Dave Honcoop

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Picinc is an online grocery shopping app that was launched last year. The company aims to disrupt the egrocery industry, which is largely domintated by Albert Heijn. This industry generated an annual revenue of €450 million and grew by 55% last year. Impressive numbers, to say the least. As of know, Picnic is online in six cities, including Utrecht and Almere. Should their competitors start worrying about this newcomer or is the country not ready yet to fully embrace online grocery shopping?

Let’s take a look at Picnic’s business model. The company offers all kinds of groceries on its online platform and claims to be the cheapest player in the industry, despite free home delivery. In order to achieve this, Picnic minimizes its costs by not having any physical supermarktets and using only one distribution centre in Nijkerk. Picnic only orders the products once the customers have actually bought them online, thereby preventing costly inventory. The company then uses electric vans to deliver the orders to its customers at a time that is convenient for them. Simultaneously, and this is also one of its main selling points, the food is very fresh because it spends no more than one day in the supply chain of Picnic.

On the other hand, Picnic is also dedicated to (benefiting from) the customer experience. The app suggests previously ordered products to customers, enables them to schedule standard deliveries a few times a week and provides real-time delivery updates. If something goes wrong, the customer is always right and will be compensated for it. The data that customers produce while shopping, can be used by Picnic to improve its product line and attract more customers to its app.

However, Picnic has a relatively small product range compared to its large competitors, while 53% of consumers actually value a larger product range when they pick a supermarket. Therefore, Picnic is not yet causing trouble for companies like Albert Heijn and Jumbo, but its app seems to be where the future of shopping is going. I would say that we give Picnic a few years to establish itself all over the country and then we will see whether the company ends up being a threat to the current market leaders.

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A few months ago, Netflix celebrated an annual revenue record of $6.8 billion, which is almost six times more than in 2007. The company introduced its streaming service in that year and has seen its number of subscribers rise to more than 80 million. Its cable competitors, meanwhile, have lost 6.7 million subscribers over the last 5 years alone. How did this happen and is this growth (from Netflix’s perspective) actually sustainable?

Netflix started of as a DVD rental company in 1997, but transformed its business model into streaming media and video on demand online. One of the first series to appear on Netflix was Mad Men, which was produced and first broadcasted by cable company AMC. At the time, Netflix was the first to put an entire season online at once. Binge-watching was born.

However, in order to stand out from the crowd and reduce its dependency on other media giants, Netflix decided to produce its own exclusive series in 2012. The first experiment turned out to be a major success: House of Cards is actually one of the best-known modern series. After successfully producing shows like Narcos and Orange is the New Black, Netflix is currently spending $5 billion on content, which also includes media provided by its competitors.

Although Netflix might seem like a success story of its own, there is a downside to the company’s success. Netflix has a negative cash flow of almost $1 billion and regularly issues new debt to finance new content. Simultaneously, its profit margin is extremely thin, with an estimated 1.4% in the first quarter of this year.

The company’s competitors, such as Time Warner, Amazon and cable companies, have also woken up. They have seen Netflix dominate this market for too long and will try to leverage on their market size (with annual revenues up to $100 billion) to rip into the current market leader. They also see the potential risk the streaming service poses to their longtime business model, since so many people are switching from mainstream TV to on demand.

Now that these companies realize that Netflix is hurting their business, it might be time for payback. The networks and studios could charge higher fees for their shows and could potentially refuse to work with Netflix altogether. In the former case, Netflix will have to raise subscription prizes and hope the number of subscribers keeps growing. In the latter case, the company will have to focus more on original content, where upfront costs of more than 30$ billion for one show is not uncommon. Either way, these developments pose a real threat to the sustainability of Netflix’s business model. To be continued…

Picnic, the future of grocery shopping?

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Will Netflix survive its own popularity?

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