Electronic Retailers Case Donavan W. Albert is a retailer\'s worst nightmare. Li
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Electronic Retailers Case
Donavan W. Albert is a retailer's worst nightmare. Like clockwork, the 28-year-old Boise, Idaho, resident used to go to J.C. Penney or Sears every three months and purchase $200 worth of Levi's casual outfits. But tired of the parking horrors at the mall, his most recent shopping trip took place via the Internet at Levis.com and sister site Dockers.com.
Levi Strauss does not allow retailers to sell its products online. So he went to the source. "They had basically every style pants I wanted, while a store might be out of a specific size or color," says Albert, a semiconductor executive. The cost, including shipping, was comparable to a store's. "I prefer to purchase directly from Levi's. I trust the company."
Excited by the opportunity to showcase their wares, forge direct links with consumers and, realize fatter profit margins, manufacturers are edging onto the Web - not just to promote their products but to sell them. Household names such as Timex, Clinique, Sony, General Electric and Ford are testing the waters or plotting Internet forays. Unlike Levi's, most are doing so carefully, fearful of alienating the retailers they rely on for most sales.
Some companies offer items not available in stores. Others go head-to-head with merchants, though they generally sell at list price so as not to undercut them. But manufacturers are expected to intensify their Internet efforts, and their online prices eventually will be more competitive, analysts say. "There's definitely tension between the camps," says analyst Kate Delhagen of Forrester Research.
Mattel, after reporting a $17.9 million quarterly loss, recently said it will beef up its much-maligned Web sites. After losing a projected $65 million on $60 million in sales in a year, its electronic commerce is expected to generate $200 million in revenue in 2000.
General Electric's financial services Web site is generating $1.5 million weekly and GE Chairman John Welch said in April that the Web will change the way GE sells everything, including appliances. Rival Whirlpool's chief financial officer, Ralph Hake, recently told analysts: "There will come a time when our products are sold directly over the Internet" at much lower costs. Whirlpool sees e-commerce as a natural in a future in which the company will monitor household appliances via the Internet.
Polaroid.com recently began selling its $199 ColorShot and PhotoMax digital photo printers along with other products such as scanners and digital cameras in coming weeks.
Ford, General Motors and Daimler-Chrysler, whose Web sites steer consumers to dealers for new or used cars, are quietly mulling the possibility of selling online, though franchise laws require dealers to play a role. Korean carmaker Daewoo is already selling online.
Virtually all manufacturers are now anticipating their future e-commerce sales strategies. They can expect to save millions on advertising by hitching their Web addresses to TV and print ads and even products. Levis.com is etched on its pants labels; BMG's music sites are promoted on its CD packages.
An Ernst & Young survey last fall found 15% of manufacturers selling online, up from 9% the previous year. In addition, some manufacturers are tired of competing for floor and Web- site space at retailers, and are taking advantage of the Internet to reach customers directly. "Macys.com has 25,000 items and limited resources to dedicate to our line of business," says Angela Kapp, a vice president at cosmetics giant Estee Lauder, which operates Clinique.com. "We can dedicate 100% of our resources to our site."
Manufacturers also are enticed by a chance to directly receive customer feedback with which they can develop better products, market other offerings to online subscribers and build loyalty. "They never owned that customer relationship before," says Laura Berland of ORB Digital Direct, an online ad agency.
Clinique.com customizes cosmetics and hair-care products for shoppers. The site has signed up 500,000 users to whom it promotes other offerings. Kapp says 18% of its online shoppers were previously not Clinique customers, and 42% of orders include products shoppers had never used. "There's a whole cadre of people who don't like to go up to a cosmetics counter," which can be intimidating, she says.
Clinique is a household name, and analysts say makers must enjoy similar cachet - think Black & Decker, Polaroid, Hoover - to succeed online. Ideal candidates are pricey products such as cars, appliances and stereos that consumers replace infrequently, typically with the brand they trust.
It is believed that manufacturers will never shut out retailers or come close to dominating online consumer commerce. Retailers can bring products from different manufacturers under one roof or onto one Web site. Thus many manufacturers plan to involve merchants in their Web sales, arranging pickups and deliveries through them. Estee Lauder says it will share its online photos with other Web retailers. "If they're building brands (on the Web) that we can sell, that ultimately improves our position," says Sears spokeswoman Paula Davis.
As for retailer backlash, stores are not likely to stop carrying such popular brands as Levi's or Sony. They could retaliate more subtly, though. Penney's Stephanie Brown says Levi's' policy spurred the chain to intensify promotion of its private brand merchandise (Arizona) over name brands.
Timex's 2-year-old Web site was created because of the company's desire to display all 270 of its watches - far more than any store offers - "the way we'd like to see it," including discontinued favorites, says Timex advertising director Susie Watson. Another driver, she admits: "Huge margins."
Shoppers can search for watches by entering the shape and style they want. The site, unlike most, is profitable and run by an in-house Web expert. Start-up costs were less than
$100,000. Sales are $6 million, or 1% of the company's total revenue, and doubling annually - not bad in an industry plagued by chronically flat sales, Watson says. More important, Timex is gathering a tremendous amount of marketing information.
Mattel's sites focus on collectibles, such as classic Barbie dolls (barbie.com), Hot Wheels cars (hotwheels.com) and customized products. By gathering e-mail addresses, the company can "sell the customer from cradle to grave," says Margaret Whitfield of Tucker Anthony.
My Design Barbie lets kids choose hair color, skin tone and outfits to design dolls that look like them. Vicky Nichols of Pasadena, Calif., recently bought one of the $39.95 dolls for her 8-year-old daughter, Hannah. Nichols says she would "definitely go to the Mattel site" for other Barbies "because they tell you what's coming up and other things retailers wouldn't know."
"We see this as incremental sales" that won't cannibalize retailers' business, says Mattel spokesman Glenn Bozarth. However, Whitfield expects the chain eventually to sell most of its other toys online, with gross margins as much as double normal. The Web, she says, could loosen Mattel's dependence on five big retailers - a contradiction of the company's stated interest. Last December, Mattel could not offer some of its hottest toys because Toys R Us cut its inventory. Says Toys R Us spokeswoman Rebecca Caruso: "We would like to be able to partner with toymakers”.
To give consumers greater choice, some manufacturers are partnering. Last month, BMG and Universal Music, the nation's two largest record companies, with a combined 40% market share, announced a joint venture to promote and sell music online. They hope to stimulate sales by using their artist relationships to let surfers chat with stars, view recording sessions and preview albums.
"We want to make people more excited about music," says BMG Vice President Kevin Conroy. Noting its prices are higher than CDNow and Amazon.com, he added, "Whether they buy online from us or at a retail location, we win."
Please answer the following questions:
How are the product service bundles changing with the advent of electronic commerce? What kinds of businesses stand to gain because of these changes? What kinds of businesses will lose?
What are the supply chain configuration implications of electronic commerce?
What are the cross-functional integration issues raised by electronic commerce?
What ethical issues do manufacturers who use electronic commerce to bypass the businesses that have distributed and retailed their products in the past face?
Explanation / Answer
How are the product service bundles changing with the advent of electronic commerce? What kinds of businesses stand to gain because of these changes? What kinds of businesses will lose?
Answer :
Yes I am agree with the statement , that product service bundles changing with the advent of electronic commerce.Electronic industry is industry where technology change affects in major %.In electronic industry because of technology changes products becomes obsolete within short period of time.So big organizations changes their Product / Service bundles as per the new technology arrivals in market.
The business which will fail to adopt the new technology changes they will out of the business. But those business which adopt the technology change & make appropriate changes they will survive.
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What are the supply chain configuration implications of electronic commerce?
Answer :
Following are the supply chain configuration for the electronic commerce
1) Efficient transportation
2) Timely & safety delivery
3) Perfect Packaging
4) IT applications & usage
5) Optimum inventory
6) Focus on Material Flow , Cash Flow , Information Flow
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What are the cross-functional integration issues raised by electronic commerce?
Answer :
Following are the cross-functional integration issues raised by electronic commerce
1) Supplier & Vendor management
2) Sales & after Service management
3) Competitions in domestic as well international market
4) Promotional aspects
5) Warranty & Guarantees issues
6) Technology up gradation
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What ethical issues do manufacturers who use electronic commerce to bypass the businesses that have distributed and retailed their products in the past face?
Answer :
1) Direct access to customer
2) Represent the true image in customers mind
3) To make available the goods in optimum price
4) To make a customer is integrated part of system
5) By doing this to avoid all the failures in distribution chains
6) To maintain & increase the Goodwill of the company.
etc
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