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9-33 Cost Structure of Retailers; the Internet; Operating Leverage Todays retailers are finding that online...

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Accounting

9-33

Cost Structure of Retailers; the Internet; Operating Leverage Todays retailers are finding that online sales and service are a necessary ingredient of their overall marketing and selling strategy because of increased competition. In certain retail sectors, consumers are moving to the internet in large numbers for convenience and selection. Unfortunately, the investment in resources, both equipment and labor, can be huge. Some studies show that less than a third of online retailers are profitable on internet sales. As a result, some new consulting firms, software firms, and service providers have begun to provide e-commerce solutions for retailers.

Required

  1. How does a consulting firm, service provider, or software firm help a retailer reduce costs and become more competitive for internet sales? What is the role of operating leverage in the retailers decision to outsource online sales and service?

  2. Cost structure is not the only thing management should be concerned about when moving into online sales. What role, if any, does globalization play in a retailers efforts to compete for internet sales?

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