Bookalokal is a social dining platform that launched in Brussels in 2012. The initial concept: Connect travelers with locals through home-cooked, gourmet meals in people's homes. Prospective diners search through Bookalokal's online database of hosts, choose a favorite based on location and interests, and then reserve their spot. Hosts set the price of their meals, and Bookalokal earns a commission on each meal.
Soon after launching the site, however, Bookalokal's market expanded. It turns out that local diners—especially those new to a city—were also interested in exploring culinary events close to home. Today, 75 percent of diners use Bookalokal in their own city, while the remaining 25 percent use it abroad. From Brussels, Bookalokal has grown organically, now including thousands of users and 300-plus hosts in more than 20 countries. The company closed a seed funding round in November 2013, and launched its first official new market expansion into Washington, DC, in February—a city close in culinary and cultural equivalence to Brussels.
Bookalokal's cofounder and CEO Evelyne White (MBA 2010) offers this case study query to HBS alumni and faculty: "We've found that our business works very well in a particular kind of medium-sized city. And in those cities, we can invest in the market to bring it to saturation. But many would argue that we should tackle the biggest cities immediately, particularly given that competitors are investing in these large markets. The question for us is about next steps: Do we go deep in small and medium-sized markets where we know our product works well? Or go wide and try to cover more territory quickly, including the biggest major cities?"
Stay small and medium-sized for now. Early results are showing that the model is more local than expected and that it's working in small and medium markets. Getting to a strong brand awareness and consideration level will be cheaper and easier in these markets, which will be critical for local business. Since this is a global play, there is a lot of runway to fine-tune the model before tackling the more competitive cities that the traveler-oriented services are blanketing. Testing a few big markets periodically will help confirm whether the return is greater by sticking to small and medium in the near term.
—David Winslow (MBA 2006)
I'd recommend that Bookalokal continue to focus only on small and midsized cities. The company seems likely to confront winner-take-all competitive dynamics at the city level, because network effects are strong—more diners will attract more hosts, and vice versa—and because hosts will confront switching costs after they accumulate reputation-enhancing ratings on one platform. Compared to a small or midsized city, more entrants will vie for dominance in a large city. In a winner-take-all battle between five players, there's essentially a four-out-of-five chance of exiting the market after incurring a big loss. If instead Bookalokal can capture many midsized markets where it will confront fewer rivals, it will be in a strong position to eventually partner with big-city victors to create a shared platform that allows travelers from any city to dine with hosts in any city.
—Professor Tom Eisenmann
In short, you're a start-up with limited resources. Your product is intently geographical. Concentrate on markets large enough to become profitable where you have no competition so you can spend your energy running the business rather than fighting wars. If big cities fit those criteria, then by all means, go for it.
—Stever Robbins (MBA 1991)
I'd continue to work the size markets you already have a handle on, but I agree, you could/should start approaching the larger cities. Treat their various neighborhoods with the same savvy you've developed in the smaller markets and build your foothold from there. Use your demographics to target your neighborhood priorities in the bigger cities.
—Fox (MBA 1990)
Someone with deep pockets (Groupon?) is going to enter this space. It is a great idea, so go for the maximum impact. Try to do one large city that is close to you, that you can control and visit continually, then use that as a basis to go to additional large cities as fast as possible. Get investors and spend heavily.
—Ted Gutelius (MBA 1973)
Enter medium-sized markets first; they won't support as many businesses so now's the time. That builds a strong, profitable base. Nurture customer loyalty and raise barriers to entry. Larger markets will have multiple competitors for a while. It'll be easier to enter them than for those competitors to enter your well-protected, entry-barriered medium markets. Also, question whether it's necessary to have both. Larger markets with more competitors might be more cutthroat. Explore and stress-test business models that don't require world domination.
—Mark Chussil (MBA 1979)
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