Basmati House Supermart: Co-Operative Competition with an E-Retail Channel
In July 2019, the owner of Basmati House Supermart (BHS), a grocery store, entered into a six-month agreement to become a partner outlet of a large online grocery retailer in India. During the first two months, BHS acquired many new customers and also increased its customers' monthly purchase. However, the steep discounts and promotions used to attract customers to the business drove down the margins, while the customer churn rate increased. The store owner was particularly concerned about the continued use of discounts to attract new consumers, which could potentially transform his own loyal customer base into deal-seeking, less loyal, and online-promotion-driven buyers, thereby leaving BHS terminally dependent on the large online retailer to maintain its sales. The owner wondered whether he should renew his contract with the online retailer in January 2020, and if he did not, what his best course of action would be. Jaydeep Mukherjee is affiliated with Management Development Institute.