Page 405 - Introduction to Electronic Commerce and Social Commerce

Case 12.1: EC Application: Aldi Supermarket Trying E-Commerce in the UK 393

The company is a discounter, so profitability is difficult to E-Commerce Failures
achieve. The profit margin is very low. The competition is
very strong, especially against well-known brands in the UK By examining the economic history of previous innovations,
(e.g., Primark). the failure of EC initiatives and EC companies should come
as no surprise. Three economic phenomena suggest why this
is the case.
The Solution Some of the specific reasons for failure in B2C EC are: lack
of profitability, excessive risk exposure, the high cost of cus-
Aldi’s major competitors do not offer online services. Aldi tomer acquisition, poor performance, and poor website design.
decided to go online since the company concentrates on sell- Two additional financial reasons are lack of funding and incor-
ing nonperishable goods such as wines and non-foods. By rect revenue models. An example of a failure is the Webvan
going online, the company hopes to reach more customers case—an express delivery company that lost $1.2 billion—the
and have its brand more be more familiar. The first product largest of any other bankrupt dot-com. Another bankrupt com-
went online in early 2016 (it was wine). Clothing and electri- pany is Kozmo, whose story is available in Online File W12.1.
cal products will go online in 2017.

E-Commerce Successes
The Results
Despite the failure of hundreds of start-ups and thousands of EC
Given that the EC experiment started in late 2015 and it is the projects, EC is alive and well, and continues to grow rapidly
first of its kind in the UK, the results are not known. According (after a short pause from 2000 to 2002), as discussed through-
to Hobbs (2015), the move is both a risk and an opportunity. out the text.
The company may increased its cost and turn to EC to be prof- EC success stories abound, primarily in the specialty and
itable only in several years. niche markets. One example is Puritan’s Pride, Inc. (puri-
Sources: Based on Hobbs (2015), Baldwin (2015), and tan.com), a successful vitamin and natural health care prod-
on Chapman (2016). uct store. Another is GrubHub, Inc. (grubhub.com), which
allows people to order food online for either pickup or deliv-
Questions ery (previously CampusFood.com). Also doing very well are
1. Read information about the case and identify all the risks travel sites, such as Expedia, Trip Advisor, and Priceline.
and opportunities. Alloy Apparel (alloy.com) is a successful shopping and
2. The company decided against EC in 2014, but changed its entertainment portal for young adults. As pointed out in
mind a year later. Find the reasons why. Chapter 3, online services such as stock trading, travel and
3. What factors can determine the success and what factors hospitality, online banking, and more are commanding a
can determine the failure in this venture. major part of the transactions in their industries. For a com-
parison of how these and other thriving online businesses have
Note: You need to read the sources to answer the questions. translated critical success factors (CSFs) from the old econ-
omy into EC success, see Table 12.3. EC successful compa-
nies such as Priceline, Netflix, Amazon.com, Facebook, and
Factors that Determine E-Commerce Success Google are becoming major players in their industries, mak-
ing their shareholders very rich.
The economic capabilities of EC described earlier influence Following are some of the reasons for EC success and
some industries more than others do. The success factors of suggestions from EC experts and consultants on how to suc-
EC depend on the industry, the sellers and buyers, and the ceed in EC.
products sold. Furthermore, the ability of sellers to create
economic value for consumers will also determine EC suc- Strategies for EC Success
cess. When deciding to sell online, looking at the major fac-
tors that determine the impact of EC can assist in evaluating • Thousands of brick-and-mortar companies are adding
the chances for success. online marketing and/or procurement channels with great
Four categories of e-market success factors exist: prod- success. Examples are Uniglobe Travel (uniglobetravel.
uct, industry, seller, and consumer characteristics. com), Staples (staples.com), Target (target.com), Home