Ventes Privées proposes to join a club of smart buyers. It works through membership and offers luxury products for cheaper prices to members. Membership can only be obtained through invitations from members. The system proposes special brands day selling overproduction of one brand on a special day for a special price.
Customers then get trendy and luxury product for very cheap prices, feeling they are part of the community of smart buyers: they found the way to buy valuable goods not with their money only but also by being alert. It solves the problem of inaccessibility of luxury good and the problem of money frustration: “I can compensate my money lack by being alert on good deals and by being part of the smart buyers club”. Buy smartly is fashion today. So ventes privees proposal is twice trendy: through the purchase act itself and through products it offers.
Suppliers of this business are luxury brands. With this type of business they can sell overstocks in a safer way for their brand image: In their stores network they can’t sell their product at too low prices because the proximity for very high prices and very low prices devaluates brand image: there is no reason that you consider that a suit worth 500€ if you see a similar one in the same store for 50€. So overstocks have to be sold on other channels. And ventes privees is a wise one because it works on VIPprinciple also (even if VIP is not based on money but on trendy behaviour).
Thank to the number and the fashionable aspect of offers, the owners of the business attract a lot of customers and develop high turnover. They first attract people through the cheaper and the most efficient marketing mean which is “ear to mouth”, they make them buy with the promise of a clever purchase and finally, they causes compulsive purchase from their customer since they are sending e-mails announcing good deals almost every day. The main revenue source is sales but there are also premium services like alerts on mobiles and ventes privees certainly gets some revenues from selling data from their customer database.
The main target is customers attracted by fashion and as fashion is always moving, those people want to be able to buy a lot of things. Whereas fashionable goods are often luxury and very expansive products. So that’s people willing to buy a lot. If they are caught by the model, they can become very valuable customers.
Competitors of the model are as well offline than on-line. If we focus on models addressing same customers, online competitors are “privateoutlet.com”, brandalley.fr”, or “surinvotation.com”. Off-line there are less big models but stocks are showroom exactly propose the same service to customers. On a basis of ear to mouth and membership, they propose overstocks from fashionable and luxury brands at cheap prices.
The link between online and offline is made by websites like “shoppingactu.com”
I would say that on-line a big competitor is also e-bay. The model is a little bit different, but the idea of good deal and clever purchase is still there. And prices are similar.
According to me the main concerns linked to purchases on ventes privees are first the fact that you can’t try clothes and then the number of mails that you get when you are on their list.
Then a way to increase business would be to lot the model into different kind of services: one for low buyers, choosing the brands for which they accept to get e-mails, and one for premium buyers, who could get additional sales days by paying membership fees.
Expend revenue sources could be done through heavily advertised partnership with new brands. I think designers would pay to be sold through ventes privees at it is now labelled as a fashionable sho. If Ventes Privees chooses smartly those partners they can become a stepping stone for new brands willing to become a fashionable and luxury brand.
jeudi 24 janvier 2008
mardi 22 janvier 2008
Social Entrepreneurs
"Social entrepreneurs are not content just to give a fish, or teach how to fish. They will not rest until they have revolutionized the fishing industry." Bill Drayton
Definition of a social enterprise: Any organization, in any sector, that uses earned income strategies to pursue a double bottom line or a triple bottom line, either alone (as a social sector business) or as part of a mixed revenue stream that includes charitable contributions and public sector subsidies. (Jerr Boschee, source socialtalent)
Social entrepreneurship is often a militant way of doing business as the purpose of developing business has not only revenue objectives but also social objectives. Social entrepreneurs claim to change the word, not to have found the most sustainable way of doing business.
However I think that this new model may be much more sustainable than the traditional ones are. Today's classical business model only aims at increasing the number of customers. It works as a circle: do business in order to develop business. Things cannot grow endlessly and the model is now highly criticized. Why do you want to develop the business if your business is spoiling environement? Why having more and more customer if your product make them obese? George Vallentis explains for Veolia the principle of contestability (link): Businesses are now observed in a global view. As far as impacts of the business are known, they are all included in the judgement of the business and consequently in the judgement of the product sold. As knowledge of all impacts is difficult to gather for all businesses and all products from a consumer point of view, the value of the product is still not measured according all impacts, but those impacts make the product and the company contestable or not.
On my point of view social entrepreneurs are currently developing a competitive advantage as they are improving their global value. By contrast, that makes traditional models contestable: they are not impacting positively their social environment. In a long term view, social entreprises will attract much more customers than traditional one do, what will make them competitive.
Of course all social entreprises don't have a sustainable business model, but now a new business model has been proposed, offering more added value to people, customers and environment, so why would we need to keep the former model?
Definition of a social enterprise: Any organization, in any sector, that uses earned income strategies to pursue a double bottom line or a triple bottom line, either alone (as a social sector business) or as part of a mixed revenue stream that includes charitable contributions and public sector subsidies. (Jerr Boschee, source socialtalent)
Social entrepreneurship is often a militant way of doing business as the purpose of developing business has not only revenue objectives but also social objectives. Social entrepreneurs claim to change the word, not to have found the most sustainable way of doing business.
However I think that this new model may be much more sustainable than the traditional ones are. Today's classical business model only aims at increasing the number of customers. It works as a circle: do business in order to develop business. Things cannot grow endlessly and the model is now highly criticized. Why do you want to develop the business if your business is spoiling environement? Why having more and more customer if your product make them obese? George Vallentis explains for Veolia the principle of contestability (link): Businesses are now observed in a global view. As far as impacts of the business are known, they are all included in the judgement of the business and consequently in the judgement of the product sold. As knowledge of all impacts is difficult to gather for all businesses and all products from a consumer point of view, the value of the product is still not measured according all impacts, but those impacts make the product and the company contestable or not.
On my point of view social entrepreneurs are currently developing a competitive advantage as they are improving their global value. By contrast, that makes traditional models contestable: they are not impacting positively their social environment. In a long term view, social entreprises will attract much more customers than traditional one do, what will make them competitive.
Of course all social entreprises don't have a sustainable business model, but now a new business model has been proposed, offering more added value to people, customers and environment, so why would we need to keep the former model?
jeudi 10 janvier 2008
Freemium Business Model
The freemium business model works by offering basic services for free, while charging a premium for advanced or special features.
The model was first described by Fred Wilson on March 23, 2006 on his blog.
Several convictions have been developped about freemium. For Fred Wilson this is very important that all barriers to the initial acquisition are eliminated in order to attract customers. Then some analysis explain that the model is based on the following actions:
The model was first described by Fred Wilson on March 23, 2006 on his blog.
Several convictions have been developped about freemium. For Fred Wilson this is very important that all barriers to the initial acquisition are eliminated in order to attract customers. Then some analysis explain that the model is based on the following actions:
Advantages of the model are mostly:
- to attract a lot of consumers to try the product and reduce the problem of the hard competition of the web. Sampling is a very efficient communication mean. And as this kind of business is still not frequent, it generates even more buzz and communication about the product
- to create loyalty by generating habits
- to compete with new marketing tools on a very fast moving market: More and more products are now accessible for free on the web. For music industry for example, this trend is now a real threat for majors. Experience shows there is no way to avoid the free availability of music on the web. How to compete then? By using same tools?
But of course the most obvious issue for this model is the revenue model. How to make money while giving for free high valuable products and services? The model absolutely needs to optimize the conversion rate from free use to premium use. But according to Sebastien Provencher this conversion rate doesn’t exceed 3% in average. This is the most important drawback of the model. For the moment, advertising rarely covers those website’s costs. And with low conversion, opportunities to make those business profitable are not obvious.
A second drawback, linked to the first one is that the limit between the initial basic service and the premium one is still very diffcult to draw. There is few histocity on those kind of business and no best practice has really been identified. The difficulty lies in the importance to provide a high valuable service to attract consumers while creating a frustration about the premium service. How to satisfy and frustrate in the same time? That’s the tricky point.
The last disadvantage of this model is linked to fix costs. To provide the basic package, costs are running whereas no revenue is linked to it. At the beginning of the business, the provider needs to create high valuable products or services with few revenues for an unknown period. The service can be used for free for some months before generating conversion. Even after, the effort made to provide the basic service is not linked to the conversion rate, so it is not linked to revenues. It is then a high fix cost model, with all related drawbacks such as sensibility to slow downs of the market (first to fall with crisis and last to rise when growth is back).
Nevertheless the Radiohead case has to be analyzed. On last October 10th, Radiohead decided to launch his last album In Rainbows on line for free. Actually that was not totally free since people could pay for it in a way reflecting their satisfaction. According to the Times, one third of the album downloaders decided not to pay for it. On the other hand some fans paid more than 40£. A few weeks later, the collector album was launched on traditional market.
For the moment no communication on the profitability of the operation has been made, but some other famous music groups such as Nine Inch Nails used the same idea.
The question now is how the music industry will transform to ensure profitability? Madonna gives a part of the answer since she leaved her lifelong record label Warner to sign a contract with concert promoter Live Nation. As for Radiohead case this is a kind a freemium business orientation: music will now be provided for free and concerts, collectors products will become premium offers.
On my understanding, freemium will shortly become a new major model for a lot of industries. In that case, marketing costs would move from advertising to free sampling on the web. Why not imagine free trainings or even free access to the web as teasers?
Examples of freemium business.
Skype – basic in network voice is free, out of network calling is a premium service
Radiohead last album “In Rainbows” – music is freely accessible on the web. The consumer can give some money to artists according their satisfaction. A premium collector album was then launched a few months later in traditional off line channel.
Second Life – A network free game in which additional abilities are accessible with fees.
Links :
Wikipedia definition
Fred Wilson’s post: "My favourite business model"
Fremium’s name birth
- to attract a lot of consumers to try the product and reduce the problem of the hard competition of the web. Sampling is a very efficient communication mean. And as this kind of business is still not frequent, it generates even more buzz and communication about the product
- to create loyalty by generating habits
- to compete with new marketing tools on a very fast moving market: More and more products are now accessible for free on the web. For music industry for example, this trend is now a real threat for majors. Experience shows there is no way to avoid the free availability of music on the web. How to compete then? By using same tools?
But of course the most obvious issue for this model is the revenue model. How to make money while giving for free high valuable products and services? The model absolutely needs to optimize the conversion rate from free use to premium use. But according to Sebastien Provencher this conversion rate doesn’t exceed 3% in average. This is the most important drawback of the model. For the moment, advertising rarely covers those website’s costs. And with low conversion, opportunities to make those business profitable are not obvious.
A second drawback, linked to the first one is that the limit between the initial basic service and the premium one is still very diffcult to draw. There is few histocity on those kind of business and no best practice has really been identified. The difficulty lies in the importance to provide a high valuable service to attract consumers while creating a frustration about the premium service. How to satisfy and frustrate in the same time? That’s the tricky point.
The last disadvantage of this model is linked to fix costs. To provide the basic package, costs are running whereas no revenue is linked to it. At the beginning of the business, the provider needs to create high valuable products or services with few revenues for an unknown period. The service can be used for free for some months before generating conversion. Even after, the effort made to provide the basic service is not linked to the conversion rate, so it is not linked to revenues. It is then a high fix cost model, with all related drawbacks such as sensibility to slow downs of the market (first to fall with crisis and last to rise when growth is back).
Nevertheless the Radiohead case has to be analyzed. On last October 10th, Radiohead decided to launch his last album In Rainbows on line for free. Actually that was not totally free since people could pay for it in a way reflecting their satisfaction. According to the Times, one third of the album downloaders decided not to pay for it. On the other hand some fans paid more than 40£. A few weeks later, the collector album was launched on traditional market.
For the moment no communication on the profitability of the operation has been made, but some other famous music groups such as Nine Inch Nails used the same idea.
The question now is how the music industry will transform to ensure profitability? Madonna gives a part of the answer since she leaved her lifelong record label Warner to sign a contract with concert promoter Live Nation. As for Radiohead case this is a kind a freemium business orientation: music will now be provided for free and concerts, collectors products will become premium offers.
On my understanding, freemium will shortly become a new major model for a lot of industries. In that case, marketing costs would move from advertising to free sampling on the web. Why not imagine free trainings or even free access to the web as teasers?
Examples of freemium business.
Skype – basic in network voice is free, out of network calling is a premium service
Radiohead last album “In Rainbows” – music is freely accessible on the web. The consumer can give some money to artists according their satisfaction. A premium collector album was then launched a few months later in traditional off line channel.
Second Life – A network free game in which additional abilities are accessible with fees.
Links :
Wikipedia definition
Fred Wilson’s post: "My favourite business model"
Fremium’s name birth
lundi 7 janvier 2008
Easy Group Model Analysis
Easy Group Business model analysis
From the basis of a low cost airline company, the Easygroup became a low cost experience provider on a permanently growing number of diverse activities.
The Easy model provides to the customer functional services at the lowest possible price, on the basis of the “real value” of the basics of the provided service, avoiding any superfluous frills. The Easy group breaks up a standard service, only keeps items that are absolutely required by the consumer and provide it to him at the lowest price taking into account the time they buy it. (The time is one of the most present valuable item in nowadays services)
As Stelios Hajiloannou (Easygroup CEO) said “Easy is a functional brand […]. In any industry where consumers are being ripped off, if I can find a way to give them real value, I’m going to do it”
On Easygroup side, the model generates a huge turnover as it seduces a lot of consumers (due to the specificity of the model and the heavy advertising of the orange brand). Direct margin are low as the model provides low prices but this is compensated by the optimization of the running fixed costs thank to the Yield management lever.
The model slicks variations of turnover (seasonality, rush hours…) by proposing attractive prices on slots where competitors use to be underperforming. As Stelios H. focuses on highly leveraged industries (high fix costs), the additional turnover generated on those unusual slots is almost a net benefit that compensates the lower margins on other sales. For example for pizzas, costs generated by the cooker salary and facilities depreciation (such as the oven) during slack hours have no compensation in an usual business. The Yield Management helps to create demand on slack hours to at least compensate a little fix costs and raise prices for consumers when the demand is high and less dependent on elasticity rules. On Saturday evenings, the pizza can be more expensive as a lot of people will anyway order one even if it's 3 pounds more. So the global margins of the business can be generated on those rush hours. (See easy pizza website, and easypizza model description)
From the basis of a low cost airline company, the Easygroup became a low cost experience provider on a permanently growing number of diverse activities.
The Easy model provides to the customer functional services at the lowest possible price, on the basis of the “real value” of the basics of the provided service, avoiding any superfluous frills. The Easy group breaks up a standard service, only keeps items that are absolutely required by the consumer and provide it to him at the lowest price taking into account the time they buy it. (The time is one of the most present valuable item in nowadays services)
As Stelios Hajiloannou (Easygroup CEO) said “Easy is a functional brand […]. In any industry where consumers are being ripped off, if I can find a way to give them real value, I’m going to do it”
On Easygroup side, the model generates a huge turnover as it seduces a lot of consumers (due to the specificity of the model and the heavy advertising of the orange brand). Direct margin are low as the model provides low prices but this is compensated by the optimization of the running fixed costs thank to the Yield management lever.
The model slicks variations of turnover (seasonality, rush hours…) by proposing attractive prices on slots where competitors use to be underperforming. As Stelios H. focuses on highly leveraged industries (high fix costs), the additional turnover generated on those unusual slots is almost a net benefit that compensates the lower margins on other sales. For example for pizzas, costs generated by the cooker salary and facilities depreciation (such as the oven) during slack hours have no compensation in an usual business. The Yield Management helps to create demand on slack hours to at least compensate a little fix costs and raise prices for consumers when the demand is high and less dependent on elasticity rules. On Saturday evenings, the pizza can be more expensive as a lot of people will anyway order one even if it's 3 pounds more. So the global margins of the business can be generated on those rush hours. (See easy pizza website, and easypizza model description)
This is true for pizzas as for flights. On flights, selling secured bookings long time before the flight ensures to fill in flights that would generate high losses if they are not full.
Easy group partners are also gaining from the Easymodel. Burger King, Mac Donald's and Subway can now propose an additional value added service of web access for a low price compliant with their own low price policy.
Revenue sources come from many industries: flights, Internet cafes, pizzas delivery, hotels, car rental, wristwatch, cruises... But it mainly comes from the use of :
1/ Yield Management technique that helps doing a lot of money from low costs products.
2/ Simple proposal of very basic services: and the first illustration to this is the fact that distribution model has been reduced to Internet, phone is available at the minimum capacity but requires extra charges from the consumer.
There are not direct competitors on the all range of low cost services proposed by the Easy group but Virgin is often competing with Easyjet on some markets. (see the link to their website) and it has the similar strategy of a large range of business with a basic proposition of low prices (from phones connexions to travels...)
Many industries are highly leveraged, and on my mind, the Yield management model that have been built for the most highly leveraged ones (airlines and hotels) can be a magic key for other industries with similar constraints. The idea is very clever, but also risky: industries with high fix costs are by definition the most sensitive to market fluctuations: there are the first to fall in case of recession and the last to recover when the market grows. Higher the fix costs are, higher the industry is likely to be impacted by market recession. So I think that the model really sustainable, but it has to be really fine tuned according to the industry by watching carefully at consumers reactions (such as Stelios H. exactly did with Internet cafe: the very basic service had to include an access to the service on the daily road of the consumer, so the Easy group repositioned Internet Café in already popular café and fast foods chains).
I think that for the moment, hotel industry is underperformed. This is the closest business model from Airlines and I really believe that a precise work on the basic services required for an hotel and a fine tuned Yield management could end on a highly growing and profitable business.
But other businesses are possible for the Easy Group such as Internet access providing and all other highly leveraged industries that target mass consumers.
Easy group partners are also gaining from the Easymodel. Burger King, Mac Donald's and Subway can now propose an additional value added service of web access for a low price compliant with their own low price policy.
Revenue sources come from many industries: flights, Internet cafes, pizzas delivery, hotels, car rental, wristwatch, cruises... But it mainly comes from the use of :
1/ Yield Management technique that helps doing a lot of money from low costs products.
2/ Simple proposal of very basic services: and the first illustration to this is the fact that distribution model has been reduced to Internet, phone is available at the minimum capacity but requires extra charges from the consumer.
There are not direct competitors on the all range of low cost services proposed by the Easy group but Virgin is often competing with Easyjet on some markets. (see the link to their website) and it has the similar strategy of a large range of business with a basic proposition of low prices (from phones connexions to travels...)
Many industries are highly leveraged, and on my mind, the Yield management model that have been built for the most highly leveraged ones (airlines and hotels) can be a magic key for other industries with similar constraints. The idea is very clever, but also risky: industries with high fix costs are by definition the most sensitive to market fluctuations: there are the first to fall in case of recession and the last to recover when the market grows. Higher the fix costs are, higher the industry is likely to be impacted by market recession. So I think that the model really sustainable, but it has to be really fine tuned according to the industry by watching carefully at consumers reactions (such as Stelios H. exactly did with Internet cafe: the very basic service had to include an access to the service on the daily road of the consumer, so the Easy group repositioned Internet Café in already popular café and fast foods chains).
I think that for the moment, hotel industry is underperformed. This is the closest business model from Airlines and I really believe that a precise work on the basic services required for an hotel and a fine tuned Yield management could end on a highly growing and profitable business.
But other businesses are possible for the Easy Group such as Internet access providing and all other highly leveraged industries that target mass consumers.
Inscription à :
Articles (Atom)