Tam Pham Bang Le
November 8, 2019
CH9 Online Retail and Services
Case Study – OpenTable: Your Reservation Is Waiting
1. What characteristics of the restaurant market made it difficult for a reservation system to work?
The restaurant industry was slow to leverage the power of the Internet. This was in part because the industry was, and continues to be, highly fragmented and local. They also realized that the Internet would give diners instant access to reviews, menus, and other information about restaurants. And there was no method for making reservations online-we all know reserving by phone is time-consuming, inefficient, and prone to errors.
2. How did OpenTable change its marketing strategy to succeed?
To induce diners to start using an online reservation system, OpenTable would need real-time access to a number of local restaurants, and the ability to instantly book confirmed reservations around the clock. When OpenTable was founded, most restaurants did not have computers, let alone systems that would allow online reservations made through a central website. OpenTable's initial strategy was to pay online restaurant reviewers for links to its website and to target national chains in order to quickly expand its reach.
3. Why would restaurants find the SaaS model very attractive?
Many restaurants report that they and their staff members find the software easy to use and beneficial to their bottom line. Specifically, it streamlines operations, helps fill additional seats, and improves quality of service, providing a concrete return on investment. This has led to both high customer satisfaction and high retention rates. By creating an online network of restaurants and diners that transact with each other through real-time reservations. OpenTable's market also exhibits network effects: the more people use it, the more utility the system delivers. More diners discover the benefits of using the online reservation system, which in turn delivers value to restaurant customers, and helps attract more restaurants to the network.
4. What challenges does OpenTable face?
After years of dominating the market for online reservations and guest management software, the company has ceded some ground to newer challengers. Priceline reduced the value of OpenTable on its books by $941 million, after increased investments in its international offerings failed to produce increased profits. In 2018, Priceline announced that it would combine the teams behind OpenTable and Kayak, an online booking site that has grown internationally with much more success. Restaurants have increasingly complained about OpenTable's pricing, arguing that once they have attracted and retained loyal customers, paying a $1 charge to OpenTable after each repeat booking doesn't make sense. Some restaurants also have concerns about the fact that OpenTable inserts itself in the middle of the relationship with the customer, capturing valuable marketing data.
1. Find an example not mentioned in the text of each of the four types of online retailing business models. Prepare a short report describing each firm and why it is an example of the particular business model.
- Bricks-and-clicks: Macy’s - a successful department store with over 853 stores around the country. Macy’s also operates Bloomingdales. Macy’s 2008 Fact Book notes that its direct-to-consumer business, including macys.com and bloomingdales.com, continues to be the fastest-growing part of the company, with sales expected to top $1 billion in 2008.
- Virtual merchant: Bluefly – This is an online outlet store with no physical outlets. They provide brands found in upscale department stores at discounts by buying from resellers (rather than the designers) on the wholesale prices. They pass the savings on to the customer. However, they must buy what is available to them at a deep discount, so not all sizes of a particular item will always be in stock. Bluefly is a NASDAQ public company (ticker symbol BFLY).
- Catalog merchant: Fingerhut.com – Fingerhut was already a successful catalog business and has now leveraged that success to an online presence. They offer a broad range of products in a variety of categories, their own Fingerhut credit card, a Spanish language version of the Web site, and links to affiliate sites. Check Hoovers.com for further information about Fingerhut.
- Manufacturer direct: FortinIronWorks.com – Fortin Iron Works has always been a manufacturer direct merchant of ornamental ironworks. This metal fabrication company based in Columbus, Ohio and founded in 1946, employs skilled craftsmen, artisans, estimators, salesmen and installers. They sell ornamental iron products such as driveway gates, walkway gates, fence, rail, curtain rods, production components, and also several lines of outdoor and indoor furniture with accessories. They also carry a line of sporting equipment including complete basketball units, soccer goals and lacrosse goals. Most products can now be purchased online including fencing, gates, planters and accessories such as pot rings, brackets, trellises, lamps and tables.
2. Together with a teammate, investigate the use of mobile apps in the online retail or financial services industries. Prepare a short joint presentation on your findings.
The use of mobile apps in association of online retail industries continues to grow exponentially, making such companies large profits due to the wide accessibility and convenience of mobile shopping. For some companies, most of their yearly sales come from mobile sales applications. These apps make purchasing extremely convenient by using store locators, price comparisons and product information right at the fingertips, enabling no need to go to a register or a desktop for that matter. Companies also largely use promotional means through apps by offering exclusive coupons and discounts, further encouraging mobile app e-commerce. From a current perspective, “brick and mortar” stores need to figure out a game plan to drive traffic and promote in-store business.