Application of POM to e‐business: B2C e‐shopping

Martin K. Starr (Crummer Graduate School of Business, Rollins College, Florida, USA)

International Journal of Operations & Production Management

ISSN: 0144-3577

Publication date: 1 January 2003

Abstract

Can operations management impact significantly the profitability of consumer‐based businesses on the Internet (called B2C)? During the past two years, Internet retailers have not provided satisfactory financial results. Whereas, leading in‐store retailers have been profitable using traditional modes for selling and delivering goods to customers. The research underlying this paper focused on analyzing the costs of doing business which are affected by operations management decisions. We wanted to determine if the criteria for best practice normally used by operations managers applied to firms engaged in e‐tailing (Internet B2C). To do this we singled out a well‐known dot.com retail failure, Webvan. Cost data were studied from startup (1998) to bankruptcy (2001). It was found that operating costs were way out of line with (even) good practice. Under in‐store retailing circumstances, the inability to reach breakeven would not have been tolerated. While concentrating on Webvan, this paper uses information about other firms to provide additional insights.