Individual Case Essay ISM 5150 Winter 2021 PDF

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An Individual Case Essay Winter 2021 for ISM 5150. An excellent resource that will give you a nice grade....

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Kevin M. Rodriguez Robles

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5051 Case Analysis Paper: Seller Labs: Democratizing e-merchants competitiveness Summary What started as a weekend project to solve his Amazon seller feedback problems for his used book business, Brandon Checketts created Feedback Genius in 2013. The program worked at automating his Buyer-Seller messaging, which proved to be extremely effective. Using himself as a successful case study, he was able to get other sellers to use the program. The result: their seller feedback improved almost immediately. This made Brandon shift his focus from selling on Amazon to developing software for sellers like himself. Fast forward to today, Feedback Genius is the most used automated Buyer-Seller Messaging program by Amazon sellers. Seller Labs has expanded its product offerings to solve other problems for sellers. Seller Labs offers tools for Amazon keyword research, Sponsored Product advertising, managed services, product discovery, and inventory management. This information system (IS) software technology helps sellers gain the Amazon Advertising Advantage. For this company, their work has not gone unnoticed. They have spoken at dozens of conferences and trade shows every year. Also, they were named the most innovative startup in the Atlanta area in 2015 and earned the 148th spot on the Inc. 500 list of fastest-growing companies in 2018. Before getting into the technical side, it is important to have a clear understanding of the context of why e-commerce has become so popular and mainstream which has driven a lot of the buyer and investor demand to buy these businesses regardless of the size. It’s no secret that ecommerce has become woven deeply into the fabric of our everyday lives. The case describes the impact of Amazon with Seller Labs, there is no doubt that Amazon tends to get most of the attention when we speak about e-commerce. The purpose of Seller Labs is to develop software tools for the rapidly growing number of Amazon’s third-party sellers. Here, it will be analyzed the Seller Labs performance, how is it growing, its weaknesses, strengths, and what the firm can do to improve their business. Background Since the 2000’s there has been a widespread availability of computers and internet 1

which has been increasing year by year. Online sales in the US reached more than $600 billion in 2019 while 20 years ago, online sales represented 15% of the US addressable retail market. Therefore, many opportunities still existed as more products and services moved online. Amazon positioned itself as the clear maker leader, experiencing a 30% increase in revenue every year for two decades. It was not until last year where around 50% of customers start their product searches on the e-commerce platform. There was a “marketplace governance” that was implemented algorithmically, and sellers could come on to the platform, transact with customers, and compete with other sellers without ever having to interact with an Amazon employee. As a result, there was an incorporation by Seller Labs of Feedback Genius which become popular among Amazon sellers. The objective for Seller Labs was to have the potential to improve a seller’s competitiveness in the marketplace. To have success on Amazon depends on three basic marketing components: product, price, and placement. Problem Statement The small and medium sellers present on Amazon to create services and software tools where they can leverage. The Amazon Seller Central, an intuitive web application where sellers could manage and monitor all their offerings, was a central element of Amazon’s offering. There was a complimentary service that included a fulfillment by Amazon (FBA). This component allows the sellers to outsource storage, shipment and returns management to Amazon. But there was a disadvantage, operating as a seller on Amazon was not that easy, it was a challenge. The main problem is that many sellers were competing with the same product, as well as with Amazon itself. One thing that Amazon did and disrupt the small and medium sellers was the change in Amazon policy. The policy determined that was against its terms of services to provide free or discounted products in exchange for product reviews, which was a common practice among these sellers. Among other changes, the seller could see their competitive position in the marketplace harmed without any prior notice from Amazon. Analysis Like any business investment, the IT infrastructure components should be evaluated based on their expected financial value. Despite still being a startup, Seller Labs had already achieved many successes. The company grew from two employees to more than a hundred and

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has been praised multiple times by the business press, ranked two years in a row among the top fastest-growing private US companies which also was a founding member of the Amazon Marketplace Developer Council. As a result of the COVID-19 pandemic, there was a surge in online commerce growth as it was projected in the next years in just a few months, this created good opportunities but at the same time challenges since for a time, online business was the only source to increase revenues. There were companies such as Facebook and Google where they took advantage of it and create other IT software for e-commerce to keep the small and medium business revenues. Seller Labs acquired X-Cart and the commercialization of X-Cart Cloud; the company had made its first move in its journey of becoming a differentiated sustainable business. Harris projected good outcomes in the last year. As expected, he said that Seller Labs is back again with a position where they can start releasing features and products again. If we compared the financial data from Seller Labs since 2015, the product services related to its revenues have been increasing nonstop. The revenues from the 2015 increased from $3,100,000 to $8,331,429 in 2019, with an increase average of $1,000,000 year over year (Table 1). Also, not only the revenues increased but the customers as well, especially between 2018 and 2019 was the best customer increase, from 3,200 in 2015 to 8,400 and 9,200 in 2018 and 2019 respectively (Table 2). Seller Lab performance has encounter challenges but has been able to overcome those; the company has been invested in infrastructure for integrating the two companies. The acquisition of X-Cart by Seller Lab expanded the competitive territory to the entire e-commerce space, because of this, Seller Labs faced an increase competition for multiple fronts. For example, the number of startups that were offered by Amazon tools was substantial and this made the market to be crowded where some small and medium business firms were providing products and services comparable to those of Seller Labs. Some firms had a different characteristic that distinguishes them from Sellers Labs, but this also was a thread for Seller Labs. There were three companies that bothered and were a big threat to Seller Labs. The companies are Sellics, Helium 10, and Junglescout (Table 3). If we compared the Sellers Lab competitors considering the monthly visits in an average website visit during February-April, Seller Labs is way behind. On the opposite, if we analyze the geographic access during February-April, Seller Labs stands out in the United States with a 3

65.59% making them the number one. One thing that is affecting Seller Labs not standing out with its competitors taking into consideration the monthly visit is the features that each company has. For example, Seller Labs does not have a listing optimization automation compared with the other three companies that have it. This is an opportunity to grow and develop Seller Labs, by doing this the monthly visits may go up. As we see in table #, this is the only feature that lacks Seller Labs to be competitive. Adding owner compensation back into revenue helps uncover the true earnings power of the business. In terms of finances, it should go without saying that the financial health of any e-commerce business will be one of the critical factors in determining its value. The following are some prerequisites that Seller Labs should take into consideration. The first one is having a thorough and verifiable financial record, a concentration revenue, and seasonality. In terms of revenue, MRR, and market share; Seller Labs has been acquired an outstanding increase in revenues in the last years. Adding owner compensation back into revenue helps uncover the true earnings power of the business. X-Cart earned a significant portion of its revenue by providing customization and maintenance services for those sellers that wanted to create an e-commerce store based on the X-Cart platform. On the other hand, the monthly recurring revenues (MRR) has increased, but there are some hacks where the company can do to increase the MRR even more such as raising the price, move upmarket, invest in new features comparing the other competitors, and up the upselling, among others. The market share has opportunities also for growth, the following are some options for how to increase the market share; the first is by innovation, followed by lowering the prices, strengthening customer relationships, advertising, increased quality, and acquisition. On the other hand, if the company Seller Labs wants to increase their company including revenues as MRR, monthly visits, and sales; they should expand beyond the Amazon marketplace. By expanding their horizons, they can increase the factors explained throughout the case analysis. Recommendations Earlier it was mentioned in the analysis section some financial factors that may help Seller Labs to stand out. First one, maintaining solid and verifiable financial records is one of the most crucial steps owners can take not only to increase the value of the business but also to operate better. Another one is once the revenues have been verified, has been essential that e4

commerce evaluates it and breaks down the revenue in several ways, for example by customer, product, and supplier. By doing this, is possible to find the strengths and weaknesses in each revenue stream. And last, seasonality, the longer the company has been in business, the easier will be to spot trends and plan for them. Also, the firm may increase the price of the service and implement what others are doing but making it innovative and targeting the competition's weaknesses. Seller Labs may increase their price, this may affect the MRR, after a period the firm that sees how the customer responds and adjust from there, if it is underpriced, an increase in seller is going to be seen, therefore, a significant increase in monthly recurring revenue. Another recommendation will be to up the upselling, this is a powerful tool to boost the customers monthly spend. The key to this is to reach out to the customer at the right time. Last is to strengthen the customer relationships, by doing this Seller Labs will protect their existing market to ensure no loss of the existing customer base goes to any other of the competitors mentioned earlier. Conclusions After approaching the Seller Labs performance in its entirely, despite the company is still in development, have had already achieved many successes. The company grew its employee team, has also been praised multiple times by the business press, and ranked two years in a row among the top fastest-growing private US companies as explained earlier. But there is also a competitive environment that has become a hostile competition. As discussed before, Google and Facebook have good offers, which means that any seller could make their e-business and be able to connect with millions of customers. If Seller Labs keeps developing their business and expanding their offers to customers, they will reach the competitor's market and get close to them. Also, the quality of the information at hand affects the quality of both the decision and its implementation. Therefore, Seller Labs must develop an understanding of what information is crucial to the decision, how to get it, and how to use it. All this will positively impact the company, but they must lead the changes driven by information systems.

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Appendices References: 

Law, R. (2021). 9 MRR Hacks to Increase Your Monthly Recurring Revenue. Retrieved 27

April

2021,

from

https://www.cobloom.com/blog/mrr-hacks-to-increase-your-

monthly-recurring-revenue 

Market Share - Overview, Impact, How To Increase. (2021). Retrieved 26 April 2021, from https://corporatefinanceinstitute.com/resources/knowledge/economics/market-share/



Pearlson, K., & Saunders, C. (2019). Managing & Using Information Systems: A Strategic Approach (7th ed., pp. 130 – 131). New Jersey: John Wiley & Sons, Inc.



Seller Labs: Read Our Story. (2021). Retrieved 26 April 2021, from https://www.sellerlabs.com/about-us/



Smale, T. (2021). How to Value and Sell an E-Commerce Business. Retrieved 27 April 2021, from https://feinternational.com/blog/value-and-sell-an-e-commerce-business/

Charts:

Table 1: Seller Labs Financial Data

Table 2: Average Website Visits During February-April

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Table 3: Competitors Comparison

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