PowerPoint PresentationChapter 9Blue Nile Sparkles for Your CleopatraMajor Trends in Online Retail, 2011–2012The Retail SectorThe Retail IndustryComposition of the U.S. Retail IndustryE-commerce Retail: The VisionThe Online Retail Sector TodayOnline Retail and B2C E-commerce Is Alive and WellMulti-channel IntegrationAnalyzing the Viability of Online FirmsStrategic Analysis FactorsFinancial Analysis FactorsE-tailing Business ModelsE-commerce in Action: Amazon.comSlide 17Common Themes in Online RetailingUsing the Web to Shop ’Till You DropThe Service Sector: Offline and OnlineService IndustriesSlide 22Online Financial ServicesFinancial Service Industry TrendsIndustry Consolidation and Integrated Financial ServicesOnline Financial Consumer BehaviorOnline Banking and BrokerageThe Growth of Online BankingMulti-channel vs. Pure Online Financial Service FirmsFinancial Portals and Account AggregatorsOnline Mortgage and Lending ServicesOnline Insurance ServicesOnline Real Estate ServicesOnline Travel ServicesOnline Travel Services (cont.)Zipcar Shifts into High GearOnline Travel Services RevenuesThe Online Travel MarketOnline Travel Industry DynamicsPhony ReviewsOnline Career ServicesIt’s Just Information: The Ideal Web Business?Online Recruitment Industry TrendsSlide 44e-commerce Kenneth C. LaudonCarol Guercio Traverbusiness. technology. society.eighth editionCopyright © 2012 Pearson Education, Inc.Chapter 9Online Retail and ServicesClass DiscussionBlue Nile Sparkles for Your CleopatraWhy is selling (or buying) diamonds over the Internet difficult?How has Blue Nile built its supply chain to keep costs low?How has Blue Nile reduced consumer anxiety over online diamond purchases?What are some vulnerabilities facing Blue Nile?Would you buy a $5,000 engagement ring at Blue Nile?Copyright © 2012 Pearson Education, Inc. Slide 9-3Major Trends in Online Retail, 2011–2012Growth in social shoppingOnline retail still fastest growing retail channelBuying online a normal, mainstream experienceSelection of goods increases, includes luxury goodsInformational shopping for big-ticket items expandsSpecialty retail sites show most rapid growthIncreased use of interactive, Web 2.0 marketingCopyright © 2012 Pearson Education, Inc. Slide 9-4The Retail SectorMost important theme in online retailing is effort to integrate online and offline operationsU.S. retail market accounts for $10.7 trillion (70%) of total GDPPersonal consumption:Services: 65%Nondurable goods: 25%Durable goods: 10%“Goods” vs. “services” ambiguityCopyright © 2012 Pearson Education, Inc. Slide 9-5The Retail Industry8 segments (clothing, durable goods, etc.)For each, uses of Internet may differInformation vs. direct purchasingGeneral merchandisers vs. specialty retailersMail order/telephone order (MOTO) sector most similar to online retail sectorSophisticated order entry, delivery, inventory control systemsCopyright © 2012 Pearson Education, Inc. Slide 9-6Composition of the U.S. Retail IndustryCopyright © 2012 Pearson Education, Inc.SOURCE: Based on data from U.S. Census Bureau, 2011.Figure 9.1, Page 579Slide 9-7E-commerce Retail: The Vision1. Reduced search and transaction costs; customers able to find lowest prices2. Lowered market entry costs, lower operating costs, higher efficiency3. Traditional physical store merchants forced out of business4. Some industries would be disintermediatedFew of these assumptions were correct—structure of retail marketplace has not been revolutionized Internet has created new venues for multi-channel firms and supported a few pure-play merchantsCopyright © 2012 Pearson Education, Inc. Slide 9-8The Online Retail Sector TodaySmallest segment of retail industry (5%–6%)Growing at faster rate than offline segmentsRevenues have resumed growthAround 72% of Internet users bought online in 2011Primary beneficiaries: Established offline retailers with online presence (e.g., Staples)First mover dot-com companies (e.g., Amazon)Copyright © 2012 Pearson Education, Inc. Slide 9-9Online Retail and B2C E-commerce Is Alive and WellFigure 9.2, p. 582Copyright © 2012 Pearson Education, Inc.SOURCES: Based on data from eMarketer, Inc., 2011a; authors’ estimates.Slide 9-10Multi-channel IntegrationIntegrating Web operations with traditional physical store operationsProvide integrated shopping experienceLeverage value of physical storeTypes of integrationOnline order, in-store pickupIn-store kiosk or clerk Web order, home deliveryWeb promotions to drive customers to storesGift cards usable in any channelIncreasing importance of mobile devicesCopyright © 2012 Pearson Education, Inc. Slide 9-11Analyzing the Viability ofOnline FirmsEconomic viability: Ability of firms to survive as profitable business firms during specified period (i.e., 1–3 years)Two business analysis approaches:Strategic analysisFocuses on both industry as a whole and firm itselfFinancial analysisHow firm is performingCopyright © 2012 Pearson Education, Inc. Slide 9-12Strategic Analysis Factors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Firm-specific factorsFirm value chainCore competenciesSynergiesTechnologySocial and legal challengesCopyright © 2012 Pearson Education, Inc. Slide 9-13Financial Analysis FactorsStatements of OperationsRevenuesCost of salesGross marginOperating expensesOperating marginNet marginPro forma earningsBalance sheetAssets, current assetsLiabilities, current liabilities, long-term debtWorking capitalCopyright © 2012 Pearson Education, Inc. Slide 9-14E-tailing Business Models1. Virtual merchant Amazon2. Bricks and clicks Walmart, J.C. Penney, Sears3. Catalog merchant Lands’ End, L.L. Bean, Victoria’s Secret4. Manufacturer-direct DellCopyright © 2012 Pearson Education, Inc. Slide 9-15E-commerce in Action: Amazon.comVision: Earth’s biggest selection, most customer-centric Business model: Retail, Third Party Merchants, and Amazon Web Services (merchant and developer services)Financial analysis: Continued explosive revenue growth, profitableStrategic analysis/business strategy: Maximize sales volume, cut prices,