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- 18 Oct 2022
- Cold Call Podcast
Chewy.com’s Make-or-Break Logistics Dilemma
In late 2013, Ryan Cohen, cofounder and then-CEO of online pet products retailer Chewy.com, was facing a decision that could determine his company’s future. Should he stay with a third-party logistics provider (3PL) for all of Chewy.com’s e-commerce fulfillment or take that function in house? Cohen was convinced that achieving scale would be essential to making the business work and he worried that the company’s current 3PL may not be able to scale with Chewy.com’s projected growth or maintain the company’s performance standards for service quality and fulfillment. But neither he nor his cofounders had any experience managing logistics, and the company’s board members were pressuring him to leave order fulfillment to the 3PL. They worried that any changes could destabilize the existing 3PL relationship and endanger the viability of the fast-growing business. What should Cohen do? Senior Lecturer Jeffrey Rayport discusses the options in his case, “Chewy.com (A).”
- 05 Mar 2019
- Working Paper Summaries
The Impacts of Increasing Search Frictions on Online Shopping Behavior: Evidence from a Field Experiment
This paper challenges the logic that making it easier for consumers to search across a wide assortment of products is the best strategy for online retailers. Experiments show that adding extra search costs to find discounted items can improve gross margins and sales by increasing the number of items inspected and serving as a self-selecting price discrimination mechanism among customers.
- 06 Jul 2015
- Research & Ideas
Money and Quotas Motivate the Sales Force Best
Bonus programs are effective for motivating sales people, but also costly for companies to maintain. Doug Chung and Das Narayandas study several compensation schemes to see which work best. Open for comment; 0 Comments.
- 21 May 2015
- Working Paper Summaries
Incentives versus Reciprocity: Insights from a Field Experiment
Sales force compensation is a key instrument available to firms for motivating and enhancing sales performance. What are the most effective forms of compensation? In a field experiment involving four regional sales forces of a prominent firm in India, the authors examined the impact of conditional and unconditional bonus schemes. Findings from this study provide guidance to firms on how to use conditional and unconditional compensation to enhance sales rep productivity and better manage the achievement of sales forecasts. Closed for comment; 0 Comments.
- 17 Mar 2015
- Research & Ideas
Where Did My Shopping Mall Go?
The growing popularity of online shopping is remaking the world of offline shopping—stores are getting smaller, malls are getting scarcer. Rajiv Lal and José Alvarez look ahead five years at our radically transforming shopping experience. Plus: Book excerpt. Open for comment; 0 Comments.
- 02 Mar 2015
- Research & Ideas
Retail Reaches a Tipping Point—Which Stores Will Survive?
Part 1: The new book Retail Revolution: Will Your Brick and Mortar Store Survive? argues that ecommerce is about to deal severe blows to many familiar store-based brands—even including Walmart. Here's how retailers can fight back, according to Rajiv Lal, José Alvarez, and Dan Greenberg. Open for comment; 0 Comments.
- 29 Sep 2014
- Research & Ideas
Why Do Outlet Stores Exist?
Created in the 1930s, outlet stores allowed retailers to dispose of unpopular items at fire-sale prices. Today, outlets seem outmoded and unnecessary—stores have bargain racks, after all. Donald K. Ngwe explains why outlets still exist. Open for comment; 0 Comments.
- 08 Sep 2014
- Research & Ideas
The Strategic Way To Hire a Sales Team
The equivalent of an entire sales force is replaced at many firms every four years, so it's critical that go-to-market initiatives remain tied to strategic goals. Frank Cespedes explains how in his book, Aligning Strategy and Sales. Closed for comment; 0 Comments.
- 22 Feb 2012
- Working Paper Summaries
The Dynamic Effects of Bundling as a Product Strategy
This paper investigates the practice of bundling as a product strategy, and identifies how consumers make choices between products and bundles in a dynamic environment. Authors Timothy Derdenger and Vineet Kumar look at the handheld video game market to study bundling in a platform setting with the goal of investigating several key questions of interest to practitioners who make product decisions: First, do consumers value bundles over and beyond their component products, indicating a synergy, which some researchers have hypothesized? Second, have there been differing opinions on whether mixed bundling, that is offering both the bundle and individual products for sale, is more effective than offering only pure bundles or even compared to offering only the products for sale? Given the prevalence of bundling in technology markets, it is critical to understand whether bundling is more effective in environments with strong network effects or with weak network effects. Key concepts include: Consumers have a negative synergy effect, that is they are willing to pay less for the bundle than for the individual console and game, leading to the question of whether introducing such bundles can increase revenue. Because bundles act similar to damaged goods, they work well in dynamically segmenting consumers and allow for purchases to occur earlier in time—the presence of bundles induces consumers to purchase earlier rather than wait. The time shifting of hardware purchases has a strong effect on software sales, since more consumers who own consoles will purchase video games over a longer time frame. Mixed bundling is especially effective compared to pure bundling, and the authors find that moving to pure bundling would reduce sales by over 20 percent. Strong network effects do not enhance the value of bundling, suggesting that bundling may instead prove more useful in settings with weak network effects. Bundling is thus a strategy that could serve as a substitute to creating stronger network effects. Closed for comment; 0 Comments.
- 19 Jul 2010
- Research & Ideas
How Mercadona Fixes Retail’s ’Last 10 Yards’ Problem
Spanish supermarket chain Mercadona offers aggressive pricing, yet high-touch customer service and above-average employee wages. What's its secret? The operations between loading dock and the customer's hands, says HBS professor Zeynep Ton. Key concepts include: The last 10 yards of the supply chain lies between the store's loading dock and the customer's hands. Poor operational decisions create unnecessary complications that lead to quality problems and lower labor productivity and, in general, make life hard for retail employees. Adopting Mercadona's approach requires a long-term view and a leader with a strong backbone. Closed for comment; 0 Comments.
- 30 Nov 2009
- Research & Ideas
Tracks of My Tears: Reconstructing Digital Music
Record labels have depended on album sales to boost profits. But in the digital music era, consumers prefer single songs over music "bundles." The result? Harvard Business School professor Anita Elberse says it is time for the industry to rethink its products and prices. Key concepts include: The unbundling of albums into a series of separately sold songs on digital music stores is hurting record label profits. Labels are less likely to get away with selling a bundle based on the strength of one or two tracks if the other songs are far less appealing. A strong artist reputation helps to curb the negative impact of unbundling. Labels might consider pushing for higher prices online and generally more flexibility in setting prices. Giving preference to quality over quantity and designing smaller, more consistent bundles may be beneficial. Closed for comment; 0 Comments.
- 13 Nov 2008
- Working Paper Summaries
The Effect of Labor on Profitability: The Role of Quality
Determining staffing levels is an important decision in retail operations. In 2006, retailers spent $393 billion on employee wages, more than 10 percent of their revenue that year and more than their inventory holding costs. Hence, staffing levels have a major impact on retailers' costs. But at the same time, staffing levels affect conformance quality—how well employees execute prescribed processes—and service quality—the extent to which customers have a positive service experience at the stores. While there is overwhelming evidence that conformance quality and service quality improve sales, both generally and in retail settings, their effect on profitability is not clear. To examine how the amount of labor at a store affects profitability through its impact on conformance quality and service quality, Zeynep Ton analyzed extensive data from stores of a large retailer. Key concepts include: How well employees execute prescribed processes is an important driver of financial performance. It is important to design processes that are simple and easy to follow, especially when there is high employee turnover, as in the retail industry and when offering a self-service environment. Good process design needs to be backed up with an organizational culture that emphasizes conformance to these processes. Too much corporate emphasis on payroll management may motivate managers to operate their stores with insufficient labor capacity that, in turn, degrades financial performance. Emphasis on payroll management can also degrade employee morale. Closed for comment; 0 Comments.
- 06 Nov 2008
- Working Paper Summaries
Extending Producer Responsibility: An Evaluation Framework for Product Take-Back Policies
Managing products at the end of life (EOL) is of growing concern for durable goods manufacturers. While some manufacturers engage in voluntary "take back" of EOL products for a variety of competitive reasons, the past 10 years have seen the rapid proliferation of government regulations and policies requiring manufacturers to collect and recycle their products, or pay others to do so on their behalf. Toffel, Stein, and Lee develop a framework for evaluating the extent to which these product take-back regulations offer the potential to reduce the environmental impacts of these products in an effective and cost-efficient manner, while also providing adequate occupational health and safety protection. The evaluation framework is illustrated with examples drawn from take-back regulations in Europe, Japan, and the United States. Key concepts include: The authors identify key policy levers that promote cost efficiency while reducing risks to the environment, public health, and the workers involved in recovery operations. Key policy decisions include setting the scope of manufacturer responsibilities, the stringency of recovery and recycling targets, design-for-environment requirements and substance bans, restrictions on when customer fees can be imposed, and limitations on the industrial organization of the recycling market. Closed for comment; 0 Comments.
- 13 Apr 2007
- Working Paper Summaries
Incorporating Price and Inventory Endogeneity in Firm-Level Sales Forecasting
Benchmarking and forecasting firm level performance are key activities for both managers and investors. Retailer performance can be tracked using a number of metrics including sales, inventory, and gross margin. For operational reasons, the sales, inventory, and gross margin for a retailer are interrelated. Retailers often use inventory and margin to increase sales; and sales, conversely, provide input to the retailer’s decisions on inventory and margins. Inventory and margin also influence each other. This research uses firm-level annual and quarterly data for a large cross-section of U.S. retailers listed on NYSE, AMEX, or NASDAQ to construct a model that examines the interrelationships among sales per store, inventory per store, and margin. Key concepts include: This model can be used to benchmark retailers' performance in sales, inventory, and gross margin simultaneously. The model can also be used to generate sales forecasts even when sales were managed using inventory and gross margin. Closed for comment; 0 Comments.
- 26 Jul 2006
- Research & Ideas
The Strategic Way to Go to Market
Too often channel strategies develop at the last minute--when a product is ready to go to market. But this haphazard approach leaves a lot of efficiencies and synergies by the wayside, says V. Kasturi Rangan. Enter the concept of the "channel steward." Key concepts include: Distribution strategies are often supplier-conceived methods to get a product to market, but these strategies fail to capitalize fully on channel partners or customers. A "channel steward" is a player in the chain who is best positioned to look out for the interests of all involved and devise a win-win strategy. Distribution strategy needs the attention of high-level executives—not just a product manager. Think of the Internet as a complementary go-to-market tool, not a total solution. Closed for comment; 0 Comments.
- 20 Dec 2004
- Research & Ideas
How an Order Views Your Company
HBS Professors Benson Shapiro and Kash Rangan bring us up to date on their pioneering research that helped ignite today’s intense focus on the customer. The key? Know your order cycle management. Closed for comment; 0 Comments.
- 21 Oct 2002
- Research & Ideas
The Parable of the Bungled Baggage And the Unhappy Customer
Sometimes a seemingly harmless corporate decision such as a budget trim can lead to big problems elsewhere. HBS professor W. Earl Sasser tells what happens when budget constraints and customers collide. Closed for comment; 0 Comments.
- 22 Jan 2001
- Research & Ideas
Control Your Inventory in a World of Lean Retailing
"Manufacturers of consumer goods are in the hot seat these days," the authors of this Harvard Business Review article remind readers. But there is no need to surrender to escalating costs of inventories. In this excerpt, they describe one new way to help lower inventory costs. Closed for comment; 0 Comments.
- 07 Aug 2000
- Research & Ideas
Rocket Science Retailing
Retailers and e-tailers have enormous amounts of data available to them today. But to take advantage of that data they need to move toward a new kind of retailing, one that blends the instinct and intuition of traditional systems with the prowess of information technology. Closed for comment; 0 Comments.
How SHEIN and Temu Conquered Fast Fashion—and Forged a New Business Model
The platforms SHEIN and Temu match consumer demand and factory output, bringing Chinese production to the rest of the world. The companies have remade fast fashion, but their pioneering approach has the potential to go far beyond retail, says John Deighton.