MID – TERM EXAMINATION PAPER

CASE BASED MODALITY

FACULTY : BUSINESS ADMINISTRATION

COURSE : MASTERS OF BUSINESS ADMISTRATION (MBA)

YEAR/ SEMESTER : SECOND YEAR / THIRD SEMESTER

MODULE TITLE : RETAIL MANAGEMENT

CODE : MGT 523

DATE : 30th June, 2020

SUBMISSION

TIME ALLOWED : 2nd July 2020

Instruction to candidates

1. The Assignment-Based Examinations is of 25 Marks, which will be subsequently

converted to 10 Marks (out of 50 Marks) and will represent 20% in the overall Internal
Assessment Markings.

2. Answers must be submitted in written format in A4 Size Papers by mentioning following

details:
a) Name of the Student:
b) Subject:
c) Semester:
d) Section:
e) LCID:

3. The answers must be submitted via KFA Online Learning System Application. Please
make sure you have the login details.

4. Submission will be closed after 12.00 am (mid-night).

1
Tesco is one of the UK’s largest e-retailers and the world’s biggest e-grocer, overturning the myth
that shoppers will not buy fresh products because of the ‘look and feel’ factor. Indeed, the opposite
is the case – of the top ten selling lines, seven are fresh, with skinless chicken breasts at number
one. Tesco has been active in telesales (at pilot locations) since 1995. The initial telesales pilot, at
Ealing, West London, was developed from the home delivery service to less mobile consumers,
subcontracted from the Local Authority. This low-tech operation was developed in 1996 into the
pilot for e-retailing (rolled out nationally in 1999) – built on the proven delivery system and hand-
picking from the shelves of the grocery stores. Tesco still uses this tried and reliable system for
groceries in preference to a heavy investment in warehouse picking centers, although many non-
food items such as books, CDs and DVD movies are now handled from a non-store facility. While
Tesco’s larger stores may carry only the top 50 CDs, Tesco.com claims to offer every CD currently
available in the UK. Not only leading in grocery e-retailing, Tesco is rapidly gaining share in
electrical, entertainment and clothing. Despite the low-key approach, Tesco has invested £45
million in its e-retailing operation, including £15 million for the transaction system based on the
Shopping Magic proprietary system from Unipower.

Customers can purchase any of the 40,000+ product lines for next-day delivery (for orders placed
by 4.00 p.m.) for UK customers within delivery distance of a store (encompassing 97 per cent of
the UK population). A limited product range is available for delivery worldwide. As an alternative
to shoppers composing their shopping list online, Tesco sends them a monthly CD-ROM and
information on special offers by mail. Using the CD-ROM can speed up and simplify the ordering
process, making it possible to save shopping lists and minimizing the effort in placing future
orders. This is a significant ‘convenience’ benefit, since 80 per cent of grocery shopping is
replenishment. Tesco follows the maxim ‘make it easy for your customers to buy’, accepting
orders on the Web, CD-ROM, fax and telephone, and offering home delivery or collection and, of
course, in-store shopping. WAP m-shopping was launched in 2001 followed by PDA in 2002. TV
Internet had to close with the demise of ITV Digital, but at the time of writing is planned to return
via BT Digital. In addition to groceries, consumers can buy books, music, clothes, PCs, and
Internet and mobile phone services. There are regular paper mailings and special offers, including
non-food promotions such as ‘The top 50 books 10 per cent cheaper than Amazon’. At £10 per
customer, the cost of acquisition is low, compared to £50 to £100 for companies such as Amazon.
Addressing the need for more social interaction, particularly for female shoppers, the Tesco site
hosts the UK version of iVillage, providing information, chat rooms, travel, and health and
nutrition advice.
Tesco make use of the ready-digitized sales data for data mining and segmented offers. Targeted
offers (for example via e-mail or SMS) are not perceived as spam by Tesco customers if they add
value. HTML e-mails to customers achieve 10–30 per cent response rates. In one example, Tesco
achieved a 28 per cent click-through to Unilever for a Dove promotion from 35,000 premium
shampoo users. Tesco can use the lifestyle data from promotion responses to help plan other
marketing initiatives. Running such promotions for manufacturers such as Unilever provides a
valuable extra revenue stream for Tesco. In addition, there are affiliate deals with major portals
based on cost-per-click or cost-per-sale. Tesco’s e-retailing joint ventures in Ireland, Korea (the
country with the world’s highest Internet penetration) and, particularly, the US allow the costs of
development to be spread. New international markets can be entered at a fraction of the cost of
starting from scratch.

2
Tesco has over one million registered customers, and an e-turnover of over £450 million. This
success might well be attributed to Tesco’s single-minded determination to provide customer
satisfaction, using an easy-entry, cost-effective e-retailing system. Tesco’s e-retailing operation
has been in profit since 2001, with profit reaching almost £2 million by 2002. Despite the fast
growth in e-retailing (6 per cent of Tesco’s total growth in 2002), e-shoppers spend over 25 per
cent more than Tesco’s bricks shoppers, which Tesco believes is not cannibalizing in-store sales.
Indeed, bricks sales have continued to increase in real terms since the launch of the e-retailing
operation.

Questions:

Question 1
What do you consider to be the advantages and disadvantages that traditional
retailers have in comparison with Internet pure plays, in terms of online trading?

Question 2
Why do you think online customers may not be loyal to a particular company?

Question 3
What are the perceived risks (economic, social, performance, personal and privacy)
of e-shopping? Explain

Question 4
What are the dangers of multi-channel operations from a company’s perspective?

Best of Luck