Nowadays, the online service sector — like online retail — has established a significant beachhead and now plays a large role in consumer time on the Internet.
As with retail goods, the promise of online service providers is that they can deliver superior-quality service and greater convenience to millions of consumers at a lower cost than established bricks-and-mortar service providers and still make a respectable return on invested capital. And, in fact, online services have been extraordinarily successful in attracting banking, brokerage, travel, and job-hunting customers.
According to the U.S. Census Bureau, the retail industry can be grouped into seven major segments: durable goods, general merchandise, food and beverage, specialty stores, gasoline and fuel, mail order/telephone order (MOTO), and online retail firms. Each of these segments offers opportunities for online retail. And online retail is perhaps the most high-profile e-commerce sector.
How to analyze the economic viability of an online firm?
Economic viability refers to the ability of firms to survive as profitable business firms during the specified period.
This blog will then analyze the viability of a number of online companies that exemplify specific e-commerce models with the approaches of strategic analysis and financial analysis.
Strategic approaches to economic viability focus on both the industry in which a firm operates and the firm itself. The key industry strategic factors are:
The strategic factors that pertain specifically to the firm and its related businesses include:
As for financial analysis, it helps us understand how in fact the firm is performing. There are two parts to a financial analysis: the statement of operations and the balance sheet. In short, the statement of operations tells us how much money (or loss) the firm is achieving based on current sales and costs. The balance sheet tells us how many assets the firm has to support its current and future operations.
The service sector is the largest and most rapidly expanding part of the economy of advanced industrial. The major service industry groups are financial services, insurance, real estate, business services, and health services.
Within these service industry groups, companies can be further categorized into those that involve transaction brokering and those that involve providing a “hands-on” service.
With some exceptions, the service sector is by and large a knowledge- and information-intense industry. For this reason, many services are uniquely suited to e-commerce and the strengths of the Internet. Besides, e-commerce offers extraordinary opportunities to improve transaction efficiencies and thus productivity in a sector where productivity has so far not been markedly affected by the explosion in information technology.
Finally, this blog will briefly introduce you the business model of an on-demand service company.
Uber, a car rental service, and Airbnb, a room rental service, are the most well-known on-demand services companies. They are also among the most disruptive and controversial.
In general, on-demand service companies provide a platform that enables the on-demand delivery of various services, by connecting providers (“sellers”) who wish to exploit their “spare” resources, such as cars, rooms with beds, and ability to perform various services via their personal labor, with consumers (“buyers”) who would like to utilize those resources and services. The companies collect a fee both from sellers and buyers for using the platform.
