Sunil Chopra and Aditya Jain had this article in the Economic times: http://articles.economictimes.indiatimes.com/2014-08-13/news/52768197_1_online-retailer-blue-nile-zales
They talk about merging the concepts of online and offline retailing with overall benefits for everyone, the consumers, retailers and etailers. As a concept no one can doubt on such win win scenarios. But, as a matter of practice, the article says nothing, and uses completely wrong examples to prove their point.
There is a comparisons of the costs of an online diamond firm Blue Nile with an offline firm Zales. Of course their cost structures are going to be different. For that matter the cost structures of Toyota and Mercedes Benz would be different, that of Walmart and Macy's would be different. To compare and then try and derive some relationships is perverse academics.
Online and offline are very different businesses. So an online business is bound to have higher revenue per dollar invested in infrastructure. But, the aim of business is surely not to maximise the revenue per infrastructure dollar. For all our enthusiasm for etailing, Amazon is still losing money.
In the Costco and Amazon example, Amazon's high transportation costs cannot be used to justify the better performance of Costco. The low variety model of Costco is great, but the profit margins of Wal-Mart are significantly higher than Costco. Here it seems that the authors have been selective in giving their pre-meditated examples so that they can prove a point.
Online and offline are very different models. As of now, 'touch' is an important part of shopping for many items. Who knows, the evolved customer may not need need to feel. Also, this concept may vary with the category of material. Last mile is surely a major cost for online models, but collaboration with offline for this may not be the only way. Online businesses may create mini warehouses inside cities. Similarly, offline businesses may not be limited to being a demonstration center for products that are ultimately bough online. They will have their own needs and create their own purpose. There also might be some form of collaboration, but not necessarily in the model that Chopra has proposed.
When I read an article by stalwarts like Chopra I expect articles with more imagination and not such mundane discussion that is part of every run of mill SCM seminar. But I guess the pressure to get something in print seems to be taking a toll of even the best among us.
They talk about merging the concepts of online and offline retailing with overall benefits for everyone, the consumers, retailers and etailers. As a concept no one can doubt on such win win scenarios. But, as a matter of practice, the article says nothing, and uses completely wrong examples to prove their point.
There is a comparisons of the costs of an online diamond firm Blue Nile with an offline firm Zales. Of course their cost structures are going to be different. For that matter the cost structures of Toyota and Mercedes Benz would be different, that of Walmart and Macy's would be different. To compare and then try and derive some relationships is perverse academics.
Online and offline are very different businesses. So an online business is bound to have higher revenue per dollar invested in infrastructure. But, the aim of business is surely not to maximise the revenue per infrastructure dollar. For all our enthusiasm for etailing, Amazon is still losing money.
In the Costco and Amazon example, Amazon's high transportation costs cannot be used to justify the better performance of Costco. The low variety model of Costco is great, but the profit margins of Wal-Mart are significantly higher than Costco. Here it seems that the authors have been selective in giving their pre-meditated examples so that they can prove a point.
Online and offline are very different models. As of now, 'touch' is an important part of shopping for many items. Who knows, the evolved customer may not need need to feel. Also, this concept may vary with the category of material. Last mile is surely a major cost for online models, but collaboration with offline for this may not be the only way. Online businesses may create mini warehouses inside cities. Similarly, offline businesses may not be limited to being a demonstration center for products that are ultimately bough online. They will have their own needs and create their own purpose. There also might be some form of collaboration, but not necessarily in the model that Chopra has proposed.
When I read an article by stalwarts like Chopra I expect articles with more imagination and not such mundane discussion that is part of every run of mill SCM seminar. But I guess the pressure to get something in print seems to be taking a toll of even the best among us.
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