Ad Mart
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Admart : What went wrong ?
Presented By Group 12 PGP/12/31 PGP/12/47
Avik Roy PGP/12/12 Vipul Vinod Jain Nikhil Upadhyay
Early Days Admart
◦ Business of online retail shopping ◦ Launched in June 1999 ◦ Direct Marketing company Sold Groceries Electronic Goods
◦ Challenged retail duopoly Welcome Supermarket ( Leader) Park’N Shop
Model Aimed
at online retail customers Order placed through telephone, fax and email Excellent Marketing Strategy ◦ Promotion in Apple Daily Problems
:
◦ 25% internet based ◦ 65% telephone ◦ 10% fax
Internet Market Size As
of June1999 potential customer 340,000 ( 17% of 2 million) Products in demand ◦ Books , CDs, Audio and Videotapes ◦ Grocery Demand
for grocery rising to 800
million$. Average purchase value 680$.
Major Deterrent Consumer
need to feel and touch
goods Haggle over prices Fear of online fraud Delivery problems Lost goods Misrepresentation of goods Overcharging
Porters 5 force Model 1. 2. 3.
Cut throat price competition Increased expenditure on sales, advertising and promotions Aggressive expansion •
• •
1.
•
•
High rental and infrastructure costs in Hong Kong
2.
Two supermarket giants could quickly replicate new idea and outdo the company which introduces it ◦ Carrefour
Wellcome’s plan to open 20 new stores
Exit of players like Carrefour and Guangnan Small retail business dropped by 20%
Big two had a firm grip over the market
1.
Resale price maintenance (RPM) system in place •
1.
2.
Refusal to sell to retailers who undercut prices–Yakult International vs. Park’Nshop
70% stake captured by big two; Local wholesaler complete refusal to deal with companies Manipulation of suppliers leading to exit of Carrefour
3.
1.
No substitute products available
Cost based leadership, differentiation reduced to minimum; Customers attracted to store with lower costs No switching costs involved in switching from one vendor to another Service quality a prime concern for buyers
Competitive Advantage
Financial Data Start
◦ ◦ ◦ ◦
Sales monthly :- 45.5 mn$ Expenses :- 50.7mn$ Average Order Size :- 3791.6$ Number of order :- 12000
Cease
◦ ◦ ◦ ◦
Sales monthly :- 18 mn$ Average Order Size :- 700$ Number of order :- 25,714 Losses :- 100 mn $ ( June 99-200) 62.4mn + 19.5mn+16.3mn
Even
though orders increased, size of orders plummeted
Recommendations/Learni ngs Strategy
◦ To remove duopoly of the major players ◦ Capture market share through internet marketing
Company
failed to align core competency with logistics & operational problems Back up your plans with a sound public relations campaign – contingency measure Diversify your risk – do not put all your eggs in one basket! – case of Apple Magazine Imitating competition may not work – case of reducing minimum order size
Thank You
Presented By Group 12 PGP/12/31 PGP/12/47
Avik Roy PGP/12/12 Vipul Vinod Jain Nikhil Upadhyay
Early Days Admart
◦ Business of online retail shopping ◦ Launched in June 1999 ◦ Direct Marketing company Sold Groceries Electronic Goods
◦ Challenged retail duopoly Welcome Supermarket ( Leader) Park’N Shop
Model Aimed
at online retail customers Order placed through telephone, fax and email Excellent Marketing Strategy ◦ Promotion in Apple Daily Problems
:
◦ 25% internet based ◦ 65% telephone ◦ 10% fax
Internet Market Size As
of June1999 potential customer 340,000 ( 17% of 2 million) Products in demand ◦ Books , CDs, Audio and Videotapes ◦ Grocery Demand
for grocery rising to 800
million$. Average purchase value 680$.
Major Deterrent Consumer
need to feel and touch
goods Haggle over prices Fear of online fraud Delivery problems Lost goods Misrepresentation of goods Overcharging
Porters 5 force Model 1. 2. 3.
Cut throat price competition Increased expenditure on sales, advertising and promotions Aggressive expansion •
• •
1.
•
•
High rental and infrastructure costs in Hong Kong
2.
Two supermarket giants could quickly replicate new idea and outdo the company which introduces it ◦ Carrefour
Wellcome’s plan to open 20 new stores
Exit of players like Carrefour and Guangnan Small retail business dropped by 20%
Big two had a firm grip over the market
1.
Resale price maintenance (RPM) system in place •
1.
2.
Refusal to sell to retailers who undercut prices–Yakult International vs. Park’Nshop
70% stake captured by big two; Local wholesaler complete refusal to deal with companies Manipulation of suppliers leading to exit of Carrefour
3.
1.
No substitute products available
Cost based leadership, differentiation reduced to minimum; Customers attracted to store with lower costs No switching costs involved in switching from one vendor to another Service quality a prime concern for buyers
Competitive Advantage
Financial Data Start
◦ ◦ ◦ ◦
Sales monthly :- 45.5 mn$ Expenses :- 50.7mn$ Average Order Size :- 3791.6$ Number of order :- 12000
Cease
◦ ◦ ◦ ◦
Sales monthly :- 18 mn$ Average Order Size :- 700$ Number of order :- 25,714 Losses :- 100 mn $ ( June 99-200) 62.4mn + 19.5mn+16.3mn
Even
though orders increased, size of orders plummeted
Recommendations/Learni ngs Strategy
◦ To remove duopoly of the major players ◦ Capture market share through internet marketing
Company
failed to align core competency with logistics & operational problems Back up your plans with a sound public relations campaign – contingency measure Diversify your risk – do not put all your eggs in one basket! – case of Apple Magazine Imitating competition may not work – case of reducing minimum order size
Thank You
