Occasionally, I hear executives saying that their business is complex because they operate a two-sided market. They mean that the business’s growth strategy is to drive value by bringing together two different customer groups, or a customer group and supplier group. The two-sided market approach is typically focused on technology-driven organizations. But it doesn’t have to be. Read on for a growth strategy case study in the non-technical world of convenience stores.
Growth Strategy Case Study: Airbnb, Uber and More
One growth strategy case study for a two-sided market is Airbnb, where the end customer group is the traveler who rents the space, and the provider customer (or supplier) is the owner or lessor of the space. Another growth strategy case study is Uber or Lyft, where the end customer group is the rider, and the provider customer (or supplier) is the driver.
In addition to Uber and Airbnb, Sequoia Capital gives additional growth strategy case study examples of two-sided marketplace providers including Amazon, YouTube, Netflix, WhatsApp, Facebook, iPhone, American Express, PayPal, eBay, and Facebook. In Los Angeles, fitdog brings together dog parent end customers (and their dogs) with provider partner trainers for skill and enrichment, e.g., agility, scent work, foundational obedience, beach excursion, or canyon hike. According to Sequoia,
“Surfacing relevant content via feed ranking or suggested content is a key driver of engagement in any consumer system.”
Growth Strategy Case Study: Convenience Store Fresh Prepared Foods
While, undoubtedly, online content strategy is helpful, in the case of convenience store prepared foods, we worked with a different two-sided market to drive growth.
For purposes of this exploration, we are focusing on fresh prepared foods in the convenience store. Popular convenience store fresh prepared foods categories are:
- pizza (38%)
- fresh baked goods (30%)
- breakfast sandwiches/wraps (30%)
- hot dogs (29%)
- cold sandwiches/wraps (26%)
The two different groups in this two-sided market include:
- End customers of convenience store hot prepared foods, who typically eat these foods immediately after purchasing or within an hour.
- Convenience store operators and their employees who work in the store, who provide the hot prepared foods. While there are many different types of operators, and chains are important, a pop culture example of an independent operator is Mr. Kim of Kim’s Convenience.
The primary focus was to create an innovation growth strategy for food products that would meet the needs of both of these customer sets.
End Customer Segmentation for Growth Strategy Case Study: End Customer Side #1
A foundational step was to create a robust end customer segmentation with an innovation matrix. This required moving beyond the industry-generalized definition of “Bubba” to identify three target groups and the specific need states that were most relevant:
- Morning start
- Better for you
Getting to these robust insights included both qualitative, in-depth interviews and a quantitative segmentation of over 1500 consumers.
Convenience Store Operator Segmentation for Growth Strategy Case Study: Customer/Provider Side #2
Equally important to success in innovation was to understand the needs of convenience store operators. Some convenience store operators like WaWa and Sheetz have extensive fresh prepared food offerings and a large amount of space dedicated to preparation. Others have more limited space and capabilities to deliver fresh prepared foods.
As of January 2021, there are approximately 150,000 convenience stores in the US, and that number is down 1.6% from over 152,000 at the end of 2019. Single-store operators make up 61% of the total number, and have been declining more rapidly by 3.1%. For market leader 7-Eleven, over 7600 franchise/licensed stores make up the majority of total stores. By comparison, WaWa and Sheetz each have 100% company-owned stores, numbering 897 and 604, respectively. Developing products that work for franchise or licensed operations and/or independent operators requires the buy in of this important part of the convenience store fresh prepared food two-sided market.
To understand the needs, we completed surveyed over 500 convenience store operators. We brought together these findings, along with the end customer findings at an Operator Roundtable meeting in Chicago. The Operator Roundtable included innovation leaders from 7-Eleven, Kwik Trip, Stop n Go, Rotten Robbie, Village Pantry and others. Coming out of this meeting, there was alignment to drive innovation and new products around the consumer segments and their unmet needs.
While there might be a tendency to think only of technology or content products for a two-sided growth strategy case study, we believe there are many other examples. At a minimum, exploring the two-sided market can be helpful for fresh thinking on your organization’s growth strategy.