©Prof. Karen Clay The Online Wine Industry Abhiroop Gandhi Sudhir Gopal Maximiliano Hernandez-Toso Raghu Kakumanu Eungsang Kim.

©Prof. Karen Clay

The Online Wine Industry

Abhiroop Gandhi

Sudhir Gopal

Maximiliano Hernandez-Toso

Raghu Kakumanu

Eungsang Kim

©Prof. Karen Clay

The Value Chain and EC

1st TierDomestic Wineries and importers that either produce or represent the producer

2nd TierWholesalers purchase wines from domestic wineries and importers

3rd TierRetailers, restaurants`

E-commerce could be used at different points in the in the industry value chain. We will focus in B2C possibilities

ConsumerVine

B2B

B2B

B2B

B2C

Regulation Authorities

B2G

©Prof. Karen Clay

Policy Issues and Barriers to Entry

• Because alcohol is a state-regulated product rather than a federally regulated one, there are basically 50 different sets of laws. The only common law among the states is that wine or any alcohol must travel via the three-tier distribution system— from producer to wholesaler to retailer— before it reaches the consumer.

• Impending legislation may help strengthen the market for internet wine sales.

©Prof. Karen Clay

©Prof. Karen Clay

Conclusion

“Legislation is the major barrier for the emergence of the Amazon.Com of wine”

©Prof. Karen Clay

The Online Women’s Clothing Industry

By Yucheng Hu,

Yimin Jiang,

Andrew Jones

©Prof. Karen Clay

Major Players in Online Women’s Clothing

All over U.S.Esprit

All over U.S.J. Crew

All over U.S.Victoria’s Secret

U.S., & U.K.Land’s End

U.S., Canada, France, Germany, Japan, & U.K.

Gap, Old Navy,Banana Republic

U.S., Canada, Japan, Germany, & U.K.

Eddie Bauer

Locations ServedFirms

©Prof. Karen Clay

Women’s Clothing

• Who are the customers– Victoria’s Secret and Esprit primarily target middle

and upper class women. They also try to attract male customers who are purchasing gifts for women.

– Eddie Bauer, Gap, Land’s End, and J.Crew sell both men’s and women’s clothing. So their customers come from both groups.

– These online clothing stores hope to take advantage of the customers they do not reach with their mall presence.

©Prof. Karen Clay

Women’s Clothing

– Gap’s Philosophy is “A simple formula drives our brands: We strive to deliver style, service and value to everyone—kindergartners and grandparents, students and professionals, athletes and philosophers, big-city urbanites and small-town folks.” (Source: http://www.gapinc.com/about_us/about_us.htm)

©Prof. Karen Clay

The Online Flower Shopping

By Ying Zhou, Yue Wu, Shan Wei,

Zhao Gang Wo, Omotola Talabi

©Prof. Karen Clay

Online Flower Shopping

Customers: Individuals• Individuals account for the bulk of purchases in

the online flower industry with male customers significantly outnumbering females.

“ Survey results show that three-quarters (76 percent) of men have ordered flowers for loved ones on Valentine’s Day while nearly a third (30 percent) of women admitted giving flowers to the men in their lives.” www.ftd.com

©Prof. Karen Clay

Online Flower Shopping

Customers: Corporations• Corporate customers patronize online flower shops

for marketing gifts. Corporations can take advantage of volume to receive discounts.

“ Our corporate clients have told us they want gifts that are exclusive and that both men and women will appreciate. They must express the high standards of their company and they expect their gifts to set the stage for continued successful business partnerships.”

www.callyxandcorolla.com

©Prof. Karen Clay

The Online Jewelry Industry

By: Emily Coyle Kevin Daily Jane Chien

Isnezawati Azali Halit Akcaglayan

Nadia-Shazrin Asari

©Prof. Karen Clay

Market Share

• In 1998, online jewelry spending was $207 million

• In 2000, online jewelry sales are expected to be $370 million

• Global jewelry sales are estimated at $200 billion a year

• The retail jewelry market is highly fragmented

©Prof. Karen Clay

The Online Mortgage Industry

Lisa Bembenick | Naresh Bhaskar | Joe Carlen Chad Carter | Lbujomir Cvetkovic

Heinz, CMU | Spring 2000

95-731: Business Strategy and Electronic Commerce

Homework 1 | 01-25-2000

©Prof. Karen Clay

Average Mortgage Rates

National 1999 average mortgage rates*

1.006.561 Year Adjustable

1.007.8615 Year Fixed

1.008.2630 Year Fixed

PointsRateMortgage

*Source: http://www.mortgage-net.com/trends/market/

©Prof. Karen Clay

Some Sample Prices

• 30-year fixed mortgage:– Today’s low rates: 7.89 (MortgageAuction)*

– Rate 8.5/ Points 1/8 / APR (PNC)

– Rate 8.0 / Points 0.99 / APR 8.152 (Hotloans)

• 15-year fixed mortgage:– Today’s low rates: 7.67 (Mortgage Auction)*

– Rate 8.0 / Points 3/8/ 8.44 (PNC)

– Rate 7.625 / Points 0.99 / 7.862 APR (Hotloans)

* Quotes as on 01-23-2000 on http://www.mortgageauction.com

©Prof. Karen Clay

The Online Travel Industry (Airline Tickets)

Adam RatanaRohit Ravinath

Thiti Wang-AryattawanichRubina Zaidi

©Prof. Karen Clay

Industry News & Projections

• Travel eCommerce is expected to reach $20 billion by 2001 (source: eMarketer)

• 33.8 million travelers used the Internet for travel planning, up from 11.7 million in 1997 (eMarketer)

©Prof. Karen Clay

Making money

• Price and nonprice competition– What is the optimal product to offer and at what

price?– Product is not just “the good”, but the entire

package• Buy a book from Amazon or Shopping.com

• The book is the same at the two sites

• The product is not

©Prof. Karen Clay

Making money

• Optimal product– As Wells Fargo shows, can’t do everything

• How do you decide what to do?

– Differentiate product– Keep up with competitors– Lower costs

©Prof. Karen Clay

Making money

• At what price– Depends on supply and demand sides of

equation• Cost structure

• How much customers value your product– Distribution of valuations

• Industry structure: number of firms, extent to which they are substitutes

– Competitive, oligopoly, and monopoly models

©Prof. Karen Clay

Making money

• Experience goods– Anything you need to try to determine how

valuable it is to you– Offer promotions, free trials, etc. to get people

to try

• What are some examples of information goods?

©Prof. Karen Clay

Making money

• At what price– Price sensitivity, distribution of valuations

• Senior citizens, students

• Offer the same product for different prices

• What are some examples?

©Prof. Karen Clay

Making money

• Versioning– Dimensions: delay, interface, speed, features,

etc.– How many versions should you offer?

• When in doubt offer 3

– Bundling• A special form of versioning in which two or more

distinct products are offered as a package at a single price

©Prof. Karen Clay

Making money

• Lock in (high switching costs)– Lock in makes customers less price sensitive

– Something that is free today may become low cost tomorrow

• Costs may rise over time

• Example is me with The Street.com

– Organizations want to lock in their customers

– The question is how

©Prof. Karen Clay

Making money

• Ways to achieve lock-in – Sticky applications like email or chat

• As a consumer, beware of the free

• There is no free lunch

– Subscription services where people have to take action to cancel

– Information• Once people invest in entering it, they are less likely to switch

– Loyalty programs