Home plus
ANANYA GUPTA (11 AM)
Executive Summary
Korea is a significant market for Tesco-Homeplus and a large part of Tesco’s overall sales in 2011 came from Asia 33.5% (Exhibit 2). The UK market is on a decline and Tesco’s hopes ride on high growth markets like Korea. Its discount store format’s popularity in Korea is waning (increase of just 14 stores from 2008 to 2011) & most of its revenues were being driven by SSMs that now face the possibility of shut down due to the looming legislative action. Homeplus needs to look for alternative growth drivers like redefining its distribution channels and focus heavily on online retail in addition to investing in technology in a way that helps it differentiate itself and achieve that competitive edge for sustainable growth.
Alternatives
1. Online Channel
Pros
Increase in the number of smartphones users in Korea as a result of which they have come to value online shopping a lot (an increase of 205% from 2005 to 2011) for the ease of use and convenience that it offers.
Homeplus needs to tap into this market by setting up a robust online channel where it makes use of Tesco’s expertise in the field and Homeplus’s strong understanding of customer’s tastes and preferences.
Cons
The concept of getting the day-to-day groceries from the neighborhood mom and pop stores and the SSMs exists for years now. The cultural/value shift of ordering groceries via an online channel for the Korean consumer may not be an easy one.
Koreans are not easy to please consumers and display shopping behavior where they but smaller quantities but more frequently. In this case, as an ecommerce platform, the minimum order amount or a minimum delivery charge arrangement may not be the most appropriate one in terms of operating costs for Homeplus or increased costs for the Korean consumer who shops often.
2. Setting up manufacturing units for PB products
Pros
Homeplus could aim to set up manufacturing units in Korea to produce PB brands instead of depending on
Executive Summary
Korea is a significant market for Tesco-Homeplus and a large part of Tesco’s overall sales in 2011 came from Asia 33.5% (Exhibit 2). The UK market is on a decline and Tesco’s hopes ride on high growth markets like Korea. Its discount store format’s popularity in Korea is waning (increase of just 14 stores from 2008 to 2011) & most of its revenues were being driven by SSMs that now face the possibility of shut down due to the looming legislative action. Homeplus needs to look for alternative growth drivers like redefining its distribution channels and focus heavily on online retail in addition to investing in technology in a way that helps it differentiate itself and achieve that competitive edge for sustainable growth.
Alternatives
1. Online Channel
Pros
Increase in the number of smartphones users in Korea as a result of which they have come to value online shopping a lot (an increase of 205% from 2005 to 2011) for the ease of use and convenience that it offers.
Homeplus needs to tap into this market by setting up a robust online channel where it makes use of Tesco’s expertise in the field and Homeplus’s strong understanding of customer’s tastes and preferences.
Cons
The concept of getting the day-to-day groceries from the neighborhood mom and pop stores and the SSMs exists for years now. The cultural/value shift of ordering groceries via an online channel for the Korean consumer may not be an easy one.
Koreans are not easy to please consumers and display shopping behavior where they but smaller quantities but more frequently. In this case, as an ecommerce platform, the minimum order amount or a minimum delivery charge arrangement may not be the most appropriate one in terms of operating costs for Homeplus or increased costs for the Korean consumer who shops often.
2. Setting up manufacturing units for PB products
Pros
Homeplus could aim to set up manufacturing units in Korea to produce PB brands instead of depending on