View
223
Download
1
Category
Tags:
Preview:
Citation preview
Copyright © 2004 Pearson Education, Inc. Slide 10-1
E-commerce
Kenneth C. Laudon
Carol Guercio Traver
business. technology. society.Second Edition
Copyright © 2004 Pearson Education, Inc. Slide 10-3
Learning Objectives
Identify the major features of the retail sector Describe the vision of online retailing in the
E-commerce I period Explain how to analyze the economic viability
of an online firm Identify the challenges faced by the different
types of online retailers
Copyright © 2004 Pearson Education, Inc. Slide 10-4
Wal-Mart Moves Online Wal-Mart the world’s largest retailer, but its performance on
Web does not yet match its offline results Wal-Mart story mirrors much of the overall online retail picture
– learning from trial and error Web site originally launched 1995; redesigned several times
since them Today, operations much more deeply integrated with stores Online merchandise compliments rather than duplicates what
is in stores Wal-Mart’s advantages include strong brand name, efficient
retailing distribution system, loyal customer base Competition includes JCPenney, Target, Sears, Amazon
Copyright © 2004 Pearson Education, Inc. Slide 10-6
The Retail Sector Most important theme in online retailing is effort to
integrate online and offline operations U.S. retail market accounts for about $7 trillion of total
GDP (2/3rds of all economic activity) Retail industry can be divided in segments, each of
which offers opportunities for online retail Biggest opportunities for online retail sales: Those
segments that sell small ticket items (specialty stores, general merchandisers, mail-order catalogs, groceries)
Mail order/telephone order (MOTO) sector most similar to online retail sector
Copyright © 2004 Pearson Education, Inc. Slide 10-7
Seven Major Trends in Online Retail 2003-2004Table 10.1, Page 575
Copyright © 2004 Pearson Education, Inc. Slide 10-8
Sources of Gross Domestic Product in the United StatesFigure 10.1, Page 575
Copyright © 2004 Pearson Education, Inc. Slide 10-9
Composition of the U.S. Retail IndustryFigure 10.2, Page 576
Copyright © 2004 Pearson Education, Inc. Slide 10-10
The Top 10 General MerchandisersTable 10.2, Page 577
Copyright © 2004 Pearson Education, Inc. Slide 10-12
Online Retailing: The E-commerce I Vision
Greatly reduced search costs on the Internet would encourage consumers to abandon traditional marketplaces in order to find lower prices for goods
Market entry costs would be much lower than those for physical storefronts, and online merchants would be more efficient than offline competitors
Traditional offline physical store merchants would be forced out of business
Some industries would become disintermediated as manufacturers built direct relationship with consumer
Ultimately, few of the above assumptions proved to be correct, and structure of retail marketplace in the U.S. has not be revolutionized
Copyright © 2004 Pearson Education, Inc. Slide 10-13
E-commerce II: The Online Retail Sector Today
Online retailing segment, although smallest segment of retail industry, is growing at exceptionally fast rate
Market size: $95-$100 billion, 75 million consumers estimated for 2003
Primary beneficiaries of growing consumer support: Established offline retailers with an online presence
Copyright © 2004 Pearson Education, Inc. Slide 10-14
Online Retail is Alive and WellFigure 10.3, Page 580
Copyright © 2004 Pearson Education, Inc. Slide 10-15
Top 15 Shopping Designations, Week Ending Dec. 12, 2002Table 10.4, Page 581
Copyright © 2004 Pearson Education, Inc. Slide 10-16
Online Retail Market Product Penetration Rate (%)Table 10.5, Page 582
Copyright © 2004 Pearson Education, Inc. Slide 10-17
Insight on Business: eVineyard.com Is a Survivor: Merlot by Mail Anyone?
eVineyard one of surviving wine retailers; acquired Wine.com/Virtual Vineyard in 2001
Now known as Wine.com Successful in part because it went got state retail
liquor licenses that allowed it to sell directly to consumers (most other competitors had not, and had to sell through intermediaries)
However, changes in laws may open up national wine marketplace to more competitors
Copyright © 2004 Pearson Education, Inc. Slide 10-18
Analyzing the Viability of Online Firms Strategic analysis of economic viability of a firm focuses on both industry as a
whole and firm Key industry strategic factors:
Barriers to entry Power of suppliers Power of customers Existence of substitute products Industry value chain Nature of intra-industry competition
Strategic factors that pertain to firm include: Firm value chain Core competencies Synergies Technology Social and legal challenges
Copyright © 2004 Pearson Education, Inc. Slide 10-19
Analyzing the Viability of Online Firms (cont’d)
Financial analysis helps us understand how a firm is performing
Includes two main parts: Statement of Operations and Balance Sheet
Statement of Operations: Tells us how much income or loss a firm is achieving based on current sales and costs
Balance sheet: Provides a financial snapshot of a company’s assets and liabilities
Copyright © 2004 Pearson Education, Inc. Slide 10-20
Analyzing the Viability of Online Firms (cont’d) Factors to look for when assessing Statements of Operations
Revenues: growing and at what rate? Cost of sales: compared to revenues Gross margin (gross profit divided by net sales): increasing or
decreasing? Operating expenses: What are they; increasing or decreasing? Net margin (net income or loss divided by net sales or revenue):
increasing or decreasing? Factors to look for when assessing a Balance Sheet:
Current assets Current liabilities Ratio of current assets to liabilities Long-term debt
Copyright © 2004 Pearson Education, Inc. Slide 10-21
E-commerce in Action: E-tailing Business Models
Four main types of online retail business models: Virtual merchant (Amazon, etc): Single channel Web firm
that generates almost all its revenue from online sales Clicks and bricks (JCPenney, etc): Company that has a
network of physical stores as primary retail channel, but also online offerings
Catalog merchant (Lillian Vernon, etc): Established company that has a national offline catalog operation as its largest retail channel, but also has online capability
Manufacturer direct (Dell, etc): Single or multi-channel manufacturers who sell directly online to consumers without intervention of retailers
Copyright © 2004 Pearson Education, Inc. Slide 10-22
E-commerce in Action: Amazon.com Vision: Earth’s biggest selection,most customer-
centric Business Model: Virtual merchant that sells
merchandise owned by Amazon, online storefronts for other merchants, merchandise owned by individuals; e-commerce services,
Financial Analysis: Greatly improved overall operational position, but not yet consistently profitable
Copyright © 2004 Pearson Education, Inc. Slide 10-23
Amazon’s Consolidated Statements of Operations and Summary Balance Sheet Data 1998-2002Table 10.6,
Page 591
Copyright © 2004 Pearson Education, Inc. Slide 10-24
E-commerce in Action: Amazon.com Strategic Analysis – Business strategy: Maximize
revenue while cutting costs Strategic Analysis – Competition: General
merchandisers who are both offline and/or online Strategic Analysis – Technology: Largest,most
sophisticated collection of online retailing technologies available
Strategic Analysis – Social, Legal: Securities, anti-trust lawsuits
Future Prospects: Long-term profitability still uncertain
Copyright © 2004 Pearson Education, Inc. Slide 10-25
Insight on Society: Internet Taxation: The Tax Man is Coming
Internet Tax Freedom Act placed moratorium on e-commerce sales taxes until November 2003
State and local government, local businesses think this is unfair
Online retailers feel it is unreasonable for them to have to determine appropriate tax rate, and who should receive tax dollars
Movement to simplify and rationalize sales tax collection underway (National Governors Association Streamlined Sales Tax Project), but moving slowly
Some major online stores that also have physical stores have begun collecting taxes
Copyright © 2004 Pearson Education, Inc. Slide 10-26
E-commerce in Action: JCPenney.com
Vision: nationwide department stores and mail-order catalog
Business Model: Clicks and bricks multi-channel general merchandiser
Financial Analysis: Flat revenue growth,operating costs, 2003 net margin of 1.3%, ample current assets
Copyright © 2004 Pearson Education, Inc. Slide 10-27
JCPenney’s Consolidated Statements of Operations and Summary Balance Sheet Data 1999-2003Table 10.7,
Page 598
Copyright © 2004 Pearson Education, Inc. Slide 10-28
E-commerce in Action: JCPenney.com Strategic Analysis – Business Strategy: Move to
online retail a major strategy to shore up poorly performing catalog and store operations
Strategic Analysis – Competition: Traditional retail department stores; Amazon and Buy.com
Strategic Analysis – Technology: Leveraging existing systems to Web
Strategic Analysis – Social and Legal Challenges: Nothing material
Future Prospects: Experiencing rejuvenation of sorts from rapid growth of Web operation
Copyright © 2004 Pearson Education, Inc. Slide 10-29
E-commerce in Action: Lillian Vernon Vision: Reasonably priced products offered
by direct mail Business model: Catalog merchant with
online capability Financial Analysis: Financial performance has
been stagnant
Copyright © 2004 Pearson Education, Inc. Slide 10-30
Lillian Vernon’s Consolidated Statements of Operations and Summary Balance Sheet Data 1999-2003Table 10.8, Page 603
Copyright © 2004 Pearson Education, Inc. Slide 10-31
E-commerce in Action: Lillian Vernon Strategic Analysis – Business Strategy: Launch of
additional catalogs, new owners intend to focus on continued development of online channel
Strategic Analysis – Competition: Catalog retailers and companies such as Williams Sonoma, Crate and Barrel
Strategic Analysis – Technology: Newly redesigned and upgraded Web site
Strategic Analysis – Social and Legal Challenges: Class action lawsuit related to sale of company
Future Prospects: Return to profitability depends on redefining brand image toward younger audiences without losing loyal repeat customers
Copyright © 2004 Pearson Education, Inc. Slide 10-32
Distribution of Retail Sales by Type of Seller (or Company)Figure 10.4, Page 606
Copyright © 2004 Pearson Education, Inc. Slide 10-33
E-commerce in Action: Dell.com
Vision: Custom-build computers to eliminate middleman and more effectively meet needs of customers
Business Model: Manufacturer-direct, “produce on demand” (demand-pull)
Financial Analysis: Impressive revenue growth, high net margins
Copyright © 2004 Pearson Education, Inc. Slide 10-34
Dell Computer’s Consolidated Statement of Income and Summary Balance Sheet Data 1999-2003Table 10.9, Page 609
Copyright © 2004 Pearson Education, Inc. Slide 10-35
E-commerce in Action: Dell.com Strategic Analysis – Business Strategy: Attempting to
broaden offering beyond pure product sales, search for ways to diversify revenue streams
Strategic Analysis – Competition: Traditional computer retailers, corporate systems integrators and computer dealers
Strategic Analysis – Technology: Sophisticated management information systems
Strategic Analysis – Social and Legal Challenges: Nothing material
Future Prospects: Continued reliance on PC computing a long-term risk factor
Copyright © 2004 Pearson Education, Inc. Slide 10-36
Common Themes in E-commerce II Online Retailing
Online retail fastest growing channel, has fastest growing consumer base, growing penetration rate across many categories of goods
Since 2002, many online retail firms have begun to raise prices
Disintermediation has not occurred, and most manufacturers use Web primarily as an informational resource
Most significant online growth has been that of offline giants who are focusing on extending brand to online channel
Copyright © 2004 Pearson Education, Inc. Slide 10-37
Insight on Technology: Predictive Modeling Builds on CRM
Predictive modeling software: Can be used to study and recognize patterns and trends in data, to help forecast sales, identify market opportunities and manage retail inventory levels
Example: CVS.com
Copyright © 2004 Pearson Education, Inc. Slide 10-38
Case Study: L.L. Bean Webward Bound
L.L. Bean: catalog retailer that is beginning to focus more intently on Web channel
Biggest challenge: Integrating its catalog, Internet and physical store channels
Web site introduced in 1995, revamped in 1996, gets high marks for usability
Recommended