Online Department Store Industry Lau, Hee-hang Li, Rui Montet, Francis Nagarajan, Sainath Major Online Department Stores Traditional Department Stores: Discount Stores: •Macy’s •Neiman Marcus •Nordstrom •Bloomingdale’s •Sears •Kohl’s •May (Kaufmann’s, Hecht’s) •JC Penney •K-Mart •Wal Mart •Target •Ames Potential Competitors: •Specific Stores: CompUsa, BestBuy •Online Stores: Buy.com, Shopping.com, Yahoo!shopping Overview • KMART • Browse + Select Items and add to Shopping Cart • Enter Shipping and Billing Information • FREE Delivery • SEARS • Search + Compare Items • Contact: Online / Toll Free / Nearest Store • Delivery to certain areas (based on ZIP code) • WALMART • Search + Compare Items and add to Shopping Cart • Checkout OR Speedy Checkout (MyWalmart) Sample Front Page – Walmart, Sears Signup Page - MyWalmart Shopping Menu Customer Profile • Who are the customers – JC PENNEY: The 2 out of 5 most important segments • “Starting Out with JCPenney - between 18 and 35 years old; usually single, or young families with no more than one child” (19%) • “Modern Spenders - between 35 and 54 years old; most often they are married with up to two children” (27%) • “The median annual household income of these targeted customer segments is $48,000.” Source: http://www.jcpenney.net/company/jcpinfo/ Customer Profile • Who are the customers – KMART: Consumers looking for “price, quality, service, product mix and convenience” Source: KMART Corp., 10K, April 1999 – SEARS: Customers looking for “competitive price and strong assortment of national brands complemented with outstanding proprietary brands …throughout all stages of their lives via any delivery channel they select” Source: SEARS ROEBUCK & Co., 10K, March 1999 – WALMART: Customers looking for “low prices on quality merchandise that offers exceptional value.” Source: Wal Mart Stores Inc., 10K, April 1999 • 45% of customers are women Customer Acquisition • How they attract customers – Strategic Marketing Alliance with ISPs: Getting them to the front door! • WALMART + AOL Marketing Alliance – Money Back Offer ($5 KMART Cash Card for each item use @ Store) – Free Shipping (KMART) – Affiliation with Web Portals (KMART-Yahoo!, Macys-Yahoo!, mall.com, Ames-Excite) – School Programs (JC Penney $30 m to JCPenney CAN DO Afterschool) (Target Take Charge of Education $18 m) – Broadcast Advertising (Most) – Direct Mail (JC Penney) – Referrals (KMART’s “Tell a Friend”) – Digital Postcards (Bloomingdales, Ames) – Shopping Spree Sweepstakes (SEARS, Bloomingdales) Value Proposition • Value Added Relationships – STRATEGIC Value: The Walmart-AOL Marketing Alliance • Value for AOL: new segments of mass market • Value for Walmart: greater success for the site. New AOL 5.0 for Walmart customers will have automatic access to the Walmart site. • Value for Walmart Customer: Sense of security and identification with trusted brand name. Signaling. • Value Added Features • Checking Order Status Online (TARGET) • “a high level of customer service, excellent credit offerings, installation and service.” (SEARS ROEBUCK & Co.) • Online Shopping Assistants (SEARS) • Multilingual (Neiman Marcus – Japanese, Bay - French) • Multiple Ship To Addresses (Neiman Marcus – handled offline) Value Proposition • Additional Value Added Features – – – – – – Match Lowest Competitor Price (WALMART) Rollback Prices (WALMART) Travel Services (Target, WALMART) True Internet Color (Bloomingdales – for garments) Clubs for Special Occasions (TARGET “Club Wedd” for weddings) Online Photo Center (WALMART) • Store, Share, Download, Print (@ $0.86/copy), Save, Email, Gift Printing – Wish List, Reminder List, Gift Registry, Purchase History (MyWalmart, JC Penney, SEARS) – Store and Allied Services Locator (WALMART-Pizza Hut) – Free Internet Access, Webpage, Email (KMART-Bluelight) – Horoscope (Neiman Marcus) – Personalized Tailoring (Neiman Marcus – “Pick-Me-Up”) Price Comparison • Sample prices – Fisher-Price© Activity Dome • TARGET – – – – Unit Price Standard Shipping(7-10) Rush Shipping(4) Express(1-2) $49.99 $ 8.95 $13.95 $21.45 • WALMART – – – – Unit Price Standard Shipping(5-8) Premium Shipping (3-5) Express Shipping (2-3) $49.96 $ 4.00 + $0.97 per item $ 6.00 + $2.47 per item $12.00 + $5.97 per item • FISHER-PRICE.com – Item NOT Available • Jeannies Kids Club on Yahoo! Shopping – List Price – Shipping (calculated) – Standard Shipping Rates handling – Express Delivery Rates $35.99 $14.05 (@ 13 lbs.) $ 0.70 cents per pound + $4.95 packing and $20.00 added to Standard for Next Day Air $10.00 added to Standard for 2nd Day Blue Customer Experience • Product Satisfaction – Returns at Brick and Mortar Store (Most) • Channel Management – Online store and catalog complement each other (JC Penney) • Order catalog online • Shop from a catalog – enter item number online Repeat Business • Turning one-shot customers into repeat customers – MyWalmart: Increases stickiness • Captures personal information, payment options, billing information and customer preferences • Reduces transaction cost – E-mail updates and special offers for registered customers (KMART, SEARS, JC Penney) – Online logistics support. E.g. online repair scheduling and parts ordering (SEARS) – $5 KMART cash card for each item ordered – Focus on private brands to build customer loyalty and encourage repeat purchases (JC Penney)