‘E-commerce flourishes in
the New Zealand flower
market’
A research to an online strategy in the B2C market
Christchurch ‘The Garden City’
Moffatt’s Flower Company
‘E-commerce flourishes in
the New Zealand flower
market’
A research to an online strategy in the B2C market
Author:
Arjan Wellen
Student number:
1337211
Groningen, August 2009
University of Groningen
Faculty Business Administration
Master Business Development
First supervisor:
Dr. K.R.E. Huizingh
Tweede begeleider: Dr. W.G. Biemans
Preface
I have been working for 11 years in the Dutch horticulture sector, in which I gained knowledge about the Dutch flower market. The challenge for me was to use my experience in a foreign country as the Netherlands is a leading country in the flower market. The innovative character of the horticulture sector is for me an interesting fit as innovation is strong related to business development.
The choice for Moffatt’s Flower Company was made because I could pick a research subject with a large scope instead of just a small part of the company. There were some interesting issues, and especially the B2C e-commerce got my interest as I followed the course ‘E-commerce’. The combination of my experience and the knowledge gained from this course during my study was very useful for this research.
Researching in a different country has been more difficult than expected. I have experienced living abroad, working and studying at the same time as a complicated combination. I would like to thank the people that supported me, especially my parents who made it able for me to study. Mr. Huizingh for giving feedback and putting me on the right track when needed. I also want to thank Mr. Biemans for the feedback. Last but not least, I would like to thank Mr. Arkesteijn for helping me getting the right information and for the great time I have had studying MFC.
Management summary
Moffatt's Flower Company (MFC) has supplied retailers and wholesalers across New Zealand with quality fresh flowers for over 50 years and is New Zealand’s largest rose-growing business. MFC predominantly sells directly to florists and flower wholesalers across New Zealand. A small store for selling to the public was kept low-key so as to not compete with their B2B customers. The changing competitive position of MFC and the change of their end-consumers relation raised the question of what the value of B2C e-commerce could be for MFC within the B2C market. Therefore the objective of this research is to advise MFC what e-commerce strategy can be used within the B2C environment. The research question that will be answered in this research:
‘How will MFC be able to use e-commerce within the B2C environment?’
The strategic business requirements that should satisfy enabling e-commerce for the B2C market need to be identified. For this case study research the three stage innovation process of Utterback (1974) is used. The current sales process to the end consumer is not yet optimal designed to serve the B2C market. The three stages of the innovation process are generation of an idea, problem-solving or development, and implementation and diffusion. The implementation and diffusion phase was not part of this study and is left for MFC. An internal and external analysis delivered the strengths and weaknesses of the company, and the opportunities and threats of the market. Most relevant are presented below:
Strengths:
Leading domestic market position.
More than 50 years of knowledge in New Zealand’s flower business. Strong reputation.
Location of the company that makes the company able to provide flowers directly. A large network of partners.
Weaknesses:
Selling to the end consumer is not their core business (lack of information related to selling to the end consumer).
Lack of knowledge to enable e-commerce activities. High selling prices compared to competitors.
High dependence on the New Zealand market, if the trend of foreign competitors continues (economy scale will become more important).
Relevant (consumer) data is not stored.
Opportunities:
Expand sales by selling online to the B2C market directly. Expand the wedding segment.
The key use that distinguishes frequent buyers is decoration, explicitly ordinary occasions at home.
For special occasions, such as weddings and funerals, flowers are the only option.
Specialisation is a development which takes place in certain product-groups and market segments, such as a Wedding florist,
Threats:
Small domestic market.
Cheap import flowers, production moves to low cost countries. Channel conflict.
Customer knowledge of floricultural products is declining.
These factors are the input of the SWOT-analysis which is used as a tool to determine the strategy. A SWOT-matrix is used to generate ideas, strategic alternatives.
Strategy 1: Sell online and support partners by informing consumers online and using partners for the
physical distribution.
Strategy 2: Use the Web site for supplying information to consumers only.
Strategy 3: Specialize in selling wedding/funeral flowers online to the B2C market, next to the current
offline business.
Strategy 4: Continue current strategy, only sell to the B2C market through their own small shop.
The alternatives are translated into actual e-commerce opportunities for the B2C market by checking to what extent they meet the strategic objectives. Specialize in selling wedding/funeral flowers online to the B2C market, next to the current offline business had the best score of all four strategies. This strategy fits best at the moment to the current strategy and responds to trends and changes in the environment, and is most likely accepted by consumer, traditional channel and MFC. Performing an online sales strategy in a B2C wedding/funeral market gives MFC the opportunity to serve the end consumer directly and preventing a channel conflict to increase the profit margin. Being active in an online B2C environment makes MFC able to gain e-commerce competences and B2C market information that need to be improved. Other flower growers can use this research to create awareness of the opportunities for them in the B2C market.
Index
Preface ... 2
Management summary ... 3
Introduction and study Approach ... 7
1.1 Moffatt’s Flower Company ... 7
1.2 Current situation ... 7
1.3 Research design ... 7
1.4 Research methodology ... 8
1.5 Data collection... 9
1.6 Outline of the report ... 9
1.7 Definition of concepts ... 9
2 Q1 - Company profile MFC ... 11
2.1 Innovation process ... 11
2.2 General ... 11
2.3 Location ... 11
2.4 MFC’s current strategic profile ... 12
2.5 Business ... 12
2.5.1 Business trends ... 13
2.5.2 Market channels ... 13
3 Q2 - Flower Market New Zealand ... 15
3.1 Innovation process ... 15
3.2 New Zealand ... 15
3.3 General New Zealand flower market ... 15
3.4 Competition ... 16
3.5 Market position MFC ... 17
3.6 Trends ... 17
3.7 New Zealand consumer flower purchase behaviour ... 19
3.8 Conclusion ... 20
4 Q 3: E-commerce ... 21
4.1 Innovation process ... 21
4.2 Introduction ... 21
4.3 Internet and e-commerce... 21
4.4 B2C e-commerce ... 21 4.5 B2C e-commerce capabilities ... 22 4.5.1 Efficiency ... 23 4.5.2 Complementarities... 23 4.5.3 Lock-in ... 24 4.5.4 Novelty ... 24 4.6 Disintermediation ... 24 4.6.1 Channel conflict ... 26 4.7 B2C e-commerce threats ... 27 4.8 B2C e-commerce developments ... 28
4.9 New Zealand e-commerce... 28
4.9.1 Consumer purchase behaviour ... 28
4.9.2 New Zealand consumers’ attitudes towards online shopping ... 29
4.10 Conclusion ... 29
5 SWOT analysis ... 31
5.1 Innovation process ... 31
5.2 Introduction ... 31
5.3 Reduction of the internal and external factors ... 31
5.4 The SWOT matrix... 32
5.6 Conclusion ... 37
6 Strategic alternatives assessment ... 38
6.1 Innovation process ... 38
6.2 Selection criteria ... 38
6.2.1 Suitability ... 38
6.2.2 Acceptability ... 38
6.2.3 Feasibility ... 38
6.3 Sell online and support partners by informing consumers online and using partners for the physical distribution (strategy 1) ... 38
6.4 Use the Web site for supplying information to consumers only (strategy 2) ... 39
6.5 Specialize in selling wedding/funeral flowers online to the B2C market, next to the current offline business (strategy 3) ... 39
6.6 Continue current strategy, only sell to the B2C market through their own small shop (strategy 4) ... 40
6.7 Best e-commerce strategy MFC ... 40
6.8 Conclusion ... 41
7 Conclusion and advice ... 42
7.1 Advice ... 42
7.2 Limitations and suggestions for further research ... 44
7.3 Reflection ... 45
Appendix A – References ... 46
Appendix B - Organization ... 50
Appendix C – Flower purchasing ... 52
Introduction and study Approach
1.1 Moffatt’s Flower Company
For over 50 years, Moffatt's Flower Company (MFC) has supplied retailers and wholesalers across New Zealand with quality fresh flowers. MFC is with 2ha of glasshouses New Zealand’s largest rose-growing business. MFC sells directly to florists and flower wholesalers across New Zealand and has about a twenty percent market share in New Zealand. A small store for selling to the public is part of their business, this was kept low-key so as to not compete with their main customers.
1.2 Current situation
Until now, the main business is selling flowers to the business-to-business (B2B) market. Since MFC launched a wedding marketing campaign in the beginning of 2007 to reach the end-consumer as well, they noticed a big raise in sales from the business-to-consumer (B2C) market. This marketing program have led end-consumers to the company Web site. The result was an increasing use of the Internet by consumers to make enquiries and this is the reason for researching the possibilities to focus on business-to-consumer (B2C) by the use of e-commerce. To serve the B2C market, the public store became more important as well, and has been professionalized recently.
The current Web site is only designed to inform B2B customers about the different varieties and to exist on the Web. The organization noticed an increasing threat of cheap flowers from India. The changing competitive position of MFC and the change of their end-consumers relation raised the issue of this research. MFC wants to know what the value of B2C e-commerce could be. An e-commerce strategy can make it possible for MFC to adapt to their changing environment.
Therefore the objective of this research is to advise MFC what e-commerce strategy can be used within the B2C environment.
To indicate the purpose of this research a problem statement is developed based on de Leeuw (2002). The problem statement consists of an objective, research question(s) and limiting conditions.
1.3 Research design
Problem statement- Objective:
To advise MFC what e-commerce strategy can be used within the B2C environment.
- Research question:
How will MFC be able to use e-commerce within the B2C environment?
Sub-questions:
1. What is the company profile of MFC?
2. What is the position of MFC in the environment of the NZ flower market? 3. What is e-commerce?
Limiting conditions:
- Process:
a. The research must take the demands of the faculty of Business Administration from the University of Groningen into account.
- Product:
a. E-commerce as examined in this research will primarily focus at the end of the supply chain, the process of selling the product to the final consumer.
b. The market focus will be the domestic market, as the company is yet to small to compete at a global scale. Therefore MFC has stopped exporting in September 2005.
c. The research must led to recommendations for the management of MFC to use e-commerce within the B2C environment.
1.4 Research methodology
The research is a policy supported case study research using the three stage innovation process of Utterback. The specific context of the research environment and the objective to advise MFC confirm this research approach. MFC is serving the B2C market through the B2B market, but has also some experience in the B2C market through their shop and the current Web site. This process is not yet optimal designed to serve the B2C market.
E-commerce needs to be an enabler of the business process in order to gain customer value. Therefore exploring the (re)development of this process is needed to answer the research question. It needs to be mentioned that the term “development process” is misleading because it implicates that the process is completely ordered linear and logical, and is controlled step by step. More often the development process is very complex or even chaotic (Lager, 2000).
To manage this research project I will use the three stage innovation process of Utterback (1974) to guide the non-linear research process. The three stages of the innovation process are generation of an idea, problem-solving or development, and implementation and diffusion.
Generation of an idea involves the using diverse information, including information about market or other need and possible technology to meet the need. Problem solving includes setting specific technical goals and designing alternative solutions to meet them. The implementation consists of the requirements to the original solution to its first use or market introduction. After the introduction diffusion takes place in the environment.
The first two stages of the innovation process of Utterback (1971) will be used to guide the non-linear research process: enabling e-commerce sales to the B2C market is an innovation for MFC. It consists of three stages:
1. Generation of an idea
a. The strategic business requirements that should satisfy enabling e-commerce for the B2C market need to be identified. Therefore the strategic analysis will take place. This consists of an internal and external analysis and delivers the strengths and weaknesses of the company, and the opportunities and threats of the market.
2. Problem-solving or development
In this phase the strategic alternatives are translated into actual e-commerce opportunities for the B2C market. The alternatives are checked to the extent they meet the strategic objectives.
3. Implementation and diffusion
The requirements to the original solution to its first use or market introduction lays outside the scope of this report and will be executed by MFC.
1.5 Data collection
Different sources are used to execute the research. For country and market information government Web sites and in-depth interviews with the management team of MFC are used to know the context. Literature research has been used to examine the subject e-commerce. In particular, books, online catalogues and databases of the university of Groningen library are used to gather information about e-commerce. Web sites are used to find e-commerce developments. To study the B2C e-commerce developments, consumer attitudes and behaviour are important as well, which is gained from existing studies.
A research report for the Northern Flower Growers Association is used to gather New Zealand flower market information and the consumer behaviour according to flowers. To find e-commerce opportunities and threats for MFC’s B2C market, information is gained from existing literature and about organizations who dealt with this in the past.
1.6 Outline of the report
In chapter 2 the company profile is presented to introduce MFC to the reader. In chapter 3 the market in which MFC is performing is examined and explains the current position of MFC in its market. The subject e-commerce is explored in chapter 4 and explains the advantages and disadvantages of its use in the context of this research. This chapter also contains the B2C e-commerce developments in a general perspective as well the New Zealand situation. Chapter 5 contains the SWOT-analyses and the generation of ideas. These ideas are accessed by using success criteria in chapter 6 in order to advise the strategy that fits MFC best. In final chapter 7 the research question is answered and the advice for the company is presented.
1.7 Definition of concepts
E-commerce: Broad definitionThe seamless application of information and communication technology (ICT) to the entire value chain of business processes, conducted electronically, in order to achieve an organizational goal Wigand (1997).
Narrow definition
The activities related to marketing, buying and selling of products and services on the Internet Gloor (2000).
B2B e-commerce: Cooperating businesses carry out transactions such as placing an order, receiving an invoice for payment, paying bills, etc, electronically.
E-commerce strategy: The online approach in which a company wants to fulfill its mission, aware of the opportunities and threats in the organizational, transactional, and contextual environment.
Disintermediation: The displacement or elimination of market intermediaries, enabling direct trade with buyers and consumers without agents (Wigand, 1997).
Channel conflict: 1. Internal channel conflict
An internal channel conflict occurs when different sales channels of one company are competing for the same customers (cannibalization).
2. External channel conflict
2
Q1 - Company profile MFC
2.1 Innovation process
To generate ideas, the internal situation in relation to e-commerce is the first exploration. The internal analysis will result in the strengths and weaknesses of MFC, that are the input of the SWOT-analysis to generate strategic alternatives (ideas). The current process of delivering flowers is explored in this chapter, in order to generate ideas to improve the B2C delivery process in an online environment.
2.2 General
For over 50 years, Moffatt's Flower Company has supplied retailers and wholesalers across New Zealand with quality fresh flowers. Roses are the hallmark of their nursery. The family business started as the first commercial rose grower of
New Zealand.
Moffatt’s Flower Company (MFC) is with 2ha of glasshouses New Zealand’s largest rose-growing business. Over 30 different varieties are currently produced, from classic favourites to current fashion colours. MFC sells directly to florists and flower wholesales across New Zealand and has about a twenty percent market share of sales in the New Zealand rose flowers market (B2B and B2C market). Besides supplying the B2B market there is also a small store for selling to the public, but this was kept low-key so as to not compete with their main B2B customers.
Besides competing, they supply other commercial growers throughout New Zealand by selling rose plants. All rose propagation is carried out on site by a specialist propagator. A small, but increasing, number of Phalaenopsis plants, also known as Moth Orchids, are sold as well, mostly to florists. MFC believes that the growth and the success of the company lies in their ability to provide a reliable supply of quality flowers while keeping personal contact with the customers. More information and the organization structure is written in Appendix A.
2.3 Location
New Zealand is an island country in the south-west Pacific and has a multicultural population of nearly four million people. Comparable in size (268,680 sq km) to the United Kingdom, Philippines and the state Colorado in the United States, makes it one of the least crowded countries (Statistics New Zeeland, 2008)
2.4 MFC’s current strategic profile
MFC does not have their strategy statements documented. For this reason these statements are the outcome of in-depth interviews and company information.
Mission
MFC’s underlying motivation for being in business and the contribution to society is to provide only the best in flowers quality and service.
Vision
MFC’s future goal is to continue be the best in the top end of the market.
Strategy
A strategy statement is made to explain how to reach the company’s goal. This is how the company executed their business until now.
- Strategy statement
Provide a rapid and reliable supply of quality flowers while keeping personal contact with customers, by using fixed prices, implementing the latest technology and varieties to grow and keep the leading market position which ends up in profit.
2.5 Business
In the financial year April 2007-March 2008 MFC had a total turnover of $NZ 2,280,900. January’s turnover was higher than previous years because the marketing program paid off what resulted in a bigger demand for wedding flowers. February had about a double turnover compared to other months due to Valentine’s Day.
This turnover is only gained from the domestic market, as the company is yet too small to compete at a global scale. In the past MFC was active at a global scale but was forced due to increasing distribution costs to stop exporting in September 2005.
MFC’s location is strategic for the distribution process. This creates the possibility to supply a quick and reliable delivery all over the country. The delivery is outsourced, but delivery to some customers and last-moment orders in Christchurch is done by the company itself to guaranty a reliable and fast delivery. The delivery time is very important for this product as flowers are perishable.
Some special days are important in the flower business. There is a large demand for red roses on Valentine’s Day. To create a big flush all the red rose plants are pinched back six weeks prior to this specific day. Six weeks later a smaller flush is created to supply red roses for Red Rose Day. Another special day is Mothers Day, more flowers than regularly have to be produced and again red roses in particular.
2.5.1 Business trends
The increasing demand for wedding flowers effected the color range. Before this trend 60 percent of all roses was red coloured, currently this fluctuates between the 30 and 35 percent. This trend was also noticed because of the increasing number of inquiries for a wedding through the Web site.
In the summer, September to April, there is a strong competition among different flower varieties. MFC can deal with this to a certain extent by the demand for wedding flowers. In the winter, March to October, there is a flower shortage which ensures rose growers to sell everything. In the winter of 2008 the company noticed that especially northern rose growers could not fulfill the demand. A raise in the flower demand for MFC was the result.
Some developments are found in the New Zealand flower market that might affect the position of the company, what can be useful for a successful implementation of e-commerce. MFC thinks that the import of flowers from India is becoming a dilemma. These growers are able to grow flowers at lower cost, this gives them the possibility to sell flowers for a lower price to the New Zealand market. This same trend happened in the world’s leading flower export country the Netherlands as well. They had to deal with cheaper flowers from foreign countries in the past, which had its effect on the Dutch flower market. Growers were struggling with quality versus price competition. Many growers went bankrupt because they were not able to compete to flowers from foreign countries. Because the lack of quality import flowers are not yet a threat in New Zealand’s rose flower business. Even though, MFC expects on short term that this will change because of the development of a better treatment method for roses. A better treatment makes them last longer and therefore profitable to transport overseas, and they might be able to compete with the quality that MFC delivers.
Besides these product trends, production costs become even more important for MFC. Since July 2008 the cost of coal rose from $100 NZ to $260 NZ per ton. Although the company made an agreement that it can buy a ton for $160 NZ, it is still an increase of 60 percent. This forced the company to look for alternatives to keep its position in the market. Currently MFC is changing their fuel installation to be able to use wooden pallets, which is cheaper than coal and has got some environmental benefits too such as carbon tax exemption.
2.5.2 Market channels
MFC is supplying the B2B market and to a less extent the B2C market. Different distribution channels can be distinguished. The channels are different in length and are displayed in figure 2.2. Besides different profit per variety, the revenue of each particular channel is not clear for MFC. They do not record these data separately.
A. B2B market
MFC supplies flowers through different distribution channels in the B2B market, the first two channels in figure 3.2. Most customers have a standing order each week, which varies from summer to winter. The B2B customer database consist of 350 customers in total, which are 250 frequent customers and 100 incidental buyers. Of these customers one is taking care of 10 percent of the total turnover and besides this MFC has two wholesalers who are important for them because of the intermediate role to supply most supermarket customers. The distribution channels that can be distinguished are through wholesalers and retailers such as supermarkets and florists. The sales channels that are used for order taking are the telephone and fax, and the Internet.
B. B2C market
For the direct channel to the B2C market MFC is using two different sales channels, the local physical shop, telephone and fax, and the Internet. A company poster makes this information available for consumers in their shop and retail shops. Of the daily inquires through the Internet about 50 percent results in an order, about one order a day. Internet orders vary between NZ$ 250 and NZ$ 1000, that is 5-20 percent of the daily total revenue. Especially wedding orders are interesting for MFC as this can be 20 percent of the daily turnover.
3
Q2 - Flower Market New Zealand
3.1 Innovation process
Next to the internal information, external information is used to generate ideas to innovate the flower delivery process and to recognize a need. The external analysis results in opportunities and threats for MFC, that are next to the strengths and weaknesses the input for the SWOT-analysis to generate ideas. This chapter explores the flower market.
3.2 New Zealand
New Zealand has a relatively small population and that is an important barrier to the rate of economic growth that can be achieved in the flower market. New Zealand is not only having some physical distribution problems due to the isolated geographical place, but also because of the relatively poor rail network, heavy reliance on air transport, relative inefficiency of coastal shipping and strict maritime regulations, and the high amount of dangerous windy road passages through hills (Walters and Dana, 2004).
3.3 General New Zealand flower market
Traditionally, growers sell their flowers mainly through the B2B channels in New Zealand. Retailers take care of selling to the end-consumer. In New Zealand there are several ways to sell flowers to B2B customers. Flowers can be sold through an auction, through a wholesaler or directly to the retailer. This is displayed in figure 3.1. In general, flowers sold by auction receive a lower price than when sold directly to the retailer or wholesaler. Wholesalers buy from growers and sell to retailers, including supermarket chains, at a fixed price per bunch. The traditional direct customers are mostly florists and supermarkets, but florists are the most important partner to sell to, see Appendix C.
Figure 3.1: B2B sales channel
Businesses use different channels to reach the end consumer. Consumers today have more choices and means to select and send alternative types of gifts, for example the Internet and 1-800 shopping. Still the traditional florist shop is most popular to buy from. The Internet as an upcoming channel in which Florists use internet catalogs to show offerings. The telephone is also common used to order flowers. The end consumer has a variety of different places to buy from. The places to buy from and the percentages of places where buyers (‘moderate’ and ‘frequent’) mostly buy from (NFGA, 2003) are:
- Florist 89%
- Roadside stall 30.4%
- Fruit shop 23%
- Web shop such as Interflora and Readyflowers 34%
- Diary 28.8%
- Farmers market 14.6%
- Petrol station 18.4%
- Hospital gift shop 17.4%
- Airport or train station 9.6%
- Restaurant 4.2%
- Grower No data
New Zealand’s domestic rose market is primarily self-sufficient, the transport costs are high to ship flowers to New Zealand and the county’s bio security makes it hard to get into the country. In the same way, the high costs of establishing offshore distribution is a barrier for SMEs in New Zealand to export (E-regions, 2006). An example of the high cost is presented in Table 3.1, where different Orchids exporting countries are compared to each other. In this case the distribution of Orchids to America will cost New Zealand companies about 5-6 times more than other countries. This barrier is exacerbated in MFC’s case by the small size of the domestic market and the physical distance from many current and potential markets. Due the small size of the domestic market the market is balancing between supply and demand. Even relatively small increases on the supply side can have a significant effect on the market returns.
Exporting country Shipments Freights Value¹ (000 dollars) Price¹ ($/piece) $/piece² % of cargo value³ Netherlands 1,090 0.66 0.189 29% New Zealand 835 2.90 0.690 23% Thailand 333 0.31 0.163 53% Singapore 186 0.57 0.109 19% Malaysia 118 0.37 0.119 32% Foreign -- 0.75 0.222 30%
1 Based on 2004 data. Foreign countries’ data obtained from the U.S. Foreign Trade Statistics (DOC)
2 Foreign countries’ freight rates calculations based on 2004 data obtained from the U.S. Foreign Trade Statistics (DOC).
3 Calculated based on the second and third columns. Table 3.1: Flower transport costs to U.S.
Source: Cai et al., 2007
3.4 Competition
growers is generally accepted as being a good estimate (FloraCulture International, 2008). In terms of area of crop, again NFGA has no real information. There are probably less than 15 growers with 1 ha or more of greenhouse space. The industry is roughly divided into two sectors:
1. Growers who are predominately export focused.
2. Growers who are predominately domestic market focused.
3.5 Market position MFC
MFC has indirect a strong position in the B2C market as they have a strong influence the B2B rose market. The advantage of MFC is that they are New Zealand’s first commercial and largest rose-growing business with 2 ha of the 15 ha rose surface area. In contrast with a lot of competitors MFC’s focus is only roses. In line with their quality flower strategy the fixed selling price of flowers is higher than the price that customers have to pay at the auctions in New Zealand.
Competitors of MFC are mostly competing on price and focusing on quantity. By being different MFC can guarantee quality, and a reliable delivery and service. This means that people are willing to pay for quality flowers and service. Or despite the identical product, the service is different and switching costs are not as low as to switch to a competitor. Important switching costs are costs as a result of unreliable delivery of competitors. This gives MFC a strong position in the market.
MFC is using fixed prices for their flowers and applies the principle ‘take it, or leave it’ for customers, because price cuts are usually easy for competitors to see and match and it is hard to get back to the previous price. Even the perishable character of flowers is not a reason for MFC to cut prices. In 2008 about 20 percent of the flowers have been thrown away to prevent dumping, but this had specific causes. Regularly, about 5 percent is thrown away. Customers are willing to pay for quality, the company wants to keep their reputation.
3.6 Trends
According to the New Zealand Herald more than 300 mainly small growers have gone out of business from 2006 until 2008 (NZHerald.co.nz). Accurate facts and figures are difficult to find since there is little or no statistical information collected on the New Zealand flower industry. Cheap imports and rising production costs are supposed to be the main cause of this decline. New Zealand’s flower organizations do not all agree to this point. According to Mr. Blewden from the Norther Flower Grower Association (NFGA) there are relatively low imports into New Zealand and even then devitalisation and fumigation will give those products not a good head start in life (FloraCulture International, 2008). Mr. O’Brien, managing director of the United Flower Auctions, comments that the New Zealand market place is in serious decline is an over-statement. Other reasons than cheap imports and rising production costs for the decline include natural attrition through retirement, changing land use, lack of economy of scale, changing demand in export markets and competition from emerging economies in our traditional export markets (FloraCulture International, 2008).
Import is not only a threat to domestic growers, but also to the bio security that these pose to New Zealand’s relatively clean bio security status as an isolated island nation. The New Zealand bio security must be ranked amongst the toughest in the world. For exporters this means that it is hard to get into New Zealand. Another significant issue at the moment is the implementation in 2009 of the New Zealand Carbon Emissions Trading Scheme, which will add significantly to the cost of production.
flower market is that supermarkets supply more and more flowers to the end consumer. Currently supermarkets hold about 20 per cent market share, but grower associations would like to see a further increase of flowers sold through supermarkets.
Dutch flower auction, Bloemenveiling Aalsmeer (VBA) looked at the future to what the situation may be in 2015 in 2007 Green Harvest Pacific’s newsletter (greenharvest.co.nz). VBA found 12 trends in the global floricultural sector based on historical information, but only 9 might be relevant for the New Zealand flower market. The other trends are because of the domestic focus of this research irrelevant. The trends population and economy changes in Europe are irrelevant for the New Zealand market. Up-scaling and specialisation is only for a part relevant. Up-Up-scaling within the retail chain, and dominant retail chains with exporters monopolising is not the case in New Zealand. Specialisation is also present in the New Zealand flower market. Another trend is a Dutch trend, the decreasing role of The Netherlands in world-wide flower trade, as the predictions of the VBA are aspects which are relevant for the Dutch auction.
1. Stronger individuality
Self-expression is becoming more important for consumers, therefore purchase behaviour is changing. Customer knowledge of floricultural products is declining. Ready made products are becoming more popular. Companies are operating more independently from institutions and co-operations. Decisions are based upon objective grounds instead of emotional ones.
In New Zealand perspective, MFC noticed this trend, ready made products were already made in the workroom by a florist instead of the florist shop. MFC tried to cooperate in the past with other growers but this was yet unsuccessful because of problems to reach the companies objectives. Partners could not fulfil the reliable service of flowers.
2. Need for solidarity to the environment increases
Consumers want to feel connected to the environment, nature and community. They prefer real and pure products instead of fake ones. Customers do not want summer flowers in winter and bouquets with long vase life lose popularity because customers see them as unnatural, companies choose to cooperate with this.
New Zealand consumers feel connected to the environment, nature and community. Many local products promote that they are made in New Zealand.
3. Paying more attention to the environment
Companies have to take responsibility for environmental and social aspects. Only companies, who take on these responsibilities, will get a license to produce. An open policy about production methods will become essential and laws and rules, which differ per country, also become more harmonised.
The New Zealand Carbon Emissions Trading Scheme makes companies responsible for environmental and social aspects.
4. Production moves to low cost countries
Production moves to places where the price/ quality is the best and the availability of light, energy and labour is optimal. That means that production is moving to areas around the equator, resulting in an increase of world-wide production. This trend occurs mostly with bulk-goods that are easy to transport. In the new world order Africa produces for Europe, South America for North America and China for Asia.
The New Zealand floricultural sector is aware of flowers from India, and might have to be aware to some extent of flowers from China.
5. Specialization
6. Decreasing costs through technical innovations
New production methods will decrease the energy usage of nurseries. New energy resources will be used and nurseries will start producing energy which will be sold to the community. The high labour costs will be fought due to automation and new machines. Because of innovation the use of chemical crop protection will be reduced.
The high energy costs in New Zealand made MFC to switch from coal to wood for heating the greenhouses recently.
7. Longer tenability of flowers
Through technical innovations, tenability of flowers will be improved Conditioning of cool containers will allow the tenability, during sea transportation to be extended to 30 days. The organisation of a proper cool chain is becoming more important. Packaging is set to be more market driven which improves presentation in the shops and logistic efficiency.
In the case of New Zealand this trend can make the distance of the country to other markets less relevant.
8. Full use is made of Internet possibilities
As the Internet progresses, more market information, which companies use for decision-making, will be made accessible. Sales and logistics will become more separate.
Internet gives New Zealand floral organizations the possibility to interact with each other and gives the opportunity to better serve less crowded areas.
9. Scarcity of natural energy resources
Competing for natural energy resources will lead to the price increase of gas and oil. As the international competition for resources increases, the focus on costs will become more apparent. Production will therefore move to areas in the world with favourable natural growing conditions, like Africa, where artificial lighting and heating are not necessary.
For New Zealand growers this means that they can only supply flowers seasonal if alternatives are not found. Growers on the South Island have an advantage to North Island growers in this situation. Despite the higher average temperature on the North Island, growers on the South Island use 25 percent less energy due to more sun hours and the use of energy screens in the winter according to MFC.
3.7 New Zealand consumer flower purchase behaviour
In a floral market, understanding when, where and why consumers purchase floral products is essential to develop an appropriate strategy. Information in this section is derived from Flower Purchasing
Report (NFGA, 2003). See Appendix C for complement figures. The most valuable flower consumers
in New Zealand are mainly woman between 30 and 60 years old. These frequent buyers account for only 14 percent of the population (aged 15+) but over half of the retail value. They are much more likely to buy for their own home than non-frequently buyers, either for ordinary occasions when expecting visitors. They also extend this to their hosts when invited to someone else’s home. Moderate buyers buy more for special occasions like birthdays, therefore purchases are limited by the number of birthdays they buy for. The key use that distinguishes frequent buyers is decoration, explicitly ordinary occasions at home. Frequent buyers see flowers not only as a gift, but also buy flowers for themselves.
greater convenience coverage. Besides that flowers are too expensive, an important barrier for frequent buyers is that they are too busy.
Although consumers today have more choices and means to select and send alternative types of gifts, there are some occasions in which flowers are the only option. Flowers for weddings and funerals have no other substitutes to compete with. MFC noticed that end consumers are making more inquiries to the grower for these occasions since they could be reached through the Internet.
3.8 Conclusion
MFC has a strong position in the New Zealand flower market, but the power of the final consumer is increasing due the use of the Internet (Porter, 2001). Consumers today have more choices and means to select and send different types of gifts. Increasing imports is another issue, but due New Zealand’s tough bio security it is hard for exporters to get into the country. Maybe even more important is the New Zealand Carbon Emissions Trading scheme, this will add significantly to the cost of production.
Although the flower market is a gift market in the broadest sense, it is for the most valuable group consumers more important to focus on the ”ordinary” use, such as decoration. Frequent buyers buy more flowers for themselves than for others and the key use is decoration. An opportunity is to increase self-purchases of consumers. In addition, the intended use of flowers is the main variable that encourages consumer motivation to buy flowers frequently. Moderate buyers have a lack of confidence in taking care of flowers, a primary target therefore should be to encourage self purchase amongst this group. Confidence in flower care is a critical component of self-purchase, education is the key. Frequent buyers can be stimulated to bigger self-purchases. Encourage positive emotions and mood, this enhances purchases for decoration. As supermarkets become more important to sell flowers, a strong relationship with supermarket retailers and understanding of an ideal supermarket environment is necessary. A great convenience coverage is needed to take away “too busy” as a barrier for buying flowers for frequent buyers.
4
Q 3: E-commerce
4.1 Innovation process
Besides market information, generation of an idea involves possible technology to meet the need. This chapter is exploring e-commerce in order to generate ideas for MFC to enable e-commerce within the B2C market. Next to meeting the need, technology can be an advantage for MFC. E-commerce needs to be an enabler of the business process, in order to create value to the business process.
4.2 Introduction
The term e-commerce is widely used these days, but it seems hard to define. In the literature different definitions can be found and it is often mixed up with the term e-business. E-business refers to a broader scope than e-commerce. E-business can be understood as the ability of a firm to electronically connect, in multiple ways, many organizations, both internally and externally, for many different purposes (Fahey et al., 2001). E-business covers the application of Internet technology (intranet, extranet, internet) in all aspects of the business world.
Wigand (1997) defined e-commerce as the seamless application of information and communication technology (ICT) to the entire value chain of business processes, conducted electronically, in order to achieve an organizational goal. Following this broad definition, various types of e-commerce can be divided. For example one-way teleshopping via television channels, automated transactions as EDI and electronic shopping.
Gloor (2000) has refined the broad definition, he distinguishes e-business from e-commerce. He defines the term e-commerce for the activities related to marketing, buying and selling of products and services on the Internet. For this research the definition of Gloor is used, as the focus of this study is related to these activities. According to the definition of Gloor, e-commerce is considered to be a subset of e-business.
4.3 Internet and e-commerce
To execute e-commerce applications, organizations need the right information, infrastructure and support services (Turban et al., 2006). The Internet is a world-wide network of computers that communicate with one another using a particular protocol. The world wide acceptance of this standard has led to the emergence of the Internet as the essential infrastructure for e-commerce and for this reason the Internet is a useful tool for MFC to do business within the B2C market. The Internet is the driver of the changing relationships. According to Porter (2001) we need to move away from the rhetoric about “e-business strategies” and see the Internet as an enabling technology that can be part of the strategy.
4.4 B2C e-commerce
1. Front lobby
Creating a general online listing for the firm and its products, when product features and/or supply chain issues constrain any significant use of e-commerce even for product support and marketing activities.
2. Maximize product profile
Using electronic commerce only to promote and provide post-sales service for the firm’s products to consumers, but not as a channel for product sales.
3. Unbundle burdensome transactions.
Utilizing electronic commerce as a support channel to expedite process components that have been traditionally inexpedient or burdensome within brick and mortar transactions.
4. Parallel lines
Utilizing electronic commerce as an independent, fully fledged B2C channel that is intentionally subordinate to the brick and mortar channel.
5. Direct integration
Integration of the brick and mortar and online channels to the greatest possible extent.
4.5 B2C e-commerce capabilities
Now that the scope and definition of e-commerce are clear, it is important for MFC to know the capabilities of e-commerce for the B2C market.
To recognize the capabilities it is useful to know the characteristics of e-commerce through the Internet. Different organizations did not take advantage of the unique features of the Internet which make it such a powerful tool. Dann and Dann (2004) have distinguished seven unique areas of Internet benefits that have emerged over time from a variety of authors:
1. Interactivity
The degree to which the user can interact with the Web site in a meaningful manner beyond following internal hyperlinks.
2. Variety and customisation
Levels of change, interaction and customised content that can occur on a Web site. 3. Global access
The international nature of the medium, and how local Web sites have a global presence.
4. Time independence
The ability of many features of the Internet to be accessed around the clock, seven days a week without the need for a physical or personal presence staffing Web site. 5. Interest driven
The extent to which the Internet is a pull medium where online experiences are based on the active seeking out of the items of interest rather than the passive acceptance of whatever push media delivers to the screen.
6. Ubiquity
The ability of the Internet to be available in the same format, manner and nature wherever the user logs onto the system.
7. Mobility
The capacity of the Internet to be delivered beyond the conventional boundaries of desktop computers and networks.
These seven unique characteristics of the Internet, when considered together, have a profound effect on how value-creating economic transactions are structured and conducted. Except from global access all the characters of the Internet can explain the potential of e-commerce for MFC.
(Barnes, 2003; Porter, 2001; Wigand, 1997). In e-commerce, value will only be added when ICT is used as an enabler for the organization’s business processes to realize the organization’s business objectives (Wigand, 1997), as is presented in Figure 4.1. The potency of e-commerce lies in the complementation of the traditional way of doing business.
Figure 4.1: E-commerce value Source: Wigand (1997)
The seven unique characteristics of the Internet can affect the business process to create value. For example, time independence enables an organization to influence the business process by being accessible 24 hours a day. This can result in a customer value by giving customers the opportunity to shop whenever they want. Another example, the interest driven characteristic of the Internet can change the business process from pushing the customer information and products, in a process where the customer pulls information and products.
The use of the Internet for e-commerce can create value, but how can it create value. Amit and Zott (2001) identified four main value-drivers that enhance the value creation potential of e-business; efficiency, complementarities, lock-in, and novelty. The next sections will deepen the B2C e-commerce opportunities that arise from the value drivers.
4.5.1 Efficiency
The data analysis from Amit and Zott’s (2001) study points to transaction efficiency as one of the primary value drivers of e-commerce strategy. The greater the transaction efficiency gains that are enabled by a particular e-business, the lower the costs and hence the more valuable it will be. This can be realized in different ways. One is by reducing information asymmetries between buyers and sellers by providing up-to-date and comprehensive information. Improved information also reduce customers’ search and bargaining costs although this makes it more difficult to capture those benefits as profits (Porter, 2001), it enables a search faster and more informed decision making. Marketing and sales costs, transaction-processing costs, and communication costs can also be reduced in an efficient e-business (Amit and Zott, 2001).
4.5.2 Complementarities
offline assets complement online offerings. Customers who buy products over the Internet value the possibility of getting after-sales services offered through brick-and-mortar retail outlets, including the convenience of returning or exchanging goods.
4.5.3 Lock-in
Lock-in prevents the migration of customers and strategic partners to competitors. Lock-in is the potential of creating value by the extent to which customers make repeat transactions. Customer retention can be enhanced in several ways. For example loyalty programs, or establish trustful relationships with customers. Customize products, services, or information to their individual needs also enhance lock-in.
4.5.4 Novelty
While the introduction of new products or services, marketing, or the tapping of new markets have been the traditional sources of value creation through innovations, the study of Amit and Zott (2001) also reveals that e-businesses innovate in the ways they do businesses, that is, in the structuring of transactions.
The four value drivers are interrelated. The efficiency features and complementary product and service offerings of e-commerce may serve to attract and retain customers and partners. On the other hand, lock-in can also have a positive effect on efficiency and complementarities. For example, Amazon is using the customer details to support the customer’s purchase decision by showing the customer similar products that others bought as well.
4.6 Disintermediation
Disintermediation is the displacement or elimination of market intermediaries, enabling direct trade with buyers and consumers without agents (Wigand, 1997). In the traditional distribution channel intermediating layers exist between the manufacturer and the end-consumer, these layers can add a high percentage mark-up on the manufacture’s prices. Dell is the best known company that eliminated the traditional intermediaries. Manufacturers can use the Internet to sell directly to end-consumers and provide customer support online. Disintermediation is illustrated in figure 4.2.
The advantages of disintermediation for a manufacturer can be lower transaction cost, gain customer information directly, offer a bigger assortment to the consumer than a reseller does (Tsay and Agrawal, 2004), improve supply chain efficiency (Tsay and Agrawal, 2004), a higher mark-up rate (Driver and Evens, 2004).
Elimination of intermediaries is not without disadvantage, if a manufacturer cannot fulfil the functions of a reseller efficiently. Consumers may have problems selecting an online trader, and manufacturers may have problems delivering to end-consumers (March and Ngai, 2006). Another disadvantage of disintermediation may be unsupportive behaviour of intermediaries (channel conflict). Elimination of intermediaries may cause an erosion of profits, market share, or both (Tsay and Agrawal, 2004).
Disintermediation and reintermediation have an effect on distribution strategies of a manufacturer. Three distribution strategies will be distinguished (Tsay and Agrawal, 2004; Turban et al., 2006):
1. Only direct sales (Figure 4.3) 2. Only reseller sales (Figure 4.4) 3. Both channel types (Figure 4.5)
Figure 4.3: Only direct sales
Figure 4.4: Only reseller sales
Figure 4.5: Both channel types
In the direct channel approach the manufacturer has to perform activities to stimulate and fulfil consumer demand next to providing the product. In the reseller-intermediated channel approach the manufacturer may rely on an independent reseller performing such activities, but which must be compensated for this. The third distribution strategy, a direct channel alongside a reseller-intermediated channel enables a greater market penetration and increases the total demand by using both instead of using either one alone (e.g. Rosenbloom, 2007; Neslin et al., 2006; Tsay and Agrawal, 2004), and raise entry barriers (Frazier, 1999). However, this can lead to a channel conflict. The manufacturer may become a competitor to its reseller partners.
4.6.1 Channel conflict
A direct channel as the Internet can provide a competing channel to established distribution channels, and therefore any transacting business online has to deal with issues regarding cannibalization of offline operations by online activities, coordination of the Internet with offline channels, and possible channel conflicts (Biyalogorski and Naik, 2003). The displacement or elimination of market intermediaries, disintermediation can cause conflicts within the organization and with the traditional intermediaries. This implies that two different types of channel conflict can be distinguished:
1. Internal channel conflict
An internal channel conflict occurs when different sales channels of one company are competing for the same customers (cannibalization).
2. External channel conflict
External channel conflict occurs when the online channel upsets the traditional channels because of damage from competition. An organization may at once be both a supplier to and a direct competitor of existing reseller partners.
The internal channel conflict may occur between the online and offline channels within the organization. Many marketers consider cannibalization when assessing the (potential) success of new product introductions (e.g. Agrawal, 2007; Netessine and Taylor, 2007), there is hardly any knowledge about channel cannibalization (Deleersnyder et al., 2002; Frazier, 1999; Gensler et al. , 2004). But the few studies that have been done on channel cannibalization showed that online sales do not significantly cannibalize offline sales (Biyalogorski and Naik, 2003; Deleersnyder et al., 2002).
The addition of a direct sales channel alongside a traditional channel is not necessarily unfavourable to the intermediary. If the manufacturer will reduce the wholesale price to retain some of the intermediary’s selling effort, this can make both parties better off as well. A commission scheme could be more profitable for both parties too in that they achieve a division of labor according to each channel’s competitive advantage: customers are obtained using the most cost-effective combination of channel efforts, and served using the most cost-effective method (Tsay and Agrawal, 2004). The same can be said about increased channel shift among the different channels a company can use, this is not necessarily harmful, and may be better labelled as channel substitution (Gensler et al., 2004).
Disintermediation can cause problems with the traditional channels. External channel conflict occurs when the online channel upsets the traditional channels due to damage from competition. Existing channels may view the new Internet channel as unwelcome competition as they fear sales will be reduced if firms sell directly to their end-consumers. These channels might lose motivation and reduce their support for the company’s products, or even discontinue their distribution (Geyskens et al., 2002). A direct channel as the Internet can provide a competing channel to established distribution channels, and therefore any transacting business online has to deal with issues regarding cannibalization of offline operations by online activities, coordination of the Internet with offline channels, and possible channel conflicts (Biyalogorski and Naik, 2003).
traditional channel. A higher price setting online than offline is one of these strategies to consider (Turban et al., 2006). Channel conflict is less likely to occur, as the redistribution of revenues or profits becomes an intra- rather than an inter-organizational issue. This can be solved through appropriate incentive schemes (Coughlan et al., 2001, Tsay and Agrawal, 2004). Kevin Webb (2002) is proposing several ways that manufacturers can minimize channel conflict. Lower levels of channel conflict will be experienced;
1. by not pricing products on their Web site below the resale price of their partners. 2. by diverting fulfilment of orders placed on their Web site to their partners. 3. by providing product information on their website without taking orders. 4. by promoting partners on their Web site.
5. by encouraging partners to advertise on their Web site.
6. by limiting the offering on their Web site to a subset of their products. 7. by using a unique brand name for products offered on their Web site.
8. the earlier the products offered on their Web site are in the demand lifecycle. (When demand is growing rapidly, selling a product on the Internet is less likely to interfere with sales through channel partners; however, in the maturity and decline stages of the lifecycle, offering products via the electronic channel is likely to cannibalize sales through existing channels of distribution.)
9. the more effectively they communicate their overall distribution strategy (internal and external).
10. the more effectively they coordinate their overall distribution strategy (internal and external).
11. the more they make use of superordinate goals (encourage employees to direct business to the channel best able to meet customer needs) (internal and external). The extent to which an organization is sensitive for channel conflict depends on its market power. Although any firm that sets up an Internet channel should expect to lose at least some of the goodwill of its traditional channels, powerful firms can use their market power to ensure to continue their relationship (Geyskens et al., 2002).
4.7 B2C e-commerce threats
Despite the many opportunities of e-commerce, there are threats as well. Channel conflict is already mentioned in the section above. As the opportunities, treats can be a result of the unique characteristics of Internet benefits. The physical absence of a product can have a negative attitude of buying online (Porter, 2001). Whereas electronic transactions can be done efficiently and often immediately, the physical delivery of goods is usually very inefficient and slow (Saanen et al., 1999). An efficient and fast delivery of flowers is crucial, because of the perishable character of the product.
Most common threats that can be found in literature are based on risk (Wright, 2001), lack of trust (Aljifri et al., 2003; Ratnasingam, 2005), and legal issues (Schubert et al., 2006). A significant risk for MFC when conducting e-commerce is the difficulty to measure some of the benefits of e-commerce, such as advertising. Mature measurement methodologies are not yet available (Turban et al., 2006). Although legal issues are not a big threat for MFC, it is something to take care of. The threats of the consumer perspective, the attitudes of New Zealand’s consumers towards online shopping, will be further explored in this chapter.
4.8 B2C e-commerce developments
According to a 2008 research of The Nielsen Company (Mittchel, 2008) more than eighty five percent of the world’s online population has used Internet to make a purchase, which is an increase of the market for online shopping by forty percent in the past two years. This sign of an increasing use of Internet for purchasing is an important development for B2C commerce, the possibilities of e-commerce seem to attract consumers.
The Internet is shifting to another way it is used, which is called Web 2.0. Web 2.0 contains a more open approach to the Internet, and is user generated content in particular. Some examples of the content are blogs, podcasts, wiki’s, social media and review sites. The user-generated content caused a change in the Internet as Web 2.0 has moved it from being primarily a B2C medium to one where information flows in all three directions, B2C, C2B and C2C (Eccleston and Griseri, 2008).
Besides a more open and user-generated content of the Internet, it becomes more flexible. The mobility of the Internet is increasing by the use of laptops, PDA’s and mobile phones (Singh, 2008; Turban et al., 2006). Amazon.com offers customers the opportunity to make purchases through text messages from their mobile phones, and created a mobile site which is particularly created for PDA’s and mobile phones with internet access.
4.9 New Zealand e-commerce
According to the report Information and Communication Technology in New Zealand: 2006 (Statistics New Zealand, 2007) 64.6 percent of households had access to the Internet in 2006. The proportion of households with Internet access was the same for the rural (64.2 percent) and urban (64.6 percent) areas. The proportion of males and females who had recently accessed the Internet was similar (68.8 percent and 69.1 percent, respectively). Most individuals accessed the Internet once a day (57.7 percent). In April 2009 the Economist Intelligence Unit (eiu.com) ranked New Zealand 11th out of 70 countries in an e-readiness ranking. It scored 8.21 on a 10-point scale of e-readiness, little worse than 8.28 in 2008 and slightly better than 8.19 in 2007.
According to a Nielsen Company research (Boyt, 2008), user-generated content is affecting a major shift in New Zealand overall consumer behaviour, from communication styles to relationships to purchase decisions, and the vast majority of Internet users are now engaging in some consumer generated media activity. 88 Percent of New Zealand internet users use Web 2.0 for sharing content such as photos, links, and video while the same percentage consume consumer generated media.
4.9.1 Consumer purchase behaviour
Besides emailing and obtaining information or general web browsing, gaining information on goods and services is one of the most common Internet activity (64.8 percent). Bellman et al. (1999) found that this is the most important predictor of online buying behaviour.
4.9.2 New Zealand consumers’ attitudes towards online shopping
Shergill and Chen (2005) found that website design, website reliability/fulfilment, website customer service and website security/privacy are the four dominant factors which influence consumer perceptions of online purchasing. They distinguished four types of online New Zealand buyers; trial, occasional, frequent and regular online buyers. Regular online buyers were much more satisfied with website variables and website factors than the other online buyers. On the other hand, trial online buyers had the poorest perception of online shopping. Moreover, the significant difference in how online purchasers perceived website design and website reliability will account for the difference in online purchase frequencies.
Many New Zealand online purchasers are less satisfied with the website design. The ambience associated with the website, and how it functions, plays an important role in whether online consumers are satisfied or dissatisfied with their online shopping experiences. Moreover, website efficiency and usability can facilitate the buying process and establish consumer confidence. On the other hand, online New Zealand buyers are more satisfied with website reliability/fulfilment and customer service.
According to Danaher al. (2003) New Zealand consumers are brand name sensitive in an online environment. A brand name is important in the sense that a "strong" brand did better in an online environment compared with a "weak" brand. In their research, "strong" and "weak" are synonymous with large and small market share, respectively. They also had some plausible explanations for this phenomenon: online shoppers may deduce product quality from the brand name; buying a well-know rather than a lesser-known brand online has less perceived risk; and after initial use of the online service, a shopper is able to select next purchases from a checklist of previous purchases.
4.10 Conclusion
The Internet is the driver of the changing relationships between seller and buyer. Internet needs to be seen as an enabling technology that can be part of the strategy. To balance e-commerce strategy with the general business strategy, five approaches are found, this varies from a partly integration to the greatest possible integration of bricks and mortar and online channels.
The unique characters of the Internet can create the potential of e-commerce for MFC. When using the Internet as an enabler for the business process value can be added. In order to add value, the use of the Internet needs to support the drivers that can create value; efficiency, complementarities, lock-in, and novelty.
Choosing one of the five strategy approaches (Bahn and Fischer, 2003) affects the distribution strategy of a manufacturer. The distribution depends on the extent of integration of bricks and mortar and online channels. A direct channel alongside a reseller-intermediated channel has the greatest potential to enable a greater market penetration and increase the total demand, and raise entry barriers.
When conducting B2C e-commerce, organizations need to deal with two important issues, disintermediation and channel conflict. Although these issues are strongly related to B2B models, these issues play an important role in the context of B2C e-commerce for MFC. MFC generates a bigger revenue from the B2B market and disintermediation can upset the B2B customers. Also conflicts within the organization can occur, fighting for the same customer. The addition of a direct sales channel alongside a traditional channel is not necessarily unfavourable to the intermediary and increased channel shift among the different channels a company owns, is also not necessarily harmful.
As market power is important to the extent of sensitivity for channel conflict, it is not likely that a channel conflict will be a big threat to MFC.
in user-generated content. Besides a more open and user-generated content of the Internet, it becomes more flexible. User-generated content and flexibility are also affecting overall consumer behaviour, from communication styles to relationships to purchase decisions in New Zealand. Gaining information on goods and services is the most important predictor of online buying behaviour.
