XYZ’s is known for its underwear clothing, but it also sells T-shirts, Sweat Shirts and Boxers. Unlike the underwear business in which the company sells product directly to large retailers such as Wall-mart, the active wear division, which manufactures blank T-shirts, uses several dozen distributors. These sells their shirts to about 30,000 screen printers embroiders who decorate the shirts and sells them to public and for retailers who then market them to customers. The market is very competitive and complex. The distributors sell other product as well and also T-shirts made by XYZ’s competitors. Therefore the relationship Between active wear and its distributors are critical. To boost these relationships, XYZ decided to develop and maintain an individual web customer site for each of their 40 key distributors on an extranet. Each site includes colour electronic catalogue, inventory level information, buyers credit availability and ordering from both the shirts printers and retailers enter the distributors site to facilitate their own back office operation of inventory and billing. The distributors are allowed to advertise and sell other vendor product on the website. This way XYZ commits itself to a supporting system that benefits all the channel members in a link that start with its own sites. XYZ hopes to gain favour with distributors, many of whom do not have time or money to built their website. The system also includes models that automatically suggest XYZ’s substitute product for products not in stock. Even though building and maintenance of 40 sites incur a cost, XYZ believes that the investment pays for itself. XYZ’s uses its experience to generate profit by setting up website for other companies. Questions (i) Which e-commerce business model has been used in the above case? What are the key elements of the model? (ii) Discuss how much effective the e-commerce model of XYZ is. Give your suggestions for the betterment of the model.
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Answer:
XYZ’s is known for its underwear clothing, but it also sells T-shirts, Sweat Shirts and Boxers. Unlike the underwear business in which the company sells product directly to large retailers such as Wall-mart, the active wear division, which manufactures blank T-shirts, uses several dozen distributors. These sells their shirts to about 30,000 screen printers embroiders who decorate the shirts and sells them to public and for retailers who then market them to customers. The market is very competitive and complex. The distributors sell other product as well and also T-shirts made by XYZ’s competitors. Therefore the relationship Between active wear and its distributors are critical. To boost these relationships, XYZ decided to develop and maintain an individual web customer site for each of their 40 key distributors on an extranet. Each site includes colour electronic catalogue, inventory level information, buyers credit availability and ordering from both the shirts printers and retailers enter the distributors site to facilitate their own back office operation of inventory and billing. The distributors are allowed
(i) B2B e-Commerce business model has been used in the above case.
- In a B2B business model, a business sells its product or service to another business.
- here XYZ sells its products to its 40 distributors.
- Sometimes the buyer is the end-user, but most of the time the buyer resells to the consumer.
- B2B transactions generally have higher-order value and more recurring purchases.
(ii) XYZ's business model is significantly effective, because
- XYZ provides a supporting system that benefits all the channel members in a link that start with its own websites.
- As they do not have any websites the distributors will definitely use the websites provided by XYZ.
- As a result, all the products of XYZ will be selling more in comparison to its competitors as the website will only recommend the alternative if it is not there in the inventory.
- Even though building and maintenance of 40 sites will incur a cost, XYZ believes that the investment will pay off.
Suggestions for the betterment of the model.
- XYZ should not allow the distributors to advertise any other brand's product on its website.
- If this rule will be applied then the distributors will have to advertise only XYZ s product on its websites.
- which will in turn increase the sales of XYZ without giving any scope to any competitors
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