MP3 / MM740 Strategy

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MP3 / MM740Strategy Information Systems
Module 4 E-Commerce Distribution
ChannelsFall 2002
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Disintermediation
Source Benjamin Wigand (1995)
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Value Gaps
Value Added A, Expense X
Value Added B, Expense Y
Expense Savings (XY) - Cost of New
Effort Value Gap (AB) - Value Added by New
Effort
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Channel Pressure
Online Channels
manufacturer
new intermediaries
manufacturer
Traditional Channels
retailer
manufacturer
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We recognize that a vendor has the right to sell
through whatever distribution channels it
desires. However, we too have the right to be
selective in regard to the vendors we select and
we trust that you can understand that a company
may be hesitant to do business with its
competitors.
HomeDepot memo to suppliers
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Channel Extending Intermediaries
supplier
customer
supplier
customer
CEI
supplier
customer
supplier
customer
Search for opportunities to add value e.g. high
customer search costs, switching costs, low
customer satisfaction Wield new power by
consolidating traditional buyers customers.
Become the first-line interface with consumers.
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Auction Formats
Liquidation Auctions (e.g. Priceline)
Seek lowest price on widely available goods and
services
Seek first to maximize existing channels reduce
inventory
suppliers
customers
disincentives to use auction shrink supply over
time
Market Efficiency Auctions (e.g. eBay)
Auction format is favored over the inefficiency
of existing channels
Seek access to unique / rare products or services
suppliers
customers
incentives to use auction increase supply over
time
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Book Business Scale in theMarketplace vs.
Marketspace

• Turnover
• 2.6 times / year
• avg. book in store 20 weeks
• Inventory
• shelf warehouse stock
• 20-30 returns
• little float / title

• Turnover
• 26 times / year
• avg. book in house 2 weeks
• Inventory
• all warehouse stock
• few returns
• avg. 32 days of float / title