Literature Review

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A few recent studies on e-tailing and online grocery shopping, which are based primarily in the US, have been reported. These studies are briefly reviewed in order to refine the focus of our investigation, and to form a base for follow-up discussion and comparison.

Ring & Tigert (2001) assert that the online grocery industry has not achieved success. In particular, pure play Internet grocery retailers can hardly survive compared to traditional "brick and mortar" food retailers. This is mainly due to substantial operating costs that make the pure Internet grocery retailers less competitive, and a lack of a profitable business model and an adequate customer base. They argue that Internet grocers dramatically overestimated the size of the market for grocery shopping from home. Although their argument is substantiated with evidence drawn from Internet Grocer Webvan and Peapod's failures, it cannot be consent without examining other types of online grocery shopping, for example, the Internet shopping channel launched by existing supermarkets. In another study, Starr (2003) took a step further to examine the cost and revenues that lead to the demise of the Internet Grocer Webvan. His study revealed that Webvan's failure centred on its large investment in building the modern distribution centers (DCs), under-utilisation of warehouse capacity, the mismanagement of the supply chain, and the high cost of switching customers to Internet shopping. However, Petco.com (PETsMART. com) and drugstore.com are cited as examples of successful online shopping. The former uses existing in-store facilities to handle picking-up and delivery, showing an example of blending Internet and in-store capabilities; the latter provides a successful example of taking orders via the Internet and allowing customers to pick-up in the retail store. These studies suggest that the pick-up and delivery approach seems critical to formulate the business model of Internet grocery shopping.

Another stream of studies concentrates on online consumers' behaviours, perceptions and benefits of shopping grocery online. Jarvenpaa & Todd (1997) studied U.S. consumer reactions to Internet shopping, and found that consumers do not entirely appreciate the new way of shopping as speculated. For example, consumers are impressed by the breadth of stores on the Web, but disappointed with the depth and prices of merchants' offerings; consumers feel Internet shopping is generally enjoyable, but at the same time frustrating; goal-directed shopping has proved difficult although consumers perceive the potential for time saving. Consumers have negative responses to customer service on the WWW. Jarvenpaa & Todd's (1997) study sheds light on consumer reactions to online shopping in general, but not specifically on online grocery shopping. However, much of their findings have been confirmed by recent studies. Alreck & Settle (2002a) surveyed 1,800 U.S. consumers on the role of time perception of shopping, and found that both Internet shopping and catalogue shopping are perceived to be more time saving than other forms of shopping—e.g., television shopping. However, respondents use Internet and catalogue shopping very infrequently compared with other formats.

Morganosky & Cude (2002) conducted a longitudinal study of online food shopping in ten U.S. markets, and report that a majority of respondents in all the three studies cited convenience as the most important motivational driver for using the online grocery shopping service. Time saving has also been perceived as important. The reasons for no longer using online shopping include moving out of the area, new competition moved into the area, online system too slow, delivery personnel and cost of the services. Surprisingly, security is not reported as a concern by U.S. consumers. This appears different from U.K. consumers' views, as reported by Dennis et al. (2002) from a survey-based study, that online shoppers are concerned with the security and payment aspects of buying goods online. Nevertheless, in a U.S.-based study, Udo (2001) did report that privacy and security are the main impediments to Internet shopping. In descending order of importance, he reveals U.S. consumers' concerns are: privacy, security and trusts, impersonation and forged identify, child protection, electronic mail safety and censorship.

Another impediment to Internet shopping, particularly for U.K. consumers, is access to the Internet. This is uncovered by Saran (2002), who conducted a quarterly survey of 1,006 U.K. consumers from a variety of social and economic backgrounds on utilisation of the Internet for shopping. The study shows that 43 percent of the correspondents did not have access to the Internet at home, while 50 percent did not own a personal computer.

The profile of online grocery shoppers is also portrayed in various studies. Morganosky & Cude (2002) describe that, compared to the general population, online shoppers were better educated, had relative higher incomes, and tended to be somewhat younger. In terms of gender of online shoppers, Morganosky & Cude (2002) suggest that they were predominantly female. However, based on a questionnaire survey of 300 U.S. men and women consumers, Alreck & Settle (2002b) report that the male and female attitudes toward Internet shopping are roughly the same. Women tend to regard shopping as a fairly social and pleasurable activity whereas men have a general aversion to shopping. Women have a more positive image of store shopping and catalogue shopping than men.

In summary, the literature review suggests the following speculation: Internet shopping model appears critical to the success of e-tailing for grocery shopping; consumers' profiles, the motivation and concerns of online grocery shopping have not been generally agreed. This triggers the need to further examine the Internet business models and customers' views of shopping groceries on the Internet.

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