Like many of you, I am ordering products online to minimize my risk of exposure to large groups of people in the grocery store.However, I am getting a real lesson in procurement practices.For example, I am placing an order for food on Monday that may not arrive until Thursday or Friday. Why? There are simply not enough shoppers and delivery personnel to get the job done. The COVID-19 epidemic has increased the demand for delivery services. If you have ever taken a marketing course, you know that opportunities always exist when there are unmet needs in society. Now, I live in a major metropolitan area and there are not enough personal shoppers/delivery providers at the moment. In contrast, my parents live in a small rural town where no personal shoppers or delivery service providers exists. Every day, I am begging my 81-year old father to stay home and away from the grocery store. Guess what? Itâ€™s not working.
How successful do you think an independent personal shopper and/or home-delivery service would be in a small rural town? Which one of these elements do you think would present the greatest opportunity and/or threat: Barriers to entry, Threat of substitutes, Threat of new entrants, Buyer power, or Supplier Power?
Here are my thoughts: (note: they are not substantiated with research as you are required to do in your deliverable and certainly can be challenged).
Barriers to entry: LOW– I believe the barriers to entry would be low to start a personal shopper and/or delivery service operation. Why? Well, you only need time, general liability insurance, reliable transportation, a tank of gasoline, hand sanitizer and gloves. With the exception of the hand sanitizer (smileâ€”I canâ€™t find any), these barriers are relatively low and/or easy to cross.
Threat of substitutes: HIGH-There are several well-established companies that are doing this well. A few examples would be Instacart and Door Dash. Some establishments will allow you to order online and pick up in-store or secure curbside delivery. So, technology is streamlining the process and providing greater substitutes for the traditional shopping experience.
Threat of new entrants:MODERATE-While becoming an independent personal shopper/delivery provider is certainly an attractive idea with income earning potential, it does not come without risk. The risk involved of being in crowded grocery stores is a growing concern. In fact, many Instacart employees are now demanding protective supplies as they work during these critical times. Click on this article to read more:https://www.usatoday.com/story/money/business/2020/03/27/coronavirus-instacart-workers-plan-strike-over-health-hazards/2925735001/ (Links to an external site.).
Buyer power: MODERATE-This is a two-fold element and very fluid element. Some buyers donâ€™t mind paying a premium of a few cents or more for the convenience of home delivery. However, we do not know how long these individuals will afford to spend extra money on delivery options.Going forward, this option will depend on the economy and employment/unemployment rates going forward.
Supplier power: HIGH-Unfortunately, you will see the prices of goods and services start to surge as people try to â€œstock upâ€ on essential goods.In fact, Amazon Prime suspended the accounts of businesses engaging in price gouging practices.Nevertheless, you will still see higher prices on some products than others because the demand is relatively high.I will spare you a lecture in economics, but you should demand drives the price of many goods and services.https://www.cbsnews.com/news/coronavirus-price-gouging-amazon-suspends-3900-sellers/ (Links to an external site.).
To Launch or Not to Launch….that is the question.
As an independent shopper/delivery driver, you set the prices charged for the services provided. Individuals who can afford these services and want to avoid crowds may not question the premiums charged. They simply want their products delivered in a timely fashion.Suppliers can also charge a premium for expedited delivery and those who need a quick turnaround must pay the price. Again, the price setting will depend on how much the market can bear at a given time period. Suppliers must be cognitive of their tangible and intangible expenses to make sure it remains a profitable business.
In my opinion, this type of service would do well in rural areas and among the elderly and those with a compromised immune system. Many of the established companies that provide these services simply do not extend to rural communities. One may not be able to charge a high premium for the service, but the service would satisfy a strong need. However, if I were in my small hometown in South Georgia, I would simply do it for free.
That’s my lecture for the Spotlight Briefcase Item of the Week! Stay Safe.
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