Tesco chose the busy working people who are train riders as the target market to open their virtual store in subway station in South Korea, the value of convenience is conveyed to customers. However, with E-commerce, the combination of IT, mobile and product distribution brings both advantages and challenges to Tesco.
Advantages
- The brand awareness of Tesco has expended due to the location of virtual shelves, the subway station, where hundreds of thousands of people are walking through every day. What Tesco is selling and What is new are easily captured by customers, more words of mouth are spread from people to people.Tesco would pop out to be the first choice in people’s mind when they do grocery shopping.
- As “Tesco is committed to conducting business in an ethically and socially responsible manner”, the e-commerce business model allows Tesco to increases sales without building up more stores. A better social image is built because Tesco takes environment and scarce social resources into consideration in a country like South Korea of a total area of 99,392 square kilometers with a population of 50 million.
Challenges
Virtual store opens in Korea (https://www.youtube.com/watch?v=hGKoW-ouQlY&feature=related)
- According to the video, the delivery fee of a purchase of 1000 won is 4000 won. The high delivery fee is a great challenge for Tesco to increase sales as well as maximize profit.
- The inventory management and the delivery schedule are difficult to be handled and communicate timely. How to allocate the resources in time is a challenge for Tesco in order to satisfy customers’ needs and expectations.
One possible solution is to collect the data from customers and track their behavior, for example, the scanning of goods through the smartphones is one of the sources to collect the primary data. Data mining can uncover the patterns of consumers so that Tesco knows what customers value, what to get in stock up-to-the-moment and how to optimize the routine of delivery to reduce cost and increase profit.