Hi PrepLounge, just recieved this case in an interview and thought I'd share: "your client, a newly founded company sells gardening tools online. It is the first of its kind, and other competitors only have physical retail presence. Will the online gardening tools market grow or fail, and why?"
Interesting case.. thoughts?
Overview of answers
From a demand POV, what does online "anything" depend on:
- internet access
- discoverability of product
- relevant product cataloguing for the customer needs / easy to access product
- online transaction / credit cards / etc
- supply chain / delivery
If internet access is growing, and people are getting more savvy on how to find products (e.g. google, etc), and have a way to transact online (more CCs being used, it's safe, etc), and they are then able to receive goods at home, then the market has a strong chance of growing. Any one of them shrinking / non-existant is a serious deterrant.
On top of that framework, you need to say a few smart things about the category in general to prove you can eat market share from retail easily and continue to grow that way even if overall market stays static:
- online TAM >> offlline - you can support a much larger customer base more widely distributed
- online products have lower inventory costs -->better pricing for price sensitive customers
- online it's easier to upsell by using various "Recommendation engines" --> more revenue per wallet
This is how I'd approach this at a high level. HTH!
Hypothesis : If the Gardening Industry is growing with rising number of cutomers interested in adopting gardening , and these customers are changing their habits to buy stuff online than in physical channels , and the barriers to entry with intital costs, regulations required are low , the market would grow otherwise fail .
I would start with the Gardening industry , move to customer preferences and then gauge the physical store competitive landscape .
1. Gardening Tool Industry :
a. what is its size ?
b. how has it grown in the last couple of years ?
2. Customers :
a. what are the segments in this market : segments by age , demographics.
b. what has been the growth rate in each segment ? (are there any particular segments which have become more interested in gardening in the past ? what are the consumer trends and habits?)
3. Competitors :
a.) Physical stores : how have their revenues and market shares changed over the last couple of years ?
b.)what is their value proposition/ best practices ?
Online marketplace :
a) Are the barriers to entry high ?
b.) Ease of carrying out operations on the online marketplace : would the suppliers be interested ? what are the set up costs ? ROI ?
Agree with Hemant. I would also pay special attention to who is the customer and who is the consumer.
If most of the purchases are done private individuals (i.e. consumers), then online might be a good channel
If most of the purchases are done by business (gardening companies are customers while private individuals are consumers), then they will probably prefer wholesale trade and internet is less relevant.
I agree with the below, and I'd add to it one more layer.
I think we should look at who our consumers are and split them into two categories.
Usually people over the age of 50 are more interested in gardening compared to the younger crowd, but also those people are less interested to buy their tools online.
A good market study is therefore needed before jumping to conclusions.