1. 1 Chapter 7 Business Model IV: Online Retailers

2. 2 What are Online Retailers? zOnline retailers are companies that (1)use a website to merchandise newly manufactured physical goods for which they take title, and then (2)rely on third-party service providers to deliver those goods from remote warehouses.

3. 3 Categories of Online Retailers zBy merchandising emphasis yHorizontal online retailers yVertical online retailers zBy pricing format yFixed pricing yGroup buying model yauction yDeep discount model

4. 4 Online Retailer’s Value Construction zAttributes of product categories well suited for web retailing yInformation-rich products yLarge selection yLittle need for hands-on services or product trial yHigh value-to-weight ratio yEasily customizable products yRapid changes in stock availability, demand, and/or price yReplenishment driven yUnpleasant brick-and-mortar retailing environment

5. 5 Barriers to Online Shopping zSecurity concern zLack of familiarity with the brands of some pure-play companies zUnwilling to wait for home delivery zOther general environmental factors

6. 6 Different Types of Shoppers zE-bivalent newbies zTime-sensitive materialists zClicks and mortar zHooked, online, and single zHunter-gatherers zBrand loyalists

7. 7 Online Retailer’s Financial Model yRevenue sources yCost structure xOperational cost xDistribution and customer service expenses yProfitability

8. 8 Online Retailer vs Brick-and- Mortar Stores zBrick-and-Mortar Stores y10% revenue on rent y14% on in-store labor for checkout, stocking shelves, etc. y2% on advertising y3% on general and administrative expenses zOnline retailer y3% revenue on developing and maintaining website y12% on warehouses, customer services, etc. y4% on advertising y1% on general and administrative expenses