Thank you for writing this interesting post about Caviar; I’ve heard a lot about the company yet had little understanding of it. I am a bit surprised by the high cost of ordering this service with a 20% markup plus service and delivery fees. That seems like a hefty price, and I wonder who, exactly, their core customers are. Perhaps they should target the corporate segment, as I could envision this service being of value to companies hosting clients for meetings – rather than going to a nice (but busy and loud) restaurant, they can conduct more effective meetings in-house with better food.
I am also curious how they intend to maintain a steady cache of couriers, as they are competing with all other on-demand service providers for this pool of independent contractors. Why would someone deliver for Caviar rather than drive for Uber, Lyft, or Postmates? If they intend to scale and keep growing at rates even close to their current growth rate, this will be an important answer to get right.
I am very interested in how all of these types of platforms grow in the next few years and, in the case of Caviar, whether their promise to deliver from the best local restaurants continues to appeal to both customers and restaurants. After all, this model requires restaurants to change their operating models, as they will have to adapt their processes to accommodate the demands of a take-out restaurant. I think Caviar’s future success will depend upon its ability to help these restaurants make this transition.
What a relevant, creative, and well-researched post. I love how you focused on a simple concept and used it to illuminate many of the concepts we have learned this semester. I imagine that the margins of a car-wash are quite low, and I was struck by Shield’s inability to harmonize human and technological processes. In an effort to serve multiple customers segments, it looks like they serve none of them well. Their self-service vacuum operation seems particularly inefficient, and I am surprised that they still provide this service.
The customer’s expectation for amenities is quite low for a car wash, and I could envision a new entrant focusing on redefining a customer’s expectation for what a car wash experience should be. I imagine that most people view car washes simply as an errand, but I wonder if people would be willing to spend more time at one if it partnered with coffee shops (Starbucks or local vendors) to offer more than what is currently (and historically) offered. If Shield’s wants to take advantage of its wasted real-estate, it should focus on forming partnerships with coffee shops or other trusted and local quick-serve restaurants to revitalize the car-wash experience.
With a business model predicated on delivering on the “wow” factor of a guest’s overall experience, it seems that Wynn is not only constant pressure to build new properties, but to constantly update its existing ones. The world of gambling is always evolving, as each hotel/casino aims to out-do the innovations of its competitors. The lifespan of a new design or service is short-lived and susceptible to repetition by competitors. That being said, I wonder how Wynn updates its existing hotels (either its design or customer experience) to an extent that is sufficient to stay cutting-edge while simultaneuosly providing the consumer with a predictable and consistent experience. Keeping up in this industry requires Wynn to be flexible both with how its employees adapt to changes and how it is able to modernize its facilities without sacrificing the quality of a given customer’s experience. Elaborate light displays, fountain shows, and entertainment seem to be the minimum requirements to entry in this business, and its operating model’s ability to keep pace with change is the real differentiator.
I agree with the concerns Carolyn raised in her above post. The purchase of a diamond is an inherently high-involvement purchase that is dependent on a deep sense of trust with the seller. I think their long-term viability depends on the strength of their contracts with their numerous supplier and their ability to oversee them. It seems as if these contracts are too good to be true, and I wonder if shorter term contracts would better incentivize supplier to consistently deliver on quality. It also seems as if suppliers are motivated by selling a large number of diamonds, whereas Blue Nile is more dependent on their customers’ perception of quality. This potential misalignment could prove costly to Blue Nile unless it is able to appropriately manage its supply chain.
Furthermore, repeat business is important to jewelers, as the jeweler’s ability to serve their customers throughout their lifetimes results in consistent and predictable future business. Oftentimes, the sale of a diamond is the hook to a lifetime relationship and is not simply viewed as a one-time purchase. I fear that Blue Nile’s operating model is not designed to forge this type of relationship.
Thanks for the interesting post, Steve!
I certainly think this is an interesting business model and applaud the founders for finding and serving a niche that is underserved by large, established players in a crowded industry. I agree that vertical integration drives their business and that this is its competitive advantage over the competition.
However, I wonder if their fit calculator and video chat with customer service representatives are enough to satisfy their customers’ expectation for service. Their operating model certainly seems to serve their business model in allowing them to provide a low-cost alternative, but I think they may have underestimated the need for in-person service. Proper fit is important to the overall look of a suit (more so than it is for the look of more casual clothing like Bonobos offers), and I am skeptical that they will be able to sufficiently serve their customers without adapting an operating model similar to that of Bonobos which leans on the uniqueness of its free standing stores and personalized attention. This may be an efficient solution for someone’s first suit purchase, but once these consumers obtain more disposable income and rise in their careers, I wonder how hard it will be able to retain them.
I read this with my fiancee, who is a kindergarten and special education teacher at Brooke East Boston. We both loved reading it and are honored that you wrote about Brooke. My fiancee echoes so many of the sentiments that you discussed and believes that the professional development and support she receives on a daily basis is monumental to teacher performance and student outcomes. The environment is relentlessly positive and is one in which both teachers and students are constantly growing and learning.
In response to the post above, charter schools do not pick and choose their students. When demand for spots in the schools exceed supply (which is the case at Brooke), students are placed and admitted through a lottery system. The Massachusetts law regarding the lottery system can be found at https://malegislature.gov/Laws/GeneralLaws/PartI/TitleXII/Chapter71/Section89.
Having done my TOM Challenge on BBW as well (!), I appreciate your focus on the larger macro issues that they face as a company and how correlated their future success or failure will be with that of shopping malls. I think you are right to question their reliance on physical space (lots of it) in locations that are becoming less and less a part of the American (and global) cultural fabric.
Supposing that they do build their online platform further, do you see bearville.com as a suitable bridge to the digital world, or is it just a gimmick / last-ditch effort to keep up with the times?
Great post! I think they are a success and admire their quest to make the clothing shopping experience more palatable to millennial men. A beer upon arrival certainly supports the business model of creating a painless and stress-free shopping experience. I have never been to a Bonobos guideshop myself, but it seems like they have created a strong set of policies and employee training regimen to make the customer feel comfortable doing something he is inherently uncomfortable doing.
I wonder, however, what supports the tenet of customer convenience more: the guideshops or the hassle-free shipping and return policies. Prime retail space is paramount to offering convenience, and although the smaller stores reduce their rent expenses, it seems like their need to be centrally located in their target customers’ neighborhoods could come at a significant cost. If it turns out that the guideshop experience is the true driver of consumer satisfaction (more so than fit or convenient shipping policies), it could prove to be quite expensive. That being said, I appreciate their creativity and ability to formulate an operating model that closely supports their business model.
Thank you for such a well-written and informative post. I’m amazed by Ferarri’s ability to seamlessly evolve its unique and timeless design with advances in technology and engineering. Ferrari truly is a model for blending art and science, and its EBITDA margin compared to the industry is truly impressive.
My concern for the company, however, is whether it is too reliant on remaining a niche, ultra high-end luxury product and if this business model can grow and evolve with the millennial generation. Ferrari will always have a cult following in pockets around the globe, but I wonder if it will be able to adapt if the extremely wealthy in emerging economies like China and the Middle East do not prove to be sticky customers. Ferrari is certainly a status symbol, but among our generation, I wonder how many people care.
I am curious to what degree Air India’s future success depends on Prime Minister Modi’s ability to deliver on his promises of economic reform. I recently read an article by Shikhia Almia on Time.com (“5 promises Narendra Modi Must Break” http://time.com/105151/narendra-modi-india-economy/) which claims that “more than 20% of India’s economy consists of poorly run, federally owned companies. About one-third of them operate on a loss, and the rest return profits of less than 1% annually.” It certainly seems as if Air India is more representative of the economy than it is an exception. I suspect that Air India may be subject to future calls to privatize, if it hasn’t been already. If this proves to be the case in order for Modi to deliver on his promise, I wonder if this will be a boon or a burden to Air India’s operating model. I imagine that it will have difficulty adapting, as the company does not appear to have a great deal of flexibility built into its operating model, as loosely defined as it currently seems to be. However, with capable leadership, this company seems ripe for improvement. New leadership would need to first define what it’s customer promise will be, as it can’t try to be everything to everybody as its recent history suggests it has tried to be.
Thank you for writing this – it presents a very interesting problem and business situation!
I had no idea that RTR is the largest dry-cleaner in the United States, in fact, I had never thought of it as a dry-cleaning company at all. However, like you alluded to, it is as much a cleaning service as it is a clothing rental business. Looking at the company through this lens, it becomes apparent that its ability to scale is a function of its internal processes’ ability to fluidly adapt to increasing inventory. RTR’s customers demand that they receive their dresses quickly and in pristine condition. If RTR tries to grow too fast and sacrifices quality, its reputation will suffer. This also makes it even more important to have a strong and proactive customer service department to pacify customers if / when their dresses arrive in less-than-ideal condition. While I imagine the the dry-cleaning defect rate is low, I also imagine that this is a metric which they track closely, as their brand image depends on delivering a high quality product on sometimes short notice.