Page 79 - Electronic Commerce

Chapter 1

In recent years, Hal has become concerned that the business is no longer growing. The
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store is facing increasing competition from hardware chains such as Home Depot and Lowe’s.
These national chains have opened many new stores, and they are larger, carry more items,
and offer lower prices on some items. The competition is fierce; for example, Hal’s Hardware
closed its lumber department because of this competition. The national chains buy lumber in
such large quantities that they can offer far lower prices. Hal matched his larger competitors’
prices, but found he was unable to earn a profit on lumber sales and that department consumed
a large amount of floor space in the store.
Hal was worried that this sort of problem could develop in other departments, so he began
looking for ways to add value to the customer experience, especially in ways that the national
chains were not willing or able to do. For example, Hal believes that most people want to try out
a new power tool in person before they spend hundreds of dollars on a purchase. Thus, Hal’s
Hardware created a tool demonstration area staffed with salespeople who are experts in power
tool operation. For each major type of power tool (drills, power saws, joiners, grinding tools, and
so on), Hal created a small booklet of hints for using that type of tool. Hal’s salespeople give
these booklets to customers as free handouts. They also sell Hal’s own low-cost instructional
DVDs.
Hal’s Hardware currently has a Web site that includes information about the company and
some store information, such as directions to the store and hours of operation. Hal is thinking
about expanding the Web site to include online shopping. He is hoping that customers might
find the Web site to be a useful way to order items, see whether items are in stock at the store,
and comparison shop among different brands of a particular item. Hal is also hopeful that the
Web site can reach customers who are not located near the store.
Hal has been talking with Sarah Johnson, his most senior store manager, about his idea for
adding online sales to the Web site. Sarah has been with the company for 20 years and has
organized a number of the classes held on Saturday afternoons in the tool demonstration area.
After hearing Hal’s ideas, she expressed even more concern about online competition than local
competition. Some of the tool manufacturing companies that supply Hal’s Hardware are talking
about selling directly to customers through their own Web sites. None of the major suppliers has
done this yet, but Sarah is worried that it could occur in the future. The store also faces compe-
tition from companies that sell online or through the Amazon.com Web site.
Sarah tells Hal that she’s concerned that going online with their entire product line might
not make any sense because the competition for common tools is likely to be just as fierce
online as it is in the store now. She has noticed that there seems to be a solid core of cus-
tomers who are interested in serious woodworking and who show up for a lot of the classes.
These customers buy some of the best, and most expensive, tools that the store sells. Many
times, she finds that she has to special order tools for these customers when they are working
on a specific project.
Sarah suggests to Hal that they might want to take the business in a different direction
online and sell just the high-end specialty tools to dedicated woodworkers and cabinetmakers.
These items yield higher margins than the regular tools. Furthermore, the salespeople who Hal
has hired are eager to develop videos and instruction booklets that would appeal to this more
skilled and specialized audience. Sarah suggests that they call the new online business Hal’s
Woodworking to distinguish it from the general hardware store business.

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