Page 173 - Electronic Commerce

Chapter 3

Earlier in this chapter, you learned about Yodlee, the account aggregation services
provider, and the online bank sites that offer these services to consumers. The
relationship between Yodlee and its bank clients is another example of a strategic alliance.
Yodlee can concentrate on developing the technology and services while the banks
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provide the customers. Account aggregation services decrease the likelihood that
customers will consider moving to another bank, which helps the bank hold on to its
customers. Thus, both parties benefit from the strategic alliance.
Amazon.com has forged a number of strategic alliances with existing firms. As you
learned in Chapter 1, Amazon joined with Target to sell that discount retailer’s products
on a Target-branded Web site. Amazon.com has also formed strategic alliances with many
smaller companies to offer their products for sale on the Amazon.com Web site.

Luxury Goods Strategies
Some types of products can be difficult to sell online. This is particularly true for expensive
luxury goods and high-fashion clothing items that customers generally want to see in person
or touch. Many luxury brands hesitated to offer their products online for fear of alienating the
upscale physical stores that sold their products. For example, clothier Lilly Pulitzer launched
its Web site in 2000, but did not sell on the site until 2008, fearing that it would lose some of
the luxury cachet it derived from limiting its sales outlets.
Some upscale brands overcome this obstacle by limiting the range of their online
offerings. For example, luxury brand Chanel, which launched its retail site in 2010, and
Calvin Klein do not offer all of their products online. Chanel sells fragrance and skincare
products online but not its clothing lines. Calvin Klein does not sell its couture line online,
but it does sell its ready-to-wear lines on its Web site.
In large part, luxury retailers limit their sales online out of concern that some or
all of their products’ features must be experienced in person and cannot be adequately
represented online. One industry that has overcome this obstacle, however, is the retail
jewelry business. After years of slow online sales, jewelry sales have grown rapidly in
recent years. Retailers such as Blue Nile and Ice.com operate highly successful online
jewelry stores. Even general retailers such as Costco offer $50,000 diamond rings online.
Helping these stores overcome resistance is the general availability of independent
appraisal certificates for diamonds and other high-priced jewelry items. Another
important factor is the stores’ well-advertised “no questions asked” return policies.

Overstock Sales Strategies
In the fast-changing clothing business, retailers have always had to deal with the problem
of overstocks—products that did not sell as well as hoped. Many retailers use outlet stores
to sell their overstocks. Lands’ End found that selling overstock items as clearance
specials on its Web site worked so well that it was able to close some of its physical outlet
stores. Many other retailer Web sites include a link to separate sections for overstocks or
clearance sales of end-of-season merchandise.
An online overstocks store works well because it reaches more people than a physical
store and it can be updated more frequently than a printed overstocks catalog. Overstocks

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