2001 Fall KAIST Techno MBA

MGT645
Electronic Commerce

Internet
shoppingmall
(LGeshop)

JAGUAR TEAM
Techno-MBA Park minshin, Hwang jungah
MIS-MBA Shim kyungsub
 Contents

• Characteristics of eShop

• LG CATV Homeshopping

• LGeShop

• Growth Starategies of LGeShop

 Characteri sti cs of
eShop

1. Explosive growing
Market Size (forecasted in Aug. 2000)

1998 1999 2000 2001E 2002E 2003E

LG 465 98 216 495 921 1,715
Research (110.8) (120.4) (129.2) (86.1) (86.2)

Andesen - 80 270 650 1,400 2,680

Consulting (237.5) (140.7) (115.4) (91.4)
(W billion)
 Characteristics of
Characteristics of eshop
eShop

2. Low entry barrier

• Little regulation
• Low capital
• # of shopping mall: 800 (’99) 2,000 (Jun ’01)

(W
bilion) 20

Hansol CS
15
Samsung Mall
LGeShop
10
Interpark
Daum
5
야후

0
1 6 12 6
‘00 ‘01
 Characteristics
Characteristics of
of eShop
eshop
3. Demographic
• Shopper: 2.9mil (1Q’01) 14% of total netizen
• #eShop over 500,000 visitors: 13 (Mar’01)
– Lotte (1.3mil), Interpark (1.1mil), Samsung (1.0mil),
Lgeshop (0.9mil)
• Shopper analysis
Housewife
16.8%
White Color
39.3%

Student 24.6%

Others
Blue Color 4.6%
14.7%
 Characteristics of
Characteristics of eshop
eShop

4. Competitors
• HansolCSclub, Samsungmall, eHyundai, [Link] etc.
but there are not much differences each other

ranking shoppingmall system contents buy/payment c/s delivery total

1 hansolcsclub E D+ D+ C+ B+ ★ ★☆
2 samsungmall E D D+ C+ B+ ★ ★☆
3 lgeshop E C D+ C+ C ★ ★☆
4 e-hyundai E D D+ C C+ ★ ★☆
5 [Link] E+ D D+ D+ C ★ ★☆
Korea Institute for Electronic Commerce
 Characteristics of
Characteristics of eshop
eShop

4. Competitors
• Samsungmall, HansolCSclub and eHyundai excel in delivery
• [Link] excels in system

[Link] [Link]
 Characteristics
Characteristics of
of eShop
eshop
5. Product Category
0 5 10 15 20 25 30 35 40 45 50

Computer & peripheral

Electronics

books, stationery

others

food and nuitrition

cars and sports goods1

clothes and beauties

ticket, travel

toys

flowers

other services
 Classification of eshop

• Portal-based mall
– Yahoo shopping, Daum, Lycos, Naver
– Brokerage: Lower cost, higher efficiency
– Disadvantage in one-stop customer service
• Pure on-line eShop
- Samsungmall, interpark, buynjoy(KT), happy2buy(Sktel)
- Based on strong IT infrastructure
- Strong influence of parent company
• Off-line based eShop
- [Link], e-hyundai, hansol CS club, LGeshop:
- Established based on off-line shopping mall
- Advantage of merchandising, delivery system
 LG homeshopping

LG CATV shop [Link]

CATV and Catalog shopping Internet shopping mall
 LG TVshop
• Launched in 1996
• Market leader among the two players (LG: CJ39 = 60:40 in ’00))
• Market size (W billion)
1997 1998 1999 2000 2001E 2002E
Market 157 414 528 1,003 1,304 1,630
size
% of 369.9 163.3 27.5 90 30 25
growth

• Bargaining power and higher margin structure

– merchandizing from small and medium companies.
• Well-off Customers with 30~40 yrs housewives
– purchase high price products: home appliances, electronics,
clothing..
 TVshop vs eShop

Market characteristics

Entry Competition Bargaining Customer

barrier power loyalty

TVshop high moderate high moderate

eShop low very high moderate low

 TVshop vs eShop
• Customers’ age • Customers’ gender
ranking TVshop eShop TVshop eShop
1 30 20
2 40 30 female 80 31
3 20 10 male 20 69

• Purchased product
ranking TVshop eShop
1 Household goods Books
2 Electronics Software
3 Apparel CDs, video tapes
4 Fashion goods Computers
5 Foods Travel/services
 LGeShop
• Opened in 1998 as a supportive function for TVshop
• Reformed and took its own way from may, 2000
• Dramatic increase in sales & # visitors
• LGeShop revenue trend

(W 8
billion) 7
6
5
4
3
2
1
0
00 J ul. Sep. Nov. 01 Mar. May
May J an.
 Critical
Criticalsuccess factor
Success Factor

• Synergy with TVShop

– Merchandising, delivery, after-sale service
– Co-promotion :VOD system

• Differentiated customer service

– Refund service(within 30 days)
– Pre-refund service
– Recall service
– Delivery on the appointed day service
– Call center(24hours a day)
Critical success factor
 Strategy of eShop

Profit

Customer loyalty

customer
price logistics
service

Supplier Delivery Inventory Sales & customer

Value chain Management management marketing management
management

SCM POS EDI CRM

 Customer loyalty

• Customer loyalty directly relates with Sales

• Sales = buy rate * customer transaction (price/buy)

Web site Buyer(000) Visitor (000) Buy rate(%)

[Link] 3,962 28,534 13.9
barnesandnoble 951 8,317 11.4
[Link] 942 8,680 10.9
[Link] 885 5,656 15.6
[Link] 739 11,050 6.7
Buy rate = buyer/ visitor
 Walmart vs JC Penny

[Link] [Link]
 Customer loyalty
Sales = buy rate * customer transaction (sales/buyer)

4Q 2000 1Q 2001
buyer 2.34 mil 2.91 mil
sales w489 bil w525 bil

Sales/buyer w209,017 w180,515

KRNIC (Korea Internet Info Center)

E-Hyundai Hyundai DS
Sales/buyer 51,483 22,000
Mar ~ May, 2001(w)
 Strategy of eShop

Profit

Customer loyalty

customer
price logistics
service

Supplier Delivery Inventory Sales & customer

Value chain Management management marketing management
management

SCM POS EDI CRM

 Price
Customer’s criteria for selecting eshop (KISDI, 2000.12)
%

30

25

20

15

10

l
e

ce
ity

ty
e

al
rit
ag
ic

io
rie

c
al

n
pr

at
cu

re
im

ie
qu

va

rm
en
se
d

fo
nv
an

in
br

co

Survey from 180 people who ever bought in the eshop

 Price
Critical factors of competition among B2C

45
40
35
30
25
20
15
10
5
0
e

e
ity

y
e

er
ar
ag

ic

nc
ic

al

rv
pr

liv
sh
im

ie
qu

se

de
en
et
d
an

nv
rk
ma
br

co

B2C companies considers the price the most critical factor in competition.
Price Strategy of LGeShop

• To establish SCM with suppliers

– For the tight control for the inventory  reduce cost

• Synergy with TVshop for bargaining

power
– with TV homeshopping, it can achieve the
economies of scale in purchasing
 Strategy of eShop

Profit

Customer loyalty

customer
price logistics
service

Supplier Delivery Inventory Sales & customer

Value chain Management management marketing management
management

SCM POS EDI CRM

 Logistics
Web Site Browse Search Item Selection Buy button
Front Office

Payment
Customer Web
Payment Process
Interface Hosting Ordering
Back Office

Order Delivery Order

Tracking Notification fulfillment

Delivery, Receive Order,

Customer Delivery
Connect Supplier
Analysis Monitoring
And Deliverer
Evaluation E-mail Notification Pick, Pack and Ship
Logistics strategy of LGeShop

• SCM with suppliers and transportation

company

• Synergy with TV shop in delivering and

storing
 Strategy of eShop

Profit

Customer loyalty

customer
price logistics
service

Supplier Delivery Inventory Sales & customer

Value chain Management management marketing management
management

SCM POS EDI CRM

The CRM
SystemCRM system overview
Strategic Analyst Statistician Marketer
CRMS Overvie

External Data

Strategic Data Communicate

Analyses Mining with Customer Customer
(Marketing)

Build Communicate
Marketing Manage with Customer
Customer D3
Database
Campaigns (Call-Centre )
DB

Communicate
with Customer
Evaluate
(Sales)
Legacy System Data Effectiveness Customers?
Responses

Management

Customer DB Manager Customers?Transactional Responses

CRM system overview

Process automation of customer contact

operational
CRM
point such as marketing, sales and call
center

Customer data analysis to establish

Analytical
CRM
marketing and sales plan for customer
service

Communication process to increase the

Collaborative
CRM
harmony within the organization and between
organization and customer
C/S Strategy of LGeShop

• To establish CRM to increase the

customer loyalty

• Synergy with TV shop in conducting

CRM
 Conclusion

Profit

Customer loyalty

customer
price logistics
service

Supplier Delivery Inventory Sales & customer

Value chain Management management marketing management
management

SCM POS EDI CRM

Thank you!