Chapter 7: UPSCALE MARKETS: Value Creation in A Mature Industry
Case Study 5 – Week 5
Terry Tairlin Kao
Professor Brian Bender
September 23, 2018
TOC o “1-3” h z u Question 1 PAGEREF _Toc525478350 h 3Question 2 PAGEREF _Toc525478351 h 3Question 3 PAGEREF _Toc525478352 h 4Question 4 PAGEREF _Toc525478353 h 6
Question 1There are few positives and negatives of the value proposition to the customers.
Pros. Saving in time and money, Personalized service (feature to add notes in your order), easy to find items you want, low cost strategy with small monthly subscription, customer’s saving in gas as they don’t need to go to the store, Customer can order 24×365.
Cons. Requirement of internet and computer, No hand-picked tomatoes (grocery) for customers, Opportunity income loss for store owners, extra investment cost, etc.
At the end of case, he raised the question that would in store grocery go the way of Gas jockeys, Bank clerk, and pay phones? Because self-service Gas is cheaper due to no labor cost, ATMs replaced bank clerk means saving in time for customers and saving in labor for banks, Cell phones replaced the traditional pay phones. In short, demand for instant, reliable service on goods by busy or rich people creates value (augmented CWP – because these customers are willing to pay a higher dollar for the product when it provides them convenience).
Question 2Scanner Data helps to make the checkout process fast, with cheap labor and higher quality service. Scanner data helps in tracking the stock level, which is helpful in maintaining service level by meeting supply with demand. Also, the coupon scanning provides lot of discount. Scanner provides high accuracy unless the printed barcode is of low quality. It allows scan-based sale system means product remains manufacturer’s property until sold.
Loyalty Card is created to make customer repeat purchases and to retain customers. Also, the loyalty card data will help analyze the pattern of customer purchase. So, the grocer can bundle those items with other items (not moving too fast of shelf) and sell it at low cost. Also, having that information grocer can send coupons to the customer to increase sales revenue. This loyalty program requires a high level of accuracy to separate information of one customer from the other
Web Shopping is the world of emerging technology, web shopping feature provides lots of benefits. It is easy to find the product you are looking for as you don’t have to walk through a number of aisles. Saving in time and money but requires internet connection and a device. Online coupons can be accessed easily. You can save the orders for the repeat purchase and can edit it based on your needs. Most of the time, customer can place the order 24×7. The only risk is hacking of your bank or credit details.
Question 3I would absolutely prefer initiative of an online grocery shopping. Yes, Upscale Market should definitely go online in Dallas. Based on the data, I figured out that online shopping is much more convenient from customer’s prospective. Also, it saves time and cost as customers don’t have to go to the store. So, instead of opening lot of stores on different location I will find out a central location in Dallas for a big box hub and I will provide free home delivery to the customers who meets minimum order requirement. According to the survey, average number of computer devices per household is more than two and the internet is getting cheaper and cheaper. So, I believe it is going to be a win-win for both consumers and us.
Our initiative will be totally different from the Rice Epicuren. Instead of going with third party (i.e. MyWebGrocers) service provider, we will create our own system. It is just one-time investment and that will surely pay off in near future. Also, we will give them a few options like: 1) $4.99 a month for free home delivery on $35 or above. 2) If a customer is close and can pick up from the store he/she can save up to $15 based on the bill amount. 3) Based on the customer’s purchase pattern we will bundle items and will provide the discount. 4) To maximize market share we will collaborate with several credit card companies. (For example, use XYZ credit card here get 10% cashback / reward points). As we will create our own information system, it is our responsibility to create value. So, we will provide services like one click shopping, order saving, notes creating, and complimentary gifts on first purchase.
Question 4As I discussed in a previous question, creating your own infrastructure takes time and infrastructure like MyWebGrocer can be copied easily. Rice Epicurean has been in online market since 2002. I don’t think of any reason Rice Epicurean will fall behind unless there were issues of hacking or negative feedbacks. If Rice Epicurean continue to differentiate themselves by providing different products which are hard to find elsewhere they will never fall behind.
Value creation is the key thing when you go online and Rice Epicurean has experience of this economy and it will help them better serve their customers. MyWebGrocer is a service which can be copied easily. Past failures will limit the investment from grocers and grocers will go to alternatives. Also, these kind of service providers hold store as well as customer’s data which is a potential risk to store.