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3 Critical Issues in Internet Retailing

The maturation of online commerce confronts Internet retailers with some important inflection points in their strategy. Managing Internet retail operations will increasingly involve more than simply managing costs, the authors point out. It will require an understanding of the unique challenges of the category and target market -- as well as the individual product and customer. Each of these factors produces a different cost-service tradeoff and, accordingly, different "right" answers. More complex still, the answers will keep changing as the online channel grows, customer expectations evolve and operational options expand.

Going forward, three critical operational issues face these retailers: How should returns be managed to achieve immediate customer profitability and long-term loyalty? Is the structure of the physical distribution network optimal? Where should product inventories be deployed across the network for the best cost and service combination?

The authors' insights draw upon their varied empirical research, a survey of the perceptions of more than 400 customers of five Internet retailers and the mining of actual transactional data from business records. Company experiences cited include those of eBags, Amazon.com, Linens 'n Things, Frederick's of Hollywood and 1-800-PetMeds.
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