Direct Marketing Business Model
In rolling back from department store outlets and relying on catalog and online shopping, Littlewoods is adopting a different strategy from other leading online and direct mail-order companies, such as Lands’ End. Discuss the advantages and disadvantages of Littlewoods’ approach.
Both Littlewoods and Lands’ End have a similar business model i.e. they are both direct marketing by mail-order retailers with the internet as an added distribution channel. However, Lands’ End is a click-and-mortar retailer in that they provide both a physical retail presence and have an online transactional capability aswell. Littlewoods decided to sell off all their high street stores in 2005 and rely solely on catalog and online shopping without maintaining a physical retail presence.
The advantages of Littlewoods’ approach are:
Higher profits due to lower overhead costs (e.g. paying for a physical store and staff) and more streamlined processes;
General e-tailers, such as Littlewoods sell a vast range of goods online, they can capitalize on the internet to offer such variety to a diverse group of customers geographically without the need to maintain a large physical retail (storefront) network;
Easier to expand server capacity and distribution facilities than a physical expansion;
Supply chain costs are lower;
Rapid ability to change and adapt to market trends and demands; and
Price changing and price discrimination is inexpensive and can be done at any time.
The disadvantages of Littlewoods’ approach are:
Lack of established infrastructure (or back office) to support the online front-office activities;
Customer relations are less stable due to anonymous contacts and less tolerance for disputes due to invisibility;
Customers shift loyalty easier therefore more resources are needed to create customer loyalty;
Customers cannot touch, feel or try on an item like in a physical store; and
Competition is moreso on a global level rather than a
Both Littlewoods and Lands’ End have a similar business model i.e. they are both direct marketing by mail-order retailers with the internet as an added distribution channel. However, Lands’ End is a click-and-mortar retailer in that they provide both a physical retail presence and have an online transactional capability aswell. Littlewoods decided to sell off all their high street stores in 2005 and rely solely on catalog and online shopping without maintaining a physical retail presence.
The advantages of Littlewoods’ approach are:
Higher profits due to lower overhead costs (e.g. paying for a physical store and staff) and more streamlined processes;
General e-tailers, such as Littlewoods sell a vast range of goods online, they can capitalize on the internet to offer such variety to a diverse group of customers geographically without the need to maintain a large physical retail (storefront) network;
Easier to expand server capacity and distribution facilities than a physical expansion;
Supply chain costs are lower;
Rapid ability to change and adapt to market trends and demands; and
Price changing and price discrimination is inexpensive and can be done at any time.
The disadvantages of Littlewoods’ approach are:
Lack of established infrastructure (or back office) to support the online front-office activities;
Customer relations are less stable due to anonymous contacts and less tolerance for disputes due to invisibility;
Customers shift loyalty easier therefore more resources are needed to create customer loyalty;
Customers cannot touch, feel or try on an item like in a physical store; and
Competition is moreso on a global level rather than a
References: Lee, J., Liang, T-P. & Turban, D. (2010) Electronic Commerce 2010: a managerial perspective. Upper Saddle River: Prentice Hall.