Chapter 9

1. Why were so many entrepreneurs drawn to start businesses in the online retail sector initially?
In the early years of e-commerce, literally thousands of entrepreneurial Web-based retailers were drawn to the marketplace for retail goods, simply because it was one of the largest market opportunities in the U.S. economy. Many entrepreneurs initially believed it was easy to enter the retail market but its not.
2. What frequently makes the difference between profitable and unprofitable online businesses today?The path to success in any form of retail involves having a central location in order to attract a larger number if shoppers, charging high enough prices to cover the costs of goods as well as marketing, and developing highly efficient inventory and fulfillment systems so that the company can offer goods at lower costs than competitors and still make a profit.
3. Which segment of the offline retail business is most like online retailing? Why?
4. Name the largest segment of U.S. retail sales. Explain why businesses in this segment have achieved and continue to dominate online retailing.The largest segment of U.S. retail sales is service sector. Service employ about 108 million people and account for about $7.7 trillion of the U.S.’s gross domestic product.
5. Name two assumptions e-commerce analysts made early on about consumers and their buying behavior that turned out to be false.Industry consolidation and the movement toward integrated financial services.
6. Why were customer acquisition costs assumed early on to be lower on the Web? What was supposed to reduce those costs?
Because people thought it would be harder than what it actually is to develop a business online.
7. Explain the distinction between disintermediation and hypermediation as it relates to online retailing.
8. Compare and contrast virtual merchants and bricks-and-clicks firms. What other type of online retailer is most like the virtual merchant?
Disintermediation is the displacement of market middlemen who traditionally are intermediaries between producers and consumers by a new direct relationship between manufacturers and content originators with their customers. Hypermediation is when it is much higher than intended.
Virtual merchants are a single-channel Web firm that generates almost all of their revenue from online sales. Bricks-and-clicks are companies that have a network of physical stores as their primary retail channel, but also have introduced online offerings.
A supply-push sales model is when products are made prior to orders received based on estimated demand. A demand-pull sales model is when products are not built until an order is received. 9. What is the difference between a supply-push and a demand-pull sales model? Why do most manufacturer-direct firms have difficulty switching to one of these?
10. What are five strategic issues specifically related to a firm’s capabilities? How are they different from industry-related strategic issues?
11. What are some of the difficulties in providing services in an online environment? What factors differentiate the services sector from the retail sector, for example?
12. Compare and contrast the two major types of online service industries. What two major features differentiate services from other industries?
The two major types of online service industries are financial services and travel services.
Consolidation, diversification, localization, job search engines/aggregators and social networking.
The service sector is the segment of the offline retail business is most like online retailing because the service sector offers extraordinary opportunities insofar as e-commerce sites can deliver information, knowledge, and transaction efficiencies.