Online groceries

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Problem Definition

Our client is a supermarket chain that is considering whether they should enter the emerging online grocery delivery business where consumers order their groceries online and have them delivered to their home. Currently, two competitors have entered the online market in the client's home-turf in San Francisco. Both competitors are quickly gaining market share. One competitor is an online player and the other one offers both traditional shopping as well as online ordering.

Our client hired you to determine if they should enter the online market.


This is a candidate-led case which means that the candidate takes the case from start to finish.

Candidate should pay closely attention to the objective as the client specifically wants to know if they should enter. The case focuses more on the qualitative aspect of market entry.

Short Solution (Expand)

Detailed Solution

Paragraphs highlighted in green indicate diagrams or tables that can be shared in the “Case exhibits” section.

Paragraphs highlighted in blue can be verbally communicated to the interviewee.

The following framework/structure provides an overview of the case:

The candidate should get a clear understanding of the customer served in the online market and the competitor's movements & positions.

I. Customer

The candidate should understand the current customer of the client and match it up with the potential customer that orders online.

Information that can be shared if inquired by the candidate:
  • In the SF area, the client serves upper-middle class customers.
  • These customers have an annual income of $60,000-$120,000.
  • They live and work primarily in the SF area and are considered to be highly educated.
  • Most customers have double-income households so convenience is important for them.

To understand the customer that shops online, share Table 1 containing an online customer profile.

Candidate should note that there are similarities between both customer profiles, so it should be a good fit to offer them the online service. But more analysis is required.

II. Competition

Candidate should ask for more info on competitors that are already present in the market to see how they're doing in order to assess the market attractiveness.

Information that can be shared if inquired by the candidate:
  • Both competitors and client company currently have a 20% market share.
  • The online player quickly build up a market share of 20% in 3 years time.
  • The full online player with no stores is growing the fastest in the online market.
  • Since their core business is online delivery, their growth is stronger than the others who still have physical stores to maintain.
  • The online player generates profit margins of around 5% in comparison with the 10% margin that our client is generating.
  • The player doing both online & offline has a 1% margin with his online business and a 7% margin in his physical store segment

Candidate should note that the market seems quite attractive to enter given that one competitor has already reached a similar market share and is growing fast with 5% margins.

Candidate should also note that it seems more beneficial to have a business focusing solely on online delivery to improve margins, since the player doing both isn't winning with margins in either segment.

III. Recommendation

  • It seems like a good idea to enter the market since our existing customer matches the customer profile of online shoppers, so there is a market fit.
  • Also, margins seem good enough and the growth rates indicate that there are good economics to capture in that segment.

The client should enter the segment by creating a seperate business that operates fully independent from the client's main business so that the new venture can fully focus on online delivery.

Judging by the performance of the fusion-player, margins are compromised once you try to do both segments under one roof.

Difficult Questions

  • What factors could be a possible liability when entering the online segment for our client?
  • Should the company uses existing infrastructure or invests in new ones? What risks might play a role here?
Related consulting question(s)
How should the client enter this market?
Anonymous gave the best answer on Jul 14, 2016 - 3 answers

As you describe it, this is the longest version of this case format; normally too long for an oral interview, so it's super important to listen whether the question is about if (the client should ente... (more)

Business situation framework
Francesco updated the best answer on Mar 27, 2018 - 1 answer
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Hi Elisey, I would personally not recommend to use a single framework for all the so-called business situations (M&A, Entry, New product, Operations etc). Although this would help to more easil... (more)

Hi - How to appraoch this case?
Anonymous updated the best answer on Apr 17, 2017 - 1 answer

Hi there, I would start by asking some general questions to have a better feeling on the case: 1) Does our client provides this new service elsewhere? If not, does our client already has the cap... (more)

Market Entry Aspects
Achyut gave the best answer on Aug 15, 2016 - 2 answers

If I understand your questions correctly, you are trying to figure out the difference between analyzing the overall market (or an industry), vs. the subsections of the market that a particular company... (more)

Which case topics to focus on first? Market entry, M&A, profitability analysis...?
Vlad gave the best answer on Feb 26, 2018 - 4 answers
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Hi, I would start with either market sizing or with profitability cases since they are much easier: 1) In market sizing cases I would try to understand the basic approach: How to structure... (more)

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Case exhibits