-to-face interviews with branch managers.

Both data collections took place early in 2003, when it was clear that an

extension of opening hours was about to happen in Germany. However, it was

not clear at that time, to what extent the law would be changed.

2.2. Secondary Data

Secondary data provided the background of this project. Information has been

collected from different sources, such as the Internet, databases, books,

magazines and newspapers.

As the political and legal situation of the extension of opening hours was

continuously changing, data collected from newspapers, magazines and the

Internet had to be updated regularly.

A variety of reports have been gathered to find out about German market

characteristics and its development.

Journals and magazines contained articles about e-commerce and consumer

trends. All relevant previous work gathered online grocery shopping and

information about the German retail trade will be outlined in the project.

Research on online grocery shopping has been limited since it is a relatively

new retail channel. Besides, as in Germany there are hardly any successful e-

groceries, all data about experienced online grocery shoppers reviewed in this

project had to be taken from research conducted in other countries, mainly the

US and the UK market. Nevertheless, these facts and numbers help to presume

the potential the e-grocery business has in Germany.

The theoretical background about how to write a major project was provided by

books, such as Saunders (2000) and Ghauri (1995).

Books also provided information about different models of analysis, e.g. how to

analyse the industry. The work of various authors contributed to the

development of the consumer behaviour analysis of this project.

3. Scenario Analysis

A scenario can be either the description of a possible future situation or the

illustration of the development that led to a certain future situation (Geschka &

v. Reibnitz, 1986, cited by Rose, 2000:73). The scenario analysis allows taking

a close look at variations of the future environment and its influences on the

considered business or industry in this case the German food trade. The

analysis helps to develop alternative images scenarios - of the future.

According to Kahn, it is important "simply to think about the problem" (Goetze,

1991:72). Within the scenario analysis the impact of different boundary

conditions e.g. parameters, quantities or weightings regarding the balance

result are determined. The results are various scenarios; extreme scenarios

generally enclose the field of potential developments.

However, it is difficult to forecast the future development of environmental

influences for the German food trade, such as unemployment, energy costs,

political influence of trade unions etc.

Figure 1: Scenario Analysis

Compare: Geschka, H., v. Reibnitz, U.: Die Szenario-Technik ein Instrument

der Zukunftsanalyse und der strategischen Planung, in: Töpfer, A., Afheldt, H.

(1986) Praxis der strategischen Unternehmensplanung. 2nd ed. Stuttgart,

Landsberg am Lech. pp. 125-170.

Subject

Scenario B

Scenario C

Scenario A

impact of different boundary conditions

Present

Future

In the following the development of the German food trade within the next 10

years will be analysed. In 2003, an extension of opening hours has taken place

in June, while the last well-known e-grocer www.otto-supermarkt.de gave up

its business at the end of the same month.

Scenario A and C are peripheral scenarios, i.e. factors adopt unexpected

values, while trend-scenario B is based on the most probable development of

considered factors.

The analysis is relatively curtailed, as environmental influences will be analysed

in more detail throughout the project.

Figure 2: Scenario Analysis Applied

Scenario A: Completely liberalised opening hours

Under the premise that the power of trade unions decreases in Germany, the

law of opening hours could be liberalised. Former and current interviews with

politicians give the impression that the major part of concerned politicians as

well as retailers are for further extensions.

However, the achievement of a total liberalisation of opening hours within ten

years is not very likely. The last extension took place in 1996 and before that

the law was not changed for over forty years. Therefore a further liberalisation

will probably take place step by step and very slowly.

Food Trade

Partly extended opening hours, partly

online shopping

Replacement of retailers by e-grocers

Completely liberalised opening hours

Weak trade unions, political measures

to reanimate consumption

Year 2003

Year 2013

Acceleration of technical

progress, high need for time-efficiency

Strong trade unions, strong

retailers, improved consumption,

increased service orientation

Scenario B: Partly extended opening hours, partly online shopping

The trade unions will continue fighting for employees in the retail industry, while

retailers will continue fighting for the right to open their shops whenever it is

reasonable. Therefore the law of opening hours will be changed slowly during a

sincere competition between both parties.

As in 2003 Germans tend to do without services to pay the lowest price

possible, the trend might change into the opposite after a certain amount of time

with discounters. After the discounter boom, German consumers are likely to

appreciate convenience services such as home delivery and online shopping.

As soon as the amount of people willing to pay a certain price for convenience

increases, it will be profitable to enter e-business. The adoption of online

grocery shopping will take place rather slowly and it will just be a value-added

service for an increasing amount of consumers.

Scenario C: Replacement of retailers by e-grocers

The technological know how of German consumers is increasingly progressing.

Especially younger generations become more and more computer literates.

These generations are growing up with the Internet, online shopping etc. When

they mature and become a responsible consumer, they are already accustomed

to online shopping and therefore they will not hesitate to buy groceries online.

Retailers will be able to go the convenient way of selling 24 hours a day without

the need of fighting against stubborn trade unions.

However, online grocery shopping will never have the potential to replace

traditional grocery shopping. Consumers will always want to experience certain

products themselves. They want to smell, touch and see the food they buy - in

particular fresh products, such as fruits and vegetables. Besides, those

generations growing up with computers increase. But it is questionable whether

they will have reached the age to already found their own household in ten

years.

4. The German Market

4.1. The German Law of Opening Hours

Since 1 June 2003 shops in Germany have to be closed on:

Exceptions are made for:

In addition federal state authorities can decide about exceptions to the law if

they are important for the broad public (Rotzek, 2001).

In March 2003 it was finally decided by the Lower House of German Parliament

that from 1. June 2003 on shops are allowed to open until 8pm instead of 4pm

on Saturdays.

Sundays and public holidays

Mondays to Fridays from 8pm until 6am

Saturdays from 8pm until 6am

Bakeries can apply for opening from 5.30am on and on

Sunday mornings

On 24 December shops are allowed to open only between

6 am and 2pm

Shops in railway stations, airports and gas stations

4.2. Definitions

According to Pfeiffer (2003) there are four main concepts of grocery stores in

Germany:

1) A "Supermarkt" is a self-service grocer with a selling area of 400 1,499

square meters. In average supermarkets keep 7.500 articles, approximately two

thirds of it food and a third non-food-articles.

2) A "Verbrauchermarkt" has a selling area between 1.500 square meters and

5.000 square meters. Groceries are located between supermarkets and

hypermarkets. Approximately 70% of the turnover is made by food and 30% by

non-food-articles.

3) A "SB-Warenhaus" is defined as a self-service store with at least 5.000

square meters selling area. SB-department stores offer around 28.500 articles.

In average 62% of the turnover is made by food sales and 38% by other

products.

4) A "Discounter" is a store with a very low price level and a strongly limited

assortment compared to a supermarket. Discounters offer between 500 and

2,500 articles. In general approximately 82% of the assortment are groceries

and 18% non-food-articles.

For the primary data collection interviews have been undertaken with the

branch managers of a "Supermarkt", a "SB-Warenhaus" and a

"Verbrauchermarkt" as well as an executive manager of a "Verbrauchermarkt"

chain. For all stores the consequences of a law extending the opening hours or

the implementation of online shopping are very similar. Therefore I do not make

a difference in the significance of the interviews for the research question. The

results can be equally valid for all forms of grocery stores. Only discounters

make an exception, as their product profit margin is the lowest and therefore

online shopping is likely to be not affordable for them.

4.3. Extension of Opening Hours

According to a poll, undertaken before the new law in June 2003 by the `institute

of trade research' (Institut für Handelsforschung) in Cologne, 92% of consumers

interviewed plead fundamentally for longer opening hours on Saturdays. 47% of

the respondents voted for an extension from 4pm to 6pm. 36% advocated for

the extension of opening hours to 8pm. Later, however, hardly anybody wants

to go shopping: only 2,8 per cent of the interviewees answered they still would

want to go shopping after 8pm on Saturdays (Manager Magazin, 13.3.03).

According to AC Nielsen, German consumers' spending on Saturdays (17.8%)

was the second highest after Fridays in 2002 (22.8%), even though they had 4

hours less time to shop than during the week due to the opening hours (AC

Nielsen, The Retail Pocket Book 2002).

A majority of 58% of the retailers would leave the opening hours as they are.

Only 18,9% of them would prefer to keep the shops open until 8pm on

Saturdays (Manager Magazin, 13.3.03). Nevertheless, some retailers see

closing on Saturdays at 4pm as hostile to customers as shops are the most

crowded just before closing (Der Spiegel, 14.10.02). One of Germany's biggest

corporate groups, the Kaufhof AG, even appealed on an institutional issue (Der

Spiegel, 12.10.02).

The German chancellor Schröder would like to liberalise the opening hours

completely from Monday to Saturday on the long run. Only Sunday trading and

opening on public holidays shall be restricted irrevocably. Nevertheless, the first

step, which came into force in June 2003, was only an extension of opening

hours on Saturdays until 8pm. With these measures he hopes to reanimate

retail trade (Der Spiegel, 3.12.02). The German retail trade grew only by 0.3%

between 1994 and 1999 (Mintel, Retail Markets in the European Context

Germany).

A big concern regarding the extension of opening hours is the work schedule.

This concern is in so far ungrounded as the work time per week is legally

regulated. In the retail sector only 38.5 hours per week are allowed. Besides, a

big part of employees in retail trade is working part-time anyhow (Der Spiegel,

14.10.02). Therefore the new law is only going to change the point of working

time but not the amount of working time.

Nevertheless Bsirske, director of the trade union ver.di, fears that due to the

extension of opening hours full-time jobs will be endangered by new mini jobs.

He claims that longer opening hours after the new law in 1996 led neither to

more consumption nor to more employment. 50.000 new workplaces have been

promised but instead 250.000 jobs have been abolished. (yahoo news,

29.01.03). In addition, ver.di fears that the sales volume will be even more

concentrated on the big shopping centres, destroying smaller businesses

(ver.di, 09.02.03).

4.4. Porter's Five Forces Analysis

To find out about an industry's profit potential one has to determine the intensity

of competitive rivalry in that industry. According to Michael E. Porter the

industry's attractiveness is determined by five forces: the threat of new entrants,

the bargaining power of suppliers, the bargaining power of buyers, the threat of

substitute products or services and the rivalry among existing firms (Porter,

1980).

In this context, Porter's five forces analysis is implemented to analyse the

German food retail industry to find out about the potential success e-grocers

could have in Germany (Appendix 4).

4.4.1. Threat of Entry

The easier it is to enter an industry, the more competitive it is in general (Porter,

1980). Apart from high capital needs, for the IT set-up costs and maintenance

costs needed to run a transactional website, the online business is relatively

easy to enter for existing offline businesses. `Bricks and mortar' retailers will

have the competitive advantage of brand recognition among consumers, while

dedicated Internet specialists have the advantage of a focused strategy, fewer

fixed overheads and a sexier image (Mintel, Retail Markets in the European

Context Germany). However, for Internet pure-plays the entry is more difficult

as they need more capital to invest into plants, human resources and

technology.

According to Gladding, `bricks and mortar' operators will dominate the online

grocery sector. The possibility of success is shown by grocer's stores such as

Tesco, the world's largest online grocer (Delaney-Klinger, Boyer, Frohlich,

2003), which expanded its business by developing effective online operations.

Tesco is marketing online groceries as a convenience, not as a low price option.

Their ability to bulk purchase gives them a near unassailable advantage for low

margin mass-market products (Gladding, 2000, The Internet Market Place

Review).

This statement is supported by Hurst (Hurst & Hurst, 2001), who states that

Internet pure-plays do not have the means to offer Internet shopping as a viable

shopping alternative for customers in the food sector. They also do not have

any history of stability and trust, which makes it more difficult to attract

customers.

As soon as the online market will become attractive in Germany, the threat of

entry will be high as the industry is relatively easy to enter. So far, the threat of

entry is low, as no supermarkets seem to be planning to enter the e-grocery

business in near future.

4.4.2. Bargaining Power of Suppliers

Suppliers can exert bargaining power over participants in an industry by

threatening to raise prices or reduce the quality of purchased goods and

services (Porter, 1980).

In the German supermarket industry there is only moderate supplier's

bargaining power as suppliers depend on the retailers to buy their products.

Retailers as well depend on their suppliers to provide the products. Usually,

they have a lot of different suppliers as they are offering a large product

assortment. But if they are not provided with only one product or suppliers

increase their prices, they are endangered to lose customers themselves. The

only solution for them would be to switch to another supplier or integrate

backwards. Due to this mutual dependence, supplier power is moderate.

4.4.3. Bargaining Power of Buyers

Buyers influence the industry by forcing down prices, haggling for higher quality

or more services, and playing competitors off against each other - all at the

expense of industry profitability (Porter, 1980).

Bargaining power of buyers is high in Germany. As the price conscious German

buyers have the opportunity to do their grocery shopping at the cheap traditional

supermarkets, respectively discounters, instead of the convenience rather than

price oriented e-grocer, they will probably stick to their habits. Instead of paying

for delivery, they will rather shop at a discounter such as Aldi or Lidl and buy the

groceries personally to get a more advantageous price. It is generally easy for

the buyer to compare prices of different retailers. Switching between different

sellers does not involve any costs for buyers.

Besides only 18.4% of German consumers could imagine buying fresh

groceries such as bread and vegetables online (Raulfs, 2000).

4.4.4. Threat of Substitutes

Substitute products or services continually threaten the industry and in effect

place a lid on prices and profitability (De Kluyver, 2000).

Generally, substitutes for Internet shopping are other convenient methods, such

as UMTS or ordering by phone. The UMTS technology is not likely to be

commonly used in the near future, while phone ordering already exists.

However, ordering groceries by phone is conducted on a very small scale. It is

generally a personal service for elderly people, who already know the product

offer of a shop nearby. This service is not suitable for the masses.

The biggest threats for e-grocers are the traditional `bricks and mortar' grocery

stores. Especially in Germany, where consumers are above all price conscious,

it will be very hard to establish a business based on convenience for customers

rather than on low prices. The most popular food stores in Germany are

discounters, such as Aldi. Customers consistently place price above all other

considerations like good service or a nice shop ambiance (Mintel, Consumer

Trends Germany, 2001).

Nevertheless, success will be determined on a case-by-case basis, as it also

depends on the locality and the distribution area of the online business.

However, the overall threat of substitutes in the German market is high.

4.4.5. Rivalry among Participants

The competitiveness of an industry depends greatly on the number, relative size

and competitive prowess of the participants (De Kluyver, 2000).

The rivalry in the German supermarket industry is very fierce. Everyone eats,

thus everyone must purchase from some retail outlet. Consequently, the

grocery industry is a huge, fragmented and enormously competitive

environment. Germany's food sector is one of the most concentrated in Europe.

Only a few large retail chains dominate the food retailing. The top ten players

captured 74% of the sector sales in 1998 (Mintel, Retail Markets in the

European Context Germany, 2000).

Market growth is slow (food retailer's sales decreased 6.4% in 1999) (Mintel,

Retail Outlook Germany, 2000) and therefore the competitive battle is more

about market share than creating new customers. The industry is highly price

competitive, discounters representing the major rivals of other grocer's stores.

4.5. SWOT Analysis of German Market for E-grocers

In general, the SWOT Analysis is a popular concept to find out about a

business' potential to succeed in the market place. The internal analysis

includes the strengths and weaknesses of the company while the external

analysis deals with the environment's opportunities and threats for the business.

In this case, the SWOT Analysis model is implemented to find out about the

German market's potential to provide opportunities of development for e-

grocers.

4.5.1. Strengths

Germany is Europe's largest retail market, although this is more by the

largeness of its population than the high spending per inhabitant (Mintel,

Consumer Trends Germany, 2001). Nevertheless the major part of the large

German population has a high level of disposable income. The affluence of the

population is ranked on fifth position of the European wealth league (Mintel,

Shopping Centres Germany, 2001). Growth in private consumption outpaced

Germany's gross domestic product in 1999, for the first time since 1995 (Mintel,

Retail Outlook Germany, 2000).

Continuously low inflation (+1% in 2002 (Mintel, European Retail Briefings))

combined with higher wage settlements lead to further strong increases in real

disposable income. (Mintel, Retail Outlook Germany, 2000).

The German Internet market is in a strong growth position, with 89% of PC

households expected to have Internet access by 2004. As the most populous

country in Europe with the strongest economy, Germany has a large online

population and is well provided with portals and ISPs (Gladding, 2000, The

Internet Market Place Review).

The German government launched a national technology plan to improve

Internet adoption and use further. Part of the scheme is investments in

improved technology and education at school as well as an increase in the

number of educated IT professionals (Gladding, 2000, The Internet Market

Place Review).

Despite a high level of Internet awareness in Germany, only 34% of the adult

population have already accessed the Internet in the year 2000 (Gladding,

2000, The Internet Market Place Review). But Internet usage is expected to

grow further (AWA online, 2002).

Two thirds of German consumers with Internet access already search for

product information online. This is the first stage in the online shopping process.

Only half of the users browsing for product information place an order online or

even compare prices. Stage 4 of the online buying process - submitting a

payment online - is undertaken by only 9% of German Internet users (Elcock,

2000, The eConsumer: European eCommerce Overview Germany).

Figure 3: German Internet Users' Stage in Online Buying Process

% Internet users*

66%

34%

33%

Stage 1:

Search for product

information online

Stage 2:

Compare prices online

Stage 3:

Place order online

Stage 4:

Submit payment online

* % German adult population with Internet access at home or work (560

respondents)

(Source: Elcock, The eConsumer: European eCommerce Overview

Germany).

4.5.2. Weaknesses

In terms of consumer behaviour, German retailers have to consider a lot of

consumer expectations. Price is the most prominent feature of the German

retail market. To pay a low price German consumers accept a low standard of

service and choice and do without any nice shop ambience (Mintel, Shopping

Centres Germany, 2001). But at the same time, German consumers are very

health and safety conscious. Safety standards are higher in Germany than in

any other European country. In addition they attach great importance to

environmentally friendly and ethically responsible products (Mintel, Consumer

Trends Germany, 2001).

These factors lead to particularly low profit margins in the German retail industry

(Mintel, Consumer Trends Germany, 2001). That makes it more difficult to

enter the online business as capital is needed for initial and maintenance costs,

and to achieve customer loyalty. Besides the customer would have to be

charged the complete amount for the delivery, which can be a reason for the

customer not to order online.

Shopping habits of German consumers are fairly traditional (Mintel, Shopping

Centres Germany, 2001). Therefore a lot of customers are satisfied with the

opening hours as they are and cannot imagine buying groceries online.

The retail sector is rather unimaginative, based on price and function rather

than customer experience. The German market seems to be remarkably

reluctant to change (Mintel, Consumer Trends Germany, 2001). Slow and

torturous planning processes constrain the creation of new opportunities for

customers, like extending opening hours or entering the online shopping sector.

In addition it repels overseas investment in the German food sector, which has

been very limited at least before the late 1990's when Intermarché and Wal-

Mart made a move into the German market (Mintel, Retail Markets in the

European Context - Germany).

The average annual growth rate of retail sales in Germany was one of the

smallest in Europe between 1994 and 1999. It was, together with Switzerland,

on the last position with only 0.3% compared to Bulgaria on the first position

with 188.9% average growth (Mintel, Retail Markets in the European Context -

Germany).

So far, weaknesses prevail the strengths of the German market. However, there

is obvious growth potential in the German market regarding Internet usage and

consequently online grocery shopping.

4.5.3. Opportunities

The German consumer market is ripe for development (Mintel, Shopping

Centres Germany, 2001). It is about time to enter new fields of customer

service such as sooner or later the e-grocery business. Customers have high

purchasing power and therefore are able to pay for convenience. Hence, there

is a potential to encourage customers to spend money through online shops.

Besides, "smaller average household sizes and more working women have (...)

resulted in that the relative amount of `free' time allocated to household duties

has increased, leading to an increased demand for convenience in, for

example, food and cleaning products." (Grunert, Grunert, Glatzer, Imkamp,

1995).

The growing demand from Eastern Germany's consumers also holds the

potential for growth in the retail sector.

Shopping centre penetration is low (Mintel, Shopping Centres Germany,

2001). Consequently there is room for much growth to develop more shopping

centres or to serve the areas by implementing online shopping and delivery.

In comparison with other European countries, UK, Italy, France and Spain,

German consumers spend more money shopping on Fridays, but much less on

Saturdays and Sundays. (AC Nielsen, The Retail Pocket Book 2002). The

reason is likely to be that shops in Germany are closed most of the weekend.

Therefore online shopping offers an alternative shopping method, when shops

are closed.

E-commerce as an additional marketing tool is an opportunity for the German

market as it helps to extend the market reach (Hurst & Hurst, 2001).

Furthermore, it gives established offline businesses the opportunity to

strengthen their links with their existing customer base and to attract other

market segments. The Internet is also a valued platform for public relations and

marketing tools. Therefore, with the help of e-commerce, retailers can increase

their target market as well as reduce marketing costs (Hurst & Hurst, 2001).

Details

Seiten
Erscheinungsform: Originalausgabe
Jahr: 2003
ISBN (eBook): 9783832483609
ISBN (Paperback): 9783838683607
DOI: 10.3239/9783832483609
Dateigröße: 829 KB
Sprache: Englisch
Institution / Hochschule: Hochschule Bremen – Wirtschaftswissenschaften
Erscheinungsdatum: 2004 (Oktober)
Note: 2,0
Schlagworte: lebensmittelhandel ladenöffnungszeiten supermärkte konsumentenverhalten

Autor

Martina Schäfer (Autor:in)