Case study 2 - 7-ELEVEN & 7dream.com

Identify the major obstacles to e-commerce in Japan

A.          Environmental Problem

1. Government intervention in markets
   • Before 1999, the Japanese Government had regulated companies heavily in the e-commerce sector, essentially strangling the growth of online transactions.
2. State of the existing telephone network and Internet access related issues such as dial-up costs and literacy rates.
3. The world's highest combined telecommunication and ISP fees
   
   • Monopoly: NTT controlled 95% of Japan’s telephone lines which drives up the telecommunication and ISP fees
4. Japan lacks sufficient investment in IT education and training.

B.          Cultural problem

1. Phobia Japanese consumers had about submitting credit card information over the Internet
2. End-fulfillment of on-line orders was a problem for many people. Most consumers were not home during the day to receive parcels they had ordered on-line. Consumers were also doubtful about receiving their parcels from on-line stores, either due to mailing errors or non-fulfillment on the part of the stores.
3. Culture difference: culture of Japan is cash based society, where they want to touch and feel the goods before their purchases. E-Commerce simply does not allow for this first hand interaction

C.          Demographic problem

• many Japanese homes were too tiny to accommodate a personal computer
  
  • Penetration rate of personal computers in Japanese family is low (only 20%)
  • often used mobile instead of personal computer, limiting their ability to purchase online
  • the convenience store is too nearby

Describe the proposed 7dream.com business model

A.          Procedures of the system

1. Customers use computer, Internet-enabled cellular phones and Internet enabled multimedia kiosks to order items.
2. Seven-Eleven transports the items to 7-Eleven distribution centers
3. The distribution centers transport the items to the specified store.
4. The systems notice the customers to pick up the items.
5.  Customers pick up and pay in the store they chose.

B.          Products:

• 8 content areas
• travel
• music
  
  
  
  
• photographs
• merchandise, gifts and mobile phones
• tickets
  
• books 
• car-related items
•  information
• products offered are not usually be found in convenience stores
• The products to be offered were especially chosen for their ease of handling

C.          Price

• Payment methods
  • Credit card over the Internet
  • Pay at 7-Eleven store cashier with payment slips
  • Pay at 7-Eleven store cashier with payment reference number
• 7-11 accept payments on behalf of the businesses

D.          Place:

• More than 8000 convenience stores located at nearly every street corner, city or town in the country (easily access by customers)
• Place of purchase
  • purchase on-line using computer
  • purchase on-line using Internet-enabled cellular phones
  • Internet enabled multimedia kiosks
• Delivery
  • To home address
  • To other address customers assigned
  • Pick up in 7-11 stores

E.           Promotion:

• Targeted at young people from teens to thirties who had taken to the Internet most enthusiastically
• Internet-enabled multimedia kiosks
• websites specially tailored for cellular phones with internet access

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How does 7dream.com define and differentiates its offerings from its traditional model?

        

	7dream.com	tradition business model
Forms of Partnership	offer services based on the technical expertise and industry knowledge of each founding member	partners do not share their expertise
Products	products offered were especially chosen for their ease of handling if they were not viewable on screen or downloadable, they were small-sized	products offered according to their profitability
	products offered would not usually be found in convenience stores travel music photographs merchandise, gifts and mobile phones tickets books car-related items information	products offered: food drinks cosmetic newspaper and magazines cigarette daily necessities
Payment	credit card over the internet payment slips with bar-codes payment slips with reference number	cash
	accept payments on behalf of other business	accept payments of the store itself
Target customer	teens to thirties	no specific target
Place of pick-up	delivered to buyer's home delivered to a specific address pick up at 7-11 store	buy from convenience store
Marketing methods	online marketing internet-enabled multimedia kiosks websites for cellular phones with internet access	no websites particularly for cellular phones no kiosks set up

Critical Success Factors of the Business Plan of 7dream.com.

Obstacles	Solutions
Phobia Japanese consumers had about submitting credit card information over the Internet	accept different payment methods to increase confidence of consumers  credit card cash with payment slips in 7-11 stores cash with assigned payment reference number in 7-11 stores
Expensive connection charge (via wired dialup), the world's highest combined telecommunication and ISP fees	set up internet-enabled multimedia kiosks for consumers to shop online in 7-11 stores
Consumers were not home during the day to receive parcels ordered on-line	employed to provide several delivery method options deliver to home address deliver to assigned address pick up at 7-11 stores
Consumers were doubtful about receiving their parcels from on-line stores either due to mailing errors or non-fulfillment on the part of the stores
The number of homes with personal computers in Japan is low (penetration rate 20% only)	set up internet-enabled multimedia kiosks launch a website for cellular phone with internet access make use of the existing logistics system that 7-11
many Japanese homes were too tiny to accommodate a personal computer
the convenience store is too nearby	provide products that would not easily be found in convenience stores to attract the consumers make use of the location of convenience stores to offer pick-up services