Future Of Supermarkets

10. The Future

LONG TERM

In the long term, the distinction between buying online and offline is likely to disappear, or at least become opaque. Even the concept of the Internet may seem confused beyond the medium term. The convergence of the Internet with mobile telephones and DTVs (digital televisions) will make the Internet an even cloudier place.

Research performed by the Henley Research Centre suggests that shopping via the television will overtake Internet shopping by 2004, and that over 90% of UK homes will have interactive shopping via digital television by 2010. 1 Iceland and Telewest are developing such a service. 2

Large companies will dominate, with a handful of companies likely to account for more than three-quarters of the market. 3

Bursting the Internet Bubble?

Spectators are starting to discuss the idea of the Internet bubble bursting. The failure of many `dotcoms' and online-based traders has made people realise that the Internet and associated new technologies do not deliver magical productivity growth and financial reward. Instead, analysts are starting to talk in terms of the Internet being little more than a genuine, powerful tool best exploited by established funds with the reputation and backing to succeed in winning over public support. For these companies, taking their strategies online can offer huge scope for cost-cutting and penetration into markets that cannot be accessed through traditional routes. It is recognised that the Internet may not offer such huge benefits to first movers, those start-ups keen to exploit a niche in the market or some fantastic technological development. Instead, it is for those firms that can spend time analysing the bigger picture before gearing up the expertise and the capital needed to wade in with the right business model. Perhaps it is worth remembering that in 1888, catalogue shopping burst onto the scene with almost as much impact as the Internet did a hundred years later. As discussed in this report, whether firms are able to benefit is subject to them being able to satisfy a number of key conditions. Less arguable are the benefits offered to consumers, for whom increased choice, greater transparency and lower barriers are clearly beneficial.

SHORT TERM

Web traders in all markets, but specifically in the grocery market, will need to meet some very challenging short-term goals in order to achieve the long-term rosy picture.

Converging Technologies

The merging of telecommunications networks, with Internet, mobile telephones and DTV all offering distribution channels to consumers, will be a key feature in the short term as well as the long term. Connecting mobile phones and digital televisions to the Internet provides a lucrative opportunity for those controlling the technology -- namely the mobile-phone and DTV companies. Convergence of power within the market may follow without carefully timed government and regulatory intervention: a complete laissez-faire attitude could do more harm than good. DTV companies are already charging high rates to businesses wishing to use their medium as a distribution channel, as the recent experience of Tesco has shown.

Converging Companies

The converging of technologies is likely to lead to a period of converging companies. Mergers and acquisitions within the grocery market are likely to accelerate, but are less likely to be with fellow retailers. It is more likely that firms will