Page 172 - Electronic Commerce

Selling on the Web

Maytag, the manufacturer of home appliances, found itself in the same position as
Levi Strauss. It created a Web site that allowed customers to order directly from Maytag.
After fewer than two years of making direct online sales and receiving many complaints
from its authorized distributors and resellers, Maytag decided to incorporate online
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partners into its Web site store design. Now, after searching and gathering information
about specific products from the Maytag Web site, a customer can click a Where to Buy
link and be directed to a nearby Maytag retailer.
Both Levi’s and Maytag faced channel conflict and cannibalization issues with their
retail distribution partners. Their established retailers sold many times the dollar volume
than either company could ever hope to sell on their own Web sites. Thus, to avoid
angering their retailers, who could always sell competing products, both Levi’s and Maytag
decided that it would be best to work with their retail partners. Similar issues can also
arise within a company if that company has established sales channels that would
compete with direct sales on the company’s own Web site.
Eddie Bauer, a retailer of clothing and outdoor gear, was selling through a catalog and
retail stores located primarily in major shopping malls when it started selling products on
its Web site. The company believed that it could make online sales more attractive by
allowing customers to return unwanted products that they had purchased online at the
retail store locations. The managers of these stores were concerned about the time it
would take for their sales associates to process these returns and about having to add
the items to their stores’ inventories. In a retail store operation, managing labor costs
and inventory are very important in achieving store profitability. The managers at the
company’s catalog division were also worried. They feared that sales through the Web site
would cannibalize sales through the catalog.
By making adjustments in the managers’ compensation and bonus plans, Eddie Bauer
was able to convince all of the managers to support the Web site. The retail store
managers were credited with an inventory and labor cost allowance for each Web site
return they handled. The catalog division managers were given a credit for existing catalog
customers who purchased goods from the Web site. By giving their customers access to
the company’s products through a coordinated presence in all three distribution channels,
Eddie Bauer was able to increase overall sales to those customers. This type of solution is
called channel cooperation.

Strategic Alliances
As you learned in Chapter 1, when two or more companies join forces to undertake an
activity over a long period of time, they are said to create a strategic alliance. When
companies form a strategic alliance, they are operating in the network form of
organization that you learned about in Chapter 1. Companies form strategic alliances for
many purposes. An increasing number of businesses are forming strategic alliances to sell
on the Web. For example, the relationships that Levi’s created with its retail partners by
giving them space on the Levi’s Web site to sell Levi’s products is an example of a
strategic alliance.

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