2. Copyright © 2004 Pearson Education, Inc. Slide 10-1 E-commerce Kenneth C. Laudon Carol Guercio Traver business. technology. society. Second Edition

3. Copyright © 2004 Pearson Education, Inc. Slide 10-2 Chapter 10 Retailing on the Web

4. Copyright © 2004 Pearson Education, Inc. Slide 10-3 Sources of Gross Domestic Product in the United States Figure 10.1, Page 575

5. Copyright © 2004 Pearson Education, Inc. Slide 10-4 Composition of the U.S. Retail Industry Figure 10.2, Page 576

6. Copyright © 2004 Pearson Education, Inc. Slide 10-5 The Top 10 General Merchandisers Table 10.2, Page 577

7. Copyright © 2004 Pearson Education, Inc. Slide 10-6 The Top 10 MOTO Retailers Table 10.3, Page 578

8. Copyright © 2004 Pearson Education, Inc. Slide 10-7 Online Retail is Alive and Well Figure 10.3, Page 580

9. Copyright © 2004 Pearson Education, Inc. Slide 10-8 Online Retail Market Product Penetration Rate (%) Table 10.5, Page 582

10. Copyright © 2004 Pearson Education, Inc. Slide 10-9 Analyzing the Viability of Online Firms Strategic analysis of economic viability of a firm focuses on both industry as a whole and firm Key industry strategic factors:  Barriers to entry  Power of suppliers  Power of customers  Existence of substitute products  Industry value chain  Nature of intra-industry competition Strategic factors that pertain to firm include:  Firm value chain  Core competencies  Synergies  Technology  Social and legal challenges

11. Copyright © 2004 Pearson Education, Inc. Slide 10-10 Analyzing the Viability of Online Firms (cont’d) Financial analysis helps us understand how a firm is performing Includes two main parts: Statement of Operations and Balance Sheet Statement of Operations: Tells us how much income or loss a firm is achieving based on current sales and costs Balance sheet: Provides a financial snapshot of a company’s assets and liabilities

12. Copyright © 2004 Pearson Education, Inc. Slide 10-11 Analyzing the Viability of Online Firms (cont’d) Factors to look for when assessing Statements of Operations  Revenues: growing and at what rate?  Cost of sales: compared to revenues  Gross margin (gross profit divided by net sales): increasing or decreasing?  Operating expenses: What are they; increasing or decreasing?  Net margin (net income or loss divided by net sales or revenue): increasing or decreasing? Factors to look for when assessing a Balance Sheet:  Current assets  Current liabilities  Ratio of current assets to liabilities  Long-term debt

13. Copyright © 2004 Pearson Education, Inc. Slide 10-12 E-commerce in Action: E-tailing Business Models Four main types of online retail business models:  Virtual merchant (Amazon, etc): Single channel Web firm that generates almost all its revenue from online sales  Clicks and bricks (JCPenney, etc): Company that has a network of physical stores as primary retail channel, but also online offerings  Catalog merchant (Lillian Vernon, etc): Established company that has a national offline catalog operation as its largest retail channel, but also has online capability  Manufacturer direct (Dell, etc): Single or multi- channel manufacturers who sell directly online to consumers without intervention of retailers

14. Copyright © 2004 Pearson Education, Inc. Slide 10-13 E-commerce in Action: Amazon.com Vision: Earth’s biggest selection,most customer- centric Business Model: Virtual merchant that sells merchandise owned by Amazon, online storefronts for other merchants, merchandise owned by individuals; e-commerce services, Financial Analysis: Greatly improved overall operational position, but not yet consistently profitable

15. Copyright © 2004 Pearson Education, Inc. Slide 10-14 Amazon’s Consolidated Statements of Operations and Summary Balance Sheet Data 1998-2002 Table 10.6, Page 591

16. Copyright © 2004 Pearson Education, Inc. Slide 10-15 E-commerce in Action: JCPenney.com Vision: nationwide department stores and mail- order catalog Business Model: Clicks and bricks multi-channel general merchandiser Financial Analysis: Flat revenue growth,operating costs, 2003 net margin of 1.3%, ample current assets

17. Copyright © 2004 Pearson Education, Inc. Slide 10-16 JCPenney’s Consolidated Statements of Operations and Summary Balance Sheet Data 1999-2003 Table 10.7, Page 598

18. Copyright © 2004 Pearson Education, Inc. Slide 10-17 E-commerce in Action: Lillian Vernon Vision: Reasonably priced products offered by direct mail Business model: Catalog merchant with online capability Financial Analysis: Financial performance has been stagnant

19. Copyright © 2004 Pearson Education, Inc. Slide 10-18 Lillian Vernon’s Consolidated Statements of Operations and Summary Balance Sheet Data 1999-2003 Table 10.8, Page 603

20. Copyright © 2004 Pearson Education, Inc. Slide 10-19 E-commerce in Action: Dell.com Vision: Custom-build computers to eliminate middleman and more effectively meet needs of customers Business Model: Manufacturer-direct, “produce on demand” (demand-pull) Financial Analysis: Impressive revenue growth, high net margins

21. Copyright © 2004 Pearson Education, Inc. Slide 10-20 Dell Computer’s Consolidated Statement of Income and Summary Balance Sheet Data 1999-2003 Table 10.9, Page 609