Chapter 2: E-commerce Business Models and Concepts
1. What is Dollar Shave Club's business model and how does it differ from its competitors?
The Dollar Shave Club’s business model is a subscription-based business model that products are sent directly to customers’ homes at a low price with only 1$. By that way, Dollar Shave Club can underprice Gillette to gain market share in the razors and blades industry. Furthermore, it minimizes its production cost by making poor quality products, cutting out retail stores with simple design to use easily to save money. Their main purpose is to create a lifestyle brand opposite of other simple delivery services.
2. What are the key elements of Dollar Shave Club's value proposition for consumers?
Dollar Shave Club creates a different value proposition for the customer than other giant razor companies such as Unilever, Gillette. The target customer of this company is American young men. Dollar Shave Club employees try to figure out what features of razors that men were looking for. They focus on the demand for this customers segment. In contrast to other big companies producing complexed and expensive razors, their products have a simple design at a reasonable cost.
3. What revenue model does Dollar Shave Club use and why does it work for them?
Dollar Shave Club use a subscription revenue model that their customers subscribe to their service every month. This model offers many different options to meet exactly customers’ need. It works really well for them because they will have a loyal customer base and might become ambassadors for their brand. The customers do not have to order by themselves. When subscribing this service, their card will be charged automatically and razors are sent to their home the same day every month.
4. How would you characterize Dollar Shave Club’s online business strategy?
Dollar Shave Club began their online business strategy with a viral video that was launched on the Internet in 2012. Dubin, the founder of the company, appeared in an online promotional video introducing his company. Through the video, the company’s services are highlighted, including comparison with high-cost razors in the market and their unnecessary features. In 2018, the video attracts a large views as a marketing trick. Dollar Shave Club use online-only videos as well as social media as a marketing purpose to get customer attention
5. How have Dollar Shave Club's competitors responded?
The growth of Dollar Shave Club is a threat to its competitors. One of the major competitors in the shaving market is Gillette. In 2017, Gillette launched a new service called Gillette On Demand which allows customer using text message to order new razors. Furthermore, they offer a lot of good services such as offering a fourth free order after three regular orders, receiving orders within 3 business days, offering a competitive price. In addition, in response to criticism that product prices were too high, Gillette reduced the price of products and ran marketing campaigns to bring the customer back. They also sued Dollar Shave Club for patent infringement but they failed. They make an effort to add a new feature to their razors with free cost. Although that, Gillette still lose traction in this shaving market.
1. Select an e-commerce company. Visit its website or mobile app and describe its business model based on the information you find there. Identify its customer value proposition, its revenue model, the marketspace it operates in, who its main competitors are, any comparative advantages you believe the company possesses, and what its market strategy appears to be. Also try to locate information about the company's management team and organizational structure. (Check for a page labeled ((the Company," "About Us," or something similar.)
· Rakuten is a Japanese e-commerce company located in Tokyo and found in 1997.
· Business model
The business model of Rakuten is B2B(merchant)2C e-commerce platform that provides shopping, leisure and lifestyle services to make daily life more convenient and enjoyable. It is the biggest Japanese internet bank and credit card company. Besides that, it also offers an internet shopping mall, fin-tech, digital content, and communications services. Rakuten is considered as Amazon of Japan.
· Customer value proposition:
Four main customer value propositions are customization, cost reduction, risk reduction, and brand. The company allows merchants to design their pages on the site by their own idea. Furthermore, merchants are provided the ability to communicate with customers through social media or email. Secondly, the company reduces cost by creating Rakuten Super Points loyalty program. The customers can earn a point after each purchase and point can exchange money to buy for the next purchase. Thirdly, risk reduction is applied when all potential merchants have to go through rigorous inspection. The company tries to check daily to remove non-compliant items. Finally, their strong brand is considered as their success. It is the Japanese biggest retailer that have 95 million products from more than 44,000 vendors.
· Revenue model: Though three revenue streams:
- Hosting Fees – Revenue make from monthly fixed fees which charged to merchants for their products/services hosted on the website.
- Transaction Fees – Revenue make from the commission Rakuten charges for each purchase transaction that occurs on the website
- Advertising Fees – Revenue make from the fees that is charges to third parties for advertisement they offer on the site.
Global market which is operates in 29 countries and regions.
· Main competitors:
Other e-commerce companies such as Amazon, Ebay, Alibaba.
· Comparative advantages:
Rakuten is also an open platform. In contrast to other e-commerce company, Rakuten focuses on finding loyal membership by offering customers many benefits through cashback and Super Point that can be exchanged to shop online and offline at the physical shop or other experiences.
· Market strategy:
Karuten puts in a lot of effort to understand and satisfies the demand of customers. The company is not simply a shopping marketplace or a bank. It is the connection between customers and retailers. They use a combination of technology, data, and strategy to match individuals to the right messages at scale. Their market strategy is not only about finding loyal customer but also finding new customers who are willing to concern, come back and buy again. Rakuten Marketing provides unique capabilities to adjust to consumers through channels and platform.
2. Examine the experience of shopping online versus shopping in a traditional environment. Imagine that you have decided to purchase a digital camera (or any other item of your choosing). First, shop for the camera in a traditional manner. Describe how you would do so (for example, how you would gather the necessary information you would need to choose a particular item, what stores you would visit, how long it would take, prices, etc.). Next, shop for the item on the Web or via a mobile app. Compare and contrast your experiences. What were the advantages and disadvantages of each? Which did you prefer and why?
I have decided to purchase a new laptop to go to school. Firstly, if I choose to go to the shop to buy the laptop, I have to go to the nearest Best Buy store in Duluth. It takes me around 20 minutes driving by car. Nonetheless, I have a chance to talk with sale presentative who provides me a lot of information about which laptop I should choose with good price or good deal. I can see it and try it out to see how it work before I decide to buy. In my opinion, the advantage of traditional shopping way is I can test the product thoroughly, especially a technology device as a laptop. Furthermore, I will not lose money because of hackers or scammers. It is more convenient for people who do not have internet such as older people or kids and they can get the products immediately after they purchase. On the other hand, there are some disadvantages to this kind of shopping are waste of time and the same products in all store. I have to travel a certain distance to get to the shop. Besides that, not all store has the exact products for customer to see and check. Secondly, there are also both pros and cons of online shopping.
When I decide to buy a new laptop via the website or mobile app, I do not have to go to the shop, just stay at home and surf the web. If I do that, I will save money and save time. It is more convenient for me to compare the prices, choose designs and colors of the laptop. Sometimes, some companies offer a better deal when I purchase online rather than in-store purchase. Furthermore, I can return whenever I am not satisfied with the product. On the other hand, if I buy online, I can’t test the laptop physically or try it. In addition, I have to wait for the product to arrive someday or meet some problem with wrong address or lost packages. Or even I have to pay a higher price for shipping than I buy in store directly. It depends on the good I want to buy when I decide to shop online or traditional shopping. But in this situation, I prefer to go to the shop to buy a new laptop because I want to check it carefully before I purchase it. Furthermore, there are many sales presentative who help me to buy a good one rather than I have to wait for sellers to chat with them when I shop online.