The following information relates to Questions 19 to 21. Sita runs a flower shop. She has been in business for 10 years and now sells flowers online, as well as from her high street shop. She has recently reviewed her accounts for 2022. Evaluate the possible impact on Sita’s flower shop of a competitor offering a free delivery service.

Mark scheme

Marking points from the official mark scheme. The mark or mark type is shown in brackets.

1. **(AO1 – 3 marks, AO2 – 3 marks, AO3 – 3 marks)**
2. Refer to the levels-based mark scheme below for guidance on marking this question.
3. **Level 1 (1–3 marks):** Candidates will identify relevant points. Limited application to the given context. Judgements are not made or are unsupported.
4. **Level 2 (4–6 marks):** Candidates will identify relevant points, showing development. Application to the given context is present. Judgements are made, but they are not fully supported.
5. **Level 3 (7–9 marks):** Candidates will identify relevant points, showing development. Application to the given context is present and used to justify points. Judgements are made, are well supported and balanced.
6. **Possible impacts include:**
7. - **Loss of customers/sales.** If customers value convenience, they might switch to the competitor for free delivery, especially for bulk orders or urgent requests. This could reduce Sita's revenue and market share.
8. - **Pressure to match the offer.** To retain customers, Sita might feel compelled to offer free delivery herself. This would increase her costs (e.g., fuel, labour) and could reduce her profit margins, especially on lower-value orders.
9. - **Reputation/brand image impact.** If Sita does not offer free delivery, her business might be perceived as less competitive or customer-friendly, potentially harming her brand image over time.
10. - **Increased competition in the local market.** The competitor's move intensifies the competitive landscape, potentially forcing Sita to innovate in other areas (e.g., unique flower arrangements, customer service).
11. - **Impact on online sales.** Given Sita already sells online, free delivery from a competitor could directly impact her online sales more significantly than her high street sales, as online shoppers often compare delivery costs.
12. **Evaluation considerations:**
13. - **Sita’s existing customer base/loyalty:** How loyal are her current customers? Will they switch for free delivery, or do they value other aspects (e.g., quality, unique selection, personal service)?
14. - **Competitor's market position/size:** Is the competitor a major player or a small niche business? The impact would differ.
15. - **Cost structure of Sita’s business:** Can she afford to absorb the costs of free delivery, or would it significantly impact her profitability?
16. - **Value of average order:** If her average order value is high, absorbing delivery costs might be feasible. If low, it could be damaging.
17. - **Availability of alternative delivery options/convenience:** Does Sita offer click-and-collect or other convenient options?
18. - **Differentiation:** Does Sita's flower shop offer unique products or a superior customer experience that justifies not offering free delivery?
19. - **Geographical reach of competitor:** Is the free delivery local or wider?
20. - **Strategic response options:** Could Sita counter with different promotional offers (e.g., loyalty programs, discounts on specific bouquets) instead of matching free delivery?
21. Accept any other valid response.