Basmati House Supermart: Co-Operative Competition with an E-Retail Channel
(8 pages of text)
In July 2019, the owner of Basmati House Supermart (BHS), a grocery store, entered into a six-month agreement to become a partner outlet of a large online grocery retailer in India. During the first two months, BHS acquired many new customers and also increased its customers’ monthly purchase. However, the steep discounts and promotions used to attract customers to the business drove down the margins, while the customer churn rate increased. The store owner was particularly concerned about the continued use of discounts to attract new consumers, which could potentially transform his own loyal customer base into deal-seeking, less loyal, and online-promotion-driven buyers, thereby leaving BHS terminally dependent on the large online retailer to maintain its sales. The owner wondered whether he should renew his contract with the online retailer in January 2020, and if he did not, what his best course of action would be.
This case can be used in a graduate-level course on retailing as well as in courses on sales and distribution management or online business strategy. After working through the case and assignment questions, students will be able to
- consider the possibility of “co-opetition,” that is, co-operating with a competitor to ensure long-term business survival and growth;
- understand when to reinvent a business model and how to evaluate alternatives that might align the business better with both the competitive landscape and changing consumer behaviour;
- understand the drivers of growth in hyperlocal grocery retail as well as the need for larger bricks-and-mortar wholesalers to change; and
- conduct simple financial calculations, including the return on investment and the customer lifetime value, in order to make marketing decisions.
India, Small, 2019
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