How do the perspectives on competitive advantage differ when comparing brick-and-mortar stores to online businesses (e.g., Best
How do the perspectives on competitive advantage differ when comparing brick-and-mortar stores to online businesses (e.g., Best Buy versus Amazon, Barnes & Noble versus Amazon, Old Navy versus Thread less [noted in Strategy Highlight 5.2], Nordstrom versus Zappos, and so on)? Make recommendations to brick-and-mortar stores as to how they can compete more effectively with online firms. What conclusions do you
Data from Strategy Highlight 5.2:
Threadless, an online design community and apparel store (www.threadless.com), was founded in 2000 by two students with $1,000 as start-up capital. Jake Nickell was then at the Illinois Institute of Art and Jacob DeHart at Purdue University. After Nickell had won an online T-shirt design contest, the two entrepreneurs came up with a business model to leverage user-generated content. The idea is to let consumers “work for you” and turn consumers into prosumers, a hybrid between producers and consumers. Members of the Threadless community, which is some 3 million strong, do most of the work, which they consider fun: They submit T-shirt designs online, and community membe vote on which designs they like best. The designs receiving the most votes are put in production, printed, and sold online. Each Monday, Threadless releases 10 new designs and reprints more T-shirts throughout the week as inventory is cleared out. The cost of Threadless T-shirts is a bit higher than that of competitors, about $25. Threadless leverages crowdsourcing, a process in which a group of people voluntarily perform tasks that were traditionally completed by a firm’s employees. Rather than doing the work in-house, Threadless outsources its T-shirt design to its website community. The concept of leveraging a firm’s own customers via internet-enabled technology to help produce better products is explicitly included in the Threadless business model. In particular, Threadless is leveraging the wisdom of the crowds, where the resulting decisions by many participants in the online forum are often better than decisions that could have been made by a single individual. To more effectively leverage this idea, the crowds need to be large and diverse.
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