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The Snakes and Ladders Game in E-Business
supplies, logistics, and distribution. Moreover, AHD was to be the exclusive hardware supplier for the new venture. Americanhome.com obtained DGGLWLRQDOYHQWXUHFDSLWDO¿QDQFLQJWRVXSSOHPHQW the initial equity funding by AHD. The CEO of AHD joined the board of directors of the venture Americanhome.com.
AHD saw Americanhome.com as a quick, fast and easy way to ramp up its e-business to ultimately become a leader in online hardware retailing. Moreover, an initial public offering by Americanhome.com in the future would also prove lucrative for AHD with its minority stakeholder status. AHD offered stock options of American-home.com for its dealers. By early 2000, over 25,000 of AHD’s products were offered through Americanhome.com, but this number increased in subsequent months. AHD and Americanhome. com launched a joint-marketing campaign to pro-mote their online offering. AHD also decided to install in-store kiosks in its dealer locations so that the customers would be able to place electronic orders during their store visits. The kiosk program ZDVLQWHQGHGWRJHQHUDWHWUDI¿FIRUERWKWKHUHWDLO stores and the Web site, leveraging AHD’s brand name. Kiosks were also expected to enable sell-ing of products that was not ordinarily stocked at AHD’s retail stores.
Though the AHD-Americanhome.com deal started off on a good note and showed signs of a great partnership, strains appeared in their re-ODWLRQVKLSZLWKLQWKH¿UVW\HDU$PHULFDQKRPH com morphed into a site that sold several other products ranging from drawer pulls to electronic toothbrushes as well as appliances such as dish-washers. Americanhome.com also expanded its offerings into categories such as cooking, garden-ing, and home décor. Further, Americanhome.com added online features for connecting customers with contractors, handymen, movers, plumbers, and other home improvement service providers. These product and service line expansions were partly prompted by the less-than-expected hard-ZDUHVDOHVWKDWZHUHJHQHUDWHGLQWKH¿UVW\HDURI
operations. Expanding products and services at Americanhome.com meant that the company had to get into relationships with other manufactur-ers and distributors, some of whom were direct FRPSHWLWRUVIRU$+`7KLVDOVRFRQÀLFWHGZLWK VRPHSURYLVLRQVRIWKHFRQWUDFWXDOIXO¿OOPHQW agreement between AHD and Americanhome. com.
AHD and Americanhome.com terminated their co-marketing agreement. AHD also stalled the plans for in-store kiosks. Americanhome.com DOWHUHGLWVORJRZKLFKFORVHO\UHÀHFWHG$+`¶V logo) and also dropped the link to AHD’s name and Web link from its site. This was followed by AHD’s CEO resigning from the Americanhome. com’s board of directors.
Expanding E-Business Initiatives
7KHUHZHUHRWKHUVLJQL¿FDQWWHFKQRORJ\DQGH business initiatives that happened at AHD during the period 2000-2001. AHD formed strategic partnerships with a B2B marketplace for lawn and garden products. Through this partnership, the dealers of AHD got the ability to make online purchases for various lawn and garden products. AHD also joined a global retail exchange with retail giants from all over the world to increase its online presence. AHD also entered into an al-liance with FindMRO.com, a Web site launched by W.W.Grainger to have access to over $5 million KDUGWR¿QGPDLQWHQDQFHUHSDLUDQGRSHUDWLQJ supplies. Through this partnership, AHD’s dealers could access and order MRO supplies by simply accessing AHD’s intranet.
CURRENT CHALLENGES
%\$+`ZDVDWDFUXFLDOLQÀH[LRQSRLQWLQ its digital transformation efforts. The business-to-business e-commerce efforts had proven to be fairly successful. AHDCONNECT provided $+`DVZHOODVLWVGHDOHUVZLWKVHYHUDOEHQH¿WV
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The Snakes and Ladders Game in E-Business
It helped streamline the supply chain, rationalize inventories, reduce transaction costs, and enhance AHD-dealer communications. On the other hand, AHD’s efforts to directly sell to end customers did not produce desired results. The partnership approach that AHD took to Web retailing was a total failure.
Nathan had several issues buzzing over her mind. Should AHD try to continue its efforts to sell hardware products online? If so, how should it go about establishing its Web presence? How should the shipment and returns be handled for online orders? While hardware sales on the Web have been limited, the Internet has emerged as a key medium for consumer research and knowl-edge base for DIY projects. Failing to have a retail presence on the Web might prove costly in the long run as other hardware retailers have HVWDEOLVKHGDVLJQL¿FDQWSUHVHQFHRQWKH:HEDQG continue to sell home improvement goods online. However, questions still remain about customer
A few colleagues had pointed out other busi-QHVVWREXVLQHVVDSSOLFDWLRQVWKDWFRXOGEHQH¿W AHD. Having built a foundation through AHD-CONNECT, AHD could invest in advanced data warehouses and business intelligence systems to capitalize on the vast sales data that could be captured through its 4,500 stores. Further, AHD could use the Web to enhance its procurement and supplier relationships.
AHD’s voyage in e-business has been marked by both ascending and descending moves, placing it at the crossroads. Like the snakes and ladders game, while some of the e-business initiatives have helped AHD ascend, some others had failed, forc-ing AHD to go back to scratch. AHD has to plan its future moves carefully, in light of its own past experience as well as the position of its rivals.
ENDNOTE
preferences for buying home improvement goods online. Some of Nathan’s colleagues had suggested winding up online retail operations and refocusing on in-store selling.
1 Press release available at http://www.jupi-termedia.com/corporate/releases/04.01.20-newjupresearch.html.
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The Snakes and Ladders Game in E-Business
APPENDIX
Exhibit 1. Sales trends in home improvement industry
(Source: National Retail Hardware Association Market Measure, 2004)
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The Snakes and Ladders Game in E-Business
Exhibit 2. Sales of home improvement products
2001 2000 1999 1998
Description Total
E-commerce
Total
E-commerce
Total
E-commerce
Total
E-commerce
Total Merchant Wholesale Trade
2,708,666 272,183 2,742,593 241,109 2,541,564 204,546 2,379,824 171,646
Lumber and other
construction material Professional and commercial equipment and supplies Electrical goods Hardware, plumbing and heating equipment Machinery, equipment
and supplies
73,553
249,981
214,312
64,864
243,312
2,236 70,778
30,904 269,129
12,111 240,362
6,497 67,108
7,947 252,349
2,183 71,339
30,827 273,848
11,117 208,355
5,988 63,444
7,591 245,453
1,963 63,661 1,982
27,127 254,069 20,461
9,345 186,721 8,039
5,939 60,352 5,426
6,890 242,531 5,400
(Source: U.S. Census Bureau, Annual Trade Survey)
Exhibit 3. E-commerce activities of national hardware retailers: Home Depot vs. Lowe’s
Key E-Commerce Statistics
Home Depot Lowe’s
Launched nationwide
April 2001 (pilot program in select cities started August 2000)
Products sold online/in stores
Visitors (March 2001)
20,000 / 50,000
1,063,000
14,000 / 40,000
907,000
)XO¿OOPHQW
Delivery charge
From stores in various cities; From stores and distribution centers; items items are then shipped via UPS. can be shipped or picked up at stores.
IRU¿UVWSRXQGVAs low as $4.93; increases with distance.
(Source: Young, E. (2001, May 21). Home improvement chains battle online. The Industry Standard.)
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The Snakes and Ladders Game in E-Business
Exhibit 4. AHD’s annual sales and net income (1999 to 2001)
AHDAnnual Sales ($ million) AHD Annual Net Income ($ million)
3150
3100
3050
3000
2950
2900
2850
2800
2750
2700
2650
1999 2000 2001
100
90
80
70
...
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