CASE PROBLEM 5-B 7-Eleven wants a chunk of e-Com? mnerce Other retailers have A
ID: 355485 • Letter: C
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CASE PROBLEM 5-B 7-Eleven wants a chunk of e-Com? mnerce Other retailers have A few years ago, management of 7 Eleven, a Tokyo-based ae pickup services in their stores with mixed results company with 57,,500 convenience stores in the United States, Canada, and the rest of the world, was worried Walgreens and Rite Aid Corp. host lockers, and many ahout ooline shopping Althanugh purchasing beer, milk, parking garages in New York City have lockers placed and candy hars over the internet might not be practical, against the wall near the entrance to the garage 7-Eleven was losing out a little to e-commerce. Many The head of a household in a medium-size city items such as beauty was asked her opinion about the 7-Eleven locker pro consumers choose to purchase products, razors, and even batteries online. With more gram. She responded, "A good idea. Package drop-ofts purchases online, 7 Eleven would expect fewer sales and at private houses have become a joke. Thieves follow the ess foot traffic in their stores. About two-thirds of the 8600 7-Eleven stores in the United States and Canada the packages lying next to the front door. Unless you arve delivery trucks into our neighborhood and then pick up home at the time the UPS or FedEx truck drops by, you can forget about receiving your package." Case Questions i. What problem or problems is the locker program 7- Eleven leadership decided to get a slice of online revenue by instaling lockers for e-commerce pickups at 200 stores io North America. The company announced that it would hold packages from Amazon, FedEx, UPS, Walmart and several other retailers in these lockers. Customers who find it inconvenient or not possible to have puckages delivered to their doorsteps, can open the sup nhot possible to pposed to 2. How would you rate the 7-Eleven program in terms of creativity and innovation? lockers by scanning bar codes sent over e-mail to their smartphones. 7-Eleven first took a pilot run with the 3. What do you think about the tradeoff between 7-Eleven renting locker space versus having the space locker project with Amazon.com in 2011 consumes about the same amount of space as a smalil commission from the package delivery service for lem, what creative solution can you offer? The lockers are placed against a wall, and each unit large shelf Both 7-Eleven and the franchise operator receive a available to sell more goods? 4. How big a problem do you think theft of delivered packages is for online retailers? If this is a valid prob- cach unit placed in a locker. Although some selling space is sacrificed, 7-Eleven management anticipates that Source: Original siory created from tacis and observalions in the tollowing The Wall people who visit the stores to pick up their packages will steet oumal, Novanber 13, 2015, pp 81.82. 7-Eleven Expands Amazon make a few impale purchases at the store. Each square ooers CS nine pwnacsononine com, November 13, 2015 sources: Loretla Chao. 7-Eleven Wants to Bo Your post Office ot in a typical convenience store generates about $600 annual sales. pp 1-2 Karf Ulermohien 7.Exven Adds More Lockers lor E-Commerce Pickupt, www.investoplace com, November 12, 2015Explanation / Answer
1)
Problems it is supposed to solve for customers: Customers who aren't home during working hours when e-commerce deliveries take place can use the locker service at 7-Eleven to receive and safeguard their deliveries. Customers can then pick-up the goods from the lockers at a time convenient to them. Also people residing in areas that are not covered by certain e-commerce deliveries can use the locker-service as a drop-off for their purchases at a prime location. Customers who face theft of goods delivered at their door-step when they are not home would be a major target segment.
Problem it is supposed to solve for 7-Eleven: E-commerce is eating into 7-Eleven sales and football at stores is reducing. This program will ensure that customers enter the store, even if it is only to pick-up their goods. Inpulse buying tendency will generate sales from these customers.
2. The program in itself is an extremely innovative one. 7-Eleven brick and mortar business was facing a threat from e-commerce. Instead of jumping on the bandwagon, 7-Eleven chose to play to their strength and use competition sales to boost its own. The program identifies a problem faced by the customer (Safeguarding deliveries when not at home/deliveries not happening at their location), problem faced by e-commerce (Loss of order due to customer concern about safety of their delivery) and problem faced by 7-eleven (loss in football due to e-commerce) and came up with a solution that is a win-win-win for all 3 parties involved. Thus from the creativity and innovation point of view it gets top marks. The only concern is that it can be easily duplicated by other retailing giants.
3. 7-Eleven identified that sales were going down since customers were no longer visiting their store for products that can be easily bought via e-commerce chains. Thus all the shelf space was not helping in reducing loss of sale let alone increasing sales. 7-Eleven believed that if customers can be drawn to the stores, impulse buying will make-up for the loss of sales to e-commerce.
The thought was that the
Annual Revenues generated from impulse buying of locker service holders + Commission from holding delivery packages > 600 * (Shelf space sacrificed to accomodate lockers)
As long as the above equation holds true the trade-off is a wise one.
4. Theft of delivered packages is a valid problem for a certain section of the customer base. One creative solution for this could be
Premium delivery option: Choose a time slot when you want the package delivered, even after general work shift.
Thus the customers who value this service would be willing to pay extra for this. At the same time this premium payment can be used to compensate delivery personnel willing to make deliveries at odd hours.
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