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Bricks and clicks business model

E-Commerce sites in India, UK, USA, France, Germany, Australia, Europe, Middle East, US & Europe

Business-to-business electronic commerce

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E-Commerce sites in India, UK, USA, France, Germany, Australia, Europe, Middle East, US & Europe

Dot-com boom

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Marketing

Online auction business model

Bricks and clicks business model is a business strategy or business model in e-commerce by which a company attempts to integrate both online and physical presences. It is also known as Click-and-mortar or clicks-and-bricks .

For example, an electronics store may allow the user to order online, but pick up their order immediately at a local store. Conversely, a furniture store may have displays at a local store from which a customer can order an item electronically for delivery.

The bricks and clicks strategy has typically been used by traditional retailers who have extensive logistical and supply chains. Part of the reason for its success is that it is far easier for a traditional retailer to establish an online presence than it is for a start-up company to employ a successful pure dot.com strategy, or an online retailer to establish a traditional presence. This strategy has contradicted analysts who believed that the Internet would render traditional retailers obsolete through disintermediation .

Advantages of the model:

Click and mortar firms have the advantage in areas of existing business model s and products . In these cases it is better to retain ties to your physical company. This is because they are able to leverage their competencies and assets, including:

1) Leveraging their core competency Successful firms tend to have one or two core competencies that they can do better than their competitors. It may be anything from new product development to customer service. When a bricks and mortar firm goes online it is able to use this core competency more intensively and extensively.

2) Leveraging existing supplier networks . Existing firms have established relationships of trust with suppliers. This usually ensures problem free delivery and an assured supply. It can also entail price discounts and other preferential treatment.

3) Levering existing distribution channels . As with supplier networks, existing distribution channels can ensure problem free delivery, price discounts , and preferential treatments.

4) Leveraging brand equity . Often existing firms have invested large sums of money in brand advertising over the years. This equity can be leveraged on-line by using recognized brand name s. An example is Disney.

5) Leveraging stability. Existing firms that have been in business for many years appear more stable. People trust them more than pure on-line firms. This is particularly true in financial services.

6) Leveraging existing customer base. Because existing firms already have a base of sales, they can more easily obtain economies of scale in promotion , purchasing and production; economies of scope in distribution and promotion; reduced overhead allocation per unit; and shorter break even times.

7) Leveraging a lower cost of capital . Established firms will have a lower cost of capital. Bond issues may be available to existing firms that are not available to dot coms. The underwriting cost of a dot com IPO is higher than an equivalent brick and click equity offering.

8) Leveraging learning curve advantages. Every industry has a set of best practices that are more or less known to established firms. New dot coms will be at a disadvantage unless they can redefine the industries best practices and leap frog existing firms.

Pure dot.coms, on the other hand, has the advantage in areas of new e-business models that stress cost efficiency . They are not burdened with brick and mortar costs and can offer products at very low marginal cost. However, they do tend to spend substantially more on customer acquisition.
Dot-com (also dotcom or redundantly dot.com ) companies were the collection of start-up companies selling products or services using or somehow related to the Internet . They proliferated in the late 1990s dot-com boom , a speculative frenzy of investment in Internet and Internet-related technical stocks and enterprises. The name derives from many of their names having the � .com � DNS suffix built into their company name.

Overview:

A canonical �dot-com� company�s business model relied on network effect s to justify losing money to build market share , or even mind share , through giving their product away in the hope that they could charge for it. Many raised cash through public offerings on the stock exchange s, with stock often soaring to dizzy heights and making the initial controllers of the company wildly rich on paper. Dot-com companies were stereotyped as having extremely young and inexperienced managers wearing polo shirts with lavish offices including foosball , free food and soda as well as Aeron chair s. Companies frequently held parties or expositions where free pens, t-shirts, stress balls, and other trinkets were given away emblazoned with the company�s logo. The companies were also stereotyped as requiring extremely long work hours and high pressure.

An annual event started in 1996 , the Webby Awards works to recognize the best websites on the Internet. The event was typically an extravaganza held annually in San Francisco, California , near the heart of Silicon Valley . The ceremonies mirrored the flashy dot-com lifestyle with costumed guests, modern dancers, and faux-paparazzi to make guests feel important. The event peaked in 2001 with thousands in attendance. In 2002, it was a more somber event with only several hundred guests and little of the excess of the late 1990s. In 2003, the awards were reduced to a virtual event because many of the nominees couldn�t fly to San Francisco due primarily to corporate belt-tightening. During the boom, attendees could slip away from their work for a short time without fear of losing their jobs.

Soaring stocks:

A stock market bubble in financial markets is a term applied to a rise or boom in the share prices of stocks of a particular industry, and applied only in retrospect when share prices have since crashed. Typically many companies thus become grossly overvalued. When the bubble �bursts�, the shares become worth a small fraction of their value at the height of the boom, and many companies go out of business.
The late 1990s boom in technology dot-com company stocks is a good example of a bubble, which burst in late 2000 and through 2001 .
The dot-com model was inherently flawed: a vast number of companies all had the same business plan of monopolizing their respective sectors through network effects, and it was clear that even if the plan was sound, there could only be at most one network-effects winner in each sector, and therefore that most companies with this business plan would fail. In fact, many sectors could not support even one company powered entirely by network effects.
In spite of this, vast fortunes were made by a few company founders whose companies were bought out at an early stage in the dot-com stock market bubble. These early successes made the bubble even more buoyant .

Free spending:
The dot-com boom had a jargon of its own including �dot-com millionaire,� �burnrate� and IPO (initial public offering). The phrase �Get large or get lost� was received wisdom as a window of opportunity beckoned to hopeful entrepreneurs and investors.
At the height of the boom it was possible for a promising dot-com to make an initial public offering of its stock and raise a substantial amount of money even though it had never made a profit, making its principals and employees, who may have been partially, paid with stock options instant dot-com millionaires. But then the matter of burnrate came into play as capital was expended in the operation of a company, which was not making a profit and had no viable business model .

An example of the free spending by dot-coms is visible in comparing advertisers for the 2000 and 2001 Super Bowl s. Seventeen dot-com companies paid over $2 million for a 30-second spot during the January 2000 Super Bowl. In January 2001, just three dot-coms bought advertising spots. The dot-com boom had major impacts on certain urban areas such as Silicon Valley , the Research Triangle area in North Carolina , the greater Seattle area, and Austin, Texas .
Historically the dot-com boom can be seen as similar to a number of other technology inspired booms of the past including railroads in the 1840s , radio in the 1920s , transistor electronics in the 1950s , and home computers and biotechnology in the early 1980s .

Thinning the herd:

The dot-com bubble burst, numerically, on March 10 , 2000 , when the technology heavy Nasdaq stock market index peaked at 5048.62, more than double its value just a year before. By 2001 , the bubble�s deflation was running full speed. A majority of the dot-coms have now ceased trading, after having burnt through their venture capital , often without ever making a gross profit , thereby becoming dot-compost . A number of companies associated with the dot-com boom have been accused of or convicted of fraud . The dot-com phenomenon has been described with a number of unflattering nicknames, including dot-con and dot-bomb .

Some reasons given as to why the bubble burst when it did are the six interest-rate increases made by the Federal Reserve in 1999 and early 2000 finally catching up with the economy.

Another reason given was rapidly accelerated business spending in preparation for the Y2K switchover. Once New Year had passed without incident, businesses found themselves with all the equipment they needed for some time and business spending dried up. This correlates quite closely to the peak of U.S. stock markets. The Dow Jones peaked in January 2000 and the Nasdaq in March 2000 . Immediately hiring freeze, layoffs, and consolidations followed in several industries, especially in the dot-com.

A few established dot-com companies including Amazon.com and eBay have survived this turmoil in good shape, and appear to have a good chance of long-term survival. The search engine Google is not typically considered a dot-com company.

The documentary e-Dreams ( 2002 ) portrays the fate of Kozmo.com, a unique start-up that promised one-hour delivery of just about anything you could think of.

The online magazine SatireWire (http://www.satirewire.com/) makes fun of the dot-com bubble.

Secondary Effects: The dot-com boom produced other economic problems, based on the theory of growth of dot-coms, and the broadband access that was assumed to follow in its wake. Many people believed that the amount of fiber optic and copper cable needed to service network traffic would go up exponentially because of the continuing explosive growth of the dot-coms. There was a famous quote made by a WorldCom executive that said that network traffic would double every hundred days for the foreseeable future. Based on this continuing assumption, many of these networking companies (like the dot-coms) took on huge debts to finance massive network expansions. IPO s they made were incredibly successful because investors also believed that they�d soon also soon be party to an explosion in network traffic.

Many of these networking companies found themselves in trouble slightly before and certainly after after the bubble burst because of their debt loads and the collapse of network subscriber growth; a few were even accused of accounting scandals used to make them appear profitable when they were not. Several were also forced to declare Chapter 11 or Chapter 7 bankruptcy . When these companies went bust, a significant portion of the fiber optic infrastructure went unused and became so-called � dark fiber �. See NorthPoint Communications , WorldCom , XO Communications , Covad Communications .

Click and mortar firms have the advantage in areas of existing business model s and products . In these cases it is better to retain ties to your physical company. This is because they are able to leverage their competencies and assets, including:


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