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BRICKS vs. CLICK!SCOMPUTER INDUSTRY

By: Mohammad Haseeb Khan

Arif Huda

industry analysis

Moore’s law

It predicts technological progress and explains why the computer industry has been able consistently to come out with products that are smaller, more powerful and less expensive than their predecessors--a dynamic curve that other industries can't match.

Trends

Moore’s Law

The Computer Industry has been consistently growing year after year. One of the most rapidly growing sectors in the industry

Cheaper Technology (example: “Netbooks”, desktops with a higher value, etc)

Focus on Social/Entertainment devices

Going Green

Segmentation

Many aspects of segmentation in the market:

Hardware vs. Software (Desktops vs. OS)

Apple vs PC (Within each, have entertainment, portable, heavy duty, powerful, etc)

Peripherals (flash memory, hard drive, web cams, etc)

BRICKSAdvertising

Bricks advertising comes in multiple forms and we are exposed to it everyday. Push Advertising.

Commercials

Weekly Magazine Advertisements

Store Design/Locations

Billboards/Buses

Radio advertisements

Branding

CLICK!sAdvertising

Pull Advertising

Web banners

Emails

Website design

Sponsored online commercials

Google

employee efficiency

More pressure to perform due to the downturn in economy

Rise in job insecurity with the collapse of Circuit City (34,000 out of work) Dell lays off 1,900.

Forecasts for all companies has been slashed, causing many to lose jobs and less hiring

our visitBest Buy

our visit

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Product

There is only difference when it comes to Products between those sold in Brick & Mortar stores versus those sold in online computer stores. That difference, marketed and taken advantage by Dell is --

Customization

As seen in the video, in Brick & Mortar Stores, including Apple, only two parts of a computer configuration can be upgraded : The RAM memory and Hard Disk Drive. This is because these components are such that can be replaced and upgraded after post production. However in –

Online stores such as Dell, HP, and Apple allow customization of their products. This allows consumers to create and order products specific to their needs.

We will see later on in this presentation that a fundamental shift in the view of the product itself is causing a change in online retailing strategies.

POSITIONING

As mentioned in the earlier slide, the main difference between computer products is their customizability or lack there of. This transitions into the positioning of the product as well.

Bricks & Mortar stores sell their products for generic users. Gamers/High End Users, Student/Home Users, Work/Mobile Users.

Online computer stores cater the Brick & Mortar stores, as well as Niche users because of their availability to offer customizable units.

PLACEMENT

Brick & Mortar Computer stores

Products are placed categorically, (Apples, Laptops, Desktops etc.). Hot/exotic products are distinguished with larger or more prominent colored signs (ie. Special Deal Tag)

Further products are placed in an harmonizing fashion. They are placed in eye level view of a main product and usually directly adjacent or opposite to it so that a consumer can easily find a complementary product. Further next to each complementary product are it’s complementary products, creating a chain of products that can be easily viewed and purchased. (Computer->Printer->Paper & Ink)

Click!

In Click! (Online) Computer stores, sale items and hot/exotic products are displayed on the main page. Other products can be searched for at will. Sometimes products that are similar to the one your are viewing are located adjacent to the main item, allowing easy browsing.

Further in some online retailers, complementary products are shown when you are looking at a Main Item. These complimentary products are shown adjacent to the main item and allow for cross browsing.

Price

The price ranges of online computer retailers versus brick & mortar stores on average are the same. BUT

Using an online retailer allows you to be selective in such that you can search and find a product that is very inexpensive or a product that is very expensive. This range mobility gives the consumer an advantage in that they are not limited to pricing options.

Profit Analysis

Consumer volume has decreased, with consumer volume online beginning to increase

However, there has been increased spending per consumer in stores. For example, Best Buy has seen an increase per customer to 193 per month per customer, which has allowed them to stablize their revenue stream.

Quick Look

Best Buy

Revenue: 40.023 billion Net Income: 1.407 billion

Majority of sales come from the actual store as opposed to online. Customer experience is emphasized.

Apple


Apple has a good balance of sales coming from retail stores and online stores. With nearly 24% of sales coming from online. And rising year after year.

Dell


Advertising mainly through the website and lacks any foundations for retail stores. (Current shift in stratgey will take them to retail stores)

Supply chain managementBricks vs clicks

Supply Chain & Marketing

The supply chain management of online vs brick stores in general is advantageous because of the use of Intelligent Information Systems

Online retailers like Dell, HP, and others have partnered up with their suppliers in creating Universal Electronic codes and have committed to following ISO standards that allow them the ability to run more leaner, faster and intuitive to customer demand than a brick and mortar store.

SEO & Location

Findability is an important characteristic for any business regardless of its nature. With the advent of google and powerful algorithms, searing and attaining desired results is easier than ever.

Another reason why online stores are advantageous to brick and mortar stores is because of their findability. Brick and mortar stores are limited to thei locational vicinity and limited to inventory on hand, while online stores have the freedom of the web, allowing them a larger access for consumers as well as giving them a larger ability of findability.

Store Layout vs. Website design

V Versus

CONSUMER REVIEWS

Older generation find retail stores to be very helpful and allow them to get what they are looking for.

Younger generation also go to retail stores but also have a “just to look” outlook on many of the products.

CONSUMER BEHAVIOR

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SWOT AnalysisBricks

Strengths-Top retailer in the computer

industry-

-Display of Products-

-Attractiveness to luddites-

-Time to receive product, significantly less-

-Able to sell complimentary products-

-Push-

Weaknesses-Higher Costs (Employee, Inventory,

Investment, Overhead Costs)-

- Store Timings-

-Limited Locations-

Opportunities

-Sell complimentary products-

-Create better Brand loyalty-

-Rewards Programs-

Threats

-Better bargains found online-

-Impending customer lawsuits-

-Downturn in economy, not good for luxury items-

-Increased competition-

SWOT AnalysisClick!s

Strengths

-Easy to access by many-

-Open 24 hours, everyday-

-Minimal Costs involved-

-No additional hassle for updating inventory and better handle over

inventory-

-Pull-

Weaknesses

-Customer wait time increases-

-Harder to maintain customer loyalty-

-Harder to sell complimentary products-

-Older generation not accustomed-

Opportunities

-Wider selection of products-

-Trend towards internet sales-

-New generation starting to use web for shopping-

Threats

-Manufacturers selling direct from their websites-

-Competitor prices easier to find on the web-

-Information Security Risks-

dell & commoditization

“Closing its world famous Topfer PC plant in Austin, TX,

Mike Cannon, President of Global Operations

Dell will still operate that model for the customers who value it, but obviously at very reduced levels (i.e., like a whole Austin plant’s worth), but its now more replicating the supply chains of its competitors.

“They are very happy with fixed configurations and extended cycle and delivery times,” Cannon said. Dell has said it believes it can save $3 billion annually from various measures, and Cannon said most of that will come out of these changes to the supply chain over the next 2-3 years. It had sales of $61 billion last year, so that’s about a 5% reduction in total costs.”

http://www.scdigest.com/assets/FirstThoughts/08-04-10.php?cid=1609&ctype=content


Recommendations

We recommend that computer product retailers need to analyze their portfolio of products and their customer segment in choosing an effective outlet for their products.

As mentioned computers are becoming a commodity, further as Moore’s Law mentioned prices and costs of computers will decline in the future. This will further turn the computer into more and more of a commodity. This information is important in preparing for the future in two ways –

Mass Market Outlet –If a computer retailer wants to attract the mass market, it should find a harmonizing balance between online and brick

& mortar outlets. This balance will not be stagnant, as the industry begins to commoditize and become more competitive, we predict retailers will begin to use online retailing as an outlet because it will allow more competitive

Niche Market Outlet -If a computer retailer wants to attract a niche or special segment of the population, we recommend the use of an

online site as an outlet. Sites like an alienware.com cater to niche crowds, offering high end customization and products but for a much higher price as well.

Questions?

Sources

http://www.dell.com/content/topics/global.aspx/about_dell/investors/financials/index?c=us&l=en&s=corp

http://www.scdigest.com/assets/FirstThoughts/08-04-10.php?cid=1609&ctype=content http://www.scdigest.com/assets/FirstThoughts/08-05-02.php?cid=1652&ctype=content http://www.icmrindia.org/casestudies/catalogue/Operations/OPER063.htm http://www.fastcompany.com/magazine/88/dell.html

http://www.oag.state.ny.us/press/2008/may/may27a_08.html

http://www.google.com/finance?fstype=ii&q=NASDAQ:AAPL

http://media.corporate-ir.net/media_files/irol/83/83192/4Q09_Release_Final.pdf

finance.yahoo.com

http://www.dell.com/content/topics/global.aspx/about_dell/investors/financials/index?c=us&l=en&s=corp





http://www.icmrindia.org/casestudies/catalogue/Operations/OPER063.htm

http://www.icmrindia.org/casestudies/catalogue/Operations/OPER063.htm

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