- eSkye.com was a startup company that aimed to create an online ordering solution to improve the inefficient alcohol beverage supply chain. It had completed successful pilot programs with retailers in Indiana, Illinois, and Michigan.
- The document discusses the challenges in the alcohol beverage industry, including a lack of information sharing across the supply chain due to regulations. eSkye aimed to address this with its online ordering system.
- It provides background on eSkye's founders and their prior experience at National Wine & Spirits, which inspired the idea for eSkye. It details eSkye's creation and pilot programs to test its technology.
Interstate Cannabis Taxes - The Future of Shipping Weed?Evergreen Buzz
Will we see interstate tariffs, read this https://cannabis.net/blog/opinion/marijuana-tariffs-the-future-of-interstate-cannabis-commerce-and-social-equity-mandates
What Top-Tier Industries Are Telling Us About Building Relationships Through Social Media, Mobile Solutions, Big Data, Interactive Technology and Online Marketing.
eWorld Cluster Development & the Globalized Supply Base (2010)Jon Hansen
eWorld Masterclass Presentation
September 28th, 2010
London, UK
One of the greatest challenges faced by both the private and public sectors in terms of driving best value decision-making, is supply base erosion. Almost irreparably damaged through ill-advised initiatives such as supply base rationalisation and low cost country sourcing (to name but two), many supplier development, engagement and utilisation programs are little more than exercises in futility. This session aims to dramatically increase your chances of success, by explaining the new dynamics of the global economy and how you can drive sustainable value through your supplier relationships.
Speaker: Jon Hansen, Procurement Insights
Interstate Cannabis Taxes - The Future of Shipping Weed?Evergreen Buzz
Will we see interstate tariffs, read this https://cannabis.net/blog/opinion/marijuana-tariffs-the-future-of-interstate-cannabis-commerce-and-social-equity-mandates
What Top-Tier Industries Are Telling Us About Building Relationships Through Social Media, Mobile Solutions, Big Data, Interactive Technology and Online Marketing.
eWorld Cluster Development & the Globalized Supply Base (2010)Jon Hansen
eWorld Masterclass Presentation
September 28th, 2010
London, UK
One of the greatest challenges faced by both the private and public sectors in terms of driving best value decision-making, is supply base erosion. Almost irreparably damaged through ill-advised initiatives such as supply base rationalisation and low cost country sourcing (to name but two), many supplier development, engagement and utilisation programs are little more than exercises in futility. This session aims to dramatically increase your chances of success, by explaining the new dynamics of the global economy and how you can drive sustainable value through your supplier relationships.
Speaker: Jon Hansen, Procurement Insights
The New Era of Marketing to Latino-AmericanstroikaLA
Latino-Americans are more empowered in the U.S. today than ever before. As such, it's more important for marketers to connect to this demographic. This presentation walks through Troika's perspective on marketing to the growing Latino-American demographic.
Inside information about meetcentive destination Bruges : accommodation, meeting rooms, special venues, culinary & event partners and other congress services.
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Must have for conference organisers and meeting & event planners. First hand information about Bruges for congresses, meetings, incentives, corporate events, business travel. Overview of hotels, (special) venues, caterers, event agencies, conference suppliers and attractions. WITH CITY MAP AND CAPACITY OVERVIEW
The New Era of Marketing to Latino-AmericanstroikaLA
Latino-Americans are more empowered in the U.S. today than ever before. As such, it's more important for marketers to connect to this demographic. This presentation walks through Troika's perspective on marketing to the growing Latino-American demographic.
Inside information about meetcentive destination Bruges : accommodation, meeting rooms, special venues, culinary & event partners and other congress services.
ORDER YOUR FREE COPY: http://www.meetinginbrugge.be/en/freeguide
Must have for conference organisers and meeting & event planners. First hand information about Bruges for congresses, meetings, incentives, corporate events, business travel. Overview of hotels, (special) venues, caterers, event agencies, conference suppliers and attractions. WITH CITY MAP AND CAPACITY OVERVIEW
ConsumersLearning ObjectivesAfter completing this chap.docxmaxinesmith73660
Consumers
Learning Objectives
After completing this chapter, you should be able to:
• Describe the nature and history of consumer advocacy.
• Outline the principal issues surrounding product safety.
• Explain the forms of deceptive advertising.
• Describe the problems surrounding the targeting of vulnerable groups.
• Describe the different unfair sales tactics.
Associated Press/Robert F. Bukaty
4
fie66722_04_c04_083-110.indd 83 3/2/12 9:42 AM
CHAPTER 4Section 4.1 Introduction
Chapter Outline
4.1 Introduction
4.2 Consumer Advocacy
History of Consumer Advocacy
4.3 Product Safety
Safety and User Reviews
Unsafe Automobiles
4.4 Deceptive Advertising
Deceptive Food Packaging
Deception Versus Puffery
Punishment for Deceptive Advertising
4.5 Targeting Vulnerable Groups
Child Advertising
4.6 Unfair Sales Tactics
Misuse of Legal Tactics
4.7 Conclusion
4.1 Introduction
The Beech-Nut company manufactured an apple juice for babies that contained no apple juice
whatsoever (Hartley, 1993). Exxon advertised that one of its brands of gasoline made engines
cleaner and reduced auto-maintenance costs, a claim that it did not substantiate (Federal Trade
Commission, 1996). Hundreds of toy products manufactured in China were recalled in a 1-year
period for containing toxic lead paint or presenting a choking and strangulation hazard. These are
just a few of the hundreds of consumer complaints against businesses that have grabbed head-
lines over the years.
Let the buyer beware! This is a general word of warning to consumers that we have all heard in our
buying experience. The warning alerts us to the fact that the products we buy may not be qual-
ity items as the seller claims, and that the burden may fall on us as consumers to research those
products before we purchase them. However, although this warning is good advice, it does not
apply to an array of products we routinely buy. This is because in the United States we have laws
in place that prevent businesses from taking advantage of consumers, and in fact many businesses
zealously guard their reputation as manufacturers or retailers of high-quality items.
Indeed, even in bygone eras, consumers had some protection. The ancient Babylonian Code of
Hammurabi (which we mentioned in Chapter 1), from around 1750 BCE, gave this stern warn-
ing to building contractors: “If a builder build a house for some one, and does not construct it
properly, and the house which he built fall in and kill its owner, then that builder shall be put
to death” (trans. 1915 by L. W. King, section 229; see http://www.fordham.edu/halsall/ancient/
hamcode.asp#text). If we go back further in time, to hunter-gatherer days when people lived in
84
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http://www.fordham.edu/halsall/ancient/hamcode.asp#text
http://www.fordham.edu/halsall/ancient/hamcode.asp#text
CHAPTER 4Section 4.2 Consumer Advocacy
small tribes, we can imagine th.
White paper Three Trends Changing the FMCG EcosystemSteve Arens
CMA White Paper - Three Trends that are Permanently Changing the FMCG Ecosystem
This paper addresses at a high level three important trends that are permanently changing the FMCG competitive ecosystem. These changes affect all the industry participants: retailers, manufacturers and the diverse community of solution providers. The three trends and their implications are:
• The Growing Power of the Retailer. The traditional weapons of FMCG mass marketing (TV and magazines) have lost effectiveness and especially efficiency thereby debilitating brand equity building. At the same time retailers have consolidated and now dominate the moment of truth at the shelf aided by new tools such as loyalty cards. The balance of power has permanently shifted towards the retailer.
• The Digitally Empowered Shopper. Today’s shopper can rapidly compare price and quality. This creates new shopping behaviors especially the cherry picking of formats to satisfy specific shopper need states.
• The Big Data Big Bang. Digitally driven shopping behavior creates billions of variegated data points. This tsunami of data comprises ‘big data’. Applying new predictive analytics to this expanding data universe enables marketers to better understand
June 2013
p a r t1Introduction toRetailingC h a p t e r 1P.docxalfred4lewis58146
p a r t
1
Introduction to
Retailing
C h a p t e r 1
Perspectives on Retailing
C h a p t e r 2
Retail Strategic Planning
and Operations Management
Perspectives on Retailing
OVERVIEW:
In this chapter, we acquaint you with the nature and scope of retailing.
We present retailing as a major economic force in the United States and
as a significant area for career opportunities. Finally, we introduce the
approach to be used throughout this text as you study and learn about
the operation of retail firms.
LEARNING OBJECTIVES:
After reading this chapter, you should be able to:
1. Explain what retailing is and why it is undergoing so much change
today.
2. Describe the five methods used to categorize retailers.
3. Understand what is involved in a retail career and be able to list the
prerequisites necessary for success in retailing.
4. Explain the different methods for the study and practice of retailing.
What Is Retailing, and Why Is It Undergoing So Much
Change Today?LO 1
What is retailing, and
why is it undergoing so
much change today?
It is easy to take for granted the impact retailing has on our economy and lifestyle.
The full importance of this statement was recently pointed out to one of the authors
when his niece, after working in New York City and Atlanta, made a career move to a
town of 15,000 in the upper Midwest. While the town had a regular Walmart (not a
Supercenter), she was now 41 miles from a Target and Walmart Supercenter and
almost three hours from a major department store. While she now spent less time in
stores, she was frustrated by the lack of selections. As a result, her overall spending
declined. This situation illustrates the impact retailing has on the economic pros-
perity of any nation as well as the lifestyle of individuals. History has shown that the
nations that have benefited from the greatest economic and social progress have
been those with a strong retail sector.1 After all, it is retailing that is responsible for
matching the individual demands of the consumer with vast quantities of supplies
produced by a huge range of manufacturers and service providers.
Retailing’s contribution to a nation’s economic growth can be further pointed
out by these two examples. First, in 2006, the Nobel Peace Prize was given to
Bangladesh economist Muhammad Yunus and the Grameen Bank, a microretail
bank which he founded decades earlier. The prize committee recognized the
importance of financing the business aspirations of ‘‘millions of small people’’ with
c h a p t e r
1
loans as little as $20 to help some of the world’s most impoverished people start
businesses so that they could work to bring about their own development by
establishing small retail outlets that helped build the retailing sector of the
economy.
The second example can be found by looking at the impact of the world’s
largest retailer, Walmart, on the U.S. economy. One business writer suggested
tongue in cheek that Walmart, which was founded in Arkan.
11 Global Marketing Management PLANNING AND ORGANIZATIONCHAPTE.docxhyacinthshackley2629
11: Global Marketing Management: PLANNING AND ORGANIZATION
CHAPTER OUTLINE
Global Perspective: GLOBAL GATEWAYS
With their domestic market crowded with competitors, Yahoo!, Lycos, America Online (AOL), and others are rushing to establish their brands in Europe, Asia, and Latin America before local competitors can create dominant franchises of their own.
Recently, Lycos Europe, a joint venture between Lycos Inc. and Germany’s Bertelsmann AG, had its initial public offering on Germany’s Neuer Markt. Many more such offerings are expected, because U.S. Web executives and investors believe that the Internet will continue to grow faster abroad than at home. The U.S. share of Internet users fell from 42 percent in 1997 to 15 percent in 2008.
The battle has been hottest in Europe among the portals that serve as starting points for Web surfers looking for news, shopping, and search services. Yahoo! and Lycos each operates about two dozen foreign portals, most with native-language news, shopping links, and other content custom tailored to the local population. Lycos’s German site features tips on brewing beer at home and a program for calculating auto speeding fines. Yahoo!’s Singapore site offers real-time information on haze and smog in Southeast Asia. AOL has about a dozen international ventures, and Excite, the portal arm of At Home Corporation, has nine international partners.
The top U.S. players face tough homegrown competitors, who often have a better sense of local culture and Internet styles. In many countries, the dominant telephone companies offer portals, giving them a big leg up because customers are automatically sent to their home pages when they log on. Germany’s leading portal, T-Online, is run by Deutsche Telekom. In France, No. 1 Wanadoo is operated by France Telecom.
The U.S. portals risk being viewed as digital colonists trying to flex their muscles around the world, according to industry analysts. Many advise that American companies hoping to set up shop abroad are better served by forming partnerships with local outfits that understand the culture.
Sources: Jon G. Auerbach, Bernard Wysocki Jr., and Neal E. Boudette, “For U.S. Internet Portals, the Next Big Battleground Is Overseas,” The Wall Street Journal, March 23, 2000, p. B1; Daekwan Kim, “The Internationalization of U.S. Portals: Does It Fit the Model of Internationalization?” Marketing Intelligence & Planning 21, no. 1 (2003), pp. 23–36; Euromonitor 2008.
Confronted with increasing global competition for expanding markets, multinational companies are changing their marketing strategies and altering their organizational structures. Their goals are to enhance their competitiveness and to ensure proper positioning to capitalize on opportunities in the global marketplace. Comprehensive decisions must be made regarding key strategic choices, such as standardization versus adaptation, concentration versus dispersion, and integration versus independence.1 Particularly as national .
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Tuck School of Business at Dartmouth 2
with suppliers, wholesalers, or retailers? Which group was going to be the main driver?
How was he going to convince potential customers, whoever they were, that this new
solution was going to result in efficiency gains and cost savings? Who was going to realize
the greatest benefits from this product? For that matter, what were the benefits? While
Smoke had thought through the answers to most of these questions, he thought it was
important to think them through yet again and expand on them in preparation for his
upcoming meeting.
Industry Overview
The $110 billion US alcohol-based beverage industry was almost evenly split with sales of
wine and spirits accounting $51.4 billion of retail sales and beer filling the remainder. While
the industry had experienced a general decline in volume sold, total revenues on a per case
basis had increased since 1994, more than offsetting the decline attributable to lower
volume. For example, the dollar amount reported from the sale of distilled spirits alone had
increased from $29.9 billion in 1994 to $33.6 billion in 1997 while unit sales had declined.
On the other hand, wine consumption had increased since 1993, both in unit and dollar
value, as consumers purchased more wine of higher quality.
The government imposed distribution structure of alcohol-based beverages largely
influenced the relationships between players within the industry. This structure and these
relationships also strongly dictated operating and financing strategies. Since the repeal of
Prohibition in 1933, the federal and state governments had regulated the sale of spirits, wine,
and beer. Most states mandated a three-tier system: Tier 1 as suppliers and importers, Tier 2
as distributors and wholesalers, and Tier 3 as retailers. All products were required to pass
through all three tiers before their eventual sale to the consumer. In many states, suppliers
were forced to use a single wholesaler to distribute their products, effectively insulating
wholesalers from competition.
States fell into two broad regulatory frameworks: control states and open states. In control
states, the government controlled the distribution of product, the retail sale of product, or
both. Wholesalers often played a very limited role in control states and retail competition
was typically limited to service differentiation since prices were set by regulatory agencies.
New Hampshire and Michigan were examples of control states. In New Hampshire, wine
and beer were sold through a traditional three-tier system while higher alcohol content
beverages were sold to consumers through state run outlets (“state stores”). In Michigan,
independent retailers sold all alcohol-based beverages, yet for liquors the state retained title
to goods from supplier until they reached the retailer and set retail prices. Certain concerns,
such as NWS Michigan, were paid a (flat) handling fee for performing distribution
operations. In open states, the wholesalers and retailers were privately owned businesses.
Wholesaler’s purchased goods from suppliers and sold them to retailers at prices determined
by a (somewhat) competitive market. The amount of real competition varied by the product
(beer, wine, and spirits) and the individual state regulations.
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Tuck School of Business at Dartmouth 3
Finally, retailers fell into one of two categories: On-premise retailers were those retailers that
sold beverages to be consumed at that location. These included restaurants, hotels, bars, etc.
Off-premise retailers were those that sold beverage for consumption in locations other than
those in which they are sold. These included package stores, grocery stores, and
convenience stores. Traditionally, on-premise accounts had been viewed as the building
areas for strong brands. Brand owners had devoted the majority of their marketing and
promotion efforts to this channel, hoping to convert on-premise sales into demand for their
products in off-premise outlets.
Challenges
The alcohol-based beverage industry was rife with inefficiencies and challenges, both
through supply chain redundancies and lack of information across the supply chain. Much
of this inefficiency could be traced back to the repeal of Prohibition with the 21st
Amendment. For that point forward, each state created it own rules concerning the
distribution and sale of alcohol beverages. The resulting regulations varied widely between
states and even within states for different products (beer vs. wine vs. liquor). When
Prohibition was repealed, the industry faced huge pent-up demand, necessitating a strong
production focus. This production focus, a very “push-oriented” model, worked very well
through 1979. Over this period, alcohol beverage consumption increased steadily and
predictably. The industry’s high volume point was reached in 1979 when the increase
reversed and a steady decline in volume became evident.
Once volume began to decline, producers were forced to move to more of a marketing focus
in an attempt to transform the market into a “pull model.” However, industry structure
prevented effective implementation of this focus. While not actively erecting barriers, the
wholesaler tier acted as a passive barrier to the flow of information from retailer to producer
and vice versa. Therefore, production strategy and market definition at the supplier tier
occurred without detailed information. In fact, the information available to suppliers was
often incorrect, incomplete, or out-of-date.
Not only did suppliers face the challenge of obtaining reliable market information to craft
marketing plans, they also had little power to ensure that those marketing programs were
fully implemented. To ensure proper implementation, effective two-way communication
between suppliers and retailers was essential. However, because of the three-tier structure
and fragmentation within the industry, it was difficult to achieve broad communication
across the entire retail tier and even then much of the information was filtered through the
wholesaler tier. Finally, suppliers had difficulty measuring the effectiveness of marketing
programs they had implemented and were handicapped in making timely adjustments and
modifications.
In addition to the three-tier structure created by law, the alcohol beverage industry was
subject to several other limitations. First, credit to retailers was tightly controlled. In most
states, payment was mandated within thirty days. In others, the transaction between
distributor and retailer was “cash only.” Distributors were also limited to marketing their
products only in the states in which they were licensed and they were precluded from
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Tuck School of Business at Dartmouth 4
shipping products across state lines. These restrictions limited competition at the distributor
level and created significant barriers to entry, resulting in a limited number of distributors in
each market, usually two or three, and exclusive supplier-distributor relationships within
each state.
Trends
Several trends were evident in the industry, many of which could impact the success or
failure of eSkye. First, for some time there had been a trend toward consolidation at all
levels of the industry. This trend had accelerated in recent years. For example, Grand
Metropolitan and Guinness had recently merged to form a huge supplier (Diageo) of many
different alcohol beverages. This creation signaled the beginning of a potentially dominant
supplier in the market. Second, there was increasing investment in premium global brands
among top brand owners. The creation of the Absolut brand was at the leading edge of this
trend and served as a model for premium branding in the alcohol beverage industry. Third,
the industry had seen shifting responsibilities from brand owners to distributors. This trend
was also accelerating over time as brand owners expected greater information sharing and
marketing expenditures from distributors. Finally, the industry was seeing the formation of
regional and national partners between distributors and brand owners.
National Wine & Spirits Inc.
The genesis of the eSkye idea grew out of National Wine & Spirits Inc. (NWS), a large
Indiana-based wholesaler. Wallin, the Executive Vice President and CFO of NWS, saw the
opportunity clearly through his extensive involvement in the industry. NWS was the ninth
largest distributor of wine and spirits in the United States, measured on a revenue basis.
Most of the company’s operations were in Indiana (54% market share), Illinois (32% market
share), and Michigan (59% market share). Spirits suppliers contracted exclusively to NWS
were Diageo-UDV (Johnny Walker, Jose Cuervo, Smirnoff) which comprised 7.7% of
NWS’ total revenues, Fortune Brands (Jim Beam, DeKuyper) which comprised 17.7% of the
company’s revenues, and Seagram (Absolut, Chivas Regal, Crown Royal) which comprised
32.6% of the company’s revenues. NWS also distributed many of the world’s leading wines
in Illinois and Indiana. These included Banfi Vintners (Riunite), Canandaigua (Alamaden,
Inglenook), and Sebastiani. Spirits sales accounted for a much larger share of revenue than
wines, 68.8% to 24.1%.
From 1994 through 1998, NWS’ total revenue increased from $396.4 million to $521.4
million. This represented a compound annual growth rate of 7.1%. NWS’ EBITDA
increased from $6.6 million to $17.7 million, representing a CAGR of 28.0%. To achieve
this performance, NWS successfully integrated several strategic acquisitions, actively
developed new geographic markets, pursued new supplier and brand relationships, and
implemented advanced product handling technology and proprietary information systems.
NWS had its eye on expanding further and remaining one of the preeminent distributors of
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Tuck School of Business at Dartmouth 5
alcohol beverages in the United States. NWS was known throughout the industry as an
active acquirer of other distributors, a technological innovator, and a logistics leader.
In 1997, NWS recognized the opportunity of the Internet for simplifying information flows
and began to build an on-line sales system in-house. Eddie Kao, who later joined eSkye as
Executive Vice President of Technology, spearheaded the effort. The system was designed
to allow suppliers access to the NWS sales system. Basically, a supplier could access sales
data for their own particular products but no others. The system was offered free of charge
to suppliers and was created as a competitive advantage for NWS. In fact, the system was
one of the most progressive in the nation at the time of its creation. However, data collection
was limited to only those products distributed by NWS in those markets served by NWS
(Illinois, Indiana, Michigan). While the idea had been discussed, the system had never been
extended to include on-line ordering for retailers. Moreover, NWS struggled to build and
maintain the system because the company had a difficult time keeping and retaining talented
developers.
Wallin realized the potential of an expanded version of the original system. However, he
realized that it could never reach its full potential as a part of NWS. The company would be
unable to expand the system beyond a limited number of products in a limited number of
areas without encountering resistance from suppliers and wholesalers outside of the NWS
umbrella. Competing wholesalers and the suppliers represented by them would be unwilling
to utilize a system which would essentially hand over their data to a competitor. A wholly
independent entity was required. Hence, the creation of eSkye.
eSkye.com
Wallin and Lobo began crystallizing the eSkye.com strategy in March of 1999. At the time,
Wallin was devoting the majority of his time to his role as Executive Vice President, CFO,
and Director of NWS. Lobo was still working as Director of Human Capital and Planning
for Coca-Cola Company in Atlanta, GA. With the help of a small group of angel investors
who provided $1.7M in seed capital, eSkye separated its identity from NWS in July 1999
and Lobo joined as President of the new company. At the inception of the company, Dr.
Kao also joined as Executive Vice President for Technology. eSkye was officially born.
Throughout the remainder of the summer, eSkye was faced with the dual challenge of
creating the technology necessary to reach their goal of an on-line ordering solution for the
alcohol beverage industry and finding customers willing to test the product in their own
businesses. To feed their development, eSkye initiated a successful private placement round
of $3.7M in September including investments from the Ingram family (Ingram Book and
Ingram Micro) and other alcohol beverage distributors (e.g., R.S. Lipman Co. of Tennessee).
Through previous relationships with on-premise retailers, eSkye was able to recruit a list of
twenty-five retail customers to participate in a pilot program for the new systems. (See
Exhibit 1 for a list of test clients.) These clients were located in NWS markets (Illinois,
Indiana, Michigan) and were limited to products carried by NWS. eSkye completed its pilot
program and announced its capabilities in a December 15 press release.
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Tuck School of Business at Dartmouth 6
The pilot project served many purposes. First, it allowed eSkye to test the efficiency of their
system, a patent pending system known as eBOTSTM
. This system was described as “an
innovative e-procurement service for enhanced control and management of alcohol beverage
purchasing.” This system was the core of the eSkye offering. It was designed to seamlessly
link the retailers, both on- and off-premise, along with distributors, and suppliers within the
existing regulatory environment. It also allowed eSkye to plan for the scaling of the product,
testing it first on a small group while planning for the implementation with a larger group.
Second, the pilot provided time and forum for the training of customer account managers,
known as CAMs.
The CAMs were supervised by Clay Wallin, Vice President of Operations for eSkye. Clay,
the younger brother of Smoke, joined eSkye in July 1999 from his position as Logistics
Services Engineer for Hewlett-Packard Company where he had been employed since 1997.
Clay’s goal was the assembly of a high quality list of independent test clients with which to
train the first CAM hires. The CAMs were intended to serve many roles. First, they would
be responsible for servicing clients on a day-to-day basis, fielding requests for technical
support and basic help. Second, the initial CAM hires were charged with creating and
documenting many of the processes and procedures established through the test program.
Third, the initial seven CAMs were intended to be the trainers of future CAMs that would be
hired as eSkye underwent rapid scaling.
Capabilities
eSkye’s web-based services provided a consolidated ordering site and product information
link for licensed beverage sellers. eSkye’s stated Mission was “to be the e-commerce
solution for the global alcohol beverage industry providing:
• A superior buyer-focused and neutral model
• Procurement solutions for all beverage alcohol as well as other supplies
• Supply chain efficiencies benefiting all three tiers
• Significant top-line growth driver
• Additional value-added web enabled services.”
eSkye was created to benefit all tiers of the alcohol beverage industry. For retailers, eSkye
provided a single, convenient and efficient ordering system that allowed them to:
• Place orders with multiple distributors on-line, promoting convenience, efficiency and
broader product offerings.
• Create a customized order guide for each individual account, based upon previous
ordering history, which reduced mistakes and simplified the ordering process.
• Track orders by distributor and quickly analyze their business.
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Tuck School of Business at Dartmouth 7
For distributors, eSkye significantly improved the order management process, automatically
taking orders from retailers and then transmitting those orders electronically to a
distributor’s order entry system, so distributors could focus on activities that increased the
volume of their business. The system:
• Simplified new product and customer development, especially through promotions and
market-based events.
• Accumulated valuable information on market offerings.
• Helped to identify key business opportunities and ensured customer satisfaction.
Finally, with no direct customer contact, suppliers had little access to trade information.
Through eSkye, suppliers had a direct link to retail data, enabling them to:
• Develop and implement highly targeted advertising and marketing campaigns that
reinforced the branding of products in a very brand-critical industry, while easily and
quickly tracking the success of these initiatives. Theoretically, this targeting could reach
down to the level of the individual account.
• Focus promotional services to meet customer needs by employing the power of real-time
access to industry information, trends, and a vital communications link with retailers to
better assess market conditions.
• Create a customized web site directly channeled to retailers, featuring information on
product availability, promotion and marketing programs, new product introductions and
announcements.
Revenue
Through weeks of brainstorming, Smoke’s team had identified four revenue strategies for
eSkye. First, eSkye offered a entirely new marketing vehicle for suppliers. Typically, less
than 50% of point-of-sale promotions actually reached the retail level. Most was absorbed
or diluted at the wholesale level. Marketing communications were also very inefficient.
Most of communications were in the form of volumeous printed material that reached the
wholesale salesperson, but were not effectively transmitted to the retail tier. eSkye believed
they were creating an entirely new channel for advertising. Much of this could occur in the
form of specific account sponsorships. For example, a supplier could target a specific
account (such as a Mexican restaurant chain), for a specific product (tequilas) based on very
specific marketing information from that account (caterers to an upscale demographic that
favors high margin products). The supplier could easily identify accounts that met certain
criteria and target those accounts only.
Second, eSkye hoped to sell product demand data to the suppliers. With its role as an
“Infomediary,” eSkye could compile and distill market data that had not been previously
available. Smoke was convinced that suppliers would pay for this syndicated data. The
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Tuck School of Business at Dartmouth 8
operational challenge for eSkye was to successfully collect, warehouse, and package this
data in a usable manner.
Third, distributors were charged for each retailer order. Initially, eSkye set that fee at $.40
per invoice, regardless of the size of order. This cost was far below the cost incurred by a
distributor to capture an order via phone, fax, or through an on-site sales representative.
Lastly, eSkye believed that they could create a suite of value-added services to bundle with
their on-line ordering service. Potential service candidates for future offerings included:
• Auction services: eSkye planed to provide a market mechanism for the industry to
allocate certain products of limited supply and to liquidate excess inventories efficiently.
• Additional category supply source: eSkye planned to leverage its experience in the
alcohol beverage industry and extend the system to include a broader array of products
and services, possibly including food and supplies.
• Information link: There are numerous trade magazines in the alcohol and food service
industries, such as Cheers, Bartender Magazine, Kennedy’s Newsletter, Wine Spectator,
etc. eSkye believed it could become the single source for information related to the
industry through both partnerships with these sources and through creation of its own
content.
• Brokerage and sales representation: Many smaller brand owners and larger brand
owners with new brands had trouble getting adequate representation across the U.S.
eSkye believed it could provide selling opportunities at a fraction of the cost of paying a
broker or other sales agent.
Wholesaler Perspective
While wholesalers were the central and most crucial factor to the success of eSkye, they
realized the most intangible benefits from the system. Besides the direct benefits for reduced
order entry cost, eSkye’s sales strategy was to leverage interest from the suppliers and
retailers to entice wholesalers to join the eSkye network. Smoke believed that suppliers
would pressure wholesales to join the network because of the tremendous value of
information that suppliers would receive from complete coverage of the industry. He further
believed that retailers would also pressure wholesalers to supply an on-line ordering system.
Within a market, wholesalers embracing the eSkye system would presumably be viewed
more favorably by retailers than those who still required manual ordering through on-site
sales representatives.
Of all three tiers, wholesales had the most concerns about the effect of the system on their
position within the supply chain. Wholesalers traditionally maintained a tight grip on the
information they gathered, viewing such information as proprietary and critical to
maintaining their identity in the market. eSkye had the potential of destroying this identity
as a retailer ordered product, not by distributor, but rather across the industry. To counteract
this fear, eSkye emphasized the maintenance of wholesaler identity through links and
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customized web sites. However, wholesalers were still concerned that eSkye would
inevitability cause brand erosion. Wholesalers had long seen their business as a service and
relationship business and many were leery of anything that would change long-standing
relationships. They were particularly protective of the relationships they had developed with
certain customers, particularly large accounts. In fact, change itself was often viewed as a
negative and wholesalers were concerned with eSkye’s somewhat cavalier attitude toward
the ease and inevitability of change.
Competition
eSkye’s faced two types of competition: web-ordering schemes developed by other
distributors and other independent start-up firms. While there were several Internet startups
working in the B2C space (such as wineshopper.com) the only significant effort in B2B was
BevAccess.com. On it’s web page (www.BevAccess.com), BevAccess declared:
BevAccess.com is the first Industry Exchange for the alcohol beverage
trade, which provides wholesale buyers and sellers with fast, easy
centralized ordering, detailed information, and highly targeted advertising.
BevAccess.com's proprietary e-commerce technology dramatically increases
operational efficiency, providing immediate financial reward.
• We focus on technology solutions for the trade.
• We deliver time and cost savings to Buyers, Sellers, and Advertisers.
• We offer all categories of alcohol beverage: wine, liquor, and beer.
• We make online ordering transactions easy to execute and user-friendly.
• We provide detailed industry information for research, training and education.
• Our technology increases your effectiveness, saving you time, money and resources.
• We have answers for every question—when you need us—by phone, e-mail, and online.
• You don't have to wait. Register now and get a ready-made platform to conduct
business-to-business e-commerce today.”
Founded by two recent graduates from Cornell’s hotel administration program who had little
liquor industry experience, BevAccess was formed 6 months before eSkye. BevAccess had
staked its success on its relationships with on-premise sector of the retail tier. This strategy
differed from eSkye that was leveraging relationships with wholesalers and suppliers.
Wallin felt that eSkye had stronger industry relationships and had assembled a more
comprehensive and credible team. Moreover, Wallin believed that eSkye had technological
advantages with a more stable and scaleable web platform.
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January 2000
As January rushed by, eSkye was in the process of migrating from a test environment to a
live environment. Over the course of the next few months, eSkye planned to roll out its
offering throughout Illinois and Indiana. To launch and test its systems, eSkye was
leveraging its relationship with NWS Illinois. Basically, eSkye was utilizing NWS’ Illinois
sales force to drive penetration in the market. The sales force was charged with getting
placement in as many accounts as possible. Duane Williams, Vice President of Business
Development, remarked:
We have to move quickly to gain penetration in the market. Success in
Illinois will go a long way to creating success in other states. We have to
move quickly, though, before wholesalers begin creating their own home
grown systems. While these systems, by their nature, will be less
comprehensive and will only serve segments of the markets covered by
those particular wholesalers, it will be difficult to supplant them once they
have been installed. Wholesalers will become attached to the systems they
have created despite the opportunity to have a more comprehensive system
through eSkye.
In addition, eSkye was quickly building momentum in control states. Control states were, in
some ways, an easier arena to penetrate because of their more centralized nature. eSkye
improved the states’ effectiveness, in effect off-loading many of their responsibilities.
Certain accounts in Michigan, a control state, were part of eSkye’s initial test and Michigan
was to become one of the first live arenas for the eSkye system.
In addition, eSkye had secured approval from the New Hampshire State Liquor Commission
to launch a pilot program providing on-premise national retail accounts throughout the state
to access the eSkye system. According to John Byrne, Chairman of the New Hampshire
State Liquor Commission, “eSkye’s online alcohol beverage ordering system offers our food
service and hospitality businesses convenience, cost efficiency and speed. With eSkye, they
can spend much less time ordering and more time ensuring that visitors to the state have the
kind of experience that brings them back to New Hampshire again and again.” eSkye was
working hard to secure similar contracts in other control states such as Pennsylvania.
eSkye was also in the process of making in-road into open states. On February 2, eSkye
announced that it had secured agreements with alcohol beverage wholesalers National
Distributing Company, Magnolia Marketing, Republic Beverage, Block Distributing, The
Wirtz Corporation, and Empire Distributing. (See Exhibit 2 for list of largest U.S.
distributors). These agreements would expand eSkye beyond Michigan, Illinois, Indiana,
and New Hampshire into Arizona, Colorado, Florida, Georgia, Iowa, Louisiana, Maryland,
Minnesota, Nevada, New Mexico, North Carolina, South Carolina, Texas, Virginia,
Wisconsin, and the District of Columbia. Wallin said,
These new partnerships take eSkye into a whole new level of market
penetration and industry acceptance. We are now active in setting up pilots
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as well as full launches in 19 states which gives us critical mass of coverage
that will allow our national account customers to realize the full benefits of
the eSkye system. These partnerships give us the traction in the industry
necessary to be successful.
Discussion Questions
1. How does eSkye’s ordering concept for the alcohol-based beverage industry change
both the flow of information and the role of the supply chain partners?
2. How would wide adoption of eSyke’s web-ordering scheme change the power
structure within the supply chain?
3. The alcohol-based beverage industry is an old and heavily regulated industry where
relationships and legislated three-tier distribution has allowed the supply chain to
remain very inefficient. If a web-based ordering system can be successful here, how
will the web impact your industry?
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Exhibit 1:eSkye.com Test Clients
• Lettuce Entertain You – Chain of Chicago restaurants
• InterContinental Hotels
• Rain Forest Café
• Food & Drink – Group of Chicago Taverns
• United Liquors (Archer Liquors) – Chicago liquor store buying group
• Armenetti - Chicago liquor store buying group
• Max & Ray’s - Chicago liquor store buying group
• The Palace at Auburn Hills
• 18 others
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Exhibit 2: Top U.S. wine and spirits wholesalers
1. Southern Wine & Spirits of America $2.82 billion
2. Charmer Industries/Sunbelt Beverage $1.575 billion
3. National Distributing $1.37 billion
4. Young’s Market Co. $1.09 billion
5. Glazer’s Wholesale Distributors $1.085 billion
6. Wirtz Corp. $660 million
7. Peerless Importers $625 million
8. Johnson Brothers Wholesale Liquor Co. $550 million
9. National Wine & Spirits, Inc. $544 million
10. Republic Beverage $425 million