Online Grocery - Partnership Proposal

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Online Grocery - Partnership Proposal

This presentation discusses the demand for online groceries, it includes many researches on market and customer trends as well as a business study on sales and cost and how to implement the solution in an effective manner to capture as big of a market share as possible by partnering with established brick-and-mortar stores.

Mohamed Al-Amoodi
July 24 2013

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  • - Video: https://www.youtube.com/watch?v=cVaimhrrgsA
  • Online Grocery - Partnership Proposal

    1. 1. Online Grocery Partnership Proposal Mohamed Al-Amoodi July 24 2013
    2. 2. Online Grocery • Introduction – We want to offer a shop/delivery service for groceries in Edmonton – Customers buy your products from our website – We shop in-store/deliver using a system – To make the service fast/cheap for customers we need to form a partnership
    3. 3. Customers • Usual customers – busy young professionals – value saving 50 mins trip and queue • 60% of customers – physically unfit (eg: seniors, pregnant mothers, injured people, etc) • 15% of customers • Usual products – dry/frozen food and housekeeping products * (PR-Newswire, 2013) (Evolution Insight, 2010)
    4. 4. Customers • Demands – low service fee (90% demanded) – personalized/online-only offers (60% demanded) – membership/loyalty cards (57% demanded) – new products requests (50% demanded) – small delivery slots (50% demanded) – clear food quality/refund policies – good website (stable, easy search, fast checkout) – good customer service * (ATKearney, 2012) (Poulter, 2011) (Symphony-EYC, 2013) (ePerformance Observatory, 2012) (Mélanie, 2011)
    5. 5. Market Demand • Summary – The trend in customer behaviour since 2000 has been an increasingly rapid migration towards online shopping - the grocery retail sector is no exception – Online grocery shopping was in it’s infancy in 2004 in the UK, but spiked in popularity around 2008, and has risen every year since
    6. 6. Revenue Market Share Trend Customer Market Share Trend Misc Color Description Market Demand 2004 2004 2005 2006 2007 2008 2009 2010 2011 2012 2012 Internationally - population planning to shop for groceries online = 26% compared to computer software = 29%, travel reservation = 30%, entertainment = 45% (Nielsen’s, 2012) UK - population shopping for groceries online at least once a year = 20%, at least once a week = 5.9% (Key Note, 2013) US - online ($13B) to physical grocery shopping market share = 1.2% (Hartman Group, 2012) US - population shopping for groceries online 1-3 times per month = 4%, at least once a week = 2% (Demery, 2011) UK – top online grocery firms annual increase in sales = 35% (Research Methodology, 2012) US - online to physical grocery shopping market share = 1% (Empower Research, 2009) UK - online to physical grocery shopping market share = 0.8% (Yousept & Li, 2004)
    7. 7. Market Demand Revenue Market Share Trend Customer Market Share Trend Misc Color Description 2013 2013 2014 2015 2016 2017 2018 2018 Today UK - online grocery shopping = GBP 11.1B (predicted to be double 2013 sales) (Neville, 2013) UK - online (GBP 5.6B) to physical grocery shopping market share = 3.5% (Neville, 2013) US - population shopping for groceries online = 30% (Trassard, 2013)
    8. 8. Market Demand • Some established companies Firm Revenue from online grocery sales Delivery cost Tesco (UK) GBP 3.2B GBP 3-7 Ocado (UK) GBP 0.7B GBP 3-7 (free certain times) Walmart (US) USD 5-7 Safeway (US) USD 10-13 (free first time) Grocery Gateway (Longo’s CA) CAD 10 Thrifty Foods (Sobeys CA) CAD 8-10
    9. 9. Business Solution • Website/mobile Design Front Page • Login/guest • Delivery slot reservation • FAQ • Guarantees • Policies Filling Cart • Favorites • Department navigation • Keyword search • Special offers Checkout • Review/save cart • Upsell (“did you forget?”, personalized deals) • Payment
    10. 10. Business Solution • Website/mobile Design
    11. 11. Business Solution • Server Design
    12. 12. Business Solution • Service fee (breakdown) * Calculations available Average Amount of Customer Purchase by Online Grocery Firm Peapod average basket price 100CAD per customer Streamline average basket price 102CAD per customer Teso average basket price 100CAD per customer WebVan average basket price 71CAD per customer HomeGrocer average basket price 102CAD per customer Average basket price 95CAD per customer Average Service Fee based on an Average Basket Price COST – To have a shopper pick up the items from the shelves (26.3 mins per customer) 4.36CAD per customer COST – For gas spent on the delivery (8.2 km per customer) 0.94CAD per customer COST – To have the items delivered to the customer (31.2 mins per customer) 5.18CAD per customer COST – Transaction fee charged by credit card companies (online credit CAD 2.36 per customer) 2.36CAD per customer COST – Admin cost, food/business license renewals, truck maintenance (CAD 2.38 per customer) 2.38CAD per customer Overall service fee 15.22CAD per customer
    13. 13. Business Solution • Service fee (impact on sales) Service Fee ($) People who would be interested (%) 0 100% 1-5 48% 5-10 18% 10-20 5% 20+ 1% * 857 people surveyed (Site, 2011) 0% 20% 40% 60% 80% 100% 0.00 5.00 10.00 15.00 20.00 25.00 PeopleInterested(%) Service Fee ($) Service Fee Impact on Sales Min 1.5% discount (as we eliminated credit card fees) Will bring service fee to $13.75 and 5% market share 1.5% discount + 2.5% commission Will bring service fee to $11.25 and 10% market share (double sales)
    14. 14. Partnership • Requirements – Commission • for reduction of service fee – Database connection • for items, quantity, department/location in shop – Return policy • for unsatisfied customers – Skip checkout • for increasing speed • for eliminating 1.5% credit transactions fees • items will be invoiced and paid at an agreed time with an agreed payment method
    15. 15. Partnership • Benefits – First-mover competitive edge • Because Edmonton has no good online grocery firm • Increase in customer loyalty – Increase in sales and customers • No investment needed • Estimated $22.5M revenue and 160,000 customers in long term in Edmonton – Free continuous feedback to improve products • Because we collect data, reviews, forum information
    16. 16. Management Team • Mohamed Al-Amoodi – Head Programmer and CEO – Education: BSc Chemical Engineer, 2011 – Experience: • Engineer/designer with Pentair (Tyco) • Programmer/manager with Rehabtronics (Bioness) * Endorsements available
    17. 17. Management Team • Khaled Al-Amoodi – Programmer and CFO – Education: BSc Electrical Engineer, 2013 – Experience: • Researcher (on multi-ferric material) with Dr Kim Chow (University of Alberta) * Endorsements available
    18. 18. Next Step • Partnership contract – Commission – Database connection – Return policy – Skip checkout • Complete business solution (web/server) – Obtain license (business/food) – Advertise to target market • Flyers/news, email/forum/Facebook, truck paintjob, etc • Expand(warehouse model/pick-up option)
    19. 19. Questions?
    20. 20. Contact Info • Name: Mohamed Al-Amoodi • Email: alamoodi@ualberta.ca • Phone: +1-587-708-6666
    21. 21. References 1. Al-Amoodi, M. (2013). Online Grocer. Edmonton: Google Drive. 2. ATKearney. (2012, March 01). Ideas and Insights. Retrieved July 13, 2013, from ATKearney: http://www.atkearney.com/paper/-/asset_publisher/dVxv4Hz2h8bS/content/a-fresh-look-at-online- grocery/10192 3. Browne, K. (2010, March 04). Grocery shopping online. Retrieved July 11, 2013, from Choice: http://www.choice.com.au/reviews-and-tests/food-and-health/food-and-drink/groceries/grocery- shopping-online/page/online-versus-instore.aspx 4. Demery, P. (2011, March 18). Online grocery shoppers like home delivery. Retrieved June 16, 2013, from Internet Retailer: http://www.internetretailer.com/2011/03/18/online-grocery-shoppers-home- delivery 5. Empower Research. (2009, April 09). Empower Research. Retrieved July 11, 2013, from Slide Share: http://www.slideshare.net/incred23/online-grocery-industry 6. ePerformance Observatory. (2012, January 01). Food and Grocery. Retrieved July 11, 2013, from ePerformance Observatory: http://www.eperformance- observatory.com/etudes.php?titre=Food%20and%20Grocery 7. Evolution Insight. (2010, January 01). Online Grocery Shopper Behaviour. Retrieved July 13, 2013, from SlideShare: http://www.slideshare.net/evolutioninsights/online-food-grocery-the-shopper- perspective-sample-extract 8. Galante, N. (2013, April 01). The future of online grocery in Europe. London, United Kingdom. 9. Goyalarpit. (2013, April 14). “Online Grocery Retail” Survey Result. Retrieved July 11, 2013, from IspiratO: http://ispirat0.wordpress.com/2013/04/14/online-grocery-retail-survey-result/ 10. Hartman Group. (2012, January 01). The Online Grocery Opportunity. Retrieved July 11, 2013, from Hartman Group: http://www.hartman-group.com/downloads/the-online-grocery-opportunity- 2012.pdf 11. Kevin, C. (2001, January 01). Online Grocery Shopping. Retrieved July 13, 2013, from Business Information Systems: http://www.freewebs.com/aimeili/onlinegrocery.pdf 12. Key Note. (2013). E-Commerce: The Internet Grocery Market Report 2013. Computing and IT , 1. 13. Kornum, N. (2004). Grocery eCommerce. Massachusetts: Edward Elgar. 14. Mélanie. (2011, July 5). E-commerce: The Future of Online Supermarkets. Retrieved June 17, 2013, from The Followers: http://blogs.terrapinn.com/internetshow/2011/07/05/commerce-future-online- supermarkets/ 15. Morganosky, M. A., & Cude, B. J. (2000). Consumer response to online grocery shopping. Emerald 28 , 1. 16. Neville, S. (2013, February 18). Online grocery market will double within five years. Retrieved July 08, 2013, from The Guardian: http://www.guardian.co.uk/business/2013/feb/18/supermarkets-online- grocery-business-value 17. Nielsen’s. (2012). Half of Online Consumers Have Bought a Grocery Product Online. Thetford: MarketingCharts staff. 18. Poulter, S. (2011, June 21). It's back to the shops! Why we’re fed up with buying groceries. Retrieved June 21, 2013, from Mail Online: http://www.dailymail.co.uk/news/article-2006005/Grocery- shopping-online-Were-fed-shops.html 19. PR-Newswire. (2013, February 13). More Than One-Third of U.S. Adults Currently or Plan to Shop for Groceries Online, Reveals New CouponCabin.com Survey. Retrieved 07 08, 2013, from PR-Newswire: http://www.prnewswire.com/news-releases/more-than-one-third-of-us-adults-currently-or-plan-to-shop-for-groceries-online-reveals-new-couponcabincom-survey-190992051.html 20. Research Methodology. (2012, July 30). Online Food and Grocery Shopping as a Branch of E-Commerce. Retrieved July 08, 2013, from Research Methodology: http://research-methodology.net/online- food-and-grocery-shopping-as-a-branch-of-e-commerce/ 21. Site, S. (2011). Online Grocery. Chicago: Survey Site. 22. Symphony-EYC. (2013, January 02). Shopper Research 2013, USA. Retrieved July 08, 2013, from Symphony EYC: http://www.symphonyeyc-omni.com/2013_SymphonyEYC_Shopper_Research.pdf 23. Trassard, P. (2013, May 2). Online Grocery Shopping Hasn’t yet Caught on among All US Consumers. Retrieved June 21, 2013, from L'Atelier: http://www.atelier.net/en/trends/articles/online-grocery- shopping-hasn-t-yet-caught-among-all-us-consumers_419378 24. Web Site Magazine. (2013, June 7). Supermarket Stats Good Retail Benchmark. Retrieved June 21, 2013, from Web Site Magazine: http://www.websitemagazine.com/content/blogs/ecommerce/archive/2013/06/07/supermarket-stats-good-retail-benchmark.aspx 25. Yousept, I., & Li, F. (2004). Online Supermarkets: Emerging Strategies And Business Models In The UK. Bled eCommerce Conference (pp. 1-22). Bled: University of Newcastle.

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