Chapter 7 Business Model IV Online Retailers 1
Chapter 7 Business Model IV: Online Retailers 1
What are Online Retailers? z. Online retailers are companies that (1)use a website to merchandise newly manufactured physical goods for which they take title, and then (2)rely on third -party service providers to deliver those goods from remote warehouses. 2
Categories of Online Retailers z By merchandising emphasis y. Horizontal online retailers y. Vertical online retailers z By pricing format y. Fixed pricing y. Group buying model yauction y. Deep discount model 3
Online Retailer’s Value Construction z Attributes of product categories well suited for web retailing y. Information-rich products y. Large selection y. Little need for hands-on services or product trial y. High value-to-weight ratio y. Easily customizable products y. Rapid changes in stock availability, demand, and/or price y. Replenishment driven y. Unpleasant brick-and-mortar retailing environment 4
Barriers to Online Shopping z. Security concern z. Lack of familiarity with the brands of some pure-play companies z. Unwilling to wait for home delivery z. Other general environmental factors 5
Different Types of Shoppers z. E-bivalent newbies z. Time-sensitive materialists z. Clicks and mortar z. Hooked, online, and single z. Hunter-gatherers z. Brand loyalists 6
Online Retailer’s Financial Model y. Revenue sources y. Cost structure x. Operational cost x. Distribution and customer service expenses y. Profitability 7
Online Retailer vs Brick-and. Mortar Stores z Brick-and-Mortar Stores z Online retailer y 10% revenue on rent y 14% on in-store labor for checkout, stocking shelves, etc. y 2% on advertising y 3% on general and administrative expenses y 3% revenue on developing and maintaining website y 12% on warehouses, customer services, etc. y 4% on advertising y 1% on general and administrative expenses 8
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