Eataly 1. Would you invest in Eataly?
Eataly’s successful integration of eating, shopping and learning has achieved great rewards, its 50,000-square-foot Madison Square Park location, is does approximately $85 million in annual revenue. It’s even larger counterpart in Chicago, which opened in late 2013, was on pace to hit $50 million last year (Carr, 2015). Eataly opened its New York store in 2010 with an initial investment of $20 million, by 2012 investors had recouped their initial investment (Collins, 2012). In 2012 Eataly accounted for about a third of Batali & Bastianich Hospitality Group, $250 million annual revenues (Collins, 2015).
Eataly opened its first store in 2007, in a highly competitive, low-margin industry, and within seven years it expanded to 27 locations around the world. Eataly specializes in providing its guests with deep culturally rooted experiences related to food consumption. Exhibit 3 shows a constant increase in revenues and profits for Eataly from 635,000 euros in 2009 to 3,370,000 in 2013. Eataly follows a quality imperative strategy by ensuring a great relationship with its suppliers which allows Eataly to provide the best food experience due to top quality products (Bello, 2015).
Readiness to pay for variety, customization, customer service, and unique experiences has increased greatly due to the social media epidemic. Eataly capitalizes on this by offering a multi-outlet where guests go to the marketplace for more than just a meal (Edwards, 2015). Eataly is a museum of Italian food that allows guests to taste, smell, learn and buy. It’s an experience, one that guests are willing to pay for (Edwards, 2015). Eataly is properly managing their financial, social and environmental risks, obligations and opportunities by being very detailed oriented when it comes to every aspect of its operations (Exhibit 3). All of the aforementioned are reasons I would be more than willing to invest in Eataly. 2. What is Eataly’s value proposition? How did it create this?
Eataly follows a more differentiation strategy by distinguishing its products on dimensions such as product design and quality (Bello, 2015). Oscar Farinetti, the founder, helped Batali & Bastianich Hospitality Group use related diversification corporate level strategy to effectively drive alignment between Eataly’s business and operating models (Bello, 2015). Eataly is not the traditional restaurant, grocery store, nor place to learn about food. It is a combination of the three and provides amazing and alluring food experience to guests. The coordination of these departments creates a synergy that allows Eataly to gain greater value than the value that would be created if each department operated separately (Bello, 2015).
The retail industry is redefining business formulas to maximize opportunities of interaction with consumers by developing service solutions to support value creation processes (Montagnini, 2009). Eataly represents an innovative, brand-new retail formula in the Italian food market, bridging retail and consumer education concepts to enhance guests value experience (Montagnini, 2009). Eataly’s business model is an attractive value proposition that has proven to be innovative and successful. This model is greatly executed by utilizing enormous spaces in high-traffic areas, which helps fulfil Eataly’s three tenants: eat, shop, learn (Edwards, 2015).
Eataly USA is amenable to virtually any product that adheres to its core philosophy of good, clean and fair. Managers must first meet suppliers, and be presented with information about the vendor, his/her company and where the food is coming from (Ankeny, 2014). When choosing new locations, the quality of the building and its past history are the key factors affecting decision making (Nacamulli, 2013). The presence of big stores and the way they are designed to engage the guests in unique food experiences through small-stores and restaurants is the key element of Eataly’s operating model (Curtis, 2015).
Eataly’s employees are educated about the brand, the philosophy and the company’s preference for its guest, and servers are trained to use their product expertise to guide guests with their shopping experience (Terenzio, 2015). Eataly’s High-end ingredients and foodie culture helps being in Eataly feel special. Eataly customizes itself in each new city, by making it feel more like a destination, this could explain why 40% of Eataly’s guests in New York are tourists (Carr, 2015). 3. What are the economics of this business?
Eataly’s gross revenues for its first year was $70 million. The global grocery retail industry was estimated to be about $6 trillion in 2013. In the U.S., the industry had $650 billion in revenues in 2013, up from about $630 billion in 2012. Exhibit 3 in the case shows that Eataly’s liabilities drastically increase due to its accounts payable. An increase in supplier cost is due to an increase in demand, an increase in demand leads to more revenue for Eataly. Eataly helps its partners manage their growth. When the store’s demand outstrips partners’ capabilities, Eataly negotiates cash advances that enabled partners to provide local growers with the stock, storage facilities and related resources necessary, and in turn Eataly gets the raw materials it needs (Ankeny, 2014). This helps foster better relationships with suppliers which helps maintain or reduce cost and increase revenue.
Eataly butchers its own meat, animals are broken down in-house, creating less waste and saving on costs. It insource almost all of its own ingredients and food items, due to local availability and gets its produce from the best local produce vendors. Throughout the day, the produce vendor employees check produce and replace non fresh products or take produce to restaurant kitchens. Almost all of what is available for purchase has been out for less than 24 hours. Fish is purchased from local fishing boats, and imported from the Mediterranean. The high volume of fish ensures the freshness of the selections (Kravitz, 2015).
What draws Guests to Italy Eataly’s is its old-world Italy and Istanbul markets concept. One of Eataly’s competitors, Whole Foods, is struggling its stocks were one of the worst-performers of the S&P 500 in 2014.This was probably due to Whole Foods offering the same store experience regardless of location (Jennings, 2015). CEO Nicola Farinetti reportedly said: "Imagine if I tried to do a crazy event at Whole Foods. People would get mad, like, ‘I just came here to shop!' But because this is Eataly, I can do all this stupid stuff and people understand it." (Jennings, 2015).
Eataly focuses on keeping guests in the building by letting them explore stores, to shop or to consider dining at another one of its restaurants while they wait to be seated. Eataly has so many concepts under one roof, its staff can give Guests more options than traditional restaurants. Each restaurant is set up as its own profit center, but the ultimate goal is to keep these restaurants within Eataly and a little friendly competition is always welcomed (Terenzio, 2015). 4. What would you do if you were CEO to improve Eataly’s business?
In some reviews I read customers or guest, as Eataly prefers to call them, talked about how there we to many signs, some stretching to the ceiling. They said there were too many people, foodstuffs, and wordy labels with hard to read text. The labels and signs tell stories about the food, region the foods are made or originated in, people who prepare the food, the brands, and the commitment to quality and authenticity from those brands. These signs are supposed to help consumers educate themselves when purchasing products (Bicknell, 2011). But it doesn’t seem to be catching guest attention and increase their willingness to educate themselves on products. People also complained about the lack of seating outside of café and restaurant areas.
As CEO I would hire an exhibit developer, environmental graphic designer, or other exhibition design professionals. These professionals could figure out ways to get guest more interested in the signs and labels, because one of our motors is to make it possible for our guest to learn about all of our products. I would hire designers who would be able to incorporate seating in Eataly, without taking away the market feel.
As for the crowds I would work with my management team to figure out ways to have the crowd be more structured. For example, maybe assign directions for each isle, or maybe assign an isle for guest who already know what and how much product they want so they can be in an out in minutes. This could encourage people who are turned off by crowds to shop at Eataly more. I would also create greenhouses in close vicinity of each Eataly, not to cut out our suppliers, but to help with the produce shortages produce vendors have due to high demand. The greenhouse may even supply more of the produce we need, reducing the amount we need from suppliers, thus helping cut cost. 5. Can Eataly achieve its goal of becoming a global business?
Batali & Bastianich Hospitality Group operates 30 restaurants in the United States, Hong Kong and Singapore (Collins, 2012). Eataly utilizes strategies of total quality management to meet or exceed Guests’ expectations an continuously improve products and services (Bello, 2015). Since its inception Eataly has established excellent relationships with fundamental Italian and international suppliers. This gives suppliers the opportunity to scale globally and gives Eataly the opportunity to offer guests amazing quality food experiences (Curtis, 2015). Eataly is proving it self to be a national responsive, multi-domestic strategic company. Continuing this way may increase its overall cost structure, and increase the likelihood that its products and services will be responsive to local needs, therefore helping it be successful worldwide (Bello, 2015).
No Eataly store in the world is the same. Eataly has been effective with customizing each store, based on guests’ feedbacks. For instance stores in Chicago and New York are different in its menus. Eataly’s ability to adapt to local needs, and be receptive to guest feedback, is an important aspect of its operational model that helps it provide great guest experience (Curtis, 2015). Italian restaurants find their way into every international city because its culture and cuisine warrant attention. Eataly greatly advanced the Italian culinary experience through differentiating itself from restaurants and markets. It has elevated the concept of food retail (Carr, 2015).
Despite Eataly’s rapid expansion, it encounters challenges when trying to venture to certain parts of the world. Some countries have protectionism laws prohibiting the exportation of certain foods. Although Italian Trade Agency (Ice), an Italian government is helping companies move abroad, Oscar Farinetti thinks more needs to be done to support businesses trying to go global. He believes there should sectors in embassies that focus on helping businesses do well in international markets. Eataly is also trying to get the government to create a “Made in Italy” trademark to spread Italian excellence around the world. With the hopes that it educates people on Italy’s great quality which can lead to countries being more accepting of Italian businesses (Scammell, 2014). If Farinetti plans become a reality Eataly will be able to become a global sensation.

References
Ankeny, J. (2014, November 1). At Eataly, Local Suppliers Are the Key Ingredient. Entrepreneur. Retrieved February 21, 2016, from http://www.entrepreneur.com/article/238450
Bello, T. A. (2015). Comparative Management. New York City, NY: McGraw Hill.
Bicknell, J. (2011, Spring). Eataly: Retail on a Mission. Retrieved February 21, 2016, from http://name-aam.org/uploads/downloadables/EXH.spg_11/9 EXH_spg11_EatalyRetail on a Mission_Bicknell.pdf
Carr, A. (2105, September 2). Eataly is an Italian grocery. Fast Company. Retrieved February 21, 2016, from http://www.fastcompany.com/3039588/most-innovative-companies-2015/eataly
Collins, G. (2012, August 28). At Eataly, the Ovens and the Cash Registers Are Hot. The New York Times. Retrieved February 21, 2016, from http://www.nytimes.com/2012/08/29/dining/eataly-exceeds-revenue-predictions.html?_r=2
Curtis, M. D. (2015, December 5). Eataly: Life is too short not to eat well. Retrieved February 21, 2016, from https://rctom.hbs.org/submission/eataly-life-is-too-short-not-to-eat-well/
Edwards, L. (2015, December 5). Eat, Shop, and Learn: How Eataly Became a Cash Cow. Retrieved February 21, 2016, from https://rctom.hbs.org/submission/eat-shop-and-learn-how-eataly-became-a-cash-cow/
Jennings, R. (2015, February 20). Eataly Is Crushing the Fancy Grocery Store Competition. Retrieved February 21, 2016, from http://ny.racked.com/2015/2/20/8075117/why-grocery-stores-must-also-be-slash-something-else
Kravitz, M. (2015, August 5). Secrets of Eataly: Smuggled yeast, free wine and more. AM New York. Retrieved February 21, 2016, from http://www.amny.com/lifestyle/secrets-of-new-york/secrets-of-eataly-nyc-1.10667901
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Nacamulli, R. C. (2013, July). Demand –Side Approchaes to Value Creation in Technology Innovation, Entrepreneurship and Strategic Management. Retrieved February 21, 2016, from https://boa.unimib.it/retrieve/handle/10281/89654/131917/Nacamulli_Pini_Egos_Motreal_2013-Full_Paper.pdf
Scammell, R. (2014, December 5). We aim to bring Italian excellence to the world. The Local IT. Retrieved February 21, 2016, from http://www.thelocal.it/20141205/we-aim-to-bring-italian-excellence-to-the-world
Terenzio, O. (2016, February 11). Olivia Terenzio, Author at Open for Business. Retrieved February 23, 2016, from http://openforbusiness.opentable.com/author/oterenzio/