Freshippo's Business Model Evolution: An Entrepreneurship Report

This report provides a comprehensive analysis of Freshippo, an entrepreneurial venture by Alibaba, focusing on its business model evolution within the new retail platform. The report delves into the integration of online and offline services, evaluating the convenience store, cloud supermarket, and Hexiaoma store formats. It identifies problems related to service quality and customer satisfaction, crucial for competitive advantage and sustainable growth. The analysis covers value creation, decision-making processes, and management strategies for the different business models. Recommendations are offered to improve the business model and address identified issues, aiming for sustainable and profitable growth. The report highlights the importance of technological advancements, efficient management, and first-mover advantage in the competitive market.

Entrepreneurship
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4/15/2020

Entrepreneurship 1
Contents
Introduction to the case..............................................................................................................2
Problem analysis........................................................................................................................3
Integrated online and offline business model.............................................................................4
Value creation............................................................................................................................6
Sustainable and profitable growth..............................................................................................6
Decision making for convenience store, cloud supermarket, and the Hexiaoma store..............7
Management of four different business models.........................................................................7
Recommendations......................................................................................................................9
Conclusion................................................................................................................................11
References................................................................................................................................12

Entrepreneurship 2
Introduction to the case
Entrepreneurship reflects the process that includes an individual to consider
opportunities that he or she can gain along with the currently controlled resources and turn an
idea into implementing in a business. Innovating new goods, services, products, business
procedures, process reflects Entrepreneurship. Entrepreneurs are not only who initiate a
business but also includes when an individual within an organisation is able to integrate the
resources in order to implement a new and innovative idea with the business model, people,
money and strategy while transforming the new idea into a strategically fit business. One
such entrepreneurial case would be taken into account for this report that is Freshippo. This is
the business model evolution with new retail platform by one of the popular E business
company that is Alibaba (Ahlin, 2014).
In order to adapt expansion strategy by Alibaba and gain opportunity to reach major
portion in China the company has considered new retail powered supermarket considering
various experimental store formats that is said to be Freshippo. With the development of new
format that is inclusive of convenience store, Micro fulfilment stations and supermarkets the
company has able to implement the proposition for large consumer groups. This has impacted
reinventing target groups by the company in order to Carter various consumers across the
nation. The first store of Freshippo initiated in Shanghai in 2016, January. The company
expanded the business by owning 46 stores by the end of June 2018 in 13 cities (hbr.org,
2020).

Entrepreneurship 3
Problem analysis
The experience presented through the case reflect that while entering into the store
that consumers are able to experience Freshippo produce that reflect supermarket
characteristic, Along with the food being prepared, packed and bags are ready for the
customers to pick. For this technology driven innovative retail platform initiated by the
company which reflect ability for the consumer to use application for order placement and
delivery of the package within 30 minutes, while consumers can also dine in a store.
However with the new business model that has been adopted by the company in order to
implement Freshippo there have been various problems identified with the evolution of
business model of Freshippo report. Some of the problems identified include management
issues at store, long waiting time in preparation of food and poor service that has been made
in the complaint by the consumers. Therefore from problem analysis of the case it can be said
that the service offered by the company and employees of the company are the major issue
that needs to be considered on priority basis (forbes, 2019).
It has been analysed that the customer satisfaction has to be considered by the
company in order to sustain in the market and gain competitive advantage. Therefore the
report will analyse the major issues concerning service offered by the company along with
the recommended strategies for the company to gain competitive advantage through
Freshippo business model (hbr.org, 2020).

Entrepreneurship 4
Integrated online and offline business model
Considering the business model developed by the company for Freshippo, it includes
integration of online as well as off-line services. Considering one of the stores initiated in
Shanghai that is of 10,000 m² in December 2016 at Freshippo market which reflect the
double size of its initial store. This tour was able to manage and welcome the customers for
shopping as well as in-store dining. This reflects the dining area to offer services of line along
with the online ordering facility which reflect preparation of the orders prior to the entry of
customers whereas the customer could pick up the order or Dine in the store. The stock
keeping units considered for eat Freshippo store was not exceeded by 5000 where the
bifurcation included 80% food and only 20% were for food items with a purpose to promote
better and healthy lifestyle consisting Freshippo produce. The food items included to be
offered included hi end or middle and end products packed in a small bag which could be
appropriate for single person consumption (Gencer, 2017). In order to consider digitalisation
the barcode was considered for the self-checkout convenience so as to implement Omni
channel business model that is online ordering by the consumers through use of mobile
application of Freshippo. It has been identified that through this business model the most
efficient aspect was online ordering where is the 50% of the sale was online in 2018 May.
Other than this the order was also delivered which reflected 10 minutes to take order and
Prepare the order and 20 minutes for delivering the order to customers (alizila, hema-
supermarket-offers-shoppers-new-retail-experience, 2017).
However the critique reflects that the company reflected long waiting time which was
one of the problems when it comes to efficiency of business model for Freshippo market.
This reflected Freshippo Nanixiang store which was majorly criticised by consumers for long
waiting time.

Entrepreneurship 5
The case reflected various stores to be considered as business model of Freshippo.
Other than regular from store, F2 convenient store, Freshippo cloud supermarket, hexiaoma
Stores are also being considered as part of business model development of the company. As
per the F2 convenience store which stands for past and fresh was initiated in December 2017.
This was a 500 m² outlet that was to offer lunch, breakfast and noon tea for office workers
nearby the store. The speciality reflected to offer appealing seafood items at low-cost prices
that is similar to regular Freshippo store. The customers were able to use application of the
company for order placement and pick up from the store. The consumer can select to either
Take food to their workplace or consume it within the store (insideretail.asia, 2020).
Freshippo cloud supermarket, he identifies various issues while experiencing online
ordering. Even after development of the delivery model the limited warehouse space reflect
not able to provide more than 7000 orders a day. Considering the 30 stores of Freshippo
reflect total processing capacity of 2,10,000 maximum orders a day. The company was
offering around 20,000 products through cloud supermarket which reflect various kitchen
utensils, cosmetics, and maternity products, variety of foods, adult products and children
supply which were not available in regular Freshippo stores. Other than this the value created
by cloud supermarket was delivery overnight which was delivered to appropriate Freshippo
store in midnight so as to deliver customers the next day (Doppell, 2017).
The Hexiaoma stores were initiated in June 2018, in joint partnership with RT mart.
This reflect the floor space of 800 m² which reflect concluding warehouse model and
traditional super market model along with the integration of online retailing model. This
reflects bifurcation of the space which 50% of fresh produce section. Some of the major
disadvantage that has been identified for this tour is ability to deliver within 3 km radius;
however time for delivery is one hour. Moreover the store was not able to offer dining
facilities, fresh seafood (Dawson & Andriopolous, 2014).

Entrepreneurship 6
Value creation
Value creation is one of the major aspects of business model development for any
organisation. This reflects the value created for the customers and the customers that have
reflected value for the organisation. Considering the value that has been targeted or offered to
the customer while developing Freshippo Business model, it includes all in one experience
for the consumers that is to offer supermarket as well as dining experience for the consumers.
Other than this the customer convenience is also part of value creation by the business model
as this includes integration of off-line as well as online services. Moreover since the
customers could easily order online and check out with no major delays and scanning
Process, convenience, easy pick up of the packets along with the friendly mobile application
availability reflect value creation for the consumers. The company has been able to capture
value from the customer, however it can be said that the complaint has also been registered
by the company which Reflect difficulty for the company to gain optimised value from the
customer satisfaction (Dewald & Osiyevskyy, 2015).
Sustainable and profitable growth
Considering the sustainability and profitable growth, this is analysed to be not fully
achieved by Freshippo business model. This could be said as the upcoming challenges from
the case that has been analysed our need for opting aggressive changes by the company as the
company is looking forward to expand the stores to 2000. Moreover the case also reflected
continuous complaints from the existing Freshippo stores. In order the company to be
sustainable and gain growth within the industry, need to consider solution for the complaints
that have been identified through transformed or joint stores. This reflects the strategies to
keep the brand competitive and increase the management while expanding the Freshippo
stores (Nyberg, Dentchev, & Van Hoof, 2016).

Entrepreneurship 7
Decision making for convenience store, cloud supermarket, and the
Hexiaoma store
After analysing the three stores it can be said that decision-making pertaining to these
three business model in place of Yi, I won’t have continue to build regular Freshippo store
along with Freshippo cloud supermarket and do not continue or created F2 convenience store
and Hexiaoma store. The reason for this decision is use of online cloud supermarket while
improving the business model would have been used for large variety of goods to be offered
to the customer as this will also align with Alibaba business model which was traditionally
used and the Freshippo regular store pulled reflect the use of large area to offer dining food
along with the supermarket facility to purchase fresh. Moreover the analysis reflect various
disadvantage to continue other two stores that is convenient store which reflect provision of
breakfast, Tea and similar products which may decrease the profitability of the company by
increasing the investment in the convenience store. Other than this Hexiaoma Store also
reflected various disadvantages and does not seem to be a good decision to continue as
management of the three or four model all together could be more difficult for the store
(Chesbrough, Tucci, & Piller, 2014).
Management of four different business models
For management of four business model as discussed previously, various steps to be
taken so as to make it sustain in future. The steps may include technological advancement,
which reflect use of advanced technology in order to make the delivery more optimised, more
inclined activities to be performed within the organisation, and increase the efficiency in
order to deliver the product with reduce time span (Saebi & Foss, 2015). Other than this
controlling is one of the major activity that is to be performed in order to better manage these
for business model. This include one of the management process as continuous complaints

Entrepreneurship 8
have been identified for the company as this was initiated with a hit and trial method which is
one of the major problem that needs to be controlled. Through the controlling process each
activity or operation within the business model is being standardised, for which the actual
performance is being measured and compared. This result into deviation is found within the
operation model. Therefore corrective actions could be taken while using such controlling
measures; this will eventually help to reduce the complaints from the customers (Brunes &
By, 2012).
Considering the decision for taken into account the first mover advantage with 46
stores within 2 year, I would consider taking the risk, however with more managed manner
and partnership. This may increase the risk for the company but higher the risk, the profits are
higher too. Moreover, it is important not offer time to other brands to imitate the business
model, thus important to take the advantage of opportunity from first mover advantage
(Liedtka & Ogilivie, 2011).

Entrepreneurship 9
Recommendations
There have been various positive that is value added activities considered by the
Freshippo business model, however there have been identified various problems as well. For
the problem is analysed previously, some of the major recommendations that are made for the
brand include
Operationalizing the brand
It is important for the brand to deliver the promise through its business model and
operations effectively so as to make the complex activities behind the business model and
reflect affective, convenient and simple shopping experience for consumers. It is important
for the company to manage their brand that is Freshippo considering the business system.
Other than this it is recommended for the company to create required operational capabilities
which it lacks at. Like increase delivery efficiency as the company limits the delivery per
day, which needs to be increased so as to optimally utilise the stores (forbes, 2019).
Partners to expand
One of the major problems identified is the major customer complaints at the time of
expansion by the company, which reflects that the management issues have been identified.
For this it is recommended to the company to search for new partners so as to increase the
number of stores and expand within the China. This may reflect partnering with retailers
which will also work towards new retail model. This could be Xingli or sanjiang as
recommended partners to be expansion considered by the company. This will not only
collaborate with the partners in future but also enhance the shopping experience for
customers through better management activities performed by integrated partnership and
management team (alizila, 2020).

Entrepreneurship 10
Automation
The only way to enhance or maximise the efficiency is use of automation across the
whole business model. The company is popular for its technological development, by
innovating and advancing the technology the company could have worked in more automated
way within the warehouses, delivery process, and processing way. Therefore it can be said
that through automated technology, the company could have gained more efficient shopping
experience for the consumers, which will transform the complete digital age for the
consumers (Birasnav, 2014). For this the company could have used delivery of the product at
door with different warehouse then that of delivery of Omni channel that this order online
and pick up from store and the off-line traditional way for the customer to enjoy dining
facility within the store from different store. These will integrate creation of operation of
large grocery store along with other warehouses from where direct delivery could be offered
to the customer (Ahlin, 2014).

Entrepreneurship 11
Conclusion
For concluding the Freshippo business model evolution analysis, some of the
concluding points include development of new format that is inclusive of convenience store,
Micro fulfilment stations and supermarkets. Alibaba gain opportunity to reach major portion
in China the company has considered new retail powered supermarket considering various
experimental store formats that is said to be Freshippo; initiated in Shanghai in 2016.
However with the new business model have various problems identified that includes
management issues at store, long waiting time in preparation of food and poor service that
has been made in the complaint by the consumers. Considering the business model it
includes integration of online as well as off-line services. The dining area to offer services of
line along with the online ordering facility which reflect preparation of the orders prior to the
entry of customers whereas the customer could pick up the order or Dine in the store.
However when it comes to efficiency, it was majorly criticised by consumers for long
waiting time. Value created for the customers includes all in one experience for the
consumers that is to offer supermarket as well as dining experience for the consumers. For
management of four business model, steps may include technological advancement and
controlling. The reason being, this was initiated with a hit and trial method which is one of
the major problem that needs to be controlled. Some of the major recommendations that are
made for the brand include operationalizing the brand, partners to expand, and automation.

Entrepreneurship 12
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