Peapod Case Situation Analysis

2758 words - 11 pages

In response to your request for a thorough analysis of Peapod and the context in which it operates, a situation analysis has been performed and the results are detailed in the ensuing remarks.Chief Economic ad Business Characteristics Market Size: In 1999 online grocery sales amounted to about $235 million, less than 0.25% of total supermarket industry sales.· Forrester Research forecast online grocery sales to reach $3 billion by 2003 and possibly $85 billion by 2007.· CDC forecast that online consumer-direct grocery sales would account for between 8 and 12 percent of the total grocery market share by 2010.Market Growth Rate: Online grocery sales expected to grow at a rapid pace as: · companies improve their service and selection, · PC penetration of households rises, and · consumers become more accustomed to making purchases online.Position in the life cycle: Infancy.Number of Rivals: 45 companies but only Peapod, HomeGrocer.com and Webvan appear to dominate.Profitability: No company has yet to be profitable due to high start-up and operating costs and small sales volumes.Customer Characteristics: Consumers are extremely price-sensitive when it comes to buying groceries.Five-forces model of the online grocery business Rivalry Among the Online Grocers "" A weak to moderate competitive force · Rivalry, at present, exists only in those locations where there's more than one online grocer. There are only a few such locations: The San Francisco/San Jose area (Peapod and Webvan), Dallas (Peapod and Albertson's), and perhaps a few others. To some extent, rivalry is a positive factor because of the extra attention that it draws to help make more people aware of the online grocery shopping option. This is an emerging and relatively unknown industry. In a very real way, the more companies there are in the industry and the more they advertise and promote their offerings, the better the changes for spurring greater consumer interest in online shopping. The presence of two or more online rivals in a particular geographic area holds potential for being more of a positive than a negative.· Where rivalry does exist, it is predicated on such factors as o Price o Selection and freshness o Delivery times and delivery charges o Accuracy of order filling o Website features (ease of navigation, menus, ability to locate particular items and brands, and so on) Competition from Substitutes "" Very strong competitive force · Most grocery shoppers are accustomed to buying their groceries in stores where they can see what they are buying and make on-the-spot comparisons and decisions.· It is unclear that online grocery firms can match supermarkets in selection, price, and convenience. Drawing large volumes of business away from traditional supermarkets will likely prove tough rather than easy.· Even if online grocery shopping does...

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