Part one: Click and Mortar vis-à-vis Dotcom retailers
The advent of information technology significantly revolutionised the retail business and the supply chain networks. Technology put pressure on business to develop platforms that would allow customers to purchase various goods and services online. This revolution resulted into traditional physical warehouses developing parallel online consumer platforms to increase profits (Bozarth & Handfield, 2015). This model of business is called click and mortar model and involves brick and mortar business to open an online store. However, this reverse of this model (click and brick) involves online stores developing physical presence. This paper explores the differences that exist between these business models.
Challenges that the two business models face
Click and brick business have faced various challenges than click and mortar stores. This claim is evident in Casual Corner’s remarkable integration of the internet as a means of enriching its customer service delivery. The company has over 1000 physical stores spread in various parts of the United States. The click and mortar company made a decision to build a stable website that could allow customers to buy products online. The company keeps online buyers apprised of developments that take place within its stores such as promotions and new products. Bowman (2001) reports that stores that rely primarily on the internet are having a difficult time in the absence of physical stores.
E-commerce companies began to fail when orders started arriving late, sometimes incorrect while in some cases they never arrived at all. This development reduced the confidence of consumers significantly. Some of these online companies lack basic supply chain expertise to advertise on the best supply chain options. Some of the online-only stores have experienced setbacks in the online retail industry (Bozarth & Handfield, 2015). This encounter has prompted some of these companies to have physical presence. For example, Penney Co. Inc. lost $40m on its internet in 2000. Amazon.com that offers the largest online retail network has never made profits. The company is contemplating have physical stores where customers can acquire their services.
Transiting into either an online or storefront presence
Using existing distribution network to transit into traditional or inline retailing presents various issues. In some cases, traditional retailers do not have the capacity to effectively market their goods online and deal with a large network of online customers. This challenge requires traditional retailers to hire online marketing experts so that they can realize significant online sales (Bozarth & Handfield, 2015). On the other hand, online-only stores that seek to develop physical stores can either acquire existing physical stores or construct new stores. Another issue in this transition is the data interface that exists between traditional retailing and online retailing. Online retailing offers is usually centralized while traditional retailing comprises stores with many distribution centres.
Differences in customer returns
Customer returns in click and mortar companies is lower compared to click and brick companies. In physical buying, the customer interacts with the item and buys it after attaining full confidence in its utility. On other hand, online retailing is characterized by utilization of the good after it has been purchased. First time interaction between the buyer and the seller takes place after purchase. Bowman (2001) reports that returns in click and brick companies stands at 20%. Most retailers allow customers to return goods on their website. Web-based retailers are yet to cope with the high rate of returns. The high rate of returns in online retailing causes delays the supply chain.
Characteristics of store that provides best customer satisfaction
A store that operates on a hybrid model has a competitive advantage over her rivals that have traditional-only or online-only options. A hybrid business model that combines the two options give customers a variety of choices. Web purchasing is a convenient way of buying goods and services since it allows customers to return goods that they don’t need. The use of websites enables consumers to make decisions on the types of goods they need as well as view stores that offer varied products. A store that ensures proper management of order gives customers the best satisfaction. Bowman (2001) added that retailers should accept orders regardless of the platforms through which they are sought to ensure that customers have one similar experience with an individual retailer. For example, an individual that buys a commodity from Amazon.com may seek its online platform and/or physical stores. The experience of such a customer should be the same across the distribution channels.
Calculating the cost that SportStuff.com incurs from leasing of warehouses in St. Louis.
Thus, F = 320,000 + 200,000+ 260,000+ 220,000+ 350,000+ 175,000
Since F = 1525000, the range of F is 0-2 million
The inventory cost for this range is given by the expression $250,000Y + 0.310F
Since Y = 1
Inventory cost = $ (25000+0.310*1525000)
= $ 705000
The shipment cost is given by (1525000/4)*3.5 = $ 1334375
Total expenses = $ 705000+1334375
If the cost of transportation doubled, I would advise SportStuff.com to contemplate other supply chain options. The high cost of inventory would result into limited profit margin. This may limit the company’s ability to sustain its operations.
Bowman, R. J. (2001). Click-and-Mortar Retailers Prevail While Dotcoms Fade. Global
Logistics & Supply Chain Strategies.
Bozarth, C. C., & Handfield, R. B. (2015). Introduction to operations and supply chain
management. Prentice Hall.