Opportunities and Challenges for 7net

To sum up the opportunities and challenges of 7net, a SWOT analysis can be drawn as the follows( See Table 5-1):

Table 5. 1 SWOT Analysis of 7net

Strengths Opportunities

1. Logistics Capacity

2. Density of 7-11 Physical Chain Stores

3. 7-11 Brand Awareness

Source: Compiled information from Chapter 3,4, and 5

Strengths

As a physical convenience store moving to virtual channel, 7-net can utilize its logistics subsidiaries such as RSI, Wisdom, and T-Cat, and density of 7-11 stores to build up its service network to both vendor and consumers. These capabilities are definitely the major

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strengths of 7net. For its pure play competitors, due to the nature of their business, it is difficult for them to own such physical resources; therefore such strengths are difficult to replace.

Well established brand image of 7-11 is another considerable strength 7net possesses.

To consumers, 7-11 is a brand name that stands for good and convenient services. The name 7net made it easier for consumers to associate it with 7-11; consumers may be interested in registering as a member, and hence will receive the information from 7net and be more inclined to purchase on 7net.

Abundant resources from Logistic Sub-Group are also what 7net can leverage in the future. Just like the click-and-mortar promotions with 7-11, 7net can also develop cross-stores marketing campaign with 7-11‘s affiliates, such as Cold Stone, Starbucks Taiwan, or Cosmed.

These potential partners may help create more incentives for consumers to keep paying attention to and actually purchase on 7net.

Weakness

Limited membership base is the major weakness of 7net. As a late comer that only has entered online shopping market since July 2010, 7net has to strive to expand its membership base in order to reach the same size of market of Yahoo or PChome.

Limited product spectrum of 7net is another major weakness. Compared to the benchmark shopping websites in Taiwan, obviously products available are still very limited on 7net; from personal observation, many products are often shown as out of stock and thus the experiences can be disappointing to consumers and may be have detrimental effects in the long run.

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Another weakness observed in 7net‘s business model is its single profit model.

Currently 7net only charges approximately 35% of the sales revenue of vendors as the handling fee, which covers exposure, advertising, and all the logistics and customer services.

The other benchmark platforms, such as Yahoo, charge vendors 15% to 22% only for online exposure; if the vendors seek for advertisement service, they would have to pay more. 7net‘s profit model is relatively single and weak; it may be an incentive for vendors to join 7net in the beginning, but in the long run, 7net would need to seek other profit models to obtain steady growth.

Opportunities

Based on the data and the result of the interview, B2C market in Taiwan will not cease to grow and therefore it provides an opportunity for 7net to expand. In retrospective, B2C market revenue in Taiwan has had over 25% growth per year; the market revenue has almost tripled from 2005 to 2009(資策會 MIC, 2010). Not only the total market size, the average spending per transaction per customer is expected to grow as well, therefore the total available market will expand exponentially. This provides a great opportunity for 7net to expand its business in the coming years; as long as 7-11 and 7net manage to utilize their click-and-mortar advantages, the business is expected to grow significantly and sustain.

Threats

The continuous growth of existing leading players such as Yahoo, PChome, and Momo Shopping is the main threat for 7net‘s development. As the first movers in the market, these companies hold the large membership bases and therefore it is relatively easy for them to bargain prices with vendors or expand its product spectrum. Since it makes little differences for consumers to buy from any websites, 7net needs to strive hard to strengthen its value.

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Local mass merchandisers such as Carrefour and Fe-Geant may be potential threats to 7net. The price offering in those stores are often cheaper than that of the convenience stores as the products come in large packs. If the mass merchandisers start to approach their consumers online by setting up shopping websites and providing door-to-door delivery services, the cheaper price offering may be an incentive to consumers and therefore 7net‘s value proposition of ―cheap and convenient products‖ will be directly impacted.

To seize the opportunities and minimize the challenges to come, 7net may take a few actions to keep on the right track in the e-commerce market in Taiwan, and improve its sustainability in the future. First, improve the weaknesses proactively in order to strengthen consumer confidence. 7net‘s major weaknesses to consumers are limited product spectrum and constant ―out of stock‖ status of products. The status is commonly found in ―exclusive brands from Japan‖ section. To make a real product sale, availability of the product is the key after the potential consumers are aware of the product‘s existence.

Therefore, the weaknesses of 7net are considered detrimental to build up consumer confidence, especially when 7net seeks to develop an image of a shopping website providing convenience to consumers. If a consumer experiences frustration or disappointment when attempting to purchase on a certain website, it leaves little opportunity for that consumer to come back to the website again. Once a consumer loses its confidence in the website, it costs more to win the consumer back than to attract it at the first place. Therefore, improving these weaknesses is the urgent action for 7net as for now.

Second, implement the available e-services in the physical 7-11 stores to strengthen its differentiation and to expand membership base. Providing billing collection service is one of the strength of physical 7-11; the service itself brings little revenue for the stores, but the key is that it brings people into the stores and make potential purchase. The same concept can be

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implemented on 7net as well. Since 7-11 already established the infrastructure for bill collection service, it costs relatively little for 7net to implement the similar service online.

Consumers in Taiwan who are aware of or already using the service in 7-11 will be more inclined to try the service online as well. This is a feasible way to expand 7net‘s membership base in the current phase. Although only a small amount of handling charge will contribute to 7net‘s revenue, it is the registration of the consumers that may bring more revenue in the future.

Finally, 7net may plan to diversify its profit model. Currently 7net only has a single profit model, which is the commission-based profit from the supplier‘s sell-out revenue. The overall percentage is 25% to 35%, depending on in which service mode the vendor chooses to cooperate with 7net. Although the total package is a significant value for vendors, the profit 7net can make has little room to increase. It is recommended for 7net to gradually launch chargeable services for vendors, for instance additional online advertisement service, or cross-branding marketing campaign with the affiliates of 7-11. It should be a feasible strategy to reach 7net‘s sustainability in the future.

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