Analysis of Consumer Behavior Regarding Peapod and the Online Grocery Shopping

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Table of Contents

Background Information
An Analysis of Online Shopping Behavior
Behavioral Effort: Online Shopping Vs. Traditional Shopping
The Types Of Consumers That Buy From Peapod
My Opinion on Online Shopping
Comparison Of Online Grocery Shopping With Eating Out
Works Cited

Background Information

Analysts forecasted an impressive growth and a bright future for the online grocery business; Jupiter Research expected that online grocery sales would be more than $5.00 billion by 2007 which would constitute 1% of the total grocery sales. But such estimates proved wrong. Many e-Grocers such as Webvan, Shoplink, and so on went bankrupt and out of business. But Peapod, the first online grocer was the one that had survived the turbulent period in 2003. But the online trade did not take off. Analysts such as Miles Cook of Bain & Company are no longer optimistic and thus hold a view that only 1% of US consumer at the most will buy groceries online and thus online trade is going to be” a niche offering in a few markets; this is not going to be a principal business.”

In this context, first, an analysis of behaviors involved in online grocery shopping and a comparison of it with traditional shopping is presented. (This answers the first question set) Second, an identification of the types of consumers preferring online shopping is attempted. (This answers the second question) Third and last, an overall evaluation of the concept of online shopping and a description of how it compares with the idea of eating out in restaurants without buying groceries and cooking at home are given in the following paragraphs. (This answers the third question set).

An Analysis of Online Shopping Behavior

The consumer’s decision to shop online or not and also whether to buy from Peapod or some other e-Grocer depends on the consumer’s culture, factors, and personal factors. Culture is reflected in a distinct set of values, preferences, preferences, and behaviors which a human being acquires from his family and other key institutions. Online shopping gives external comfort, personal effectiveness, and freedom from tiresome, time-consuming personal visits to the grocery shops, all of which are a part of American values. Culture apparently in this case is not an obstacle. Coming to social factors which include reference groups, family, and social roles and statuses, a consumer follows the open or implied recommendation of his social groups and his family members in conformity with his roles and statuses; consumer while buying behaves in ways that either enhance his status or at least keep it. (Kotler and Keller p.165-173) Online shopping being in its nascent phase in the US does not associate either positive or negative social connotations. But McClelland observes, “For centuries the market has been a principal meeting-place and even now shops are for housewives one of the principal places of social contact outside home.” (38) From this viewpoint, online shopping is at disadvantage. In regards to personal factors such as “occupation and economic circumstances”, “lifestyle and values”, and “personality and self-concept”, which influence the consumer’s decision to shop online or otherwise, it is common knowledge that today’s ‘time-starved’ people require the facility of doing shopping without the headache of driving, parking, waiting in billing counters and so on. Similarly, online shopping apparently does not either interfere with the occupation of any kind or clash with personal values, or harm self-concept. It in fact enhances the lifestyle of busy individuals. However, a study is needed to confirm the preceding assumption.

Before a consumer opts to buy groceries online, he passes through five stages of decision-making: problem recognition, information search, evaluation of alternatives, the decision to purchase, and post-purchase evaluation. (Some analysts divide the decision-making into six stages by separating the decision to buy from actual buying.) His decision to continue shopping online after the first purchase depends on the fifth stage, post-purchase evaluation. The consumer must, first of all, feel the need for online shopping. Consumers strapped for time must have felt the need for this facility. That is why Peapod can find some consumers and sell to them. Either Peapod or the e-grocery industry has to employ some stimuli like an advertisement so that the consumers recognize their need to buy from Peapod or the online industry. After the need recognition, the consumers seek information about the existence of alternative solutions to their problem or need. Consumers receive information from public and private sources. The online grocery industry or Peapod has to use public sources such as advertisements in print and electronic media and private sources such as friends, references groups and so on so that consumer is exposed to the information about the solutions to his problem. After getting to know that there are alternative solutions, in the third stage involving the evaluation of alternatives, the consumer rates the alternative sources keeping in mind his needs and the level of the ability of each alternative to satisfy them. The industry has to provide adequate information to the consumers and ‘frame’ them to buy. Later, in the fourth stage, he decides to purchase from a particular shop in a particular method. But at this stage, there is uncertainty about buying since he may postpone the purchase by a few days, or the store may not be open at the time he decides to buy, or some information against the online shopping may come from an unsolicited source. If he buys he goes to the fifth stage where he evaluates the correctness of his act of buying; he checks if the quality of the goods purchased is satisfactory and the delivery of them is done on time and in an undamaged condition. If he is satisfied, he will repeat the behavior; else he will stick to his old methods of buying. (Kotler and Kevin 181-189) The e-Grocer has to put in the best effort to see that the customer does not get into cognitive dissonance, a feeling of discomfort caused by the post-purchase conflict in the consumer’s mind.

It is important here to know who buys first and how buyers continue to buy from the same source in the same method, which is referred to as ‘buyer adoption process’. A consumer goes through five stages while adopting a new idea like online shopping: awareness, interest, evaluation, trial, and adoption. An overview of these stages is given in the following. He is first aware that there is a facility for online shopping. Later he becomes interested in the idea of online shopping because it satisfies his need. An interested consumer seeks more information and rates the method (online shopping) itself as well as each alternative outlet in the light of his needs. Later, he makes a trial purchase. If the first trial is satisfactory, he adopts the idea. (Kotler and Armstrong 203)The company at this stage, by employing correctly the four levers called 4 Ps, product (the merchandise and its delivery in a proper form), price, place (a good, easily accessible website), and promotion (positive communications to the consumers), has to facilitate the adoption process; adoption ensures continuity of transactions. Another point to be noted here is that the consumers who come first to online shopping are the innovators and opinion leaders who constitute only 2.5% of the total number of adopters of this idea; they have to be properly taken care of in terms of quality.

To understand consumer behavior further, one has to assess the risk involved in online shopping, the extent of the requirement of consumer involvement in terms of the effort to search for information, and the availability of alternatives. I feel that online shopping is moderately risky since satisfactory deliveries are not guaranteed; further, the consumer has to involve himself deeply while choosing to buy online. Moreover, the alternatives are too few to choose freely. The behavior in such a situation is called ‘Dissonance- Reducing Buying Behavior’. (Kotler and Armstrong 197-198) The grocery company has to reduce the perceived risk by building a good brand.

Behavioral Effort: Online Shopping Vs. Traditional Shopping

Traditional shopping is done in person by seeing, observing, touching, and negotiating face-to-face. A consumer perceives less risk in choosing a traditional outlet or its merchandise; deliveries are taken by hand on the spot definitely don’t give any problems. People, physical pieces of evidence, and processes are clearly visible, and hence perceived risk is minimal. But the perceived risk in online shopping is high since nothing is physically present before the consumer till the deliveries are made which may possibly give shock and surprise. Hence online shopping companies have to do what it takes to generate positive word-of-mouth publicity which a consumer easily believes and also build a strong brand, which reduces the perceived risk.

The Types Of Consumers That Buy From Peapod

It is stated in the given case itself that dual-income families strapped for time prefer to shop online with Peapod. A survey conducted by E-Agribusiness Working Group corroborates this; it is revealed by the survey that “the “ideal” consumers of online shopping are likely to have the following characteristics; be between the ages 25 and 44, live in a dual-earning household, have a household income greater than $50,000, more likely to have children, and are consumers looking for convenience. E-Grocers are servicing approximately 1170 distinct zip codes in the US.”

My Opinion on Online Shopping

I am positive about online shopping to the extent that, first, my credit card details don’t go into the hands of criminals; second, the deliveries are made on time in undamaged condition.

Comparison Of Online Grocery Shopping With Eating Out

Both online shopping and eating out in restaurants are primarily service industries. Online shopping, however, does not involve direct interaction with people (except during delivery at home); physical evidences, as well as processes adopted, are not visible to the consumer in online shopping to evaluate their quality. But restaurants, on the other hand, are clearly seen, felt, and observed; direct interaction by the consumer with the service provider happens. This facilitates easy evaluation of the quality of goods and services to be provided and thus perceived risk is minimized. But the presence of the consumer is indispensable for the consumer while taking service from the restaurants whereas online shopping does not require the presence of the consumer at the service location. Both have their unique pluses and minuses.

To sum up, online Grocery shopping is perceived to be risky. People short of time for shopping only prefer this mode of shopping. Peapod and the online grocery industry have to communicate most effectively the availability and the advantages of this shopping facility besides making all-out efforts to build a powerful brand.

Works Cited

E-Grocery, E-Agribusiness Working Group. 2007. Web.

Kotler, P and Armstrong, G. Principles of Marketing. Tenth Edition. New Jersey: Pearson Prentice Hall, 2004.

Kotler, Philip and Keller, Kevin. Marketing Management. New Jersey: Pearson Prentice Hall, 2006.

McClelland, W.G. Studies in Retailing. Oxford: Basil Blackwell, 1964.

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