Biz model for tesco's online groceries


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My students use ideas from my (Jeff Funk) course to develop a business model for Tesco's online grocery service. Consumers can use the bar code reader on their smart phones to order groceries in the subway station simply by reading the bar codes that are included on the walls of subway stations along with pictures of the groceries. These slides discuss the value proposition, customer selection, and method of value capture for this new business.

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Biz model for tesco's online groceries

  1. 1. Virtual Store By: Ajay Srinivasan Sneha ShashiKumarBusiness Model Presentation Souvik Sen Susanne Pihl
  2. 2. IntroductionValue PropositionCustomer SegmentValue Chain and Scope of ActivitiesStrategic ControlConclusion
  3. 3. Tesco People of South Korea3rd Largest Retailer in The World Population of 50 Million, ~80% in Urban AreaPresent in 14 Countries, Revenue of Technology Driven$94,185 Billion in 2011
  4. 4. Very Busy People 2nd Most Hardworking People Long Work Hours Very Less NO. of LeavesShopping A Dreaded Task Long Queue Easy To Access To Store Only on Weekends Other Easy Means
  5. 5. E-Mart is a Big Rival NO. 1 Retailer in South Korea Large NO. of Stores Position of Tesco Cannot Open New Stores? To Be NO.1 in South Korea Strict Gov. Regulations? Increase Sales Without Increasing NO. Of Stores Opposition of Mom-Pop Stores
  6. 6. Smart Phone User Subway 15 Million Smart Phone Users Free Internet on the Subway ~40 Million Smart Phone Users by 2014 Widely used by South Korean Lots of Place for ADs Demographic Location of Population 80% People Stay in Urban Area Technology Friendly People
  7. 7. 2D Images of Products Metro Entrances and PlatformTablets and Smart Phone To Scan Items Delivered to CustomersBridge the Gap between Online & Physical Shopping
  8. 8. Bring The Store To The People Shop On-The-Go Waiting Time At Station Equal Shopping Time
  9. 9. Convenient Delivery Secure Online Payment Order Before 1pm, Delivered On Same Day No Cash Payment Hassle Accommodate Delivery Changes Tie With O2, App work on Android, iOS, Symbian Set Delivery Date 3 Weeks in Advance
  10. 10. People in Korea work 2193 hours ayear, the highest rate in the OECDwhere the average is 1 749 hours. 5:30 am up 11-12 pm 6:30 Leave Arrive home home 39-year-old Lee. A civil servant at the ministry of agriculture 9 pm or 8:30 Arrive later Leave at work work
  11. 11. • Work long hours• Very little peronal time• Shop at night or in weekend  So crowded• Prefer fresh food• Often Singles or no children• Tech savy• Buying power Conveinient location, shop on the go. Make waiting time to shopping time Hassle free payment New unique experience Convenient delivery Wellknown company, branded products, fresh items
  12. 12. Korean society is aging rapidly, and government policies are struggling to keep up with the pace of change. However, many ordinary Koreans are not prepared to give up ontheir long tradition of respect and care for the elderly. (Jarrod Hall/The Epoch Times.)
  13. 13. Those Aged 65 and Above By 1990: 5 % By 2012: 11,8 % By 2050: 37,6 % That is 5.6 million people above 65 in 201260 % of population hassmartphone. Age group expand
  14. 14. • Shop few items often• Often limited mobility• Flexible shopping and delivery hours• Often have a caretaker/family for shopping• Cooking an issue. Help needed• Sceptical to new technology• Price important Convenience. Caretakers can shop on their way to/from work Convenience: Retiree shop from home, no travel, store come to them Convenience: Skip Q and commute to store, delivery at doorstep Fresh items, known brands, Delivery fee can be an issue
  15. 15. Virtual store and Catering service Skip cooking Caretaker shop and provide meals on the go Or retiree order from home
  16. 16. Tradition for women to stopsworking when married50 % of women between15-64 are home runners2010: 54.6 % of householdshave children.Only 33,9 % Korean families usechildcare
  17. 17. • Shop often; - fresh food and rising prises• Shop bulk items (Diapers etc.)• Cook at home• Go by subway to parks/play areas• Flexible times during day for delivery• Healthy food and childrens items important• Shopping difficult with children Skip nightmare shopping with kids in store. Hassle free Convenience: Shop comes to her. Delivery: Do not have to carry items. Delivery fee can be an issue
  18. 18. Shop comes into costumers homeBuy when seenExpose costumer to Virtual shop
  19. 19. Shop when need appearAd to shopping chart instantlyConvenient real time shopping;-Storecomes to costumer every where
  20. 20. Convenience:Save time - Shop anytime - Shop whereWating time to active time you are - Delivery atNew cool shopping experience doorstep Brand - Branded company - BrandedHassle free shopping products SelectionNew cool shopping experience - BroadStore comes to her home - Fresh
  21. 21. Homeplus virtual shopping 7 eleven E-martHigher price (delivery) Expensive Low price- Convenient location - Conveinient location on - Location inconvenience the way- Convenient opening hours - Convenient opening hours - Limited opening hours- Convenient delivery - No delivery, carry home - Normally carry home- Hassle free payment - Time consuming payment - Time consuming payment- Fresh items - Ready meals/ not fresh - Fresh items- Broad selection - Limited (targeted) selection - Broad selection- Branded products - Branded products - Branded products- Waste time to active time Foreign and Fancy Pain the ……..- Real time shoppingNew unique experience Fast culture National treasury
  22. 22. High Low E-mart 7 Eleven HomePlus Virtual store
  23. 23. Ordering Delivery Packaging
  24. 24. More than 500 products Scanning of any codeOrdering
  25. 25. Super Market WarehousePackaging
  26. 26. Time slots-Interval of 2 hours.Ordering before 1 pm, goods deliveredon the same day.Delivery during weekends preferred. Delivery
  27. 27. ‘Virtual fridge’ inside Gatwick -Stockup while waiting for your plane.Pick a delivery slot date/time( up to 3 weeks ahead)
  28. 28. Customer Scan & Place Order Tesco Home plus Delivery Charges ADs In Online Subway Payment DeliveryInteractive Packaging Display Commission On Posting Ads Suppliers Tesco Gatwick
  29. 29. Grocery shopping while waiting for their friends at the station foyer.Cold Storage Virtual Shops at Bugis and Boon Lay Subways Train Platform Don’t have Larger Advertising SpaceAnalyst Feel it’s a Failed Attempt A lack of strategy Besides strategy, everything else fails
  30. 30. Sustaining Appropriability Competitive profitability Regime Advantage • Complementary • E Mart business vs• Create market wave assets Tesco Business• Value proposition to • Control of industry • First mover advantage create market architecture • Customer focus presence• Tech ego of people Superior Value Proposition
  31. 31. Tesco identified the fact that 15 million smart phone usersKorean’s were adept in using smart were there in Koreaphones to the fullest.Tesco’s strategy was to target Tesco believed that reaching thethe technological ego of the critical mass to the population shallyoung office going Koreans enable its market presence.
  32. 32. Tesco identified the fact that 15 million smart phone usersKorean’s were adept in using smart were there in Koreaphones to the fullest.Tesco’s strategy was to target Tesco believed that reaching thethe technological ego of the critical mass to the population shallyoung office going Koreans enable its market presence.
  33. 33. Capturing the voice of customer was the most important strategy !!Tesco’s strategy of having entered Korea with Samsung was to identify thementality of Korean peopleKorean’s were tired waiting at long queues for getting their items billed.First Mover advantage – Virtual Store
  34. 34. Market control using Red Ocean Strategy Tesco competed in Korean market 1 which was ruled by their competitor E-Mart RED OCEAN STRATEGY 2 Tesco’s target was to beat E-Mart and become No.1 in Korea Compete in existing market space1 Beat the competition The people of Korea were tired of2 3 long queues in billing counters3 Exploit Existing Demand Tesco provided items and lower cost4 Make the value-cost-trade-off 4 and hence concentrated on providing better value Align the system of firm’s activities to a5 strategic choice of differentiation OR low Tesco strategic intent was to cost 5 differentiate itself from its competitor
  35. 35. Poor Customer Logistic issues planningPoor planning Higher delivery costFailure to provide due customer Big investment on delivery vansserviceFailure to predict the readiness of Spending too much capital beforethe consumer market producing any profitCustomer acquisition costs - Branding Expanding too quickly before trying to establish in a specific market
  36. 36. Order Stores to people Packaging Value Proposition Delivery Shop on the go Handling Display* Waiting Time toScope of Activities Shopping time Customer Segment Strategic Control People of South Korea Products Sold Tech Driven Delivery Charges Young Working people Commission* House Wife Value Capture
  37. 37. 15 million smart phone users were there in KoreaStrong Technological capabilities
  38. 38. Future of Shopping First Mover AdvantageSuperior Value PropositionLeveraging the E-Commerce Smart Shopping