Expert Case by Giulia

Online Grocery

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Online Grocery The largest French supermarket chain with 15.000 stores, including mid-sized local supermarkets, little convenience stores close to train stations and hypermarkets stores, is considering whether or not to enter the online market. The supermarket yearly revenues are €45B, of which 90% come from grocery products and 10% from houshold products. In France there is not a big online supermarket player at the moment. Should the client be the first in France to provide online supermarkets?
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Problem Definition

The largest French supermarket chain with 15.000 stores, including mid-sized local supermarkets, little convenience stores close to train stations and hypermarkets stores, is considering whether or not to enter the online market. The supermarket yearly revenues are €45B, of which 90% come from grocery products and 10% from houshold products. In France there is not a big online supermarket player at the moment. Should the client be the first in France to provide online supermarkets?


Comments

This question can be answered in two parts:

  1. Factors to be taken into consideration (strategical/theoretical part)
  2. Estimation of the online grocery market size in France (numerical part)

Short Solution (Expand)

Detailed Solution

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

Paragraphs highlighted in orange indicate hints for you on how to guide the interviewee through the case.

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

1. Factors to be taken into consideration/areas to investigate:

Hint: Please consider that the following "investigation questions" directly represent the suggested answer to the first question "Which factors need to be taken into consideration/which areas need to be investigated". There is not the need to give any answer to the following questions. The candidate only needs to show the interviewer that he/she has identified questions that need to be addressed to identify factors/areas to be investigated.

1. Customer Demand

  • How popular is online ordering in France? Across Europe?
  • How many and which customers are already ordering groceries online?
  • How does the online channel fit with the profile of the current customers?

2. Competition

  • What other players in France are offering online ordering? Do these sites operate retail stores?
  • What are they offering and how has that changed over time?
  • What has been the sales trend? How popular are the sites now?
  • What is the best estimate of profitability by product category?

3. Offering

  • What products would be offered online?

4. Financials

  • Would it be profitable to operate an online channel? Which hurdles would need to be met (e.g., costs, prices, repeat customers)?
  • What investments would be required?
  • How does profitability compare to the traditional in-store business? What about cannibalization?

5. Operations

  • From where would the company deliver orders to customers? How would the orders by delivered?
  • What kind of logistics infrastructure would be required?

6. Synergies with current retail business

  • Can the company utilize existing parts of its retail business in the online business (e.g., purchasing, marketing)?
  • Are there inventory synergies (e.g. Warehousing, sorting)?

2. Estimation of the online grocery market size in France

Share "Sharable info to answer Question 2" with the interviewee.

3. Conclusion

  • The estimated size of the online grocery in France is around €2B (2% penetration of grocery market)
  • Assuming the penetration of the online grocery market in France can get up to 10% in the following years, due to more and more adopters, the estimated size of the online grocery in France would be around €10B
  • If the largest France supermarket chain decides to be the first in France to provide online supermarket, it could leverage on the first-mover advantage and get a valuable portion of the market of the France online grocery market (20%-30% market share)
  • Asssuming the online market can become highly fragmented and competitive in the follwing years, but assuming that the first mover can still get 20% of market share, the client could make 20%*10bn=2B, increasing its yearly revenues of 2/45=4%, so it may be valuable to enter the market
  • Further analyses still need to be performed
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Case exhibits

Sharable info to answer Question 2