This document analyzes different digital merchandising business models including bricks and clicks, catalogue merchants, pure players, and bit vendors. It discusses the key features and challenges of each model. It also examines the characteristics of e-merchants like ubiquity, global reach, information density, and personalization. Finally, it provides an overview of Tesco's online business model focusing on their key activities, resources, value propositions, channels, and customer segments.

1. DIGITAL
MERCHANTS
Business Model Analysis
Fenia Megremi
Christina Loukissa
Burag Peksezer
Lara Zaccaria
Siqi Yang
Sandeep Ravindran

2. WHAT IS DIGITAL
MERCHANDISING?
• Digital Merchandising defines all the activities involved in
selling goods and services through the Internet and can
include business-to-consumer as well as business-to-
business sales.

3. BRICKS & CLICKS (or Clicks & Mortar)
A business model by which a company integrates both offline
(bricks) and online (clicks) presences
Features
• Traditional retailers with strong
brand equity
• Extensive logistics and supply
chains
• Traditional face-to-face service
and existing customer base
Challenges
• Integration with bricks & mortar
operations
• High costs of physical stores
• Different value proposition for
on line shoppers (e.g. big
sizes)

4. CATALOGUE MERCHANTS
(or Clicks & flips)
A variation of "bricks and clicks" that includes catalogue
shopping
Features
• Small investment on physical
stores
• Utilizing an existing print asset
to extend the online reach
Challenges
• Adapting in the digital context
• The changing
customer behavior
• Growing competition from both
store and non-store retailing

5. PURE PLAYERS
(Virtual Merchants or E-tailers)
Companies that handle their business appearance, the sales
process and the customer service completely online. They
don't appear physically to the customer at any time.
Features
• No investment for physical
presence
• Information
• Convenience
Challenges
• High costs for logistics
• Higher investments for
customer relationship
management and marketing
• Security concerns

6. BIT VENDORS
A merchant that deals strictly in digital products and services
and, in its purest form, conducts both sales and distribution
over the web.
Features
• Infinite storage space
• Much smaller overhead costs
• More efficient use of digital
channels
Challenges
• Interdependent on hardware
sales
• Emerging competition – Spotify,
Android, Pirate, Deezer

7. CHARACTERISTICS OF
E-MERCHANTS
Websites as a tool that converges their business goals with
the customers’ needs.
3 Key contexts
• Efficient in attracting customers
• Functional site architecture and content
• Realiable in payments, delivery and customer relations.

8. Ubiquity
Serving
anytime/anywhere. No
waiting, no queus, larger
storage
Global Reach
Across boundaries,
across continents
Universal Standards
Same or similar
standards for site
founding, membership,
navigation
Information Density
Accurate inexpensive
and plentiful
information,. Easy to
compare, easier to
decide
Interactive
Responsive buying
process. Accessible and
self-reachable
Information Richness
Different forms of
content: Video, audio,
and text contents, Personalization &
Customization
Customized search,
profiles, relevant
content, personalized
messages
User Generated
Content
Shares, reviews,
recommendations on
site, WOM effect
MAIN CHARACTERISTICS OF
CUSTOMER JOURNEY

9. Attract
• Seo
• Keywords
• Social Media
Presence
• Forums & Blogs
Convert
• Appearance
• Website Design
• Easy navigation
tools
• Easy
architecture
Close –Security
• Distinct
categories
• Good navigation,
search bar
• Delivery Options
• Partners
• Policies
SALE & AFTER
SALE
• Customer
Relations
• Social media-
CRM, UGC
• Building
Communities,
• Newsletters
• Loyalty Programs
Ubiquity Global
Reach
Info
Richness
Universal
Standards
Interacti
vity
Info
Density
Personali
zation
User
Generated
Content
ENVIRONMENTAL EFFECTS
• Higher operating uncertainty
• Rapidly changing environment
• High investment in Mobile Commerce
and other trends
• Large Storage – Long Tail (Earn from
less)
FINANCIAL RESULTS
• Large expenditures on site
development
• Large expenditures on customer
acquisition or traffic analysis
• Low levels of revenues
• Fast growth in revenues

10. KEY FACTS
£ 70.9bn
Group Sales
£ 2.3bn
Group profıt
before tax
6,784
Stores
Worldwide
12
Markets
Source: http://files.the-group.net/library/tesco/annualreport2014/pdfs/tescoar14_ataglance.pdf

11. TESCO ONLINE BUSINESS MODEL
Key Partners
• Suppliers and
businesses at a
regional and local level
• Local joint ventures
• Associations
Key Activities
• Buying and selling
consumer goods.
• Effective distribution
system
• Collect feedback
suggestion and
information
• Analyzing consumers
demand and traffic
• Warehousing and
Logistics
Key Resources
• Web site and accounts
on various digital
platforms
• Access to Clubcard
holders data
• Warehousing and
logistics
• IT infrastructure
Value Proposition
• Wide selection variety
combined
• By 7/24 shopping
experience
• Safe online buying
• Personalized shopping
experience for
cardholders
• Home delivery or
collecting from preferable
Tesco store
• Convenient shopping –
no lines
Customer
Relationships
• Long-term relationship
• Identify and Retain loyal
customers Clubcard
• Attract more consumers
• Listen to consumers in
a number of ways
Channels
• Stores
• Tesco’s website
• Social Media (Twitter,
Facebook, )
• Mobıle application
• Dedicated websites
e.g.tescoplc.com
tescomedia.com, etc
Customer Segments
Mass Market
segmentatıon:
 Low – middle
Income
 Easy going,
traditional lıfestyle
 Student
 Housewife
 Older people
 Tesco.com
Subscribers
Cost Structure
• Staff
• IT Infrastructure
• Warehousing and logistics
• Capital Expenditure
Revenue Streams
• Sale of goods
• Home Product Delivery

12. TESCO’s 5C
Coordination
Facebook, Twitter, G+,
Pinterest, blogs, Youtube
review videos and customer
segmentation
Commerce
Delivery systems, Security
systems , trade partners
and large inventory
Community
Tesco baby, ladies and
charity contests-more
directed to the house wives.
Old people care, local
household communities
Content
Personalized content,
preferances driven, well
architectured website
Communication
NetPromoter Community,
Mobile applications,
E mail marketing

13. TRENDS OVERVIEW
- Mobile Commerce - Increasing number of apps, sites
becoming mobile apps
- Changing demographic – Y generation, Millenials
- New technologies - NFC, Augmented reality
- Security & privacy - Biometric recognition

14. MOBILE TRENDS
• '‘Real-time technologies and location-based services are
expected to drive mobile retail'‘ Mashable,2010
Source: https://www.linkedin.com/pulse/article/20140801235123-11284593-m-commerce-numbers-you-shouldn-t-
miss

15. ENVIRONMENT & STRATEGY
Tesco’s strategy
Pursuing disciplined international growth and establish
a multi-channel leadership in all 12 markets using the
UK Model.
Priorities
• Becoming leading multi-channel retailer
• Improving TESCO brand equity
• Expanding globally
• Transparency
• Multi-channel customer centric market strategy

16. PERFORMANCE
Is TESCO really loved by customers?
• 70% retained loyal customers
• 29% of new loyal customers
• 59,7% customers shopping across channels
• 64.3% shop the brand family

17. ISSUES
• Pest Analysis
• Political
• Economic
• Social
• Technological
• Competitors
Bricks &Clicks Pure Players Potential

18. ISSUES
• Go for products with discounts.
• Verify rates with other supermarkets.
Customer Mentality
• Few issues of being non-responsive.
• Being rude, call waiting
Customer Care
• Improper logistics
• Out of stock.
• Delivery as a competitive advantage
Logistics
• Quality ControlSupply Chain

19. WAYS TO TACKLE AND
FUTURE PROPOSITION
• Competitiveness
• Focusing more on price competitiveness.
• Decreasing the delivery expenses
• Improving the Customer Value
• Bringing more Dark Stores
• Personalized suggestions and special offers
• Creating a higher quality customer service.
• Making deeper analysis of Clubcard holders to anticipate trends and
use it to gain market share
• Improving the online user experience with new features like live chats
• Constant Innovation
• Redesigning the offline store and integrating with online
• In online shopping having new innovations like 3D experience,
Microsoft photosynth

21. Sources - Definitions
1. http://www.investopedia.com/terms/e/electronic-retailing-e-tailing.asp
2. http://en.wikipedia.org/wiki/Catalog_merchant
3. http://en.wikipedia.org/wiki/Brick_and_mortar
4. http://en.wikipedia.org/wiki/Bricks_and_clicks
5. http://en.ecommercewiki.info/fundamentals/business_models/virtual_merchants
6. http://ie.com.au/the-survival-of-the-catalogue-in-the-digital-age/
7. http://digitalenterprise.org/models/models.html#Merchant
8. businessmodelgallery.com
9. http://www.scribd.com/doc/13892099/E-Retailing

22. Sources - Characteristics
1. Ryan, Damien. 2014, Understanding Digital Marketing, London. Kogan Book
2. http://www.webology.org/2010/v7n1/a77.html
3. http://classes.soe.ucsc.edu/ism050/Fall00/obriench8/sld039.htm
4. http://www.ehow.com/info_12021311_eight-features-ecommerce-technology.html
5. http://www.tokyowebdesigns.com/advice/1192/35-key-e-commerce-platform-
features#.VBv2Vfl_tqU
6. http://www.hubspot.com/products/calls-to-action
7. http://www.searchenginejournal.com/15-must-have-features-ecommerce-site/27233/
8. http://www.reportlinker.com/ci02106/E-commerce.html
9. http://www.qfinance.com/sector-profiles/e-commerce
10. http://www.businessnewsdaily.com/5097-virtual-merchant.html
11. http://www.slideshare.net/mauriciogq/introduction-to-ecommerce-12876912

23. Sources – Business Model
1. http://research-methodology.net/tesco-segmentation-targeting-and-positioning-2/
2. http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/9356088/Tesco.com-to-
split-customers-according-to-wealth-and-age.html
3. http://www.essay.uk.com/business-resources/case-study-database/tesco-case-study.php
4. http://en.wikipedia.org/wiki/Tesco#Internet_retailin
5. http://www.tescoplc.com/index.asp?pageid=160#ref_partnerships
6. http://www.tescoplc.com/files/pdf/reports/ar14/download_strategic_report.pdf
7. http://www.tescoplc.com/files/reports/ar2012/index.asp?pageid=19Insight:
8. https://www.youtube.com/watch?v=bf9Xe_xYMkc.

24. Sources - Trends
1. http://www.tescoplc.com/index.asp?pageid=548#ref_index.asp?pageid=540
2. http://www.coriolisresearch.com/pdfs/coriolis_tesco_study_in_excellence.pdf
3. http://www.gurufocus.com/news/128547/tesco-plc-tscdy-business-and-value-analysis
4. http://businesscasestudies.co.uk/tesco/#axzz3DgsiC9WX
5. https://www.pwc.com/es_CL/cl/publicaciones/assets/retailing2015.pdf
6. http://mobilenext.net/mcommerce-numbers-you-shouldnt-miss-infographic/
7. https://www.linkedin.com/pulse/article/20140801235123-11284593-m-commerce-numbers-
you-shouldn-t-miss
8. http://mashable.com/2010/04/13/mobile-web-stats/
9. http://www.internetretailer.com/2014/03/10/mobile-commerce-will-be-nearly-half-e-commerce-
2018

25. Sources - Issues
1. http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/10769680/The-five-
numbers-that-highlight-Tescos-problems.html
2. http://www.dailymail.co.uk/news/article-2113233/Tesco-forced-apologise-customers-plagued-
problems-30m-dotcom-store.html
3. https://ie.trustpilot.com/review/www.tesco.com
4. http://www.independent.ie/business/irish/dan-white-clarke-faces-tough-task-as-new-tesco-
ireland-boss-29313757.html
5. https://dataprotection.ie/Viewtxt.asp?DocID=1195#4
6. http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/10769680/The-five-
numbers-that-highlight-Tescos-problems.html
7. http://www.theguardian.com/uk-news/2013/oct/22/horsemeat-scandal-guardian-investigation-
public-secrecy
8. http://www.bestdaily.co.uk/food/news/a560353/supermarket-spy-tests-online-shopping.html
9. https://uk.finance.yahoo.com/news/the-best-value-supermarket-for-your-online-shop.html
10. http://www.dailymail.co.uk/news/article-2561697/Aldi-edges-Waitrose-favourite-supermarket-
Chain-voted-best-provides-value-money.html
11. http://www.ft.com/intl/cms/s/0/fb345f5e-0650-11e2-bd29-00144feabdc0.html#axzz3DxMkoI8i