Brick-and-mortar stores

Of course, true competitive advantage is usually the result of making coordinated innovations on multiple fronts. Through the combination of its iPod and iPhone products with its iTunes business model, Apple created about 70 billion in shareholder value in just three years. Amazon s business model innovation of cutting out the brick-and-mortar store is coupled with service innovations such as 1-Click, Recently Viewed Items, Customer Reviews, and Books You Might Also Like. This is a taste of how these companies have innovated across the board. 

Insight Identify patterns and trends that are comprehensible so that action can be taken based on the insight. For example, characterize the heavy spenders on a website or people who buy product X. By understanding the underlying patterns, one can personalize and improve the website. The insight may also lead to decisions that affect other channels, such as brick-and-mortar stores placement of products, marketing efforts, and cross-sells. 

Nearly two-thirds of all North American households have purchased online. Although the majority of retail sales still take place at traditional brick-and-mortar stores, online sales overthe next five years are expected to grow at a compounded annual growth rate of 14% (Forrester, 2005). The fast growth rate of Internet retailing provides new challenges for management. 

Meanwhile, Redbox, a unit of Coinstar Inc., operated vending machines that rented DVDs for as little as 1 a night. Despite its best efforts. Blockbuster s brick-and-mortar stores could not match the low-cost operating models of Netflix and Redbox, leading to its bankruptcy (see financial results in Table 2-5). 

PRODUCT VARIETY A company selling online finds it easier to offer a larger selection of products than a bricks-and-mortar store. For example, Walmart.com offers a much larger selection of prodncts than Wahnart stores do. Offering the same selection at a store would require a huge location with a correspondingly large amount of inventory. 

CUSTOMER EXPERIENCE Online sales affect cnstomer experience in terms of access, customization, and convenience. Unlike most retail stores that are open only during business hours, the Internet allows a customer to place an order at any convenient lime. In facL W.W. Grainger has observed a surge in onhne orders after its bricks-and-mortar stores close. Online sales also allow a firm to access customers who are geographically distant. Using the IntemeL a small specialty retail store located near Chicago can reach customers aU over the United States—or even the world. Access to online sales is limited only by the customers access to the IntemeL... 

Association of Chain Drug Stores, 2006). The new millennium also saw the implementation of Internet pharmacy sites, many of which are owned and operated by traditional brick and mortar chain pharmacy corporations. 

One development is that many bricks-and-mortar retailers are adding their own online channels (Tessler 2000). So a manufacturer that chooses to distribute only through, say, Walmart may yet obtain an Internet sales presence (albeit still an intermediated one) through Walmart.com. Here any channel conflict would be between Walmart s stores and online divisions. More generally, a modem manufacturer may simultaneously manage a variety of its own channels (e.g., online and company stores), sell through independent bricks-and-mortar retailers that also have online channels (e.g., Walmart, Macy s, Costco, etc.), and also sell through independent online retailers (e.g., Amazon.com). 

The location of a retail outlet or service centre has traditionally, and for obvious reasons, been determined by the proximity to customers, or expected growth of population (and future customers) in the region. The opening of a warehouse, such as Ikea, in the proximity of a town has been known to inCTease the revenue in that town. With the impact of e-commerce the traditional bricks and mortar locations are now to some extent challenged by clicks and mortar , nonetheless large new super stores and shopping malls continue to open and to prosper. 

This provided opportunities for disintermediation in the value chain, and enabled companies like Amazon.com and Dell to set up online retail stores bypassing traditional brick-and-mortar retailers and distributors. Nonlinear information access also contributed to overall efficiency, as the supply chain became more transparent. 

The trend for order fulfillment among most online e-grocers is to establish large, automated distribution centers for home delivery in each major market they serve, while some brick-and-mortar chains have employed only in-store order fulfillment. 

We can also contrast Blue Nile, with its online retailing model for diamonds, with Zales, which sells diamond jewelry through retail outlets. Blue Nile has emphasized the variety of diamonds available from its website and the fact that its margins are significantly lower than its bricks-and-mortar competition. Customers, however, have to wait to get their jewelry and do not have any opportunity to touch and see it before purchase (Blue Nile does provide a 30-day return period, though). At Zales, in contrast, a customer can walk into the retail store, be helped by a salesperson, and leave immediately with a diamond ring. The amount of variety available at a Zales store, however, is limited. Whereas Blue Nile offers more than 90,000 stones on its site, a typical Zales store carries fewer than a thousand. 

Facility Costs. The online channel allows the Dell supply chain to lower facility costs relative to the retail channel because Dell incurs only the cost of the manufacturing facility and warehousing space for components. A bricks-and-mortar retail chain must pay for the distribution warehouses and retail stores as well. 

A hardware manufacturer can use the tailored approach outlined earlier to take advantage of the strengths of both online sales and traditional retail and distribution channels. Gateway failed in its effort with retail stores because it did not use any of the supply chain strengths of the bricks-and-mortar channel. Instead of just helping people with configuration at its retail stores,... 

To counter these drawbacks, Amazon has exploited several opportunities on the Internet to attract customers and increase revenues. Amazon attracts many customers by offering a selection of millions of books. Customers can search for hard-to-find books or those of special interest. A large physical bookstore, in contrast, can carry fewer than a hundred thousand titles. Amazon also uses the Internet to recommend books to customers based on their purchase history. Amazon also provides reviews and comments from other customers on the titles available. New titles are quickly introduced and made available online, whereas in a bricks-and-mortar bookstore chain, all retail stores must be stocked. 

As the economy tightened during the holiday season of 2007, the differences in performance between Blue Nile and bricks-and-mortar retailers were startling. In January 2008, Blue Nile reported a 24 percent jump in sales during its fourth quarter. For the same quarter. Tiffany posted a 2 percent drop in domestic same-store sales, and Zales reported a 9 percent drop. The chief operating officer of Blue Nile, Diane Irvine, stated, This business is aU about taking market share. We look at this type of environment as one of opportunity. ... 

Whether or not a brick is frost-proof is measured by allowing the brick to absorb water and subsequently storing it at temperatures below freezing. When cracks are formed the brick is not frost-proof. An important aspect as far as processing is concerned is the absorption of water. When a brick absorps too much water this is abstracted from the mortar and as a result the bond between the brick and the mortar will be less strong. 

Consider the following neutralization reaction. Hydrochloric acid, HCl, is a common household and laboratory acid. Muriatic acid is the common household name of hydrochloric acid. It is often sold in hardware stores to be used in masonry work to remove excess mortar from brick. Sodium hydroxide, NaOH, is a common household and laboratory base. The common name of sodium hydroxide is lye. It is the primary component of many drain cleaners. Figure 15.1 shows litmus tests before and after mixing these substances together. 

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