Reference no: EM132829858
Jim Johnston started an ordinary hardware store, named Johnston's Hardware in Brampton, Ontario, in 1990. He had been working during his summer vacations from college for a long-established hardware store and decided he liked the business. Johnston's Hardware developed an excellent reputation as a friendly neighborhood store. The store managers are all active in the community and the store regularly sponsors youth sports teams and supports local charities. When hired, salespeople go through a comprehensive training program that includes skill training in the areas of the store in which they will work (plumbing, electrical, power tools, flooring, garden, and so on), and they are trained in customer service skills. As a result of this focus on service, Johnston's Hardware became a community gathering place.
Jim offers classes and workshops for the homeowner and hobbyist three evenings each month and regularly schedules seminars for professional customers on weekday mornings. Many of these workshops and seminars are underwritten and taught by manufacturers to promote their products, but an increasing number are being created by Johnston's Hardware staff members.
Jim's staff also developed a line of premium tools which have been successfully sold in the store. Johnston Professional is the name that they have used, and the tools have a good reputation in the area for innovative design and commercial quality. The tools are assembled in Mexico, and if the volumes can be increased, there is potential for high margin sales to contractors and hobbyists.
In recent years, Jim has become concerned that the business is no longer growing despite the innovation and new services. The store is facing increasing competition from hardware chains such as Home Depot and Lowes. These national chains have opened many new stores, and they are larger, carry more items, and offer lower prices on some items. The competition is fierce; for example, Johnston's Hardware closed its lumber department because of this competition. The national chains buy lumber in such large quantities that they can offer far lower prices. Jim matched his larger competitors' prices, but found he was unable to earn a profit on lumber sales and that department consumed a large amount of floor space in the store.
Jim was worried that this sort of problem could develop in other departments, so he began looking for ways to add value to the customer experience, especially in ways that the national chains were not willing or able to do. For example, Jim believes that most people want to try out a new power tool in person before they spend hundreds of dollars on a purchase. Thus, Johnston's Hardware created a tool demonstration area staffed with salespeople who are experts in power tool operation. For each major type of power tool (drills, power saws, joiners, grinding tools, and so on), Jim created a small booklet of hints for using that type of tool. Johnston's salespeople give these booklets to customers as free handouts. They also sell Johnston's own low-cost instructional DVDs.
Johnston's Hardware currently has a Web site that includes minimal information about the company and some store information, such as directions to the store and hours of operation. Jim is thinking about expanding the Web site to include online shopping. He is hoping that customers might find the Web site to be a useful way to order items, see whether items are in stock at the store, and comparison shop among different brands of a particular item. Jim is also hopeful that the Web site can reach customers who are not located near the store.
Jim has been talking with Sarah Jones, his most senior store manager, about his idea for adding online sales to the Web site. Sarah has been with the company for 15 years and has organized a number of the classes held on Saturday afternoons in the tool demonstration area. After hearing Johnston's ideas, she expressed even more concern about online competition than local competition. Some of the tool manufacturing companies that supply Johnston's Hardware are talking about selling directly to customers through their own Web sites. None of the major suppliers has done this yet, but Sarah is worried that it could occur in the future. The store also faces competition from companies that sell online or through the Amazon.com Web site.
Sarah tells Jim that she is concerned that going online with their entire product line might not make any sense because the competition for common tools is likely to be just as fierce online as it is in the store now. She has noticed that there seems to be a solid core of customers who are interested in serious woodworking and who show up for a lot of the classes. These customers buy some of the best, and most expensive, tools that the store sells. Many times, she finds that she has to special order tools for these customers when they are working on a specific project.
Sarah suggests to Jim that they might want to take the business in a different direction online and sell just the high-end specialty tools to dedicated woodworkers and cabinetmakers. These items yield higher margins than the regular tools. Furthermore, the salespeople who Jim has hired are eager to develop videos and instruction booklets that would appeal to this more skilled and specialized audience. Sarah suggests that they call the new online business Johnston's Woodworking to distinguish it from the general hardware store business.
Answer following
Conduct a SWOT analysis to assess Sarah's proposed strategy of extending Jim's online presence.
Use the SWOT analysis you developed to make tactical recommendations for the new site. What new features and functions would you propose that would leverage strengths/opportunities and mitigate weaknesses/threats?
Discuss the suitability of Johnston's Woodworking's products for sale on the web. What strategies might you recommend to address the poor shipping profile of some of the products being sold (ex. Wheel barrows)
How would the implementation of the new site affect Jim's transaction costs?