HI6008 Penetrating Market As New Entrant In Online Baby Care Product Industry Assessment Answer
Answer
PENETRATING THE MARKET AS A NEW ENTRANT IN
“Online Baby Care Product Industry”
Literature Review
Introduction
There is a wide number of organisations that offer ‘baby care’ products and services through e-commerce and that have gained considerable consumer loyalty. The study concerns itself with identifying the viability of new businesses to penetrate the baby care industry over e-commerce. With the presence of large-scale competitors, it is challenging for new entrants to penetrate the market along with generating sufficient amounts of consumer trust and loyalty to achieve success. Furthermore, there is an extensive range of elements that influence the capabilities of the companies in terms of attracting and retaining consumers.
Growth of Online Baby Care Businesses in Australia
As per the market value report generated by Statista, the online baby care market in Australia, as of 2020, is worth 345 million USD indicating a CAGR growth rate of almost 2.8% over the next 5 years (Statista, 2020). The baby care products that are most sold by the online businesses in this segment include baby formulas, skin and hair care items, as well as, disposable baby care items including diapers and wipes. The major competitors that sale baby care products online include Target Australia, Amazon Australia, Bonds, Myer and The Iconic. Over the past 5 years, the crude birth rate of Australia has declined from 13.4 to 12.9 (Statista. 2020). However, it is expected that the online baby care market would experience further growth in the coming years. As evident from TABS Analytics research, almost 20% of all baby product sales are performed online (TABS Analytics, 2016).
Challenges for New Entrants
Despite the exponentially growing size and structure of the online baby care market, there are several challenges associated with the market entry that new entrants have to face while operating in the e-commerce segment. There is a wide number of sellers offering similar baby care products at premium prices to consumers. Furthermore, as opined by Tyagi (2018), from a psychological perspective of parents, it is likely for parents to select baby care items that are pricey due to the perceived high quality and the desire of the parents in terms of taking the ‘best possible care’ of children. As postulated by Wang (2018), for new entrants, the inter relativity among premium pricing and perceived high quality may pose threats as the likelihood of consumers choosing the offerings of the new businesses rather than already established ones is significantly low. As argued by Hånell et al. (2019), in an industry that has intense competition, new entrants must offer a unique value proposition to engage and attract consumers which need to be backed with the identification of the right products and services based on consumer demand.
Generating Consumer Attraction
As defined by Kracklauer et al. (2004), customer attraction refers to the practices used by a company in terms of inspiring consumer interest in the offerings and services of the organisation. In the context of retail businesses, customer attraction relates to generating more potential leads and sales. A wide range of strategies are employed by e-retailers to attract potential consumers including personalisation of product and service offerings based on the needs and wants of the clientele, establishing company-consumer interaction to keep potential clients informed of the offerings, word of marketing where existing consumers who are satisfied with the offerings promote the brand to their peers, friends and families and many more. Online baby care providers carry out their operations in a specific niche. As postulated by Toften and Hammervoll (2013), in the context of niche markets, the growth of companies may be significantly slower due to the lack of customer demand. Furthermore, with the presence of large companies in the industry, generating consumer interest becomes prone to disruption for new businesses owing to the limited capabilities of innovation.
Consumer Retention and Loyalty in E-Commerce
As defined by Singh (2006), customer loyalty refers to the likeliness of consumers in terms of repurchasing the offerings of a company or reengaging with a brand. Consumer retention, on the other hand, is defined as the ability of a company in terms of keeping their consumers over a specified period (Sarwar et al. 2012). Both consumer loyalty and retention are perceived as vital in the context of e-commerce as the rate of e-commerce innovation and progress is very high due to which, if a company does not constantly upgrade its offerings to meet the best interests of the consumers, it may soon become obsolete and the business may be disrupted. In the context of the baby care product market, upgrades refer to the product improvements such as the use of more soft and absorbing materials in diapers to prevent soiling or outer clothing marks. As per the findings of Alnawas and Altarifi (2016), generating consumer loyalty entails the development of a transparent business framework while meeting the consumer value perceptions and expectations at the same time. A critical challenge for a new entrant, therefore, is the analysis of the consumer behaviour and purchase patterns to develop sufficient comprehension regarding the manners in which to meet consumer expectations (Alnawas and Altarifi, 2016). In this context, the Howard-Sheth Model of consumer behaviour indicates four variable sets that allow companies to determine consumer behaviour including stimulus, internal variables, exogenous variables and response-output variables. As per this model, a company must be able to identify the motives and attitudes of the buyers and use relevant stimuli including the characteristics or attributes of the offerings, the perception of the individuals of the characteristics of a product and social stimuli provided from social groups, families, and friends.
Figure 1: Howard-Sheth Model of Consumer Behaviour
(Source: Prachi, 2019)
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