Harvard Case - Honestbee: Adding a Brick and Mortar Store to its Online Business
"Honestbee: Adding a Brick and Mortar Store to its Online Business" Harvard business case study is written by Wee Liang Tan, David Gomulya, CW Chan. It deals with the challenges in the field of Strategy. The case study is 8 page(s) long and it was first published on : Oct 26, 2021
At Fern Fort University, we recommend Honestbee proceed with caution in adding a brick-and-mortar store to its online business. While the move can offer potential benefits, it requires careful consideration of the company's core competencies, competitive landscape, and resource allocation. Instead of a full-scale brick-and-mortar store, Honestbee should explore a hybrid model that leverages its existing online infrastructure and technology, focusing on smaller, strategically located 'experience centers' to enhance customer engagement and brand building.
2. Background
Honestbee, a Singapore-based online grocery delivery platform, has experienced rapid growth since its inception in 2015. The company operates in multiple Asian markets, leveraging technology and a network of partner stores to provide convenient and efficient grocery delivery services. The case study explores the company's decision to expand its business model by adding a brick-and-mortar store in Singapore, aiming to provide a more immersive customer experience and potentially attract new customer segments.
The main protagonists in the case study are the Honestbee leadership team, tasked with evaluating the potential of the new business model and its impact on the company's overall strategy.
3. Analysis of the Case Study
To analyze Honestbee's decision, we can utilize several strategic frameworks:
a) Porter's Five Forces:
- Threat of New Entrants: The online grocery delivery market is attracting significant investment and new entrants, increasing competition.
- Bargaining Power of Buyers: Customers have a high degree of choice in online grocery delivery, making them price-sensitive and demanding high service quality.
- Bargaining Power of Suppliers: Honestbee's reliance on partner stores gives suppliers some leverage in negotiating terms.
- Threat of Substitutes: Traditional grocery stores and other online delivery services pose a significant threat.
- Competitive Rivalry: The online grocery delivery market is highly competitive, with players like GrabFood, Foodpanda, and Deliveroo vying for market share.
b) SWOT Analysis:
Strengths:
- Strong brand recognition and customer loyalty.
- Established technology platform and logistics network.
- Data-driven approach to operations and customer insights.
- Expertise in online grocery delivery.
Weaknesses:
- Limited experience in brick-and-mortar operations.
- Potential cannibalization of existing online business.
- High operating costs associated with physical stores.
Opportunities:
- Expanding customer base and market reach.
- Offering a more immersive customer experience.
- Generating new revenue streams through in-store sales.
Threats:
- Increased competition from established players with physical stores.
- High operating costs and potential for lower margins.
- Risk of brand dilution if the physical store experience doesn't align with online expectations.
c) Value Chain Analysis:
Honestbee's value chain is primarily focused on technology and logistics, with a strong emphasis on efficient order fulfillment and customer service. Adding a brick-and-mortar store introduces new activities, such as inventory management, in-store customer service, and physical space management, potentially impacting the company's existing value chain.
d) Business Model Innovation:
Honestbee's core business model relies on a technology-driven approach to online grocery delivery. Adding a brick-and-mortar store represents a significant departure from this model, requiring a shift in focus and resource allocation.
4. Recommendations
Honestbee should consider a hybrid approach that leverages its existing online infrastructure and technology while introducing a limited number of strategically located 'experience centers.' These centers should focus on:
- Enhanced Customer Engagement: Offering interactive displays, product sampling, and personalized recommendations to enhance the customer experience.
- Brand Building: Creating a physical space that reflects Honestbee's brand values and strengthens customer loyalty.
- Product Development: Testing new products and services in a controlled environment before launching them online.
- Data Collection: Gathering valuable customer insights through in-store interactions and analytics.
These 'experience centers' should be smaller in size and strategically located in high-traffic areas with a focus on customer experience rather than traditional retail sales.
5. Basis of Recommendations
This recommendation aligns with Honestbee's core competencies in technology and logistics while minimizing the risks associated with a full-scale brick-and-mortar store. It considers the following:
- Core competencies and consistency with mission: The hybrid model leverages Honestbee's existing technology and logistics expertise while allowing for experimentation with a new customer experience.
- External customers and internal clients: It caters to both existing online customers and potential new customers seeking a more immersive experience.
- Competitors: The hybrid model allows Honestbee to differentiate itself from traditional retailers and online-only competitors.
- Attractiveness: The 'experience centers' can be implemented with a lower initial investment and offer a more controlled environment for testing new concepts.
6. Conclusion
Adding a brick-and-mortar store to its online business presents both opportunities and challenges for Honestbee. By adopting a hybrid model with strategically located 'experience centers,' Honestbee can explore new customer segments, enhance brand engagement, and generate valuable data insights without significantly disrupting its existing business model.
7. Discussion
Alternatives not selected:
- Full-scale brick-and-mortar store: This option carries significant risks, including high operating costs, potential cannibalization of the online business, and competition from established retailers.
- Online-only strategy: While this maintains Honestbee's core competency, it may limit growth potential and hinder customer engagement.
Risks and key assumptions:
- Customer acceptance: The success of the hybrid model depends on customer acceptance of the 'experience centers' and their willingness to engage with the new format.
- Operational efficiency: Managing both online and physical operations requires efficient logistics and inventory management.
- Financial viability: The hybrid model needs to be financially sustainable, ensuring profitability and return on investment.
Options Grid:
| Option | Strengths | Weaknesses | Opportunities | Threats |
|---|---|---|---|---|
| Full-scale brick-and-mortar store | Increased customer reach, new revenue streams | High operating costs, potential cannibalization, competition | Expanding customer base, new product offerings | High risk, operational challenges |
| Hybrid model | Leveraging existing technology, enhanced customer engagement | Limited physical presence, potential for cannibalization | New customer segments, data insights | Customer acceptance, operational efficiency |
| Online-only strategy | Focus on core competency, low operating costs | Limited customer engagement, potential for stagnation | Cost-effective, efficient operations | Increased competition, limited growth potential |
8. Next Steps
- Pilot program: Launch a limited number of 'experience centers' in strategic locations to test the concept and gather customer feedback.
- Data analysis: Analyze data from the pilot program to evaluate customer behavior, product performance, and operational efficiency.
- Refine strategy: Based on the pilot program results, refine the hybrid model and adjust the strategy for future expansion.
- Marketing and communication: Develop a targeted marketing campaign to promote the 'experience centers' and attract new customers.
- Continuous improvement: Implement a system for continuous improvement, monitoring performance, and adapting the hybrid model to changing market conditions.
By carefully implementing this hybrid approach, Honestbee can capitalize on the potential of brick-and-mortar stores while leveraging its existing strengths in technology and logistics. This strategy allows for a more controlled and data-driven approach to expansion, minimizing risks and maximizing the opportunity for sustainable growth.
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Case Description
In January 2019, Raymond Holmes, head of the Singapore Association of Chief Marketing Officers (CMO), an informal roundtable of CMOs from multinational corporations, went to explore Habitat, a hi-tech grocery store by Honestbee, a food and grocery delivery company. The advent of e-commerce allowed consumers to buy products online. Asset-light retailers had cost advantages over physical stores when it came to rental expenditure and inventory storage. Honestbee pioneered the food concierge service in Singapore, helping busy consumers fulfil and deliver online grocery orders from partners that had physical stores. Three years after its founding, the company added a physical storefront that aimed to be a lifestyle destination with a grocery store and other dining concepts. The futuristic store would also attract non-shoppers to the area. Holmes wondered if Honestbee's multichannel approach would provide a better experience for the consumers and enhance its profitability.
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