Rice epicurean specials

Case Study for Chapter 7 UPSCALE MARKETS: Value Creation in a Mature Industry As he walked into the office, Blake Ives was already thinking about his next move. As the CEO of Upscale Markets, a seven-store local grocery chain in Dallas, TX, he had been inspired by the recent move by the Korean subsidiary of UK-based grocery giant Tesco, plc. Called Home Plus in Korea, the grocery chain set out to leapfrog the dominant local player, E-mart, to become the largest grocery provider in Korea. However, with a smaller number of stores than its rival, Home Plus had to think creatively. The result was a series of stores located in subways . . . with the peculiarity that the store windows, which looked remarkably similar to the Home Plus store aisles, were in fact virtual (Figure 7.1).1 Figure 7.1. Home Plus Subway Virtual Stores Each virtual item on display had a QR code2 (Figure 7.2) that, when scanned with a smartphone, would add the item to the individual’s shopping basket for delivery at his or her home later that same day. Home Plus claimed that the innovation had been very successful and had allowed the company to become the No. 1 online grocery chain in Korea and to closed the gap with E-mart for No. 1 overall. Reported results were very encouraging with over 10 thousand consumers visiting the virtual stores using their mobile phones. Figure 7.2. Example of QR Code As he heard the story Ives immediately thought: “The great intuition of Home Plus has been converting idle time (waiting in the subway) to productive time (shopping). Most consumers considered grocery shopping a necessary chore . . . they certainly do not enjoy it. I am sure that Home Plus has created significant value.” Could he pull off a similar feat? Could his grocery chain use online shopping as vehicle to expand without the cost-prohibitive effort of building new stores? As his mind raced, Ives realized that he needed to walk before he could run. Dallas did not even have a subway system! But it did not have any web-based online grocery store either, “and that’s where the opportunity is!” Ives mumbled to himself. Upscale Markets could be the first to offer online grocery shopping and home delivery in its local market, and this move could indeed provide the first mover advantage that Ives was looking for, boosting sales and market share. Such a bold move had to be thought out thorougly however. He had to perform a clear analysis of added value to be sure that the initiative would be a success. Luckily, he had a friend in Houston, TX—Larry Cantera—that had enjoyed online grocery shopping for a few years already through a local grocery chain called Rice Epicurean. Ives immediately called him and, after a few minutes catching up, he asked Cantera to describe his experience. Cantera responded: Since my daughter Julie was born, our lives have become more hectic. With both of us working, grocery shopping became even more of a burden. On most weeks my wife or I were going to the grocery store twice a week. I did one big run on Saturday, when everyone else in the world was in the store. From the time I stepped out the door until I had the groceries home and in the fridge took about two hours. Later in the week we’d be shopping for bread, cold cuts, milk, and whatever we had forgotten. Last week I spent fifteen minutes completing the on-line order. My wife maybe spends another five minutes going over with me anything special she thinks we need. After six weeks I have pretty much everything we ever order on our master list at Rice Epicurean. This was promising and inspired Ives to continue his research. Understanding the value proposition offered by Rice Epicurean held the key to his own decision making. Rice Epicurean Background Rice Epicurean Markets was the self-reported oldest family-owned chain of supermarkets in Houston, Texas. It traced its roots to Rice Boulevard Market, opened in 1937 by William H. Levy, grandfather of the current owners. In 1937, Rice Boulevard was a dirt road in a largely undeveloped future suburb of Houston. Seven decades later, that store, considerably increased in size, sat in the middle of one of the most desirable living areas in Houston. In 1957 a second store was opened. Its first customers included rice farmers living west of Houston; by the time the new millennium rolled around those rice fields had become Houston’s prestigious Galleria area. Rice Epicurean’s other four stores were located in similarly well-to-do neighborhoods, including one almost across the street from a recently opened giant HEB Central Market. The six stores ranged in size from 20,000 to 42,000 square feet.