Chapter 9

Case Study:

1.  Why have OpenTable competitors had a difficult time competing against OpenTable?

There are several reason OpenTable’s competitors had a difficult time competing against them.  OpenTable has proprietary software that was easy to use for the customers and restaurants.  It is service based so customers did not buy the software or have to install into their computers.  It has a mobile Web site and applications that works for almost every smartphone platforms.  They are now available in several countries.  They used direct sales force and focus on building a restaurant customer base.

2.  What characteristics of the restaurant market make it difficult for a reservation system to work?

“The restaurant industry was slow to leverage the power of the Internet.”  It is fragmented and made up of local, small, independent businesses or local restaurant-owing groups.  This made it difficult to deal with the restaurants as a single market.  Customers needed real-time access and the ability to book confirmed reservations at any time to local restaurants.

3.  How did OpenTable change its marketing strategy to succeed?

They “retooled its hardware and software to create the user-friendly ERB system and deployed a door-to-door sales force…from high-end restaurants.”  They had also refocused to just four cities: Chicago, New York, San Francisco, and Washington, D.C.

4.  Why would restaurant find the SaaS model very attractive?

It is readily available once they subscribe and there is no additional hardware for cloud service.  Which means no additional cost to provide services for the restaurants.  It provides ease of use for additional service and storage.   

Questions:

1.  Why were so many entrepreneurs drawn to start businesses in the online retail sector initially?

They were drawn “simply because it was one of the largest market opportunities in the U.S. economy.”  They also thought it would be easy to enter the online retail sector.

5.  Name two assumptions e-commerce analysts made early on about consumers and their buying behavior that turned out to be false.

1.    That the Web consumer was rational and cost-driven -- not driven by perceived value or band, both of which are non-rational factors.

 

2.    As prices fell, traditional offline physical store merchants would be forced out of business.

 

10.  Which is a better measure of a firm’s financial health:  revenues, gross margin, or net margin?  Why?

A better measure of a firm’s financial health is net margin.  This is because “net margin tells us the percentage of its gross sales revenue the firm was able to retain after all expenses are deducted.”  This number tells the company how successful they are at making a profit on each dollar of sales revenue.

15.  What is the most common use of real estate Web sites?  What do most consumers do when they go to them?

“The major impact of Internet real estate sites is in influencing offline decisions.”  Consumers use these sites to view listings, prices and research historical prices.  They also look at neighborhoods, schools and other factors that would weigh in their decisions.   

20.  Why are on-demand service companies viewed as being disruptive and controversial?

They are viewed as being disruptive and controversial due to their unregulated nature of service which could greatly reduce demands for regulated service.  Examples of the two most disruptive firms are Uber and Airbnb.  Airbnb does not have the regulatory or tax burdens of hotel owner.  “It is unlikely that on-demand service firms will escape regulation altogether, but due to their popularity and success, it is likely that regulation will be minimal.”   

 

Projects:

#2.  Four types of online retailing business models.

1.  Virtual Merchants

Zappos is a virtual merchant firm that generates revenue from sales online.  Their niche is in name brand shoes, some clothing and accessories.  Zappos is owned by online giant Amazon, and in 2014 opened a physical store. 

2.  Omni-channel Merchants

Sam’s Club is a bricks-and-clicks merchant which has a network of physical stores as their primary retail source, but also have offerings online.  Sam’s club is owned by Walmart.  This business sells name brand or store brand product in bulk quantities.

3.  Catalog Merchants

REI is an example of an established company with national offline catalog operation, but also developed online capabilities.  They sell outdoor gear and clothing and is similar to companies like Cabela.

4.  Manufacturer-Direct

Cannon is an example of a firm that “are either single- or multichannel manufacturer that sell directly online to consumers without the intervention of retailers.”  They sell from cameras to printers and accessories.  Because they sell direct, retailers that carry their products must compete with the manufacturer.