Get the Right Mix of Bricks and Clicks BA 490X1 E-Business & Commerce Mgmt Professor Michael Shaw...
25
Get the Right Mix of Bricks and Clicks BA 490X1 E-Business & Commerce Mgmt Professor Michael Shaw February 8, 2003 University of Illinois Executive MBA Program Davis Felella Gill Barry Carvell V a n D e r B o s c h W i l s o n EMBA TEAM CHICAGO
-
Upload
kelly-griffin -
Category
Documents
-
view
214 -
download
0
Transcript of Get the Right Mix of Bricks and Clicks BA 490X1 E-Business & Commerce Mgmt Professor Michael Shaw...
Get the Right Mix of Bricks and Clicks
BA 490X1 E-Business & Commerce MgmtProfessor Michael Shaw
February 8, 2003
University of IllinoisExecutive MBA Program
Davis Felella Gill
Barr
y
Carv
ell
Van
Der B
osch W
ilson
EMBA TEAM CHICAGO
E-Business Management 490X1 Case Study:
“Bricks and Clicks”
The Manager’s Dilemma ---
Should we integrate our Internet business with our
traditional business OR
should we keep the two separate?
E-Business Management 490X1 Case Study:
“Bricks and Clicks”
The Click-and-Mortar Spectrum
SEPARATION INTEGRATION
• Greater Focus• More Flexibility• Access to Future Funding
• Established Brand• Shared Information• Purchasing Leverage• Distribution Efficiencies
Strategic Joint In-House
Spin-Off Partnership Venture Division(BarnesandNoble.com) (RiteAid & Drugstore.Com) (KBKIds.com) (OfficeDepot.com)
E-Business Management 490X1 Case Study:
“Bricks and Clicks”
Barnes and Noble
Their Goal: To compete with Amazon.com.
Why this Goal? Because Amazon was eating their lunch.
E-Business Management 490X1 Case Study:
“Bricks and Clicks”
Barnes & Noble
What steps did they take to achieve their goal?
Created a separate division and ultimately spun it off as a stand alone company.
Implemented new management structure that was entrepreneurial.
Benefits included faster decision making, flexibility and access to available capital for internet startups.
Barnes & Noble maintained 40% ownership.
E-Business Management 490X1 Case Study:
“Bricks and Clicks”
BarnesandNoble.com – What Happened?
Lost 90% of equity in 3 years. CEO resigned after one year. Sacrificed more than they gained:
– Forfeited marketing opportunities by not promoting the web site in their stores.
Barnes & Noble stock recovered from the
e-commerce losses in 2001…and then declined.
E-Business Management 490X1 Case Study:
“Bricks and Clicks”
What did others learn from Barnes and Noble?
The benefits of integration are too great to abandon.
The “Manager’s Dilemma” should be modified to be:
What degree of integration makes sense
for OUR company?
E-Business Management 490X1 Case Study:
“Bricks and Clicks”
Office Depot
Goals: Polar Opposite of Barnes & Noble Tight integration of physical stores and Internet. Internet viewed as ‘‘just another channel’’.
Why? Existing catalog infrastructure, including delivery services. Existing IT infrastructure which maintained current inventory
levels at all locations, among other things. Low involvement product with high cost procurement with mostly
B2B customers
E-Business Management 490X1 Case Study:
“Bricks and Clicks”
Office Depot
How? Order for delivery next business day or refer to a
local store for pickup. Provide information on in store availability Detailed product information on website B2B customer enhancements, such as individual
purchasing limit. Design inter and intra net offering
E-Business Management 490X1 Case Study:
“Bricks and Clicks”
Office Depot
Results: Increased traffic at physical sites-prompt “for store pick up” to
drive incremental sales Cannibalization of catalog business increases profitability Now head to head with Staples who has integrated it’s web
business after large $$$$ losses OfficeMax does 180 million in e-business without commercial
linkage Eliminated all “virtual” competitors Office Depot - $1.5 Billion in e-business sales.
E-Business Management 490X1 Case Study:
“Bricks and Clicks”
Office Depot
E-Business Management 490X1 Case Study:
“Bricks and Clicks”
Office Depot
First to announce a Spanish language site.
Currently do 13% of global sales via e-business.
Maintain Viking brands (Direct Mail/Catalog) site.
Multi-division structure:– Stores - International– Business Services - Call Centers– Catalog - Depot.com
E-Business Management 490X1 Case Study:
“Bricks and Clicks”
KB Toys
Goals: New infrastructure for e-commerce Take advantage of strong brand name Take advantage of BrainPlay’s Internet experience
Why? Zero Internet experience at KB Toys. Toy shoppers are highly price sensitive.
E-Business Management 490X1 Case Study:
“Bricks and Clicks”
KB Toys
How? $80M invested in joint venture, 80% stake in
BrainPlay. KBkids name leveraged their image while allowing
expansion into other products. Emphasis on easy return policy at its stores. Boards of directors included representatives from
each company.
E-Business Management 490X1 Case Study:
“Bricks and Clicks”
KBkids
Results: Little cannibalization at mall stores which rely on
impulse purchases Physical stores increased buying power.
Today: Back to KB Toys, management buyout of division
from parent company, now privately held. Purchased eToys in bankruptcy.
E-Business Management 490X1 Case Study:
“Bricks and Clicks”
RiteAid
Goal: Internet presence fast through strategic partnership
with Drugstore.com
Why? Convinced it was the future way of doing business Drugstore.com had strong investors available,
limiting RiteAids risk. Drugstore.com had the internet experience.
E-Business Management 490X1 Case Study:
“Bricks and Clicks”
RiteAid
How?
Purchased a 25% stake in Drugstore.com Both brands promoted at each destination (coupons,
labels, etc.). Separate identities maintained. Appearance of integration to customers. Integrated business functions.
E-Business Management 490X1 Case Study:
“Bricks and Clicks”
Rite Aid
Results: Drugstore.com now has access to PCS Healthsystems
customers, which approves their reimbursement. Flexibility for customers that often need prescriptions
immediately.
E-Business Management 490X1 Case Study:
“Bricks and Clicks”
Rite Aid-Drugstore.com Today
Prescription Refills Stock
– around $60 in 1999 to $3.00 today
GNC Relationship
Drugstore.com is a glorified porn site
Stock – Around $80 in 1999 to
around $3 today GNC relationship
E-Business Management 490X1 Case Study:
“Bricks and Clicks”
Four Business Dimensions (5 actually)
BrandManagementOperationsEquityCompetition
E-Business Management 490X1 Case Study:
“Bricks and Clicks”
Brand
Strong existing brand adds credibility to the Internet site.
Less fear of credit card fraud, important to customers
Extending brand identity to the Internet can inhibit product offerings to maintain commonality.
E-Business Management 490X1 Case Study:
“Bricks and Clicks”
Management
Draw on current expertise with integration.
Encourage innovation with separate management.
E-Business Management 490X1 Case Study:
“Bricks and Clicks”
Operations
Leverage existing distribution and/or IS capabilities.
Build new state of the art systems at large cost.
E-Business Management 490X1 Case Study:
“Bricks and Clicks”
Equity
Retain and gain entire value of internet operation.
Spin off and limit risk.
Spin off and ensure access to capital (less of a factor today?)
E-Business Management 490X1 Case Study:
“Bricks and Clicks”
Competition
Are you entering a no-win situation?
Is it possible that your rival is not accountable for a profit for years to come?
What would you have done if you had been a manager at Barnes & Noble?
