Virtual Store Case Study

Q1. The central question Tesco should evaluate is “ what are the gains and losses associated with introducing or not introducing the virtual store” The answer is brought about by analyzing internal and external influences on the company’s actions.

Starting off with the internal influences, Tesco should outline the purpose of launching the virtual store concept. Whether it’s used as a promotional tool or a strategy to increase online sales makes a difference. Promoting Tesco may increase sales in existing supermarkets and attract new customers. On the other hand, using the virtual stores to increase market share in online grocery retailing may actually cause sales to divert from the supermarket purchases to online purchases. This brings us

For instance, Wi-Fi and cell signal is weak in underground stations, acting as a disincentive for customers to make their purchases. Also, if the virtual stores’ aim is to provide convenience, they would have to guarantee fast delivery. Nonetheless, is this feasible if we take heavy traffic congestion in London into consideration?

Q2) One reason that supports the initiation of the virtual store is that Tesco has already established itself in the online market with over 3.4 million registered users by the end of 2009 and has 61% penetration amongst people who use Internet for grocery shopping. This implies that customers are accepting the idea of online grocery shopping, especially with Tesco. Tesco also has a strong brand image, which can be utilized to further promote their virtual stores and attract more customers. Moreover, increasing virtual stores and reducing the number of express stores will be cost efficient as they will no longer need to pay for the space, employees and other associated costs of operating an express store. The reduction in such costs will be reflected as higher contribution margins for Tesco as they are reducing costs and maintaining

Train stations are very commonly used in the UK with an average of 1.3 billion journeys a year. 59% of these journeys either started or ended in London, meaning that this particular location will give virtual stores maximum exposure. Moreover, of the 84% trail trips during weekdays, 51% of them were for commuting and 8% were for business. These segments are likely to use the virtual stores as people who use the trains for commuting will find it more convenient to make quick purchases at the virtual stores and people on business trips will appreciate the time it saves them. Also, the fact that goods will be delivered to their doorsteps will be valued they do not have to carry the products with them in the