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.

1. 2. 3. • •

Cut throat price competition Increased expenditure on sales, advertising and promotions Aggressive expansion
• Wellcome’s plan to open 20 new stores

High rental and infrastructure costs in Hong Kong Two supermarket giants could quickly replicate new idea and outdo the company which introduces it ◦ Carrefour Big two had a firm grip over the market

2.

Exit of players like Carrefour and Guangnan Small retail business dropped by 20%

1.

1.

Resale price maintenance (RPM) system in place
• Refusal to sell to retailers who undercut prices–Yakult International vs. Park’Nshop

2. 3.

70% stake captured by big two; Local wholesaler complete refusal to deal with companies Manipulation of suppliers leading to exit of Carrefour

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

1.

No substitute products available

Competitive Advantage

Financial Data
 Start

◦ ◦ ◦ ◦ ◦ ◦ ◦ ◦

Sales monthly :- 45.5 mn$ Expenses :- 50.7mn$ Average Order Size :- 3791.6$ Number of order :- 12000 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

 Cease

 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

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