O20 STRATEGY AND POSITION TRANSFORMATION: BENJY'S STRATEGY TOWARDS SHOWROOMING Yang Yiying 16307090134 Course: English for Academic Purposes(Business) Date: 27 December 2017
1 O2O STRATEGY AND POSITION TRANSFORMATION: BENJY’S STRATEGY TOWARDS SHOWROOMING Yang Yiying 16307090134 Course: English for Academic Purposes (Business) Date: 27 December, 2017
The company benjy's is a brick-and-mortar retailer of electronics and appliances, aiming at providing customers with the biggest range of products at the lowest prices. Last quarter Benjy's suffered a sharp decline in sales--almost $700 million, resulting from the prevailing showrooming phenomenon. More and more people came to Benjy's to look at products but then buying them from its online competitors whose lack of a brick-and-mortar presence enabled them to offer discount prices. Although Benjys took low price and high volumes its objective, it couldnt afford to match online prices due to its operating procedures Disagreement occurred between the Ceo and the chairman about the possible solutions towards this issue. The chairman favoured a two-pronged approach that Benjy's could increase the difficulty of showrooming, at the same time, try to match online prices. The CEO wanted to pursue a different strategy. He thought Benjy should set itself apart from the competition by emphasizing a curated product mix, knowledgeable employees and follow-up services. The chairman's plan seemed a short-term but low-cost and potentially effective solution. The CEO's was more costly and risky but possibly much better in the long run. The company needs to decide on a counter strategy to solve the dilemma and win back online shoppers Showrooming is expanding into markets we might have thought exempt. Today we can investigate everything from cars to books to groceries in person and then proceed to order them online, often with greater ease and significant savings Although Benjys could offer consumers better shopping experience, guaranteed quality and after-sale service, the online retailers win over more and more customers with lower price, home delivery service as well as wider product range. Simple price competition is a guaranteed losing strategy for Benjys, especially with Amazon, whose long cash floats and high inventory turnover allow them to stay profitable even with no margin. On the other hand, even though most online retailers are good at showing customers what theyve got and filling orders, they 're not as good at selling or responding to vague queries. Thats where the opportunity for Benjys lies
2 The company Benjy’s is a brick-and-mortar retailer of electronics and appliances, aiming at providing customers with the biggest range of products at the lowest prices. Last quarter Benjy’s suffered a sharp decline in sales—almost $700 million, resulting from the prevailing showrooming phenomenon. More and more people came to Benjy’s to look at products but then buying them from its online competitors whose lack of a brick-and-mortar presence enabled them to offer discount prices. Although Benjy’s took “low price and high volume” as its objective, it couldn’t afford to match online prices due to its operating procedures. Disagreement occurred between the CEO and the chairman about the possible solutions towards this issue. The chairman favoured a two-pronged approach that Benjy’s could increase the difficulty of showrooming, at the same time, try to match online prices. The CEO wanted to pursue a different strategy. He thought Benjy’s should set itself apart from the competition by emphasizing a curated product mix, knowledgeable employees and follow-up services. The chairman’s plan seemed a short-term but low-cost and potentially effective solution. The CEO’s was more costly and risky but possibly much better in the long run. The company needs to decide on a counter strategy to solve the dilemma and win back online shoppers. Showrooming is expanding into markets we might have thought exempt. Today we can investigate everything from cars to books to groceries in person and then proceed to order them online, often with greater ease and significant savings. Although Benjy’s could offer consumers better shopping experience, guaranteed quality and after-sale service, the online retailers win over more and more customers with lower price, home delivery service as well as wider product range. Simple price competition is a guaranteed losing strategy for Benjy’s, especially with Amazon, whose long cash floats and high inventory turnover allow them to stay profitable even with no margin. On the other hand, even though most online retailers are good at showing customers what they’ve got and filling orders, they’re not as good at selling or responding to vague queries. That’s where the opportunity for Benjy’s lies
Consumers do appreciate interacting with informed sales reps, trying out products first-hand, and getting items immediately. One fundamental point deserves to be underscored is that shopping is emotional. The internet offers many functional dvantages: selection is endless and endlessly searchable, prices are excellent, and here's none of the hassle of going to the store. Most purchases, though, arent purely functional, and a well-designed shopping experience works with that by heightening the positive emotions and countering the negative ones. Like other physical stores that sell branded products, Benjy's may need to rethink its traditional business model if it wants to survive The past couple of decades have demonstrated that the macro trend is going against the retail chains that depend on physical stores. The early age of electronic commerce is associated to the names of retailers only or mainly online like amazon and Dell. However, after some dithering, many brick-and-mortar retail chains, especially large, big box ones, have heavily invested in the technology, creating online divisions alongside their network of physical outlets. Today, "hybrid"retailers--those lling both online and through traditional stores-hold significant shares of the online market in several sectors, from books to electronics to apparel. 2 To survive and succeed in the fierce market competition, it's time for Benjy's to take the 020 strategy and make its position transformed. The O20 strategy has complementary advantages because it could combine the strengths of online and offline shops, making it possible for the company to offer more attractive price, higher level of convenience as well as better shopping experience to customers First of all, Benjy's should integrate online and offline resources, products and ervices to achieve successful transformation. the resource integration includes the integration of supply chains and information. Benjy's, as a traditional electronic and appliance retailer, has formed certain resource advantages over pure e-commerce Sohrab vossoughi, "Make Customers Want to Buy Offline Harvard Business Review Digital Articles Jun23,2014,p5 Andrea Pozzi. The effect of Internet distribution on brick-and-mortar sales" RAND Journal of Economics Vol 44,No.3,Fal2013,p569 Qiu Lijuan. " Research on the transformation of the mode of home appliance retail industry based on 020 mode ( Master Thesis, Hebei Normal University, Hubei, China, 2014), pl 13
3 Consumers do appreciate interacting with informed sales reps, trying out products first-hand, and getting items immediately. One fundamental point deserves to be underscored is that shopping is emotional. The internet offers many functional advantages: selection is endless and endlessly searchable, prices are excellent, and there’s none of the hassle of going to the store. Most purchases, though, aren’t purely functional, and a well-designed shopping experience works with that by heightening the positive emotions and countering the negative ones.1 Like other physical stores that sell branded products, Benjy’s may need to rethink its traditional business model if it wants to survive. The past couple of decades have demonstrated that the macro trend is going against the retail chains that depend on physical stores. The early age of electronic commerce is associated to the names of retailers only or mainly online, like Amazon and Dell. However, after some dithering, many brick-and-mortar retail chains, especially large, big box ones, have heavily invested in the technology, creating online divisions alongside their network of physical outlets. Today, “hybrid” retailers—those selling both online and through traditional stores—hold significant shares of the online market in several sectors, from books to electronics to apparel. 2 To survive and succeed in the fierce market competition, it’s time for Benjy’s to take the O2O strategy and make its position transformed. The O2O strategy has complementary advantages because it could combine the strengths of online and offline shops, making it possible for the company to offer more attractive price, higher level of convenience as well as better shopping experience to customers. First of all, Benjy’s should integrate online and offline resources, products and services to achieve successful transformation. The resource integration includes the integration of supply chains and information.3 Benjy’s, as a traditional electronic and appliance retailer, has formed certain resource advantages over pure e-commerce 1 Sohrab Vossoughi, “Make Customers Want to Buy Offline” Harvard Business Review Digital Articles Jun23,2014, p5 2 Andrea Pozzi. “The effect of Internet distribution on brick-and-mortar sales” RAND Journal of Economics Vol. 44, No. 3, Fall 2013，p569 3 Qiu Lijuan. “Research on the transformation of the mode of home appliance retail industry based on 020 mode.” (Master Thesis, Hebei Normal University, Hubei, China, 2014), p13
retailers after years of development, including logistics distribution system, physical storefronts, stable and reliable suppliers, relatively perfect supply chain system and rich experience in retail services. Relying on existing systems to develop online business can not only reduce the difficulty and cost of transformation, but also promote dual integration by sharing integrated supply chain system with traditional marketing channels At the same time, Benjy's need guarantee the consistence of quality and price between online and offline products, trying to cultivate a reputation for reasonable prices. "People often showroom because a retailer has done a bad job establishing pricing credibility, " said Joshua Pollack, executive consultant at the Parker Avery Group. The consumer is not necessarily looking for the lowest price--just their own knowledge of prices y o reasonable one. "He suggests getting ahead of the issue by maintaining a firm grip on Besides, Benjy's could design for empathic expertise. Since home appliance product is high added-value commodity, consumers tend to be more cautious, They will not only observe the product appearance but also pay more attention to commodity performance. Customers are willing to pay extra for a trusted advisor helping them make the right choice. So Benjy's need improve its staff hiring and training concerning professional consultancy of electronic devices and appliances They could replace cash registers with tablets that allow the staff to interact with customers and provide immediate merchandise information There's no doubt that the o20 strategy is a win-win strategy to both customers and the company. To customers, they can get more comprehensive information about merchants and their products in the physical stores. In this way, they could pre-order he products and get a cheaper price online than direct offline consumption. As for the company, the 020 strategy could help them reduce their dependence of offline entities on the prime location which means lower rent cost. At the same time, they could master user data with the aid of information technology, which will improve the Phillip m. Perry. Showrooming: How to Turn Enemies Into Advocates. Rural Telecom. Vol 32 Issue 5 Sep/Oct2013, p37
4 retailers after years of development, including logistics distribution system, physical storefronts, stable and reliable suppliers, relatively perfect supply chain system and rich experience in retail services. Relying on existing systems to develop online business can not only reduce the difficulty and cost of transformation, but also promote dual integration by sharing integrated supply chain system with traditional marketing channels. At the same time, Benjy’s need guarantee the consistence of quality and price between online and offline products, trying to cultivate a reputation for reasonable prices. "People often showroom because a retailer has done a bad job establishing pricing credibility," said Joshua Pollack, executive consultant at the Parker Avery Group. "The consumer is not necessarily looking for the lowest price—just a reasonable one." He suggests getting ahead of the issue by maintaining a firm grip on their own knowledge of prices.4 Besides, Benjy’s could design for empathic expertise. Since home appliance product is high added-value commodity, consumers tend to be more cautious, They will not only observe the product appearance but also pay more attention to commodity performance. Customers are willing to pay extra for a trusted advisor helping them make the right choice. So Benjy’s need improve its staff hiring and training concerning professional consultancy of electronic devices and appliances. They could replace cash registers with tablets that allow the staff to interact with customers and provide immediate merchandise information. There’s no doubt that the O2O strategy is a win-win strategy to both customers and the company. To customers, they can get more comprehensive information about merchants and their products in the physical stores. In this way, they could pre-order the products and get a cheaper price online than direct offline consumption. As for the company, the O2O strategy could help them reduce their dependence of offline entities on the prime location which means lower rent cost. At the same time, they could master user data with the aid of information technology, which will improve the 4 Phillip M. Perry. Showrooming: How to Turn Enemies Into Advocates. Rural Telecom. Vol. 32 Issue 5, Sep/Oct2013, p37
naintenance of old customers and marketing effect Commerce is in a period of intense creativity. The future promises adaptation and change. Brands that adapt to changed circumstances survive and thrive-until they don't adapt, and eventually die. In conclusion, to survive and succeed in the fierce market competition, it's time for Benjy's to take the o20 strategy and make its position transformed
5 maintenance of old customers and marketing effect. Commerce is in a period of intense creativity. The future promises adaptation and change. Brands that adapt to changed circumstances survive and thrive — until they don’t adapt, and eventually die. In conclusion, to survive and succeed in the fierce market competition, it’s time for Benjy’s to take the O2O strategy and make its position transformed