How is cybermarketing disrupting the way to shop

** FINAL ASSIGNMENT **


I. History of supermarkets

The first cooperative of consumption was actually founded in Scotland beginning of 19th century by Robert Owen, an utopic socialist. But this idea was progressively abandoned until 1844 when Félix Potin opened his first shop in Paris, selling products to fix and visible prices. The merchandises are packed in factories and not anymore by the grocer. This principle will then be transposed to the US by franklin Winfield WoolWorth and his brother and in 1879, year of opening of their second grocery store, will appear the Woolworth’s chain, becoming soon very popular. In the 20’s opened the first shops in self-service, like the “King Kullen” in New-York, founded by Michael Cullen, who rent an old garage, with prices 20 to 50% cheaper, selling essentially overproduction.
In France appeared Uniprix in 1931, from Prisunic and in 1932 Monoprix. All these concepts became very popular to the urban working class. In 1949 Edouard Leclerc opened his first discount store, becoming very soon the leader of supermarkets in France until now. In the 80’s appeared the even cheaper hard-discounts with Aldi, Lidl, Norma…

In the year 1985 was launched the first Internet supermarket by Monoprix, called Telemarket, in France. It is now possible to shop online, to choose the desired products by a click, to pay online and to be delivered directly at home. Cybermarketing was born. In the year 2000 Cora launched also launched its own site, called “Houra.fr”.

Study of the French Market:

The main sites for cybermarketing are:
http://www.telemarket.fr/ (Monoprix, 9000 products online, delivery in France)
http://www.auchandirect.fr/ (Auchan, 5000 products online, delivery in Paris)
http://www.houra.fr/ (Cora, 50000 products online, delivery in France)
http://www.ooshop.com/ (Carrefour, 7000 products online, delivery in France)
http://www.natoora.fr/ (Biological products, delivery in France and Corsica)
http://www.coursengo.com/ (Franprix, 4000 products, delivery only in Paris)

They all insure a delivery under 48 hours when bought before 8.00 pm. As we can see the main cybermarkets are part of a supermarket group. This is showing the investment made in this new segment by traditionnal sellers. It is the natural step from offline to online, keeping the exact same core business, with new logistic issues.


II. Business model analysis

The main problem solved for customer, is the possiblity to stay at home to shop, instead of taking the car, making their shopping in a crowded and noisy place, queueing to pay and coming back with their car. It safes time, money (think about the oil prices!), and tiredness. For the owner of the business it is possible to reorganise the storage in a place with less space, it avoids cashiers and it securises the payments.
The customer groupe served is composed of connected people, who does not have enough time in their daily lives to go shopping, especially working women with children (70% of the customers, according to Houra in 2005). The group is also composed of people who don't like to go shopping.
The revenue sources for the cybermarkets are quite similar to the revenue sources of traditionnal supermarkets, they have a margin on the sold goods. The cybermarkets can also make a little money whith the delivery and sponsored links on their website. But still it seems that the margin is higher for the moment on cybermarkets than in supermarkets.

This model is sustainable as it doesn't change the core business of supermarkets, which is to buy as cheap as possible to producers, like farmers and to sell with a quite low margin (~2%), to insure to their customers low prices. We know that the supermarket business model is sustainable, so cybermarketing has to be, as long as it offers the same prices and a cheap but efficient delivery service. Cybermarketing is much more disrupting the way to buy than the way to sell! The model is scalable by increasing the number of products available online, and increasing the number of delivery zones including foreign countries.

To develop the market, I would invest in advertisement production, in order to be able to realise real ad-spots on the web site, to make money like a traditionnal agency and in same time increasing the number of products sold. The traditionnal adverisment will have a much lower impact, as the customer is not walking around in a supermarket, he won't recognize a product he saw on tv, and then buy it. People will use the integrated search engine of the website to look for a group of products, and the site will be able to choose which brands will appear first on the list, or even showing an ad, during the response waiting time, that will show a specific brand. The website will replace the television and its way to make money. Cybermarkets could earn money realising the ad and then selling the allocation on their website to the same supplier, with a final effect of growing their sales! Finally, the way to sell could be disrupted as much as the way to buy.


III. Conclusion

In 2005 Houra announced a turnover growth of 21% (57 million Euro), which is a very good result, as the growth in 2004 was 15%. They reached 61 million in 2006. But the market is still not mature, and many efforts can be made to reduce the delivery costs, by optimising the logistic flow. To have a delivery service is an ecological behaviour, as the consumption of one truck delivering to a certain number of people is consuming less oil than each individuals driving to the supermarket. The ecological trend will reenforce the cybermarketing trend. The offer of products can be largely increased, and in parallel projects of more efficient search engines are developped, to help customers to find out the desired product.
Cybermarketing has become over the past few years, one of the most competitive business on the web, making it grow even faster.

When extrapolating all these facts, we can imagine that cybermarketing is going to become the new traditionnal way to shop, having in paralell the development of internet, which is increasing the number of people connected and a population getting older, especially in Europe and in the US, this way will help people having problems to move from their homes. Cybermarketing will soon become the regular way to shop.

Stay connected

** Body of knowledge **

New technologies are coming up for "older" people who does not have a computer, but would really enjoy to receive some e-mails from their family. An example with the "PRESTO" company:

http://www.presto.com/


The only thing you need is a telephone line, and a person that will be able to manage your account through internet (your doughter for example). All the allowed e-mails will then be printed out automatically. It seems that this technology is only available in the US for the moment. This could be an opportunity market for entrepreneurs in Europe...

Crowd-sourcing for hospitality industry

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INNOCENTIVE

"We believe in the power of open innovation, bringing together creative minds to create breakthrough solutions that touch every human life. " Innocentive website

Here is the value of Innocentive, an e-business company launched in 2001 by Jill Panetta and Alpheus Bingham.
In December 2006 the company signed an agreement with the Rockefeller Foundation to add a non-profit area designed to generate science and technology solutions to pressing problems in the developing world.

InnoCentive links experts (The Solvers) to unsolved R&D problems, allowing these companies (The Seekers) to tap the talents of a global, scientific community and to the researchers to win prizes. With some 125,000 scientists from 175 countries registered, the company now provides on-demand solutions for major companies.

The research sectors are: Computer Science, Math, Chemistry, Life Sciences, Physical Sciences and Business, Business and entrepreneurship,Chemistry,Engineering & design Life sciences.

The main advantage for the customers of Innocentive, which are most of the time big companies, is to reduce their R&D costs of a huge amount (Customer group served). The prizes are between 10.000 and 100.000 dollars, and this does represent a huge amount of money when comparing with annual R&D budgets of some companies like Procter&Gamble. (Prize 4 Life offers 1.000.000 dollars)

Ed Melcarek, for example, a 57 years old scientist, won 25.000 dollars helping the R&D of Colgate-Palmolive to find a solution to inject fluorized powder in a toothpaste tube. In this case the supplier is an individual, part of the "croud" member of Innocentive's solvers. For them is an relative easy way to earn money, by making reasearchs on their favorite subjects.

The owner of the business has just to managed properly his internet site, to facilitate the encounter of the solver and the seeker.

Innocentive earns money each time a challenge is posted, as the seeker pays a deposit around $2000.

Competitors:
NineSigma, Yet2.com, and YourEncore.

The model could hardly be applied offline, as internet assures the easiest way to make a contact between seekers and solvers, which have to be sorted out from millions of people.

The model is sustainable for the moment, as long as R&D costs are still very high for the companies. But with the time companies will rethink their R&D departments, and invest more in innovation through new networks, and progressively, each mayor company could have its own Innocentive-like network and prizing system. Innocentive could than become a rank 2 company, trying to fit together networks of seekers with networks of solvers.

If I had to run the business of innocentive, I would prepare this natural scale evolution, and I would begin to work with social networks, like facebook or Myspace, to find communities of solver, which would be able to solve even more difficult problems in less time and for less money.
On the other side I would propose my services to companies to reorganize their R&D department in an innovative and networking way, trying to reduce their costs and increase their efficiency.

The companies mostly interested by Innocentive are in the sector of Chemistry, Biology and Bioindustry.