Woolworths Online

Richard Harrison, General Manager, Woolworths Online, provided an overview of the Woolworths Online home shopping Internet site, which was launched in November 1998, and summarised how the organisation has developed the site to date.

He opened by noting the tremendous growth in the online market, citing US data showing:
 â€¢  65% Internet penetration into the US population (home-based access)
 â€¢  purchases via the Internet by 39 million people in 2001
 â€¢  1999 average spend per person of $500
 â€¢  13% of net users purchasing food or drug products via the Internet in 2001.

The top three reasons for shopping online are savings (achieved by managing an ongoing total and assisting budgeting), ease-of-use and 24-hour convenience.

Harrison noted that earning the trust of the consumer is also a critical component in online success.

An overview of the New Zealand Internet market showed steady growth in online shopping (from 167,000 online shoppers in the first half of 1999 to 391,500 in the second half of 2001). Similar steady growth has occurred in the grocery market online.

There has been a jump in total annual online spend since 1999 (from $278m per annum in the first half of 1999 to $940m per annum in the second half of 2001). Purchasing frequency is changing, with repeat shopping increasing.

Books and travel are ranked first and second in the product categories purchased. Groceries make up the greatest percentage of repeat purchases across a number of different categories.

Harrison demonstrated the Woolworths online shopping process (see: www.woolworths.co.nz), in particular the payment options including using direct debit or credit cards, product selection options and the range of delivery options offered. A customer’s choice of delivery location dictates which facility their order is routed to.

Customers are categorised into first-time and repeat shoppers. A number of specially designed features for the repeat shopper include "quick lists" that allow the system to present preferred items to the customer based on previous selections. This is seen as the feature most responsible for increased sales.

Customers can bring up and edit their previous orders for ease of re-ordering. These features become increasingly valuable as a customer’s shopping history with Woolworths builds.

Woolworths online also offers customers a selection of recipes. It is possible to select a recipe and have the relevant ingredients added to the "trolley". Customers may then delete any items not required. There are plans to further develop this feature to allow for complete meal planning.

Customers may also give personal instructions for food selection, eg, relating to fruit ripeness.

Out-of-stock items are managed by offering substitutions and, if necessary, a higher value item is offered at the same price as the originally selected item. This further builds customer confidence.

A checkout confirmation list allows customers to refine their trolley contents before purchase.

Other features that have been critical to the business model’s success include the ability to select delivery time (within a two-hour window).

Accuracy and efficiency in the fulfilment process are most important. A laser radio transceiver is used to scan item bar codes as the order is collated and ensure order accuracy. The same device works out the logical order of product selection to collate orders most efficiently. Accuracy is critical as the business operates with a mere 3% profit margin. The cost of replacing a wrongly provided product could eliminate profitability from a customer account for some months.

Building a clear understanding of the value proposition and turning feedback into development requirements have been keen to the site’s success.

In Harrison’s view, the reason e-retailers are failing is because they do not treat web-based business as a normal business, failing to apply the same business disciplines.