: E-Business At Sephora - Case Study Example

?CASE STUDY: E-BUSINESS AT SEPHORA and Introduction The internet has revolutionized the way firms operate and has led to the emergence of the virtual and click-and-mortar businesses. Some of the common business-to-consumer (B2C) e-business models include the e-shops and e-malls. While maintaining their traditional outlook, some of the firms have adopted the internet for marketing and provision of financial services. With the continued adoption of the e-business, terms like viral marketing, mass customization, and real simple syndications will be common. The expansion of the e-business had had a positive impact on online payment platforms such as Moneybookers and has encouraged the use of electronic check, electronic bill and payment and digital wallet systems. This paper examines the Sephora’s e-business model and in particular its website and other elements associated with the B2C collaborations. 2. Sephora: brick-and-click model The Sephora Company is one of the major players in the beauty industry and provides the consumers with trendy and modern products and services. The company’s origin can be traced to the 1960s, and it relies heavily on the self-service model to sell various products. All the customer is required to do is to walk in any of its stores, and try the available offerings at no cost. The company was founded by Dominique Mondonnaud in Sweden but since then, the company has expanded its operations to many foreign countries including the United Kingdom. The company was acquired in 1993 by the Louis Vuitton and currently, the company offers over 200 brands and 13,000 products (Jansen and Mullen, 2008). By offering quality products to the customers, the company has been able to compete effectively with the close competitors. At the same time, the company offers differentiated goods and services which it then at a premium to its customers. According to Schibrowsky, Peltier and Nill (2007) its products are differentiated on the following basis: freedom, experience and guarantee. In this regard, customers have the freedom to choose their preferred products from a wide of range of brands at different prices. They also test the products before they sell them to the targeted consumers. To popularize product offerings, the company has adopted the digital marketing strategy by launching a well-integrated website. The website was launched in 1999 and is used by the customers to purchase different products and services, view feedback and watch make-up tutorials. Through the website, the company is able to conduct promotional activities including rewarding its customers with free samples for each online purchase. The company’s website is particularly important in reaching the chic audience, and has really helped the company to diversify avenues through which it distributes goods and services. The company competes directly with Macy’s, Nordstrom, Saks Fifth Avenue and Neiman Marcus, but despite the huge competition, the company has managed to maintain market leadership by offering premium products and by selling niche brands. At the same time, by offering a wide range of products and services, the company has been able to increase the consumers’ choice. Moreover, through the company’s website consumers can access information related to their inventory, ratings and reviews. One of the prominent activities conducted at the company’s website is the beauty talk. Customers are able to discuss the suitability of different products and services, and through such forums they are also able to obtain information about various product categories, expert advice and ask beauty questions (Pickett-Baker and Ozaki, 2008). The beauty talks are enhanced by video, which directs the consumers on how to use different products and a lounge where users can share their hauls and beauty confessions. To help the customers in the decision making process, the company’s website features a ‘top 10’ product list. Even more helpful is the ‘TV’ feature which contains trendy stories and how-to-do videos. According to Kerin (2012) some of the popular stories that are featured on the website include the ‘how to get a Hollywood glamorous look’ and ‘how to apply the lock-it foundation’. To further promote its current offerings, the company has initiated a competition through its website. The competition dubbed,’ the Sephora Colour wash’ requires the participants to create boards to be able to win gift cards (Kotler and Keller, 2012). The competition also involves creating beauty shopping lists which help the company to generate sales and provide quality services to the customers. The use of a wide range of digital platforms has helped the company to increase its sales to its clientele and provide customers with current information about the available products and services. While supplementing the brick and mortar stores, digital platforms have significantly reduced the company’s advertising costs and are used for numerous other activities including consultations, product presentation, contract arrangements and product delivery. Beside, the company’s digital marketing strategy involves the use of e-mail facilities, mobile platforms and social media sites. 3. E-business at Sephora According to Whiteley (2000) e - business entails the use of information technology to provide consumers with a variety of products and services. In the world today, the business environment has become very competitive forcing business entities to adopt alternative ways of doing business. In this regard, businesses have opted to change the way they distribute goods and services to the consumers and the time they take to deliver various offerings. In e-business, information technology is considered important in the buying and selling of various products and services. The information technology is used to integrate the processing and communication aspects of the business and according to Schneider and Perry (2000) e-business can be used to deliver many forms of goods and services. The first categories of goods that can be delivered through e-business are physical goods. Physical goods are classified into two: bulk goods and discrete goods. Discrete goods are sold in unit volumes while bulk goods are sold in large volumes. Through information technology, businesses are not only able to advertise these products, but they are also able to ensure they are delivered to the targeted consumers within the targeted timelines. Digital goods differ from the physical goods in that they can easily be copied and as such the manufacturers have to take great care to protect them from unauthorized buyers. In addition, unlike the physical goods, digital goods are very much easier to transport and as such the sellers are able to reduce their operating costs. According to Grefen (2010), some of the subclasses of the digital goods include: digital content, digital information and software. Another key category is the services which do not require an actual exchange of physical goods between two parties rather one party performs a process on behalf of the other to achieve a certain goal. Services can be classified into digital and physical depending on whether manipulation of physical objects is required or not. According to Turban et al. (2002), time scope defines the timeline through which e-business collaboration lasts. It is widely acknowledged that time scopes are relative and not absolute. Static time scope is not associated with individual orders rather than maintaining long-lasting relationships between two parties (Rayport and Jaworksi, 2000). Static scope is suitable in situations where one party is of strategic value or where the parties share business, organizational and technical infrastructure (Macdonald and Smith, 2004). Likewise a semi-dynamic time scope depends on the individual orders, and the selection of the parties is done at a tactical level (Leek, Naude and Tumbull, 2003). The dynamic time scope is based on individual orders and the selection of parties is done so as to improve operational effectiveness (Laudon and Traver, 2001). The selection of partners is done frequently, while the ultra-dynamic time scope involves a flexible relationship whereby collaborations can be changed even during the execution of an individual business order (Lancioni, Smith and Oliva, 2000). This type of collaboration is very common in the e-retail industry where customers can terminate any transaction and the any amount paid is charged back to their accounts. The Sephora Company sells discrete goods to the consumers and currently the company has over 13,000 products which can be accessed in stores and through digital platforms (Kotler and Keller, 2012). Beside buying discrete goods from the website, consumers also access services from the professionals. 3.1 Dynamic time scope The consumer products market is very competitive and as such customers take due care when selecting their preferred sellers. The company faces huge competition from other firm selling similar products and services. Some of the firms have developed very quality websites and very low prices for their products. A case in point is the Neiman Marcus, Bloomingdales and Nordstrom, which offer similar products at a cheaper price. In addition, there are many speciality stores that are offering similar products, and so the company is forced to look for more effective distribution channels and differentiate its products and services (Schweiger, 2008). With this in mind, the company’s model can be described to rely more on the dynamic time scope. Customers are only able to buy products from the company after comparing them with other similar goods from the competitors. However, although the collaboration between the company and the customer can best be described as dynamic, at times the company strives to establish long-term relationships through customer relationship management. 3.2 Information systems at Sephora IT systems are very important as they allow business entities to make strategic decisions as well help the management gather, analyse and summarize the key internal and external information used in the business environment (Jap, 2002). There are many forms of information systems that are used in the modern business environment and they include: execute support systems, management information systems, decision-support systems, knowledge management systems, and office automation systems (Wolfinbarger and Gilly, 2001). The management information systems help us to organize the internal sources of information while the decision support systems are used by the management to make decisions in uncertain situations and in choosing the most appropriate solutions and alternatives. To improve the knowledge capital in an organization, systems play an important role and are even considered important in the creation of commercial opportunities. On the other hand, office automation is considered important in enhancing the employee productivity. Key components of the e-business software are discussed in the next few sections. 3.3 Enterprise Resource Planning It is considered as the interface of an organization’s internal and external information systems. The available literature indicates that enterprise resource planning is effective in lowering operating costs, reducing cycle times and increasing customer satisfaction (Shields, 2001). Indeed, Grant, Hall, Wailes and Wright (2006) conducted a quantitative to examine the underlying reasons as to why firms choose to adopt ERP systems and identify the attendant benefits associated with the implementation of the system. In a similar study, Loh and Lenny (2004) indicated that implementation of the ERP system can enhance the competitive advantage through effective resource management. Information systems help an organization manage the tangible assets, production, financial resources and human resources (Head, 2005). The Sephora Company has embraced the ERP with the aim of enhancing its position in the market, and improving its brand image. The company has also restructured the business processed and developed new sales channels. The ERP targets the retail solution portfolio and the system provides the company the capability to implement identical processes throughout all group subsidiaries. The project was first rolled out in France and later on was expanded to the rest the entities throughout Europe. The management controllers, category managers and the supply chain managers rely on the system for effective delivery of goods and services to the consumers. 3.4 Supply chain management It is considered an important element in the coordination of all processes in an organization. It involves management of various activities including: shipment of raw materials, maintenance of work-in-process inventory and transfer of goods from the point of production to the point of consumption. The Sephora Company maintains proper upstream supply chain relationships to ensure products are delivered in good time. Likewise, depends on healthy downstream supply chain relationships when transacting with customers and other intermediaries. To provide quality products and services, the company maintains high levels of agility. Having high levels of agility enables the company to respond faster to the changing business environment. Information flow and sharing is maximized through the entire company, and the customers are updated about new products through newsletters and other advertising channels. Using an integrated communication mix enables the Sephora Company to reach all types of consumers including the aged and the young ones. To ensure the ordering process is seamless, the company’s internal operations are appropriately integrated. Internal integration has improved the company’s performance of cross-functional processes. To improve external; communication the company is externally integrated with its partners. At the Sephora, the e-retailing concept has been revolutionized through efficient supply management. The company launched the, the same day beauty delivery service, which allows the consumers to order online for popular brands such as NARS, Dior and Clinique. Reducing the customer lead time to a few hours is considered one of the important aspects of the agile organizations. 3.5 Customer relationship management It is considered an important element of enhancing interactions between the customers, clients and business partners. Business entities adopt technology to synchronize business process. In the Sephora Company, customer relationship management is carried through the automation and synchronization of the following business processes: marketing, customer service and technical support. An important aspect of the customer relationship management of the company is the use of e-mail marketing. Customer constantly receives e-newsletters and other periodicals informing them about the upcoming events, in-store promotions and new products. Like any other business entity the goal of the Sephora Company to minimize the operating costs by optimizing the supply chain operations. This is achieved by having the right product at the right location, at the right time and by maintaining high inventory stock percentages and service levels. Before enhancing the right supply chain practices, the company experienced problems of excess inventory. However, using appropriate technology and with the help of the consultants, the company was finally able to handle this problem. As a result of streamlining the supply operations, the company has been able to reduce the inventory levels, and improve inventory allocation and velocity. In addition, the continued use of Merchandise Planning and Forecasting solution allows the company to provide quality services to the customer, and improve brand visibility. 4. The BOAT framework According to the available literature, the BOAT framework is considered suitable in developing e-businesses and by integrating several development stages. The acronym BOAT stands for three elements: business, organization, organization, architecture and technology. As suggested by Weill and Vitale (2001) using the framework has other attendant benefits such as discovering new business opportunities and improving the existing market vault chains. In this context, the framework could be used to improve the collaboration between the company and the customers. To further examine how the framework has been appreciated in the company, it will be imperative to discuss each of its elements individually. 4.1 Business According to Saloner and Spence (2002), the business perspective can be identified by checking the characteristics that are impacted on through the adoption of e-business and by improving the collaboration between the parties. The business perspective can also be analysed by discussing the directions taken by firms and the new structures resulting from the collaboration between the parties. In this regard, the company has adopted many distribution channels to improve the modal reach of its products to the customers. At the same time, the company continues to enhance the geographic reach by increasing the number of brick-and-mortar stores (Holmlund, 2004). The richness of the collaboration between the company and the consumers has been enhanced through various activities. For instance, through beauty talks and videos at the company’s website, customers can be able to access important information from various professional make-up artists. Through the website, the company is also able to collect the consumers’ information which is then used of target marketing and directing promotion activities (Angeles, 2000). The use of the website and other digital marketing platforms allow the Company to increase the online purchase, and this strategy is considered more effective than relying on the brick-and-mortar concept only (Chaffey, 2004). The website not only enhances the frequency of the communication, but also the level of interactivity. Another key element of the richness as suggested by Grefen (2010) is the amount of information provided to the customers. Typically, marketing channels are required to provide as much information to the consumers to help them make the best purchase decision. In this regard, the company’s website contains information about the main items including make-up, fragrances, bath and body products, nails, hair tools and brushes, the available brands and various gifts available. At the same time, the website has a fly-out menu hence reducing clutter and providing potential consumers with as much information as possible (Krishnamurthy, 2003). The contents of the website improve the customers’ experiences through good design. In this regard, the website is modelled after the departmental-store model whereby similar products are grouped under one time. Grouping similar items together allows the consumers to effortlessly purchase the required goods and services (Kalakota and Robinson, 1999). A key concept associated with the ‘business’ element which in e-business scenario is achieved through the adoption of the information technology. In a business setting, efficiency can be adjusted in three levels: operational level, tactical level and the strategic level. (Eisenmann, 2002) The operational level is associated with the primary business processes and making transaction-scale decisions while the tactical level is concerned with making medium-scale decisions. The strategic level on the other hand is associated with the long - term, large-scale decision. 4.1.1 Business chains The available literature suggests that the aspects of reach and richness can be altered through the use of e-business. Collaborations between customers and the company can be restructured through disintermediation and re-intermediation. Disintermediation involves the removal of the unimportant link through the adoption of e-business technology (Salo, 2006). In contrast, re-intermediation involves inserting a new link to the existing business chain. The company’s model has been dis-intermediated whereby the role of retailers and wholesalers has been eliminated through online offerings. The company’s also relies on the traditional brick-and-mortar model to deliver goods and services to the consumers. Combining both the dis-intermediation and the re-intermediation models ensures the company is able to reach a wide clientele. 4.1.2 Business directions According to the available literature, business direction is defined by different elements including enriched customer relationship management, true on time and online capability, integrated bricks and clicks model, using a multi-channel business design, automating the entire business and having a time compressed business (Chen, 2001). In this regard, through digital platforms and the website, the company has been able to enhance the interaction between the buyers and the sellers. Both the digital and the traditional platforms complement each other hence adding value to the company. The model, which uses a multi channel business design, is considered essential in reducing the costs associated with a pure brick-and-mortar model (Laudon and Traver, 2001). 4.2 Organization and Architecture This aspect of the BOAT framework describes how organizations are structured and connected to achieve the goal defined in the business aspect. Some of the functions that are examined under the organization sub-category include the organization structures business processes and business functions (Mahadevan, 2000). On the other hand, the architectures are pivots that are used in e-business scenarios to describe the information systems between organizations and within organizations (Afuah and Tucci, 2001). 4.3 Technology According to Salo(2006), the technology used in e-business is classified into three: infrastructure, aspect oriented and function oriented. Some of the basic infrastructures in e-business include the internet and the web technology. According to Stephens and Ramos (2003), aspect-oriented technology helps business entities to fulfil specific aspects such as data management while the function-oriented technology helps businesses to perform specific functions such as business intelligence. The technology aspect of the BOAT framework describes the technological realization of the systems within with architectural structures. Some of the components related to the technological aspect are: software, languages, communication protocols and hardware (Saloner and Spence, 2002). 4.3.1 Online payment system It is widely acknowledged that the ease and speed of a transaction influence the willingness of a customer to make the purchase decision. In this regard, some of the online payment systems make it impossible for the customer to buy products and services as fast as possible. Aware of these facts, the Sephora’s website allows the customer to easily proceed to the checkout step without as fast as possible and without much effort. As suggested by Wise and Morrison (2003) the online payment system is composed of the following components: selection of products, checkout, selection of a bank, entering account details, confirming payment, receiving payment confirmation, and receiving order confirmation. Each of these steps should be observed in order to ensure the consumers are satisfied as possible. The company’s website is designed in such a way that each of these steps is observed and the customer details are protected from third parties. 5. Conclusion The BOAT framework is used to describe the business, organizational, architectural and the technological aspects of e-business. The model is comparable to the strategic alignment model which aligns the role of the business and the informational technology. 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