The Aspects of Four E-Commerce Businesses
...customer. They also make money through their customer database which holds information for approximately 27 million people. Lillian uses this information to market its products and rents the information out for a small source of income. Dell Corporation’s business model is simplified using its direct method. Selling directly to the customer eliminates the need to support a wholesale and retail sales network. It also gives Dell complete control over its customer database. Dell contains a very low amount of inventory to free up the expenses of unsold products. Financial Analysis Amazon’s financial situation has been all over the charts, but is consistent at holding a net loss. They became large very fast, and their sales increased at amazing speeds, but unfortunately their expenses did the same. Amazon has made some recovery since 2001, but still had $149 million net loss in 2002 (Laudon & Traver, 2004) JCPenney on the other hand is fairly consistent at earning a net income. In January of 2001, JCPenney had a net loss of $705 million. Other than that, they have had net income ranging from $98 million to $405 million (Laudon & Traver, 2004). Lillian Vernon has never been a huge money making event, but they do make enough to stay on their feet. However, in the last few years, their revenue has gone down. They went from having a small net income to an increasing net loss. Except for one slight decrease in revenue in 2000, Dell revenues have grown the last five years. They have boasted a net income ranging from $1 million to $2 million since 1999. They have a good thing going, and seem to have a great chance at keeping it. Business strategy Amazon’s strategy is to become a mass market with low prices. In order to maintain this, Amazon needs to reduce its costs to a bare minimum. Amazon also offers free shipping as a way to increase revenue. Another strategy is to offer a huge amount of products. Amazon started its Merchants@ and Amazon Marketplace programs in 2002. These programs allow other businesses and individuals to sell their products on Amazon’s web site. This program has expanded Amazon’s selection by offering more than 500 brands. One way Amazon has lowered costs is by hiring mathematicians to optimize the location of their products among their warehouses. This process will help lower the expenses Amazon pays for shipping their products. When e-commerce became increasingly popular, JCPenny changed its business strategy. They focused more on developing an e-commerce site to make up for the decreasing catalog and store sales. They also closed 92 of the lower performing stores. JCPenney’s web site became one of the top ten retail sites when they made the entire catalog inventory available online. With this wide selection, they were hoping to compete with stores like Amazon who have such a vast selection. Lillian Vernon has very simple business strategies. They just want to be a direct marketer. They have very little programs to help increase their sales; they have taken a couple steps to increase sales, however. They launched a website in 1995 to gain revenue from the millions of people shopping online. They also purchased Rue de France to increase the variety of their inventory. With the lack of marketing and slowly decreasing sales, Lillian agreed to be bought by Ripplewood. Ripplewood plans to launch extensive marketing and merchandising skills to boost sales. They also plan to make improvements in the online channel, change some of their products to attract younger customers, and increase operational efficiencies in catalog production and order fulfillment. Dell also used the strategy of offering a variety of products to increase revenue. They began offering warranty services, product integration and installation services, Internet access, software, peripherals, and technology consulting. They also hooked up with EMC to be able to sell storage systems. The company thrives on internet business, but it also advertises through TV, catalogs, and newsletters. Competition Strategy Amazon’s competitors are general merchandisers who are both offline and online. They will be in competition with specialty stores in some areas. For example, they sell a lot of books, so they will be in competition with book stores like Barnes and Noble. JCPenney competes with other department stores who focus on the cost-conscious customer. JCPenney also competes with online retailers such as Amazon.com. Lillian Vernon faces very tough competition with other mail-order businesses. The number of general retail catalogs has grown to over 10,000 in the last few years (Laudon & Traver, 2004). Also, the growth of e-commerce has definitely affected mail-order businesses as more people are shying away from catalog sales. Dell competes with traditional computer retailers, such as Gateway, as well as computer dealers. Beating the competition in their game is by offering lower prices. There is a continual cost war going on between these companies. Technology Each company will also have various amounts of technology that they use. Amazon has the biggest collection of online retailing technology of any single web site. They also have a system to handle different shipping methods. The employees of Amazon also have good technology. Each of them carries a device that is a bar code scanner, display screen, and two-way data transmitter in one. JCPenney has some bragging rights. They were one of the first national retailers in the 1970s to develop point-of-sale data capture using bar coding. They also developed a customer management system to operate the catalog division. This system allows customers to be able to return a product to any JCPenney store in the nation. They have also converted these systems to their web operations. Lillian Vernon uses its technology to develop a good web site. They first launched their web site in 1995. In 2002 they revamped this web site to include automated order entry, displaying all 6,000 items, and tracking orders from warehouses to shipping. The new web site allowed them to process orders 40% more quickly (Laudon & Traver, 2004)....