Chapter 9

1.      Why were so many entrepreneurs drawn to start businesses in the online retail sector initially?

       So many entrepreneurs are drawn to start businesses in the online retail sector initially because it was one of the largest market opportunities in the U.S. economy.  Most believed it was easy to enter the retail market; however they were mistaken.

2.      What frequently makes the difference between profitable and unprofitable online businesses today?
       Profitable online businesses involves having a central location in order to attract a larger number of shoppers, charging high enough prices to cover the costs of goods as well as marketing, and developing high efficient inventory and fulfillment systems so that the company can offer goods at lower costs than competitors and still make profit.

3.      Which segment of the offline retail business is most like online retailing? Why?
       The service sector is the segment of the offline retail business that is most like online retailing.

4.      Name the largest segment of U.S. retail sales. Explain why businesses in this segment have achieved and continue to dominate online retailing.
      The largest segment of U.S. retail sales is the service sector.  Businesses in this segment have achieved and continue to dominate online retailing because services employ about 108 million people.

5.      Name two assumptions e-commerce analysts made early on about consumers and their buying behavior that turned out to be false.
      Two assumptions e-commerce analysts made early on about consumers and their buying behavior that turned out to be false were industry consolidation and the movement toward integrated financial services.

6.      Why were customer acquisition costs assumed early on to be lower on the Web? What was supposed to reduce those costs?
      Customer acquisition costs were assumed early on to be lower on the Web because people thought it would be harder than what it actually is to develop a business online.  

7.      Explain the distinction between disintermediation and hypermediation as it relates to online retailing.
      Disintermediation is the displacement of market middlemen who traditionally are intermediaries between producers and consumers by a new direct relationship between manufacturers and content originators with their customers.  Hypermediation is when it is much higher than intended.

8.      Compare and contrast virtual merchants and bricks-and-clicks firms. What other type of online retailer is most like the virtual merchant?
      Virtual merchants are a single-channel Web firm that generates almost all of their revenue from online sales.  Bricks-and-clicks are companies that have a network of physical stores as their primary retail channel, but also have introduced online offerings.  

9.      What is the difference between a supply-push and a demand-pull sales model? Why do most manufacturer-direct firms have difficulty switching to one of these?
      A supply-push sales model is when products are made prior to orders received based on estimated demand.  A demand-pull sales model is when products are not built until an order is received.

10.  What are five strategic issues specifically related to a firm’s capabilities? How are they different from industry-related strategic issues?
      The five strategic issues specifically related to a firm's capabilities are consolidation, diversification, localization, job search engines/aggregators and social networking.  

11.  What are some of the difficulties in providing services in an online environment? What factors differentiate the services sector from the retail sector, for example?
      Some of the difficulties in providing services in an online environment is if your selling a product, your not able to physically see the product.  Also, there can be the thought that some customers have of their identity being stolen so they choose to not shop online.  The retail sector is more or less products while the services sector is a service you are offering.

12.  Compare and contrast the two major types of online service industries. What two major features differentiate services from other industries?
       The two major types of online service industries are financial services and travel services.