The Digital Transformation of the UK’s Grocery Market

Online grocery is one of the fastest growing retail channels in the UK, but little is known about how the digital transformation of grocery shopping is affecting retailers or consumers. Research to date has focussed on defining the factors driving digital transformation strategies, but is sparse in its application to specific markets. The study of online grocery shopping practices has been limited to small-scale studies. Most have been qualitative in nature and rely on the respondents’ reported intentions matching their actual online behaviour. This thesis uses WM Morrison Plc’s (Morrisons) late entry to the market as a central case study to explore the digital transformation of traditional retailers and their consumers. An innovative sequential exploratory mixed-methods research design is employed. The qualitative phase consists of semi-structured interviews with key retail executives and focus groups with online consumers. These are triangulated to ascertain the drivers, strategic shifts and outcomes of digital transformation. The qualitative insights inform quantitative hypotheses tested using hundreds of thousands of real transactions drawn from Morrsions.com. The dataset represents probably the largest sample of online transaction data ever examined in academic online grocery shopping research. The dataset is also sensitively combined with existing national level analysis, increasing its generalisability to the UK’s online grocery market. This thesis contributes to the strategic and management information literature by developing a powerful model of digital transformation, building on Matt et al’s ‘four dimensions’ of digital transformation. The model describes digital transformation as a continuous and cyclical process which is bounded and driven by financial opportunities and the capacity to utilise new technologies, but also by a new dimension proposed in this thesis – namely the ‘distribution of agency’ (between retailer, consumer and technology). This new dimension furthers understanding of comprised of interacting human and technological agents. In low-profit environments such as the online grocery market, examination of the distribution of agency and how retailers and consumers react is particularly important to survival in the market. The application of the digital transformation model proposed in this thesis to the UK’s online grocery industry shows that late-mover advantage is limited – the market is saturated and the high costs involved in delivering low margin perishable products make the market financially inhospitable. Entry is made more challenging for incumbent retailers by the emergence of non-traditional competitors who have more established technical skills and stronger relationships with online consumers. Despite low financial opportunities, the addition of the ‘distribution of agency’ dimension shows that there are opportunities to increase technological skill and embed these strategically. This thesis argues that those retailers who are able to manage their costs, utilise technology and nurture relationships with consumers to redress the ‘re-distribution of agency’ from retailer to consumer have the best chance of survival. In terms of consumer practices, it is shown that contrary to extant research and the expectations of retailers, online consumers show little evidence of being price-sensitive or time-poor; and spend no less on perishable goods than offline consumers. Despite significant growth, online grocery shopping remains primarily the domain of customers from higher socio-demographic backgrounds. The model of digital transformation developed in this thesis arms practitioners with a powerful toolkit to predict and evaluate the success of digital transformation strategies. The introduction of the concept of ‘distribution of agency’ paves the way for practitioners in theory of practice and consumption theory to transform our understanding of consumer practices and complex socio-technical systems such as online grocery shopping. digital transformation by encapsulating online grocery shopping as a ‘social machine’ – 5 The Digital Transformation of the UK’s Grocery Marke