NOVEMBER, Edition # 37, 2001

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One of the world's most outstanding retailers is the UK based giant Tesco.
Tesco is the largest supermarket retailer in the U.K, and was one of the first companies to exploit retailing via the Internet.
Very early in the development of Internet retailing, Tesco made the link between a web-based retailing entity as an integrated component of the "bricks and mortar" presentation to the general public.
It is regarded as the world's most successful Internet retailer, and Woolworths have used the Tesco model to underpin its own Internet retailing venture.

In its rise to fame, Tesco has had a home-based advantage of a demographic structure that is peculiar to few countries. The UK is a very dense population concentrated in a small overall area, which has resulted in large regional towns and cities located close to each other.
Delivery patterns and population catchments are such that it is much easier to establish a retail operation, both physical and Internet. If you compared these demographics to Australian conditions, you can readily identify why the major retailers have only established an Internet base in capital cities, and do not have the capacity to reach even into the larger regional towns as yet.

Because of its UK success, Tesco has now decided to branch out and develop an operation in the USA, and in the process build on its considerable annual turnover of 23 billion pounds sterling (300 million pounds sterling online), one million registered online customers and an order processing count of 70,000 per week.
Impressive as these figures may sound, Tesco's online sales amount to a mere 0.4 percent of total UK grocery sales and just under 2 percent of Tesco's own sales, and a smaller percentage still of its profits.
Online sales are predicted to be at ten to twenty percent of total sales by 2006.
The average cash sale online is 85 pounds sterling, which is four times that achieved in the "bricks and mortar" environment.
There have been some online disadvantages in that deliveries have tended to include the bulkier and cheaper items, but this is hoped to be offset with a catalogue extension into higher priced and better margin merchandise.
This development could force an investment into more complex warehousing, which is a move away from utilising existing stores to provide the distribution function, so the apparent successes are tempered with some emerging problems.

The UK model is not directly transportable to the US because homes tend to be further apart in the US, with longer delivery routes.
Internet connections in the US run at 60 percent, while the UK runs at 30 percent and Australia is in the mid 50 percent range.
To facilitate the process, Tesco is forming an alliance with Safeway, one of the largest retail chains in the US and Canada. Tesco will also purchase a 35 percent interest in Grocery Works, a Californian based Internet retailer.

This alliance will give Tesco access to a customer base of 150 million customers in the US, which is three times larger than its UK base.
The US consumer is more impatient than its UK counterpart, so fulfillment becomes the most important part of the new operation. The online market in the US is ten times larger than the UK, so the overall expectation is that with Tesco operational expertise, coupled with US style aggressive marketing, success should be assured.

Meanwhile, back in Australia there is a small skirmish surrounding the purchase of the Franklin's chain of supermarkets, the final washup being Woolworths gaining 67 stores, Coles took 20 stores and independents took the remainder.
One of the more disturbing aspects of the break up was that the 20 stores that went to Coles, were originally designated for independent operators.
Shopping centre landlords refused to assign the leases, stating that they wanted only national operators in their centres.
This does seem to be a restraint on trade and maybe an aspect that the Australian Competition and Consumer Commission (ACCC) should perhaps be looking at.
It is certainly hard for a smaller, but successful independent retailer to be heard in the shopping centre world, and this lesson should not be lost by pharmacists.

On the Internet side, there are some government initiatives directed to small business that could prove interesting.
No matter which government is in power after the next November 2001 election, government assistance to small business will be accelerated in the area of e-commerce.
The Coalition has promised to budget $6 million over the next two years to assist e-commerce uptake by small business, and to create easier access to government sites, particularly sites dedicated to purchasing.
Assistance will take the form of training and information to help increase efficiency and competitiveness, plus access to market opportunities.
Recent surveys of small business Internet usage (Australian Bureau of Statistics) have indicated that the Internet had already delivered up to 5 percent in savings on costs, particularly in the areas of banking and bill payments.
Government at all levels will be providing e-businesses in the SME sector with cost effective software for electronic procurement, to encourage electronic dealing with all their departments and agencies.
Australia is currently ranked second after the US in terms of e-business readiness, but the gap between small business and big business is widening, with the current federal government wishing to take steps to allow small business more access.
The initiative will be coordinated by the National Office for the Information Economy (NOIE) in conjunction with the Department of Employment, Workplace Relations and Small Business also the Department of Industry, Science and Resources.
Planned is an electronic business directory service, which will enable small business to register details of the goods and services they supply online.
Verification of ABN and registration details and terms of trade will be listed to facilitate alliances, partnerships and general trading volume.
The rollout includes an online Business Resource Facility (BRF) service to enable small business easier access to government through an expansion of its existing Business Entry Point (BEP).
The new BRF service will collect information about e-business startup plus how to run an e-business, which is information most commonly requested.
BRF will also cover training, networking, mentoring and advisory services, government assistance and grants.
The use of improved universal descriptors by government agencies, such as industry or location information, will give small business more accurate and timely access to user-friendly online information and services they need.
The Business Entry Point website has already been redesigned to make it user-friendly and the first phase of the BRF is currently being readied for introduction in 2002.
The whole process will be one of continual upgrading.

So what is happening on the e-commerce front in pharmacy?

Well, there is obviously a lot of preparatory work going on in respect of the BMMS and there has been a sprinkling of new e-tailing sites making their appearance.
Brett Clark, of ePharmacy, has undergone a major expansion to service his rapidly growing Internet and mail order business.
A lot of work has to be done at community pharmacy level and it will involve developing a database of universal product codes (EAN numbers).

If you don't know what that means, you need to find out sooner, rather than later

Ends

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