“Online Grocery Retail” Survey Result

At the end of my previous post on Online Grocery Retail, I circulated a link, for surveying and analysing reasons for buying and not buying grocery online. Though, response hadn’t been so overwhelming as I hoped. Nevertheless, here are results.

A. Reasons for Purchasing Grocery Online

chart (1)

Avoid Traffic 18 24%
Special Deals 8 11%
Better Product Selection 13 17%
Takes Less Time 18 24%
Stick to Budget 5 7%
Save Fuel Costs 14 18%

B. Barriers to Purchasing Grocery Online

chart

Waiting for Delivery 20 29%
Confusing 6 9%
More Expensive 9 13%
Lack of Touch and Feel 20 29%
Products Damaged 9 13%
Can’t use Redeem Coupons 5 7%

Overt insights:

1)  Most of the consumers are from working age group. With challenging and lengthy working hours, heavy traffic problems add more misery, giving them less time to buy right products. Thus, online grocery offers a perfect solution to all those problems. It is also evident from the results, with almost 50% of the participants preferring online grocery just to avoid traffic and reduce time consumption.

2) Less time in hand (as described above) cause wrong or poor selection of products. Therefore, 17% participants are shifting to online grocery to avoid such happenings.

3) Almost 60% participants feel that lack of touch and delivery time could hamper online grocery market, which is very significant and a big number in my view. This provides important info to new players to focus on these two main issues, in order to get good returns out of this business.

Surprising results:

1) Maintaining house budget is a big headache, specially for middle class consumers. Supermarkets and hypermarkets offers delusional schemes. With salesperson, who by the way watching your every move, sometimes present products in a different way, and ultimately consumers end up buying more than required. Online grocery option can prove to be a good solution here. Only 7% participants recognizing and appreciating this, comes as a surprise.

2) Nowadays, many companies are providing its employees thousands of worth of coupons instead of hard cash (as incentive). This gives them opportunity to buy products, without paying any money, in exchange of those coupons. In my view, it can hamper online grocery market profits, but with only 7% people in agreement, I’ve to call it a surprise.

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Online Grocery Retail – The Webvan Story

Recently, one of my friends told me his start-up plans in online grocery retail domain. On asking few questions on what he wants to accomplish, the idea didn’t seem very attractive. Instead, I told him to look for Omni-Channel Retailing as I was a bit more equipped and have done a prior research. Also, after discussing his pricing model, I was convinced that margins here would be razor-thin. But, I realized soon I hurried on suggesting him something else. So, I decided to get some familiarity on “Online Grocery Retail” market.

online-grocery-shopping

First Q: What is Online Grocery Retail?
Organizations providing Online Grocery Retail services allow customers to order groceries online and have them delivered to their homes within a particular time frame, usually few hours or same day.

Second Q: Reasons for purchasing grocery online?
a) Avoid Traffic                      b) Special Deals
c) Takes Less Time                d) Better Product Selection
e) Sticking to Budget            f) Save Fuel Costs

Third QBarriers to Purchasing Grocery Online?
a) Waiting for Delivery       b) Confusing
b) More Expensive              d) Lack of Touch and Feel
e) Products Damaged          f) Can’t Redeem Coupons

Fourth Q: Has this been tried before?
Many companies have both tried and failed in the past last decade trying to mark their presence in such a niche and risky market segment.

Now, Let’s see and analyze Webvan, first major market player of this segment.

The Webvan Story
Webvan was established in 1997. In the dot.com period, because of its uniqueness, attracted many investors and with them millions of dollars. These funds were used to build state-of-the-art warehouses with management team betting heavily on Hi-Tech. Soon after its IPO in 1999, it seemed to bustle right up to the top beating all the competition from supermarkets and elsewhere. But it turned out to be a big disaster both for its investors and employees and went bankrupt in 2001.

Webvan Business Model
a) High-tech Distribution Centers: To increase productivity. The reason behind was the low margins of US grocery retail business. Thus, to obtain huge profits (or huge margins) they need to distribute fast with less man power (less man-power means low salary expenditures) so as to keep no. of consumers, using their website, per order high.

b) Customer Acquisition: The 1999-2001 period saw great boom in dot.com market. Hence, Webvan reached its consumers lightning fast, through widespread and prolonged publicity. But changing traditional approach was a daunting task considering cost structure, delivery and spoilage problems, which affected their customer retention policy.

c) Pricing Model: Charged a $4.95 delivery fee for orders under $50, a threshold it increased to $75 in the late 2000.

d) Payment Structure: Consumers could pay easily and immediately via credit cards without any hassle.

Competitive Forces Model Analysis
a) Threat of new entrants: The market was new and untested. In addition, huge setup costs blocked many new entrants. Thus, it didn’t play huge role in issues such as profitability, customer loyalty, and access to distribution.

b) Threat of substitute services: Supermarkets and traditional retail stores were the only substitutes; with home delivery the only service differentiation. Many consumers reluctantly prefer not to pay high delivery charges due to availability of large number of small traditional stores in nearby areas, which had a huge impact on Webvan’s overall business.

c) Bargaining power of customers: Bargaining leverage was very low as consumers can no more enjoy long-term seller-buyer relationship benefits. And due to fixed price structure consumers’ could quickly shift from online grocery option to traditional stores without any money lose. This hampered their both customer retention policy and profit margins.

d) Bargaining power of suppliers: Availability of many traditional grocery stores and few supermarkets gave suppliers high bargaining power. Suppliers switching costs were low, if not negligible. Plus distribution centers problems with handling of products cause further gain in the bargaining power of suppliers. But since Webvan was the only player selling grocery online and consumers’ attractiveness to online grocery, might had tempted suppliers to compromise a bit on profits, which would had given Webvan some power to bargain.

e) Intensity of competitive rivalry: High-tech distribution centers, comprehensible branding and advertising strategy, and top management team was not enough for Webvan because of its low concentration ratio. The competition was really fierce as most of the market was shared by traditional outlets. And with huge investments needed in both marketing and innovation the Webvan model was not sustainable at that juncture.

Factors Responsible for Failure

a) Large volumes of orders dropped in last 3 months, before the close down. As a result two things happened:

i) High Losses: Huge inventory with no sales to support.
ii) Decreasing cash: Cash outflow took a sudden plunge as sales went down drastically.

b) Very aggressive expansion into multiple cities and complex website structure.

c) Extremely optimistic about people’s willingness to ditch traditional stores in favor of there dot.com boom.

d) Acute margins due to lack of customers and low sales volumes.

Go through Checklist (before stepping into this niche market segment)
a) Returns on sales.

b) Customer acquisition model.

c) Pricing strategy.

d) Inventory (Warehouses) setup.

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Please poll your option(s) on Google survey form: “Online Grocery Retail

Results are to be announced in next few days.

The Tickle-up Innovation

Yesterday, I read an article about importance of investments in R&D to manufacture and sell low-cost products or technology in developing markets like India, China and Africa. It emphatically also pointed out troubles to promote such products because of their low customer reach, and lesser brand recognition due to a stiff competition from other well-established consumer products companies. One thing, which caught my eye, was the term “tickle-up innovation“. A total mystery for my knowledge, I decided to Google. Here are my findings and I will try to relate it to you in some or other forms.

First, what is Tickle-up Innovation? (also known as Reverse Innovation) is a practice, which is used first, in developing countries and then sold elsewhere in the world. Traditionally, innovation originates from a developed country, which further moves to a developing markets, if successful. But here life-cycle is reverse, hence the name “Reverse Innovation”. The contrasting point involved is that the products/technology/services, which are a part of it, are created locally in the developing markets.

But what edge does this gives to a local manufacturer?

1) Cut down huge shipment costs.
2) Easy availability of hundreds of low-pay skilled workers.
3) Customer feedback can be obtained and processed much faster and more efficiently.
4) Setup and opportunity costs are considerably lower.
5) Humongous market size to test/pilot any product/technology.
6) Superior customer acquisition model as product developers would mostly be from the country of origin.

Okay. Now comes the part: what all problems it can eradicate by providing a plausible solution. Following is sector-wise analysis:

a ) Food:

High price and Saddled working hours: Life style in developing countries is rougher in comparison with developed countries, thus people tend to miss a daily dose of healthy food or right amount of nutrition (both in rural and urban areas). Costly food further adds misery. Therefore, there is a dire need of a new category of food supplement.

b) Health:

Non-availability of state-of-the-art medical facilities: Paying monthly medical bills isn’t easy. Instruments with high cost and steep power consumption system makes a patient life’s more miserable. Steep power consumption means more electricity requirement, and countries like India, having acute shortage of electricity, ask for efficient and cost-cutting alternatives. To counter such problems many companies are recommending battery based medical devices as a solution.    

c) Technology:

The Power of Web: Everyone demands it but only few can afford. With mobile internet market size to grow to 300 Million by 2015 in India (and considerably at a higher or same rate in other developing countries) there are only two ways to cash-in the upcoming customers. Either by decreasing prices of smartphone devices or by innovating applications for non-smartphone segment to allow users to access web. The later could be a more cost-effective and plausible solution at this moment. Due to this reason alone, most of the tech companies are investing and betting on cloud computing today.

d) Travel and Transportation:

Easy on pocket, anytime, anywhere: The “mantra” for travel nowadays. Everyone loves to own car but affordability is the biggest issue stopping them from fulfilling their dreams. Projects like Tata Nano aims to fill that bridge, though, is far from a huge success and yet to be tested worldwide, provides ample opportunities for other Auto-manufactures to take a leap in this segment. Also there is a huge requirement for a new day-to-day transportation model, to keep pace with the growing demand and population.

What NEXT?……If it is successful in developing countries, then it can be upgraded for sales in developed world. But that raise questions about whether or not they be able to compete in the top-tier markets (as I pointed out early). This particular concept is called “provenance paradox“. Though, many experts suggest to go for a long-haul then looking for short-term profits and flaunt your country of origin, if you want build your brand for the future, the real deal is yet to be proven.

innovation

“Roadmap of business innovation for the world” –  Mukesh Ambani

“Essential for global business leaders” – NR Narayana Murthy

“Reverse Innovation explains how innovations are originating from developing countries” – Ratan Tata

Is working from home on the rise?

Gone are the days of you sitting in your office for relentless 8-10 hours, working your butt off to add value to your firm and more importantly to make yourself available to your boss. An exemplary topic for board-room discussions crossed my mind only recently, when I noticed many employees at my office opting for work-from-home mode on a regular basis. “Work-from-home” is now a world-wide parlance, a brouhaha, which promises to revolutionize the entire system. Though, the recent Yahoo snub and tough economic conditions have lofted many organizations in quandary whether or not to adopt this new trend but gusts in its favor are sturdy due to availability of so many office management tools today.

Ask yourself: how many hours do I spend sitting in my office cubicle daily. Personally, I spend more than 75% of my office hours warming my swivel chair. I agree, it depends a lot on the type of job/field you work in but still many of us spend most of our office time just doing that. Now, imagine how wonderful it would be for you to do the same work sitting in more comfort hours of your home. Feeling better? I bet you are.

Having said that, we must recognize its other side too. I see following questions glued to this very idea:

1) Employees’ role and approach towards working from home?
2) What % increment in productivity does it offers to an employee?
3) How often/frequent a firm should allow its employees this benefit?
4) At which hierarchical level, employees should be allowed to avail this opportunity?
5) Should employee remuneration be scaled-up or scaled-down?
6) How to evaluate employees for promotion?
7) Will it strengthens company-employee relationship?
8) Any increment in retirement age?

Unfortunately, I don’t have fool-proof suggestions, at this moment, to the above raised questions. Answers are not straightforward as it makes or breaks a firm’s fortune, if used widely and frequently. Moreover, before jumping onto productive and counter-productive aspects, its a must for any firm to evaluate every perspective financially because it pledges to cut company ‘s costs efficiently more than just making life easier for employees.

Now, lets study some of the benefits it has to offer both to firms and employees-

Employee’s perspective:

1) Will reduce consumption of hundreds of barrels of fuel daily.
2) Better time utilization due to decrement in commute hours.
3) Office employees can unshackle themselves from putting  thousands of dollars on their office wardrobe.
4) May increase employees’ productivity as they now be less burdened/frustrated by office dilly-dally.
5) Allow working parents (esp. working mothers) to live dual lives with vastly improved work-life balance.
6) Efficient energy management system for physically challenged and old aged employees.
7) Prevents unnecessary traffic accidents.

Firm’s perspective:

1) Can operate their business literally 24×7 with flexible working hours.
2) Can cut down fixed and variable costs by huge margins (like office bills, building costs, employees’ pay, travel costs).
3) Open door for investments in many less glamoured avenues like social sector.
4) Sharp improvement in ROT (return on time) by reduction in wasted pitch-ins.
5) Helps firms to reduce attrition rate.

work_at_home

Apart from all the good-good aspects, the environment office hours provides both in terms of knowledge and networking is tremendous. Replacing office by home is a absolutely rubbish claim and should not be on the table of any organization ever. Right balance has to be achieved to gain greater heights

The Chinese Renaissance

Only recently, I came across an article, eliciting how China’s one-child per household policy has promulgated its economy assiduously. The thought, without any disbelief, is subtle with knotty implications but we all, with consensus, have to agree that it was a winning stroke by Chinese government, during the times when their fortunes were darting in a wrong direction. This made me spent a few hours to find a rationale on how China made its path to the top. And here are my findings:

First, lets look into the not-so-good factors:

1) Working population: Population, generally, is divided into three groups: young age, working age and old age. With one-child per household policy, the old age group held (still hold) a larger portion in Chinese population, which saddled China due to:

a) Decrement in the % of population involved in any productive work.
b) Distribution of large chunk of Chinese money as pensions.
c) Shortage of funds for investments in various avenues.

2) Supply-Demand ratio: In a large population, like China, demand for basic necessities was relatively higher. But supply too, due to low % of working class people, was low. Hence, there always a disruption in the supply-demand ratio from time to time, which lead to raise in prices, and shambles the economy.

3) Dearth of natural resources: To satiate the needs of a rampant population, and with attenuation of resources, China forced itself to increase imports. This again put Chinese government on back foot.

Inspite of many caveats down the road, China is now able to compete with the USA and other top economies because of following upheaval:

1) Foreign Investments:  China was (and still is) a humongous consumer market and interests from abroad were thus quite imminent. In return, it bolstered infrastructure, and valorises copious job opportunities to Chinese masses. With more and more people now earning healthy income, stirred the demand for better life quality, and lead them to technological renaissance.

2) Education: Plentiful job opportunities, urged Chinese government to invest heavily on education to produce skillful work force. With educated employees and technological support, China’s productivity quadrupled, and its growth became inevitable.

3) Decentralization: With the backing of a huge labor force, it became easier for firms to decentralize labor. This division of labor caused a greater increase in production than any other factor and lead to universal opulence in China.

4) One-child policy: Single child parents, with a  huge pile of money [as they only had one child to spend on] under their beds, created a gemutlich environment for all market segments.

Along with, all the above discussed factors, behavior too helped them to achieve a great success. And I hope they could see back on what they were and help others achieving big without any rancorous. Now, as usual, I would leave you with a quipped quotation.

When I was growing up, my parents told me, ‘Finish your dinner. People in China and India are starving.’ I tell my daughters, ‘Finish your homework. People in India and China are starving for your job. – Thomas Friedman

Pointers by Dominic Barton

Last week, I was a part of a rampant YouTube drive [my own creation], revving my knowledge on major business issues. It, not only, retrenched my intern work but also galvanized office bandwidth. It was a fun week as I was less saddle with onerous work. My drive shrouded by Dominic Barton and here are his pointers to the business world:

1) Center of gravity of world’s GDP is shifting back to Asia (North of India).
2) Technology is running at a jarring speed as compared to management.
3) China, Indonesia and India have copious investments opportunities.
4) Ethics among business executives is an obnubilate topic.
5) World is facing an adrift inequality (42% people in Spain are unemployed).
7) Need to shift focus from “Time” management to “Energy” management.
8) Agri-Food has a humongous business potential.
9) Businesses have to study consumer markets as cities not as countries.
10) Infrastructure is a solid motivation behind China’s GDP.
11) Issues related public, private and social sectors are now interconnected.

His advice to future leaders:

1) Take risks to learn resilience (one has to fail a lot to succeed).
2) Chuck out boring aspects of your personality (Be a story teller).
3) Coming days will be about “who leaders are” rather than “what leaders do”.
4) Leadership is about character (it is a muscle and can be build).
5) More successful people have more bad luck. Posturing should be avoided.
6) The more you give (without expecting to get back), the more you get.

Business, more than any other occupation, is a continual dealing with the future; it is a continual calculation, an instinctive exercise in foresight. – Henry R. Luce

“Rocket Science” behind Team Building [Part-1]

Building a team is tougher than it sounds. There is no chemical “X” which could offer you a miracle. Instead, you have to push yourself to the limit to pull out decisive steps to prepare a team for present and future. The three phases in a team building [In my view, of-course] are:

1) Hiring 2) Decentralization & Coaching 3) Finding your successor

I’m going to cover this broad topic through a series of 3 posts. Each post  precisely covering one of those 3 phases. So lets begin!  

1) Hiring:
“Get ready to fire up your brain and prepare some kick-ass interview questions”. If that’s your first reaction, then you better stop and settle down first or you wouldn’t be able to dodge bullets later. Here is what one must do.

a) Decide min. no of applicants you want aboard.

b) Heat-up your applicants by a written test [This is your golden opportunity to test applicants’ thinking process. Don’t waste it by asking stupid standard questions; Give a case study].

…….Now come interviews.

c) By this step, you already knew your interviewees’ thinking process [to some extent]. Therefore, to be absolutely sure, give them a modified version of the previous case study [it should sound/look absolutely different].
Whatever their answer is, just tell them the opposite. For say, if there is no variation in their approach; ask them why same concept to two different situations and if you see some variation, then question: why different approach to a same situation.

Sole purpose here is to check: interviewee’s sharpness and whether or not they have an eye for details. 

d) Final stage: Ask them tough questions [to dig deep]; preferable ones are:

d.1) What similarities and differences you can point out b/w you and “ABC” firm?
d.2) Whom you talked with, in “ABC” firm and what did he/she say that inspire you to join us?
d.3) What initiative(s) you took? What challenges you faced? Do you consider yourself successful in those challenges? and why?
d.4) How much changed person are you now?
d.5) How much “ABC” firm can help you with your long-term prospects?
d.6) What you want to be remembered for, lets say after 15 years from now? And how you gonna achieve it?

You can definitely add more to the above list as per your liking. But remember! judge your interviewee on behavior and not on attributes.

I am convinced that nothing we do is more important than hiring and developing people. At the end of the day you bet on people, not on strategies.
– Larry Bossidy

Thought Provoking

Some articles really change the way we think and bring a whole new perspective to our lives. Here are the links to my top 5 (actually, 4) of this month, which are worth sharing and reading. Have fun!

1) To keep miseries at bay:  How to Have a Year that Matters 

2) Aspiring entrepreneurs: Is Your Company Ready for the Circular Economy?

3) Deep thinkers: How Will You Measure Your Life?

4) Young masses: Why you should travel young 

5) Follow my blog if you need more 😉

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