Week 4: Business Models and the New Era of Competition

Articles/Material Covered:

-"Business Models on the Web”

- Warby Parker

- Dollar Shave Club

- Bonobos

- More on Warby

- The Mobile Internet is Changing Brick and Mortar Retail

- "The Economics of Giving it Away"

- Business Models of New Websites

- A Taxonomy of Internet Commerce 

24 June

After reading the articles "The Economics of Giving it away" and "A Taxonomy of Internet Commerce", the common theme that I took away was the idea that attention and reputation are the currencies of the internet, not actual money.  One line that I found especially enlightening from the "A Taxonomy of Internet Commerce" article was  "much of value is created and exchanged on the Internet but that the interactions involved are not financial but may involve the accumulation of 'reputation capital' ". To that, I would have to agree and also disagree.  I see financial capital and reputation capital as interdependent rather than different entities.  From the same article, the native economy of the internet is not based on scarcity but on abundance.  I understand that statement to mean that abundance is driving the internet economy; more informational websites, more clothing retailers, more social networking sites, etc is what produces value, not scarcity.  With that point, I want to focus on a specific sector to clearly highlight my overall point.  There are a vast number of baseball retail websites on the internet; again, abundance is the driving force, not scarcity.  Therefore, there is fierce competition between these baseball retailers and an individual firm fights for a competitive advantage.  This is where the reputation capital comes into play.  In order for consumers to purchase products from one baseball retailer over another, they must be reputable.  A retailer will try to enhance their reputation capital through blogging and social media outlets.  At this point, there are no financial transactions, but reputation accumulation like mentioned before.  But, the end goal of reputation accumulation is to produce a financial transaction.  That is why I view reputation accumulation and financial transactions as linked rather than separate entities.  

30 June  
Looking at the differing business models that are being created within the virtual world, there are many that have potential to be successful with others that don't make much sense.  I want to focus in on one company whose business model seems counter-intuitive.  Bonobos is a menswear company that has brick and mortar locations that are essentially fitting rooms where individuals cannot purchase clothes directly from the store.  After trying on clothes, the customer must order the clothes from the website and have their products shipped to their house.  To me, this model does not seem very beneficial.  When buying casual clothing such as shirts and pants, I usually go to a store and try on the items and then purchase them right there.  I want to take as little time possible with as much convenience when buying clothes.  The Bonobos model seems like it adds more inconvenience than benefits; after trying on clothes the individual has to then go online to purchase the item and then have to wait for the clothes to be delivered.  However, the Bonobos model I think would be successful if it was implemented for formal menswear such as suits and tuxes.  Having a brick and mortar location to try on suits and get personally fitted for the suit and then that order is placed online and delivered to the individual.  This system would add convenience to the customer by having a place to physically see and touch the suit and then the item would be delivered to the customer, saving them a trip back to the store to pick up there purchase.  Currently, the company online company Indochino provides this service without the brick and mortar location.  One goes onto their website, browses through the selection and inputs all of their measurements.  Then, after purchase, the custom fitted suit is shipped to the customer's house.  Not having the opportunity to see and feel the suit is one hurdle that Indochino must overcome and could potentially look into the benefits of having a brick and mortar store.