The 2017 Exit Exam for Dual Degree students of the Master in Management at IE Business School consisted of a strategic company analysis of KiranaNow, an Amazon online subsidiary launched as a hyperlocal platform for B2C grocery delivery in India. My group developed a written report as well as the following presentation, which provides an analysis of the Indian online grocery market and recommends a future strategy for KiranaNow. The vast potential of the Indian market, which is set to grow extensively and is yet to experience the grand transition to online retail, urged Amazon to venture into the online grocery market and gain a first-mover advantage. The use of technical, strategical and industrial analyses, including PESTEL, SWOT and Porter Five Forces will provide the basis to suggest three potential strategies for KiranaNow’s success in the future. Of which the best alternative is to cease business with Kirana stores and venture through AmazonNow smartphone application into partnerships with continuously hyperlocal, yet more established food retailers. The strategy recommendation includes a revised business model featuring financial, operational and marketing forecasts as well as implementation strategies. During the time, the government blockade of foreign direct investment limited Amazon from launching an inventory-led B2C model, yet forecasts strongly implied that this ban would be lifted. As soon as this takes effect, we propose Amazon to venture mission towards such model, similar to Amazon Fresh in the United States, in which Amazon gains full control of operations and profit.

1. KiranaNow
Dual Degree Exit Exam
2017 Master in Management
IE Business School

2. Amazon’s KiranaNow
2013 Amazon enters Indian market with only 2
Categories: Books & Movies
2014 expansion of other categories
2015 Pilot of KiranaNow
 Hyperlocal marketplace solution for Kirana
stores
 Small local “mom-and-pop” stores
 Express or Scheduled Delivery of
Kirana products

3. AGENDA
01
02
03
EXTERNAL SITUATION ANALYSIS
PESTEL & Porter’s 5 Forces
INTERNAL SITUATION ANALYSIS
SWOT & Problem Identification
SOLUTION ALTERNATIVES
3 Possible Options
RECOMMENDATION
Implementation Plan
04

4. External Situation Analysis
through
PESTEL & Porter’s 5 Forces

5. CONTEXT
Political
Economical
Social
Technological
Environmental
Legal
PESTEL

6. 1 2
3 45
PORTER’S 5 Forces
Threat of new entrants, bargaining power suppliers & buyers, SUBSTITUTES,
rivalry among competitors

7. 1 2
3 45
Threat of New Entrants - High
Endogenous entry barrier: Highly concentrated market with
strong brands
Low entry barriers in marketplace model: low initial investment
Highly attractive market: Exponential annual growth of market
and customer base

8. 1 2
3 45
Bargaining Power of Suppliers - Moderate
Small commission on already thin margins
Strong loyal customer base with existing delivery option
Benefit from online market integration

9. 1 2
3 45
Bargaining Power of Buyers - High
Low switching costs
Undifferentiated products
Loyal relationships with Kiranas – negotiation / credit / promotion

10. 1 2
3 4
Threat of Substitutes - High
Direct shopping at Kirana store
Large supermarket chains with competitive pricing
Shoppings done by maids / Eating at restaurants
5

11. 1 2
3 45
Rivalry Among Competitors – Moderate/
High
Several large players with early mover advantage
High threat of new entrants
Undifferentiated offering / increasing customer demand

12. Internal Situation Analysis
through
SWOT Analysis and Problem Identification

13. Strengths Weaknesses
Opportunities Threats
• Leveraging Amazon’s resources and
capabilities
• Convenient cancellation and delivery policies
• No distribution centers & lower costs
• Economies of scale
• Competitive pricing model
• Funding backup in case of price war
• Strong brand image
• Little quality control and low quality data
• Costly cancellation and return policies
• Difficult to predict customer behaviour
• Inflexible payment options in a cash-dominated
country (90% of transactions cash and 50% of
population own bank account)
• Network of drivers, suppliers and buyers needs
time to be established and sustainable
SWOT
• Kirana stores are niche segment
• Growing phone & internet penetration
• Increasing acceptance of digital buying
• Technology push, modernizing Kiranas
• Growth in online grocery shopping
• Increasing disposable income, rising GDP
• First-mover advantage: achieve high market
penetration
• Change in regulations to allow FDI in inventory
based models
• Low technological penetration in India
• Consumer preference: offline shopping
• Strategic deal between Walmart and Flipkart
• Dynamic sector with frequent market entries
and exits
• Changes in regulations
• Strong bargaining power of buyers, mainly due
to very low switching costs

14. The
Challenges
Low Customer Demand
 Consumer preference: offline shopping
 Low technology adaption: customers & suppliers
 Value proposition: increase convenience, flawless high-quality shopping
experience, customer retention schemes.
1
Market-Based Model
 FDI regulations prevent inventory-based online retail model
 High delivery costs
 Difficulties assuring product availability and limited product portfolio
 Quality control of perishable goods difficult up to impossible to achieve
2

15. Employee Turnover
 Very high attrition rates
 Business model requires high number of trained staff
 Negative effect on the business scalability
3
High Competition
 Increasing rapidly due to low entry barriers and attractive economic, social and
technological market trends
 Inevestments and mergers among competition
 Failure of similar ventures in the past
4
The
Challenges

16. Solution Alternatives
definition of
3 Possible Options

17. Change to B2B
supply businesses (Kiranas,
Restaurants) through
inventory-based model
Integrate KiranaNow
in AmazonNow
and establish partnerships with
large supermarket chains
Continue Business
but adapt operations and enhance offering to
better address challenges

18. Change to B2B
Supply businesses (Kiranas,
Restaurants) through
inventory-based model
Integrate KiranaNow
in AmazonNow
and establish partnerships with
large supermarket chains
but adapt operations and enhance offering to
better address challenges
Continue Business

19. Implementation Plan
of our
Recommendation

20. Two Possible
Paths
1
Enter market
and expand
alone
2
Enter and expand
by acquiring
ZopNow

21. Financial Analysis
Independent Expansion vs. Acquisition of ZopNow
Calculation of NPV for both projects
 Estimations based on PepperTap & Grofers
 Expansion into 17 Cities, cost 10$m
 ZopNow Acquisition price: 25$m
 CAGR: 62%
 Online grocery growth: 30%
NPV 1:
- 22$m
NPV 2:
400$k
Decision: Acquire ZopNow

22. Financial Analysis
Independent Expansion vs. Acquisition of ZopNow
Input Source
CAGR
Revenue share
Acquisition price ($million)
Merger cost ($million)
Expected revenues 1 ($)
Growth rate
CFs 1 ($)
Expected revenues 2 ($)
CFs 2 ($)
0,62
2%
25
10,00
65.106,30
0,3
203.457
Online grocery market
online vs. overall grocery market
Rule of thumb 2-3 times raised funds
Required for expansion in 10 cities
Without Zopnow (20’188 orders/day); based on
Grofers revenues
Growth rate of retail industry
Infinite growing annuity calculation
NPV 1
NPV 2
-22.796.543
129.000
403.125
403.090
With Zopnow (40.000 orders/day)
Infinit growing annuity calculation
Revenues Burn Rate Losses
Bigbasket
Grofers
$87,24m
$ 2,22m
$6m
$2m
42,92
34,86
Company

23. Operations Chain
After order is
fulfilled, user
rates
experience
Places order
on
AmazonNow
application
Partner store
receives order
digitally
Picker
assembles
order within
time given by
Amazon
Amazon
algorithm
chooses and
notifies best
driverDriver picks
up order at
partner store
and delivers
to user
User
1 2
3
5
4
Cash
payment
collected if
chosen
6
Automated online
payment if
chosen
Partner receives
payment minus
commission
2

24. Organizational Strategy
Attrition rate and high staff demand lead to increased costs for staffing and
training
Well trained and qualified staff is crucial for business success
Incentives to increase employee motivation: corporate culture and
reawarding system

25. MARKETING Value:
5-Box Positioning Model
”Kirana Now has a small
product variety and doesn't
promise quality or standard.
The technology is unreliable
and drivers are tardy ”
”I order at Kirana Now
sometimes, but can’t pay with
cash and I am not getting the
same prices as with my local
Kirana, therefore visit them
directly”
”Get a large variety of high
quality products delivered to
your door in less than 2h at at
a great value for money.
Simply order and pay using
our mobile app ”
“Amazon’s high quality and
brand products are superior,
while the simple and reliable
user experience makes my life
easier and saves time.”
“I buy all my groceries and
necessaire at Kirana Now
because it is the most
convenient option and they
have everything I need”
Current Belief
Current Do
Desired BeliefConsumer Proposition
Desired Do

26. $
PriceProduct
Deliver Value: Product
Price Placing, Positioning
• Enhance offering
• Standardize products
• Better quality control
• Smooth customer experience

27. $
Price
Deliver Value: Product
Price Placing, Positioning
Product
• Enhance offering
• Standardize products
• Better quality control
• Smooth customer experience
• Competitive prices across all
segments
• Rising willingness to pay for
convenience
• High quality = high price

28. Placing Promotion
Deliver Value: Product
Price Placing, Positioning
• Easy use on mobile devices
• Scheduled delivery option
• Catering to flexibility needs
• Expansion throughout India

29. Promotion
Deliver Value: Product
Price Placing, Positioning
Placing
• Easy use on mobile devices
• Scheduled delivery option
• Catering to flexibility needs
• Expansion throughout India
• Online and mobile targeting
• SEO, PPC, email newsletters
• Social media
• Magazines and high frequency
areas
• Discount and loyalty program

31. Summary and Outlook

32. Summary
Cease operations with Kiranas
Leverage technology advantage and user base
Potential acquisition of ZopNow
Prepare for FDI approval for B2C inventory based model
Partner with supermarkets through
AmazonNow
Immediately venture into inventory led model

33. AmazonNow
Dual Degree Exit Exam
2017 Master in Management
IE Business School