VG Jones e-commerce - Essay Example

Executive Summary Computerised technology has transformed every aspect of conducting business and nowhere is that more evident than the recognitionby high street retailers that the World Wide Web represents an important venue for conducting business. While this method of doing business seems au courant, e-commerce relies on time-tested methods of smart, ethical business practises to realise profits. VG Jones can leverage its existing business experience as it expands into this new arena. Two of the biggest and most successful retailers online are Amazon.com and Barnes & Noble. Amazon.com is the world’s largest online retailer, offering everything from the latest bestselling novels to garden gadgetry. It “exists” only online and as such is known as a “pure play” operation. Barnes & Noble is the largest bookseller in the United States, with many large high street shops known as “superstores” as well as a significant online operation, though none in the UK. Both companies have simply found new channels through which to earn profits and offer significant lessons for VG Jones as it seeks to expand its presence onto the web. Both websites are examined in detail for lessons that VG Jones can use in its web planning process. As the company ventures into an expanded web presence, the following recommendations can help provide guidance: 1. Make sure the existing business model is a good one. 2. Create a distinctive presence as a UK retailer. 3. Make the online experience enjoyable and informative. 4. Take advantage of “buzzworthy” events. 5. Make the website work for the high street shops and vice versa. 6. Improve online customer service. 7. Improve high street customer service. 8. Use technology wisely. 9. Decide which tech functions to develop in-house and which to outsource to specialists. 10. Be a good online corporate citizen. These recommendations form the backbone of a commonsense plan to bring VG Jones into the new millennium, where an online business presence is not a luxury, but a vital channel for improving profits and growing loyal customers. Introduction Maintaining a profitable business model on the World Wide Web for high street businesses is possible, and increasingly desirable, as a way to maintain a competitive edge and reach out to and retain customers. Web commerce has been around for just over a decade, but it has never been more crucial for high street retailers to take advantage of it (Owens, 2006:24). A recent article in the Birmingham Post, for example, shows the woes facing bookseller Ottaker’s (Duncan, 2006: 24). Like-for-like sales (a measure of constant sales that excludes business expansion activities) were down more than eight per cent already this year; in January alone, the losses tallied ₤4.6 million, compared to a ₤6.9 million profit in the same period of 2005. The company blames “unprecedented price competition” from the Internet as well as supermarkets, particularly over sales of the sixth instalment of the Harry Potter series. A web presence can significantly aid many businesses that will keep their high street, or “bricks and mortar,” shops if simple business rules are kept in mind. When the web can be utilised to increase profits, decrease costs and develop customer loyalty, it can improve high street sales, rather than detract from them. In this, Barnes & Noble, the New York-based book and media seller, has excelled. The company already had expertise in high street retail sales, supply chain management, print catalogues and order fulfilment and was able to merge its online operations quickly, after Amazon.com shot to prominence in the mid 1990s. A popular term for this type of business arrangement is “clicks and mortar,” to show the merging of web-based and real world shopping. Book and media selling, however, are ideal for Internet commerce, as most of the products are small and low weight compared to their price, a measure known as value-to-weight ratio. Books are said, therefore, to have a high value-to-weight ratio. Some items with a high value-to-weight ratio, such as jewellery or designer clothing, do not always sell well online, as customers like to see, feel and touch them first (Schneider, 2004:14). The same can be said of food, although some operations like Tesco in the UK have successfully developed online shopping services as a profitable convenience. Books and media also have strong brand identities -- think Harry Potter again -- so that many customers will come to the website already with the idea to purchase it. The challenge for VG Jones will be in keeping them onsite and enticing them to buy other, untried titles as well. It is here that Seattle-based Amazon.com has excelled. The goal is finding the right way to do business profitably by creating a business model that works. The theory behind a successful business model is simple: Find what it is -- processes, products and/or services -- the company needs to turn a profit. Some early e-businesses found business models unique to the web, such as auction site eBay, which allows users to do business amongst themselves whilst collecting fees for their transactions. Most early e-business failures came because in some fashion, costs outstripped revenues, either through a failure to appreciate distribution systems or anticipate buyers’ willingness to pay shipping costs (Napier, et al., 2003:400). Others relied on advertisers’ willingness to pay to have customers view adverts, having been lured to a well-designed “destination” site by free products or services. But mere exposure failed to bring a return to the advertisers, who quickly saw their money going down the tubes. Even today, advertisers get easily frustrated through online advertising schemes, as witnessed in the widespread discontent that led to lawsuits against Google for not effectively policing fraudulent usage of its “pay per click” cost scheme. VG Jones is looking to continue its existing revenue model -- identifying, marketing to and selling to customers directly. In modern economic terms, that strategy is now referred to as “B2C,” for “business-to-consumer” to distinguish it from B2B or business-to-business and several other arrangements popularised by e-commerce and Internet culture. Schneider (2004:99) identifies six web-based e-business models: web catalogue; digital content delivery; advertising-supported; advertising-subscription supported; fee-per-transaction; and fee-for-service. Advertising and subscription sites also have a variety of transition models as sites adjust their business model to suit the climate in which they do business. The model most relevant for VG Jones is the one to which Amazon.com and Barnes & Noble conform: the web catalogue model. Web catalogues function much like print catalogues, except they can offer a wider -- or narrower -- range of products and are more easily changed or upgraded. This model offers many benefits of convergence between web and high street operations. For example, the U.S.-based ball cap seller, Lids, sells mostly sporting-related headwear through its high street operations, Lids and HatWorld. With many affordable hats and a wide selection of teams, the shops make many impulse sales. The shops, however, are too small to stock the 10,000 different products the company sells and if a customer walks in expecting to find a specific team hat, he may walk out disappointed (Stuart, 2000). Not to worry: The customer can go home and order the hat on the Internet. Loyalty discounts for repeat customers who join the “Passport Club” apply to both types of purchases. The web site is bright and colourful and offers up close, detailed views of the products for further inspection with a click, larger than is standard for a print catalogue. A sizing chart explains how to measure the head to ensure a good fit and reduce the need for returns. One risk with the clicks and mortar approach is channel conflict, or cannibalisation. Schneider defines channel conflict as “whenever sales activities on a company’s Web site interfere with its existing sales outlets” (2004:128). This risk is lessened in a model such as the online and high street book and media seller, because the products being sold are commodities that the retailer acquires through other sources. However, if customers find it easier to buy online than to face surly shop personnel, the high street business could suffer. Integrating an expanded web presence should go hand-in-hand with overall business improvements, as will be discussed below. Webpage Analysis Amazon.com, the parent company of UK spin-off amazon.co.uk, is one of the oldest and best known worldwide of the purely web-based businesses. It is now the world’s largest online retailer, having moved well beyond its primary mission of providing books, music and videos/DVDs at deep discounts (Brohan, 2005). Its fate has been closely watched for years, particularly during the Internet boom years in the 1990s, when the company’s stock soared but it was not turning a profit. Analysts credit the ever-evolving site itself as much as the products it offers. Through the years, Amazon.com moved into the international realm, generally buying up in-country booksellers and distributors that provided it with ready-made databases and infrastructure. The amazon.co.uk website, upon first view, offers a design optimised for its wide range of products, offering quite a bit of information in a limited space without feeling crowded. The customer is able to see at a glance many types of product offerings through section tabs. Specials are prominently displayed to drive customers to various products. The dynamic content changes each time the customer returns to the homepage. On a recent visit, the following items or links were visible on a single screen view: Front and centre, a selection of two books and one CD, personalised and based on the customer’s recent page views, known as “The Page You Made;” Tabs to various product departments, including books, electronics, home & garden, etc…; Links to how-tos, other information on site services such as shipping costs and the Marketplace, where customers and rivals become Amazon partners; A page devoted solely to Harry Potter books and merchandise; A featured toy product; A wedding registry service; Paperback titles on sale; A separate link to other “bargains;” Account and order information; A DVD rental service offer, similar to Netflix; and An index list. And that was just the first screen. The customer is able to scroll down more than four full screens on the opening page, or bypass that and head directly to specific products. The home page offers “something for everyone” and is an excellent indicator of what the company is about. The webpage offers a clean design with similar tabbing and section themes on every page, though the colour scheme varies. All backgrounds are plain white. Most text is black, sans-serif font, with blue for hyperlinks. New and used copies of many items, particularly books, being sold by the Marketplace sellers, can be found easily at the top of the item pages. Wherever they go, users can discover what items are bestsellers. Most page items feature industry and customer reviews. A five-star rating number is also given, as well as the number of reviews that have been posted. New products are often hyped as “must-haves,” and another recent visit produced such an item from the “Kitchen & Home” product line in the top right corner of the home page: an apparently revolutionary spice grinder that cracks up spices as you shake it, the invention of a popular TV chef. The page features pictures of the chef-inventor showing how to use it, and a positive review from an Amazon employee. However, customers were less kind, and at ₤18.97 for essentially a plastic bottle with a ceramic ball inside, page viewers are able to make a more informed decision on what seems a pricey gadget. The less-than-flattering reviews made for rather enjoyable reading -- not so good for Mr. Celebrity Chef, but a boon for Amazon. However, the spice grinder page does provide an excellent example of what Amazon has been able to do well for a commercial site: provide the viewer with an experience. An item is examined in ways one cannot do in many virtual environments, through feedback from others. In an appropriate twist, customers can even rate each other’s reviews as helpful or not. On book and music pages, items from the same author or artist, or related in some way, are often offered as a package deal at reduced prices. Personalisation has been one of Amazon’s most recognised brand services. Amazon continues to develop new searching technologies through its A9.com division. By contrast, the Barnes & Noble site is one-and-the-same for all countries. However, it is primarily designed for North American, especially U.S., customers. The contents of the home page do not change with every return visit or refresh. The first screen is much less graphically populated than the Amazon site. There is a tabbed header similar to Amazon’s. Beneath that, the right-hand column is blank; the centre column prominently features a toy sale and below it, a few books and movies, and a chance to buy a membership discount card. The left column is chiefly for navigation, including a store locater function that asks for a zip code, again reminding international visitors it is primarily an American operation. Indeed, Barnes & Noble is America’s number 1 bookseller, through its series of high street “super stores” and related chains in shopping malls (Milliot , 2006:6). B&N has yet to move outside the books-and-media realm, so there are more links to book sections in the header tabs than Amazon. In the Video Games section, the most prominent feature is the X-Box 360 game console; other features are game titles, all with cover pictures, including previews of unreleased products. On the book product pages, customers find links, but no pictures, of similar books and books purchased by others who also bought that title. There are industry, critic and customer reviews, also based on a five-star system, but no chance to review the reviewers. Unlike Amazon’s personalised recommendations, B&N offers staff recommendations as “Books We Love,” etc… Through another feature, the “Barnes & Noble University,” readers are offered free virtual classes on a variety of topics including gardening, exercise, writing mystery novels, and book discussion groups -- some of which are led by the authors themselves. Both sites are relatively easy to navigate and give viewers plenty of information to sort through. Overall, the B&N site is less cluttered than the Amazon site, with fewer graphical elements per page. It provides less of an “experience,” particularly for book lovers, even though the focus of the site is clearly more on books and less on other items. Amazon is generally more entertaining and engaging, especially with its reviews. Barnes and Noble does promote the web business in its high street shops, including announcing offers only available online (Miletsky, 2002:24). Recommendations VG Jones can learn much from both websites as it endeavours to expand and improve on its own web presence. The company is looking toward a hybrid business model similar to B&N’s clicks and bricks and it is through this that the company can hope to seize some advantage over Amazon UK. Many of the decisions to be made during the web design and building process will involve knowing and catering to the target audiences, so it is crucial for the company to know who those targets are. Specific site features can be introduced initially for the core targets, such as a special section for children’s books, much as a physical location is laid out. If later experience shows emerging new patterns, new features can be added. One benefit of web pages over print catalogues is the ease with which they can be upgraded -- though there is always a cost involved for technology services. The specific recommendations, most of which are intertwined with one another in both theory and implementation, are as follows: 1. Thoroughly examine the existing business model for the high street shops. Identify key target markets for both high street and online customers, noting where the two intersect. Find efficiencies in all areas of distribution, as Amazon still does 12 years in (Deutschman, 2004). 2. Create a distinctive online and high street presence as a UK retailer. Amazon’s home pages and features differ from country-to-country based on local tastes, but it has no high street presence to take advantage those differences to build loyalty. Be more aggressive in promoting local talent by hosting in-store and online events with UK authors. This represents a key brand identity VG Jones can develop (Schneider, 2004:132). 3. Continually find ways to make the online site a real experience for book, music and movie lovers. These represent the best way to build customer loyalty, as they are already loyal to their favourite media and brands, and it makes for better connections between seller and buyer, according to former B&N editor Jack Aaronson (2005). VG Jones may not need as many services as Amazon, but it can offer more than Barnes & Noble does. 4. Take advantage of the “buzz” products by offering both online and in-store features and promotions. Harry Potter, The Da Vinci Code, the Shopaholic novels -- all generate significant (and free) media coverage. Though Amazon has become the pre-order channel of choice for Harry Potter and supermarkets offer day-of-release cut-rate prices, local book shops are still the place for family events, or the hard core “queue up at midnight” fan base. 5. Use the high street shops to sell the website and vice versa. Make both channels work for each other. Train staff to direct customers online for titles not available in the shops. Make online purchases returnable to the shops, and train staff to handle them efficiently. Advertise across both channels. 6. Do Amazon one better and make online customer service a reality. Amazon touts that customer service for online orders can be done through informed self service. However, customers still worry about their purchases and often want a number to call (Grimes, 2001:53). This represents a considerable commitment of resources as well as an opportunity. 7. Follow the online customer service commitment with policies and training ensuring that in-store customer service is second to none. Many customers are frustrated with poor service in high street shops (Roberts, 2005:23), and this represents a singular opportunity to create a competitive advantage. Once customer service commitment is in place, start advertising it. Make customers feel valuable and they will come back for more. Make them want to pre-order Harry Potter from VG Jones because they know if anything goes wrong, VG Jones will make it right, and quickly. 8. Use technologies wisely. Avoid fads, but don’t ignore potential new technologies that can bring a return on the investment. Web page design and coding languages are constantly changing, largely to better serve e-commerce needs. Better product tracking, through RFID (radio frequency identification) tags, may be an answer to order fulfilment needs. Security issues represent very real concerns that must be addressed. The technology used should be reliable, fast and upgradeable. 9. Decide which technology functions can be done in-house and which are better off outsourced to specialists. Many businesses start out utilising outside talent, only to find they eventually need to grow their own. 10. Remember that online business is still business. Practises valued in the high street and corporate operations should extend online as well, including legal and ethical concerns. Legal notices should be clearly identified and readable; using web technology or design to mislead or confuse customers can have serious financial consequences (Schneider, 2004:283). An “About Us” feature on the website can be the place to tout the company’s history as well as declare its ethical and corporate responsibility values. Barnes and Noble.com features a link offsite to its separate corporate webpage where these issues are discussed in detail (http://www.barnesandnobleinc.com/). Summation Technology represents a new way of doing business the old-fashioned way. It has created e-commerce, and some new business models. But the most successful players, such as Amazon.com and Barnes & Noble, nevertheless operate under time-tested revenue-generating principles. A well-designed, technologically stable and user-friendly web presence can go a long way towards building the VG Jones brand name online as well as in its high street shops. As with all business expansion or reconfiguration schemes, this requires careful planning and flexibility during the implementation. It is hoped that VG Jones can learn from these two competitors to carve out its own distinctive presence online and re-assert itself as a profitable high street retailer. References Aaronson, Jack 2005, Customer Loyalty Versus Self-Service. ClickZ Experts on ROI Marketing, 6 May. Retrieved March 31, 2006 from http://www.clickz.com/experts/crm/ traffic/article.php/3502531. Brohan, Mark 2005, The Top 400 Guide. Internet Retailer, June 2005. Retrieved April 2, 2006 from http://www.internetretailer.com/article.asp?id=15099+ Deutschman Alan 2004, Inside the Mind of Jeff Bezos. Fast Company Magazine. Issue 84, August 2004, page 52. 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