...THE CHALLENGE Surviving a major crisis — an immigration audit that decimated the company’s work force — at a time when the company was hemorrhaging money and alienating customers because its basic business model was not working. THE BACKGROUND When FreshDirect was founded in 1999 — in those euphoric days before the Internet bubble burst — the idea of an online grocer in New York City seemed promising. The company would not only sell just farm-fresh food, it would sell time and convenience, too. FreshDirect started building its 300,000-square-foot headquarters and packing plant in 2000 in the Long Island City section of Queens and made its first deliveries two years later. But little went as planned. “We broke too many eggs,” said Richard S. Braddock, who would become the company’s chairman in 2005 and its chief executive in 2008. “We showed up with thawed ice cream. We bruised the produce. We delivered late. We missed boxes. We didn’t remediate your service issues.” During FreshDirect’s formative years, the only thing that kept the company alive was its ability to churn through customers. A series of incentives for first-time buyers — including a $50 discount on orders of $100 or more — kept attracting newcomers, but most of them dropped the service after their discounts ran out. Back then, according to Mr. Braddock, about 85 percent of the company’s customers placed just one or two orders before giving up on the site. Revenue was on the rise, but profits did not...
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...FreshDirect Case Study COMPANY NAME/WEBSITE/INDUSTRY FreshDirect is an online grocer providing high quality fresh foods, popular grocery and household items at incredible prices delivered to residences and office in New York City and the metropolitan area. Their website can be accessed at www.freshdirect.com. FreshDirect tailors cuisine, perishables and dishes for its clients by means of an assembling practice known as Just-In-Time lessening waste and enhancing quality and freshness. FreshDirect is prominent for its resource usage of local agriculture offering organic, natural nourishment supplying commodities the consumer would purchase in their local supermarket. BACKGROUND/HISTORY Founded in 1999 by Jason Ackerman and Joseph Fedele, they ascertained learning from failed attempts of other online grocers. Ackerman, who worked in finance, sought out Fedele, who worked at Fairway grocery. In a Bloomberg TV interview last year, Ackerman said, “[W]e really founded on two guiding principles. First was to rethink how we get product from the farm to a customer's table in a much more efficient way which lends itself to deliver better quality products at better prices. And second, because we know so much about our customers, is to use that information to deliver a much more personalized, better experience.” [ (Goldberg, 2010) ]. The Key Executives for FreshDirect, LLC are Mr. Jason Ackerman, Co-Founder and Mr. Steve Druckman, Chief Marketing Officer. The company...
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...Webvan Model The fundamental problem with the Webvan model was that they overestimated demand. They tried to expand and grow too quickly and spent too much of the investors’ capital before there was even any revenue. Webvan spent too much on its sophisticated infrastructure in order to establish in multiple areas and the costs far exceeded the sluggish sales growth. You have to eventually make a profit in order to succeed and Webvan never delivered any profit. The first major issue was revenue in relation to capital investment and margins. Webvan’s initial capital investments were enormous. They invested heavily in automated warehouses, logistics software, and a fleet of vans. The company’s distribution centers and warehouses were the most automated and technological advanced in the world. The idea was that technology would help the firm provide groceries more cheaply than its competitors. To make these investments pay, Webvan needed either large numbers of customers spending large amounts per order or great margins. But Webvan never raked in enough sales to make up for its initial expenses. Webvan’s gross margins compared to cost structure were a huge issue. Webvan was not generating huge sales volumes and needed significant operating efficiencies to make its model work. Operating facilities, marketing the company, and delivering the orders were all more costly than Webvan anticipated. The process of fulfilling customers’ orders was particularly expensive. Webvan lacked...
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...The key issue seen in the Webvan case is that the management “dream team” that Borders assembled became obsessed with information technology innovation and failed to apply the underlying principles of business (supply & demand, value disciplines, value chains and systems, costs & benefits). The executives of Webvan did not understand the importance of focusing the business on its value discipline and did not push to advance the organization’s operating model. The decisions made by management displayed a clear lack of conscious focus on “delivering superior customer value (Tracey and Wiersema, p.84)” in line with their value discipline of operational excellence. Webvan did not understand the grocery business and therefore, they were unaware of what the consumer in this segment actually valued. Webvan believed that “most people viewed grocery shopping as an inconvenience and that nearly 55% of all Americans considered time to be their most precious commodity (Webvan, p.5).” However, according to the article E-Business: Revolution, Evolution, or Hype?, many people see the task of grocery shopping as one of life’s social pleasures that they have no intention of giving up. The article goes on to state that, “many of the products and services we purchase have to be seen, felt, or touched before they can be appreciated (p.61).” Webvan needed to find a way to overcome this natural human behavior and change what the customer valued. They needed a to create value to the customer...
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...The Collapse of Webvan | |The grocery business is gigantic, with annual retail store sales that are estimated at $650 billion. However, it is a very tough business because the profit margins are tiny, only 1 to 2 percent of sales. Moreover, the industry is very price competitive. Yet Webvan, which was founded in late 1996, chose groceries as the way to establish itself as a Web-based powerhouse. [pic]Aside from the tiny profit margin, on-line grocery sales face other problems. Most successful Web retail sales involve delivery several days after ordering via parcel delivery services such as UPS or FedEx. Yet people usually need grocery delivery right away, and the groceries usually include such spoilables as milk, ice cream, fresh vegetables, and meats. [pic]A number of companies, including Peapod, HomeGrocer.com, Kozmo.com, and Safeway have struggled to establish on-line grocery businesses. Webvan Group Inc. of Foster City, California (in the Silicon Valley), was the brainchild of Louis Borders, the cofounder of the very successful Borders bookstore chain. Webvan’s founders and management believed they could succeed where others were faltering by using a different business model. The company carried about 20,000 high-quality grocery items, including fresh fruits and vegetables, meats, and frozen foods, and delivered the orders to customers throughout a large metropolitan region. Webvan had no retail outlets, but instead it operated out of massive regional distribution centers...
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...For the exclusive use of O. Camacho, 2015. 9 -6 1 5 -0 1 3 REV: AUGUST 15, 2014 RORY MCDONALD CLAYTON CHRISTENSEN ROBIN YANG TY HOLLINGSWORTH AmazonFresh: Rekindling the Online Grocery Market We believe that a fundamental measure of our success will be the shareholder value we create over the long term. . . . We will make bold rather than timid investment decisions where we see a sufficient probability of gaining market leadership advantages. Some of these investments will pay off, others will not, and we will have learned another valuable lesson in either case. — Jeff Bezos, 1997 Letter to Shareholders As Fishmonger Ryan Reese skillfully filleted a fresh rainbow trout at Seattle’s Pike Place Market one morning in late 2012, the usual mix of tourists and locals gathered to admire his prowess. The iconic downtown market’s appealing array of fresh and specialty foods drew daily crowds eager to admire its vendors' showmanship and buy their wares. But the trout wasn't for any of them. Ryan's customer was miles away on Mercer Island. Within hours AmazonFresh, the grocery subsidiary of Amazon.com, would deliver the fish, which she'd ordered online, right to her doorstep.1 AmazonFresh had spent five years testing and refining its business model since its launch in August 2007. The challenges were numerous; no other online grocer had yet succeeded on a national scale. Amazon typically allowed new businesses only a short time to achieve profitability before ...
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...COMPANY NAME/WEBSITE/INDUSTRY FreshDirect/ Long Island City, Queens New York/ Food delivery Industry. BACKGROUND/HISTORY FreshDirect offers online grocery shopping and delivery service to more than three hundred zip codes in New York. Additionally they offer pick up service at one location in Long Island. The idea behind this company is to give the customers the freshest food possible by buying it straight from the grower, and then delivery it the next day after the customer’s order is placed. They specialize in delivering over 3,000 items including seafood, fruits, vegetables, coffee, meats and cheeses, and items from the bakery. This company was launched by Joseph Fidele and Jason Ackerman in 2001. Jason Ackerman is the company’s current CEO. Since they are a privately owned company profit information isn’t readily available but it is estimated that the company increased revenue in 2009 by $20 million and estimated $250 million in 2010. http://www.forbes.com/2010/06/29/freshdirect-online-grocery-braddock-cmo-network-grocery.html “Ackerman says FreshDirect now does 25,000 orders per week. Many customers are attracted by the $50 worth of free food that comes with a first order; others by prices that can be 10 to 15 percent lower than neighborhood stores. FreshDirect says it retains about half the customers who try the service, and that the company began turning a profit this January. “We make money doing this. Period. The end,” Ackerman says. “We’ve got lots of money in our...
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...Pretotyping@Work Invent Like A Startup, Invest Like A Grownup Jeremy Clark Co-Founder, PretotypeLabs First Edition ! Copyright © Jeremy Clark 2012 PretotypeLabs.com AUTHOR’S NOTE This is an economics book. Before you drop it like it’s on fire and run screaming from the room, let me explain. Economics is the study of resource scarcity and choice; it helps clarify the trade-offs we face when we make decisions about where to put our time and money, when and how much we should spend or save. In the context of innovation, economics informs the type and number of innovations attempted in a given period - how bold, how aggressively pursued, and how funded. This book describes an approach to innovation decision making that can break enormously wasteful historical trade-offs in resources. The goal of this book is to enable the practical application of that approach - pretotyping - within mature companies looking to improve the effectiveness of their front-end innovation processes. My colleague and friend Alberto Savoia is the originator of the term pretotype and much of the theoretical foundation for pretotyping. For an entertaining and rapidly-digestible primer on the method, I commend his excellent book Pretotype It1. I owe Alberto - and his many collaborators at Google, where pretotyping abounds - a profound debt, and I heartily acknowledge his prior art. This book is based upon the Pretotyping@Work workshop materials I developed with Alberto that makes pretotyping...
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...MIS (Spring 2007) Information Systems Theory and Practice Professor: Professor Jason C.H. Chen, Ph.d. Class time: Tuesday (February 27 – June 16) E-mail: chen@jepson.gonzaga.edu URL: http://barney.gonzaga.edu/~chen Office: to be announced Office hour: to be announced and by appointment Required text: 1. Pearlson, K.E. and Saunders, C.S, Managing and Using Information Systems, Wiley, 2006 (3nd edition) 2. A package of Harvard Business School Case Studies Additional Readings and Cases: Class handouts as needed. Course Description and Goals This course is designed to provide the current and future managers with understanding and appreciation of the issues that are related to the organization’s information technology assets. The course is not to educate technical specialists, rather, it is to give students a managerial perspective on the use of, design of, and evaluations of information systems that exist in organizations today. The objective of this course is to prepare students to manage information services in both today’s and tomorrow’s environment with its managerial, social, political, ethical and global issues. Conduct of the Course All students are expected to read the assigned materials (text, end-of-chapter discussion board questions (DBQ) and Harvard Business School case studies- HBC) before coming to the class. Some days we will discuss the materials in the text book. You are expected to be prepared...
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...Mini Research Paper: Internet Bubble Fundamentals of E-Commerce Professor: Russell Calhoun Precious Harper Table of Contents Introduction…………………………………………………………. 3 Brief Description of WWW and Internet …………………………… 4 Successful Dot.com companies……………………………………… 5 Unsuccessful Dot.com companies…………………………………… 6 Conclusion……………………………………………………………. 6 Work Cited…………………………………………………………… 7 British engineer Tim Berners-Lee developed the world-wide-web in 1989; the World Wide Web became available publically on August 6, 1991. The world-wide-web is a system of resources that allows people to view and interact with a variety of information. A computer that is connected to the Internet can access the world-wide-web. Many people believe the Internet and the World-Wide-Web are one in the same when in-fact they are not. The Internet is a massive network of networks; it connects personal computers, mainframes, cell phones, GPS units, music players etc. The Internet started in the 1960’s and it’s a massive hardware combination of millions of personal, business and government computers all connected like roads and highways. The world-wide-web (WWW) is a system of Internet servers that support specially formatted documents. The documents are formatted in a markup language called Hypertext Markup Language (HTML) which supports and links documents, graphics, video and audio files. Web...
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...Name: Course Name: Course Instructor: Date of Submission: EBAG management growth case examines a set of expansion options for a positive progressing internet luggage retailer, with a specific emphasis on the operational difficulties. EBags’ business model offers a diverse collection of products in a single online retail location. Their website made it possible for consumers to search for goods without spending time and money on traveling to different stores and locations. EBags’ online storefront minimized their supply chain and, therefore, provided a chance for important cost-savings. Two varieties of processes were introduced into the business model: drop –ship satisfaction and also private label supply chain. In the drop-ship model, inventory was sorted out at the producers or distributor level. EBags was acting as an intermediary for the customer. The customer ordered on the website, and eBags electronically transmitted the order to the vendor. The vendor, in turn, shipped orders directly from producers to consumers. eBags.com domain lent more opportunity to expand into several categories. It has helped the company encounter rapid growth and can be attributed to three strategies: a drop ship model, customer reviews and outsourced call Centre. It has reduced the inventory risk. The company also drop-ships products, but part of the business has shifted to an inventory model which has permitted them to work with a broader choice of brands. The issue, as eBags revealed and...
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...Creating and Building Entrepreneurial Ventures Lecture 10: Pre-start Analysis, Part 3: Assessing Business Model 胡秋江教授 1 What We Shall Discuss This lecture is Part 3 of our discussions on pre-start analysis. In this final part, we shall discuss the following: What business models are and what they are not The elements of a business model Assessing new venture business models: What makes a good business model Examples of effective and flawed business models 2 Business Opportunity & Business Model On recognizing a promising opportunity, an entrepreneur will formulate hypotheses relating to the following: The likely customers that the venture should target How the opportunity can be exploited to develop and deliver products/services that target customer need or want at an appropriate cost, allowing the venture to make a good profit The resources required to pursue the identified opportunity In formulating these hypotheses, the entrepreneur is essentially formulating the underlying premises for a business model. 3 What Is a Business Model, Really? ‘Business model’ is a widely used but remains a fuzzy concept with no universally accepted definition. Nevertheless, a good business model is essential to every successful enterprise, new or established. It is… A valuable analytical and communications tool Tool for realizing value from technological innovation Our working definition of business model: A representation of (1) what value a new...
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...The Internet Bubble Fundamentals of E-Commerce Instructor: Scott Howell Student: Lisa Mercer May 27, 2012 Introduction Within the past decades of the internet first being established the lives of everyday Americans and the world have changed greatly. Businesses have changed and evolved greatly with the access to the internet, as many are able to purse dreams of starting a business and possibly making millions. The internet has opened the doors for many to communicate with each other, receive daily news, and to do shopping. The upcoming of possibilities through the internet also led to irrational decisions brought on by greed from investors that made way for the Dot Com Bubble. History of Internet A pioneer of the creation the internet was Tim Berners-Lee. Though the internet didn’t become wide spread until the early 1990s the making of the World Wide Web can be traced back into the 1980s. Berners-Lee tried to sell his creation to the company that he was working for in Switzerland, but they were slow to acknowledge his efforts.(Griffin, 2000) With that Berners-Lee turned to the internet community in 1991 making his World Wide Web browser and web server software available. (Griffin, 2000) Many enthusiasts began setting up their own web servers around the world. Many scientists were already using the internet to share information found it easier to post their information on the web and wait for a reply. With some government agencies having the responsibility...
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...1.)(a) Nonstore retailing- it is alternatives such as online retailing are growing as a convenient way for two income households to shop. Television home shopping, direct mail, and catalogs also provide convenient retailing alternatives to these households. (b) The retailing mix- retailers will have to adjust their mix in terms of store hour and locations. Working couples may need to shop at less traditional times and in locations convenient form their work location. Also, credit cards and online ordering may become more important because of the time pressure on these types of households. 2.) Maintained markup differs from original markup in an important way. Maintained markup is the final selling price less retailer’s cost. Original markup refers to the difference between the retailer cost and the initial selling price. Initial markup is what the retailer hopes to get for the product; maintained markup is what the retailer can actually sell an item for to consumers. It must cover costs for a retailer to show a profit. 3.) The retail and product life cycles are similar in that they consist of four stages over which market share and profit (from sales) are matched. In the first stage of each life cycle, new retail forms or products enter the market. Competition emerges in the second stage, and by the maturity stage, the major fighting between competitors has occurred. In decline stage, both curves show falls in market share and profit). Differences relate to nomenclature. The...
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...What is a Business Model? The e-Business model, like any business model, describes how a company functions; how it provides a product or service, how it generates revenue, and how it will create and adapt to new markets and technologies. It has four traditional components as shown in the figure, The e-Business Model. These are the e-business concept, value proposition, sources of revenue, and the required activities, resources, and capabilities. In a successful business, all of its business model components work together in a cooperative and supportive fashion. Figure: e-Business Model [pic] Although an e-Business is often thought of as e-Commerce, there are other types of online activities that fall under the definition of e-Business that can benefit from this discussion (see e-Business Basics for basic concepts and definitions). E-Business Concept The e-business concept describes the rationale of the business, its goals and vision, and products or offerings from which it will earn revenue. A successful concept is based on a market analysis that identifies customers likely to purchase the product and how much they are willing to pay for it. Goals and Objectives The e-Business concept should be based, in part, on goals such as "become a major car seller, bank, or other commercial enterprise", and "to become a competitor to some of the well-known firms in each of these industries." Objectives are more specific and measurable, such as "capture 10% of the market", or "have...
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