Expert answer:Walmart vs Amazon, Groupon and Etsy ch10 case stud
Expert answer:There are 3 case studies for Chapter 10, Walmart vs Amazon, Groupon, and Etsy.watch the videos listed on each case and read the case than answer the question for each case.Each answer should be under its question. All cases should be in one document.
mis15_ch10_case1_walmart_v_amazon.pdf
mis15_ch10_case2_groupon.pdf
mis15_ch10_case3_etsy.pdf
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Management Information Systems 15e
KENNETH C. LAUDON AND JANE P. LAUDON
CHAPTER 10
CASE 1
E-COMMERCE: DIGITAL MARKETS, DIGITAL GOODS
Walmart Takes On Amazon: A Battle of IT and
Management Systems
(a) How Wal-Mart is moving the needle on e-commerce
URL
https://www.youtube.com/watch?v=mLGt_GPyPFU; L=18:59
Systems
(b) Wal-Mart To Acquire Jet.com For $3.3B
URL
SUMMARY:
CASE
https://www.youtube.com/watch?v=WxQXvmnfCaw; L=2:58
In what promises to be the retail battle of the decade, Walmart and Amazon are going
head-to-head for the retail consumer dollar. Walmart brings to the fray the largest
physical retail presence in the U.S., and the world. But it has lacked a powerful online
presence. Amazon brings to the fray the largest online retail presence in the United
States, and is second only to Alibaba in China. But Amazon lacks a physical footprint in
retail commerce. Walmart is moving towards an omnichannel approach that combines
online and offline retail, while Amazon is emphasizing same-day delivery, local drop-off
boxes, and may well introduce local physical stores in the future.
Traditional retail in the United States, the kind you find at the malls, and urban department
stores, is in trouble. The very large retailers such as Walmart, Macys, Kohls, Sears, and
Nordstrom all have reported about 1% to 2% sales growth since the recession of 2008. In
2016, Target, Macys, Sears, JCPenny, and others are closing hundreds of stores. Since 2000,
consumers have been shifting away from traditional retail goods like apparel and electronics
continued
Chapter 10 , CASE 1 WALMART TAKES ON AMAZON
2
(the mainstays of retail stores), and buying more services like vacations, exercise, dining, and
health care.
The much bigger threat to traditional retail is coming from online retail, mostly Amazon,
that has gobbled up the lion’s share of online retail (about 25% of all online retail), and has
been growing at astounding rates like 15% to 20% a year since 2008. Apparel and electronics are also the largest sales items for online retailers, so the physical stores and the online
giant all compete selling the same goods.
Traditional retailers have spent over a billion dollars in the last decade trying to become
online retailers, and meet consumers wherever they want to buy, online, or at the store. It’s
called an “omnichannel” strategy: using multiple channels like physical stores and online
Web and mobile apps to sell products. Many traditional large retailers such as Walmart,
Macys, and Costco, have wound up in the top ten online retail rankings. But so far the
omnichannel strategy has not been especially successful in keeping up with Amazon’s
growth.
In what promises to be the online battle of the decade, the two biggest players, the heavy
weights, Walmart and Amazon, are going head to head for the consumer dollar. In a
broader sense, it’s the online-business model versus the physical- department-store business model which was invented by Macy’s in 1870. But to be fair to the traditional retailers
who have developed their online and mobile sales channel, it’s more accurate to say it’s the
omnichannel model versus the pure-online digital model of Amazon.
Here’s how the two heavy weights shape up. Walmart’s revenues in 2015 were $485.6 billion
(the largest Fortune 500 company), it had earnings of $15 billion (about a 3% margin) , and
e-commerce sales of 13.7 billion (around 3% of total sales revenue). Walmart has about
5,200 stores of all kinds in the U.S. It produces around $15 billion in free cash flow a year,
and has about $9 billion cash on hand. In 2016 Walmart’s market value is in the area of
$230 billion. It’s sales growth in 2015 was 1.8%. Walmart employs about 2.1 million people
(1.4 million in the U.S. alone), making it the largest employer in the world and the U.S. That
works out to $231,000 of revenue for each employee.
Amazon’s revenues in 2015 were $107 billion (the largest e-commerce company, but only 35
in the Fortune 500), it had earnings of $596 million (about a 1.8% margin), and e-commerce
sales of $92 billion. Amazon has about $8 billion in cash on hand. In 2016 Amazon’s market
value is about $366 billion, and its sales growth in 2015 was about 20%. Amazon employs
about 222 million people. That works out to $481,000 of revenue for each employee.
The retail battle of the decade shapes up as a contest between a giant traditional retailer
that is growing very slowly, and has only a tiny online presence, versus the largest online
retailer which is growing very rapidly, and has no physical store presence. Both companies
have significant financial assets, and nearly limitless credit, to build or acquire whatever
capabilities they choose. Walmart needs to develop new systems and capabilities both
continued
Chapter 10 , CASE 1 WALMART TAKES ON AMAZON
3
in-house, and through acquisitions. In 2016 Walmart bought the start up Jet.com, and small
but fast-growing Amazon competitor.
Videos 1 and Video 2 describe Walmart’s senior management strategy for developing a
competitive online presence. The outcome will in part be determined by how well Walmart
can develop a competitive logistics system to compete with Amazon.
The Instructional Videos for this chapter describe how both Walmart and Amazon are developing their fulfillment systems, and their plans to compete on delivery and fulfillment.
VIDEO CASE
QUESTIONS
1. What are the three key assets that Walmart can leverage (build on) to compete with
Amazon and other online retailers?
2. What is Walmart’s e-commerce strategy?
3. Why isn’t Walmart worried about the channel conflict between its online sales and its
store sales?
4. Why is Walmart in-sourcing the development of its online operation, in part by acquiring
technology companies rather than outsourcing development to low-cost countries and
other domestic firms?
5. Why did Walmart acquire Jet.com?
6. How does Walmart’s fulfillment operation differ from Amazon’s?
COPYRIGHT NOTICE
Copyright © 2017 Kenneth Laudon.
This work is protected by United States copyright laws and is provided solely for the use of instructors
in teaching their courses and assessing student learning. Dissemination or sale of any part of this work
(including on the World Wide Web) will destroy the integrity of the work and is not permitted. The work
and materials from this site should not be made available to students except by instructors using the
accompanying text in their classes. All recipients of this work are expected to abide by these restrictions and
to honor the intended pedagogical purposes and the needs of other instructors who rely on these materials.
Management Information Systems 15e
KENNETH C. LAUDON AND JANE P. LAUDON
CHAPTER 10
CASE 2
E-COMMERCE: DIGITAL MARKETS, DIGITAL GOODS
Groupon: Deals Galore
(a) The Real Deal With Groupon
URL
http://www.youtube.com/watch?v=tgeh607ZXA0; L=12:42
(b) Introducing Groupon Now!
URL
SUMMARY:
CASE
Systems
https://www.youtube.com/watch?v=9mjpVDEydxs; L=1:00
Groupon is the leading daily-deals site on the Internet, with nearly 50 million subscribers.
In 2011 it was the fastest growing company in the history of the Internet, but in 2012
it imploded to be one of the fastest falling stocks on Wall Street. Groupon Now! is a
Groupon location-based service that finds local deals you can buy and use immediately
using your mobile phone. It is also used by merchants to attract customers during their
least busy hours. It is one of several new initiatives from Groupon as it seeks to expand
beyond the vulnerable daily-deals marketspace.
Groupon’s business model is based on the theory that everyone loves a great deal. Groupon
is a popular “deal of the day” Web site offering discounted gift certificates usable at local or
national companies. Each day Groupon e-mails its subscribers discounted offers for goods
and services that are targeted by location and personal preferences. Consumers can also
access its deals directly through its Web sites and mobile applications.
Customers purchase Groupons from the company and redeem them with affiliated
merchants. The discounts are huge—usually 50 to 90 percent off. But there’s a catch: A deal
continued
Chapter 10, Case 2 Groupon: Deals Galore
2
becomes available only if a certain number of people sign up for a specific daily Groupon
offer. If the predetermined minimum is not met, no one gets the deal that day. This reduces
risk for retailers, who can treat the coupons as quantity discounts as well as sales promotion
tools. Groupon makes money by keeping approximately half the money the customer pays
for the coupon.
Groupon personalizes “deals” for users who supply some information about themselves,
such as their zip code, gender, and age—and it will make sure you see the deals most
relevant to you. Subscribers who opt for personalization still receive information about their
location’s featured deal of the day as well, and they can also pass along deals to their friends
via e-mail or broadcast them to their social networks.
Groupon Now! is Groupon’s service for mobile users. Subscribers can buy Groupon Now!
deal vouchers on a mobile touch site, touch.groupon.com, or through the iPhone or Android
app. Most Groupon Now! deals are only valid for a few hours and have a limited quantity.
This is how Groupon Now! works for customers:
1. The user enters his or her location to find deals nearby. The user chooses
the type of deal he or she would like to see.
2. If the user finds a deal he or she likes, that person “buys” the deal online
via Groupon. The user can print the voucher or bring it up to display on a
mobile device.
3. The user presents the Groupon Now! deal voucher to the merchant within the
specified time frame and receives a discounted “deal” on movies, restaurants, or
retail items.
For merchants, Groupon Now makes it easy for them to launch discounts and special offers
during the times when they are least busy.
Groupon grew to $500 million in revenue in just three years, faster than eBay or Amazon,
and now offers more than 1,000 deals each day in over 48 countries. However, since going
public in November 2011, Groupon’s stock has fallen about 70 percent, owing to high business costs and a failure to lock in repeat transactions with merchants and customers.
Groupon also faces increased competition from both Amazon.com and Google, which
started their own daily deal businesses. Google offered to buy Groupon for $5 billion in 2011,
but was rebuffed. Groupon has attempted to move beyond the group coupon business, into
the selling of goods (Groupon Goods) and Groupon Payments (a mobile payment service).
In 2012 it rolled out Breadcrumb, a point-of-sale iPad application for hospitality businesses,
like restaurants and bars, to manage transactions. The goal, Groupon executives have said,
is to turn the company into the back-end engine for local commerce. Despite growing
continued
Chapter 10, Case 2 Groupon: Deals Galore
3
20% in revenues in 2015, and forecasting 30% growth in 2016, analysts are not impressed.
Groupon’s stock has fallen from $30 a share five years ago to $3 a share in 2016.
Analysts are not convinced that Groupon can ever become an successful online retailer
and compete against Amazon, or a mobile payment system that can compete against
PayPal. Even in the coupon voucher business, it faces stiff competition, including Facebook.
Some analysts argue that its business model is not based on an innovative Web solution
for finding customers, but revolves around a sales force in Chicago that calls merchants to
propose voucher marketing programs. In the Internet age, a sales force turns out to be very
expensive.
VIDEO CASE
QUESTIONS
1. What are the weaknesses of Groupon’s business model described in the videos?
2. What features of contemporary e-commerce does Groupon Now! utilize?
3. What value does this service provide subscribing merchants? What value does it provide
customers?
4. What kinds of businesses are most likely to benefit from using Groupon?
5. Visit Groupon’s Web site and enter your zip code. What kinds of deals are displayed?
Would you use Groupon? Why or why not?
COPYRIGHT NOTICE
Copyright © 2017 Kenneth Laudon.
This work is protected by United States copyright laws and is provided solely for the use of instructors
in teaching their courses and assessing student learning. Dissemination or sale of any part of this work
(including on the World Wide Web) will destroy the integrity of the work and is not permitted. The work
and materials from this site should not be made available to students except by instructors using the
accompanying text in their classes. All recipients of this work are expected to abide by these restrictions and
to honor the intended pedagogical purposes and the needs of other instructors who rely on these materials.
Management Information Systems 15e
KENNETH C. LAUDON AND JANE P. LAUDON
CHAPTER 10
CASE 3
SUMMARY
E-COMMERCE: DIGITAL MARKETS, DIGITAL GOODS
Etsy: A Marketplace and a Community
Etsy is an online marketplace for handmade items, art and craft supplies. Etsy strives to
build a sense of community among buyers and sellers.
Inside Etsy’s Handcrafted Wonderland
URL
CASE
http://www.youtube.com/watch?v=0hCSdmpdJuE; L=10:07.
Systems
Etsy is more than a marketplace: it’s a community of artists, creators, collectors, thinkers and
doers. This e-commerce Web site focuses on handmade or vintage items as well as art and
craft supplies, including art, photography, clothing, jewelry, edibles, bath & beauty products,
quilts, knick-knacks, and toys. The site follows in the tradition of open craft fairs, giving
sellers personal storefronts where they list their goods for a fee of $0.20 plus a sales commission of 3.5% for each item. Etsy has been described as “a crafty cross between Amazon and
eBay,” to “your grandma’s basement” and as “one of the largest, most chaotic flea markets
the world has ever known.”
Etsy says its mission is to “empower people to change the way the global economy works.
We see a world in which very-very small businesses have much-much more sway in shaping
the economy, local living economies are thriving everywhere, and people value authorship
and provenance as much as price and convenience. We are bringing heart to commerce and
making the world more fair, more sustainable, and more fun.”
continued
Chapter 10, Case 3 Etsy: A Marketplace and a Community
2
Etsy is headquartered in DUMBO, Brooklyn, and also has offices in Hudson, New York, San
Francisco, CA, and Berlin, Germany. The Hudson, New York location is an old cannonball
factory housing Etsy’s call center and Web site design facilities for Etsy’s CEO. The goal is to
treat Etsy sellers with the same level of attention that Zappos lavishes on shoe buyers.
Etsy’s head office in Brooklyn houses the company’s technology, customer support, public
relations, business, and communications teams as well as “Etsy Labs,” where employees can
experiment with handmade projects themselves. It also features a Monday craft night where
Etsy Labs are open to the public.
In 2015, Etsy has over 800 employees and 55 million members. About 1.5 million active
shops sell on Etsy, and in 2014, these sellers moved $1.93 billion worth of merchandise. Etsy
offers multiple options for paying for items, including credit card, money order, and PayPal.
Very few of these sellers make a living solely through Etsy. Perhaps a thousand sellers make
$30,000 a year or more, and a only mere handful who make more than $100,000 annually.
Most sellers use Etsy as a part-time source of income.
Etsy requires that all new products listed on the site be made by the people selling them—
the use of mass production is prohibited. According to Etsy, about 30% of Etsy entrepreneurs sell creative goods as their sole occupation, while around 45% use their earnings to
cover household expense. “Etsy has made it possible for a lot of small businesses to get
off the ground,” says Dale Dougherty, the publisher of Make magazine, which covers the
do-it-yourself economy. But even the most successful crafters run up against the limits of
their own labor. Handmade can be a limited idea. That means that the most successful Etsy
sellers are in an awkward position: They must stay small and offer only handmade goods or
abandon Etsy.
Meanwhile, the site has been adding features at a furious pace. For instance, Etsy now
provides social networking functions similar to those of Facebook that allow users to
make friends with other Etsy members and keep track of their friends’ favorite shops and
purchases. There’s also a new gift service, which looks at the Facebook profiles of your
friends and suggests items they might like, and something called Taste Test, which asks you
to rate a smattering of random items and then suggests things to buy. You are invited, of
course, to share the recommendations with your friends on Facebook and Twitter and with
other Etsy members.
Etsy’s founder and former CEO Rob Kalin hopes that these moves will make it easier for
buyers to discover new products, but he also sees the new emphasis on social networking
as part of a deepening of Etsy’s mission that goes beyond buying and selling.
continued
Chapter 10, Case 3 Etsy: A Marketplace and a Community
3
1. What is Etsy’s business model and revenue model?
2. How does Etsy’s Brooklyn headquarters depicted in the video reflect the culture and
values of the company?
3. How important is “community” at Etsy? Visit Etsy’s Web site and describe all of its
community-building features.
COPYRIGHT NOTICE
Copyright © 2017 Kenneth Laudon.
This work is protected by United States copyright laws and is provided solely for the use of instructors
in teaching their courses and assessing student learning. Dissemination or sale of any part of this work
(including on the World Wide Web) will destroy the integrity of the work and is not permitted. The work
and materials from this site should not be made available to students except by instructors using the
accompanying text in their classes. All recipients of this work are expected to abide by these restrictions and
to honor the intended pedagogical purposes and the needs of other instructors who rely on these materials.
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