As a passionate Italian, proud of its culinary tradition, I have always been frustrated by the usual statement: “Italian firms are about quality not business scale”. Italy is one of the countries with the richest food variety in the world, still Italian firms seem unable to exploit this potential and the majority of large scale retail businesses are not Italian (e.g. McDonalds, Starbucks,..).
This article is about Eataly, an Italian firm in the food sector that has been an exception and that has combined high quality with scale. I would definitely consider Eataly as a winner firm thanks to its ability to align its business model with the operating model. As an example Forbes named Eataly as the 23rd most disruptive brand in the world in 2015 (VI).
What is Eataly and what is its Business Model?
Eataly (from eat + Italy = Eataly) is food marketplace where customers can eat food at restaurants, can shop high quality food and learn more about food through cooking classes. The key aspect of its business model is to offer customer an amazing Italian food experience while they eat at restaurants or shop or learn about food.
Eataly was founded by Oscar Farinetti in 2007 with a store in Turin. Today Eataly has more than 25 stores (of which 8 abroad) and generates 350M$ of revenues. Eataly plans to IPO the firm by 2017 and to reach 100 stores globally.
Eataly has big stores (e.g. the New York Eataly is over 50,000 square feet,..) where customers are immersed in a unique food experience. (III)
Which are the key success factors of Eataly operating model?
There are several aspects of its operational model that have helped Eataly gain a dominant position while several competitors have been forced to close.
1) Store concept: big bazaar and innovative layout
Eataly aims at providing to customer an amazing food experience. Deciding to build big and expensive bazaar in the centre of cities was definitely a risky move but it turned out to be one of the winning factors of Eataly operating model.
Eataly is not the traditional restaurant nor traditional grocery store nor traditional place where to learn about food. It is a combination of the three that provides an overwhelming and fascinating food experience to the customers. The customer is offered the opportunity to try new dishes at the restaurant, to buy ingredients of the food they ate (the stores are appropriately located next to each restaurant) and then to take also cooking classes. (IV)
The presence of big stores and the way they are designed to immerse the customers in a unique food experience through small-stores and restaurants is a key element of Eataly operating model.
2) Choice of business partners
Farinetti’s choice of partners has been instrumental for Eataly success.
For instance, when Farinetti set up his firm he partnered with Coop (a cooperative of consumers’ cooperatives operating the largest supermarket chain in Italy) that still own 40% of Eataly. Coop was a strategic partner since it allowed Eataly to quickly sign partnership with several high quality suppliers which are very important to offer customers a great food experience. (I)
In addition, also internationally, Eataly has relied on important partners that allowed the firm to enter quickly in the market, to know better customers and to sign partnerships with other key stakeholders/suppliers. For example, when it opened in New York Eataly partnered with Bataly hospitality group that has strong connection in the food scene in NY. (III)
Choosing experienced and well selected partners has allowed Eataly to establish quickly in the market, to sign important partnerships with suppliers and consequently to offer clients a top class food experience in line with Eataly business model.
3) Excellent relationship with suppliers and internal restaurants
Since the inception Eataly has been able to establish excellent relationships with key Italian and also international suppliers. Suppliers are offered the opportunity to scale globally and Eataly the opportunity to offer customers an amazing food experience.
Eataly often has flexible payment terms with suppliers (e.g. sometimes they are paid in advance) allowing suppliers to make the needed investments to produce top quality food. (II)
In addition, also as it relates to restaurants, Eataly has been able to sign important partnerships with several Italian restaurant chains. Eataly offers several retailers the opportunity not to have to pay for rent in the store as long as there is a 40-50% profit sharing (VII).
The excellent relationship of Eataly with its suppliers is a distinctive aspect of its operational model. It allows Eataly to provide customers the best food experience thanks to top quality suppliers.
4) Adaptation of each store
No Eataly store in the world is the same. Eataly has been very keen to customize each store, especially abroad, based on customers’ feedbacks. For instance, also the two current US stores in Chicago and New York are different in their menus. (V)
Eataly ability to adapt to local needs, to be receptive to customer feedback and learn from it, is an important aspect of its operational model that helps the firm provide a great customer experience.
Eataly’s ability to promote the Italian food through an innovative operative model has been a key driver of its current and, hopefully, glittering future success.
Last but not least: Eataly is coming to Boston in 2016!!
(VII) Customer interviews