Chapter 9 Online Retailing and Services Part 2

42) Which of the following is not an example of a virtual merchant? A) Overstock B) Wayfair C) Newegg D) Dell Answer: D Difficulty: Moderate AACSB: Application of knowledge Learning Objective: 9.3: Identify the challenges faced by the different types of online retailers. 43) Omni-channel merchants are also referred to as: A) virtual merchants. B) bricks-and-clicks companies. C) catalog merchants. D) manufacturer-direct firms. Answer: B Difficulty: Easy AACSB: Application of knowledge Learning Objective: 9.3: Identify the challenges faced by the different types of online retailers. 44) ________ is a subscription-based retailer using predictive marketing and Big Data? A) Macy's B) Stitch Fix C) Dell D) Lands' End Answer: B Difficulty: Moderate AACSB: Application of knowledge Learning Objective: 9.3: Identify the challenges faced by the different types of online retailers. 45) Virtual merchants face potentially large costs for all of the following except: A) building and maintaining a website. B) building and maintaining physical stores. C) building an order fulfillment infrastructure. D) developing a brand name. Answer: B Difficulty: Easy AACSB: Application of knowledge Learning Objective: 9.3: Identify the challenges faced by the different types of online retailers. 46) All of the following statements about Amazon are true except: A) in 2016, Amazon purchased Jet.com, one of its discount competitors. B) Amazon Web Services is now a major part of Amazon's business. C) eBay can be considered a competitor of Amazon's. D) the rising cost of shipping represents one of the biggest threats to Amazon's long-term profitability. 12 Answer: A Difficulty: Difficult AACSB: Application of knowledge Learning Objective: 9.3: Identify the challenges faced by the different types of online retailers. 47) All of the following are challenges faced by bricks-and-clicks firms except: A) coordinating prices across channels. B) handling returns of online purchases at retail outlets. C) building a credible website. D) building a brand name. Answer: D Difficulty: Moderate AACSB: Application of knowledge Learning Objective: 9.3: Identify the challenges faced by the different types of online retailers. 48) All of the following are challenges for catalog merchants except: A) high costs of printing and mailing. B) building a credible website. C) the need to bring staff in or manage new technology. D) building sophisticated order entry and fulfillment systems. Answer: D Difficulty: Moderate AACSB: Application of knowledge Learning Objective: 9.3: Identify the challenges faced by the different types of online retailers. 49) The term supply-push refers to: A) making products prior to orders being received based on estimated demand. B) waiting for orders to be received before building a product. C) channel conflict. D) multi-channel manufacturers who sell directly online to consumers. Answer: A Difficulty: Moderate AACSB: Application of knowledge Learning Objective: 9.3: Identify the challenges faced by the different types of online retailers. 50) All of the following are examples of the challenges that traditional manufacturers experience when using the Internet to sell directly to the consumer except: A) moving to a demand-pull model. B) high cost structures. C) developing a fast-response online order and fulfillment system. D) channel conflict. Answer: B Difficulty: Moderate AACSB: Application of knowledge Learning Objective: 9.3: Identify the challenges faced by the different types of online retailers. 51) Which of the following occurs when retailers of products must compete on price and currency of inventory directly against the manufacturer? 13 A) disintermediation B) localization C) channel conflict D) hypermediation Answer: C Difficulty: Moderate AACSB: Application of knowledge Learning Objective: 9.3: Identify the challenges faced by the different types of online retailers. 52) Which of the following has the highest share of online retail sales? A) omni-channel merchants B) virtual merchants C) catalog merchants D) manufacturer-direct Answer: B Difficulty: Moderate AACSB: Application of knowledge Learning Objective: 9.3: Identify the challenges faced by the different types of online retailers. 53) Which of the following has the second-highest share of online retail sales? A) omni-channel merchants B) virtual merchants C) catalog merchants D) manufacturer-direct Answer: A Difficulty: Moderate AACSB: Application of knowledge Learning Objective: 9.3: Identify the challenges faced by the different types of online retailers. 54) Why have so many online retailers had difficulty in achieving profits? How had this changed by 2018? Answer: There are several reasons for the difficulties experienced by online retailers in achieving profits. The path to success in any form of retail involves having a central location to attract a larger number of shoppers, charging high enough prices to cover the costs of goods and marketing, and developing highly efficient inventory and fulfillment systems so that the company can offer goods at lower costs than competitors and still make a profit. Many online merchants failed to follow these fundamental ideas, lowering prices below the total costs of goods and operations, failing to develop efficient business processes, failing to attract a large enough audience to their websites, and spending far too much on customer acquisition and marketing. Now, however, the lessons of the past have been learned, and far fewer online merchants are selling below cost, especially if they are start-up companies. There's also been a change in consumer culture and attitudes. Whereas in the past consumers looked to the Web for cheap prices, they now look to online purchasing for convenience, time savings, and time shifting (buying retail goods at night from the sofa). Consumers have been willing to accept higher prices in return for the convenience of shopping online and avoiding the inconvenience of shopping at stores and malls. This allows online merchants more pricing freedom. Difficulty: Moderate AACSB: Application of knowledge 14 Learning Objective: 9.3: Identify the challenges faced by the different types of online retailers. 55) Discuss Amazon's future prospects. Do you think Amazon will ever be consistently profitable? Answer: In 2016, Amazon finally began to show investors and analysts what they had been waiting years to see—sustainable profitability. The profitability of its AWS unit is also a major positive for Amazon, with revenues from Amazon Web Services (AWS) rapidly growing in 2018. Amazon Prime is also a key component of the company's strong performance, with Prime subscription revenue nearly quadrupling from $2.76 billion in 2014 to $9.7 billion in 2017. However, Amazon has reached its current position of dominance in e-commerce by defying analysts' expectations, and the company plans to return to its old habits of spending prodigiously to grow even larger in 2018 and beyond, compromising profitability in the process. Difficulty: Moderate AACSB: Application of knowledge; Written and oral communication Learning Objective: 9.3: Identify the challenges faced by the different types of online retailers. 56) Describe the virtual merchant business model and its unique challenges in becoming financially viable. Answer: Virtual merchants are single-channel e-commerce firms that generate almost all their revenue from online sales. Unfortunately, they face a number of challenges. They must build a business and brand name from scratch quickly and face many virtual merchant competitors. They also face large costs in building and maintaining an e-commerce presence, building an order fulfillment infrastructure, and developing a brand name. Customer acquisition costs are high, and the learning curve is steep. Like all retail firms, their gross margins are low. Therefore, virtual merchants must achieve highly efficient operations to preserve a profit, while building a brand name as quickly as possible in order to attract a sufficient number of customers to cover their costs of operations. Most merchants in this category adopt low-cost and convenience strategies, coupled with extremely effective and efficient fulfillment processes to ensure customers receive what they ordered as fast as possible. Difficulty: Moderate AACSB: Analytical thinking; Written and oral communication Learning Objective: 9.3: Identify the challenges faced by the different types of online retailers. 57) In the United States, the service sector accounts for approximately ________ % of the United States GDP. A) 70 B) 75 C) 80 D) 85 Answer: C Difficulty: Moderate AACSB: Application of knowledge Learning Objective: 9.4: Describe the major features of the online service sector. 58) Service industry groups are categorized generally into two groups, those that provide transaction brokering and those that involve: A) retailing goods. B) personalization. 15 C) information brokering. D) providing hands-on services. Answer: D Difficulty: Moderate AACSB: Application of knowledge Learning Objective: 9.4: Describe the major features of the online service sector. 59) Approximately ________ % of the United States labor force is involved in providing services. A) 50 B) 60 C) 70 D) 80 Answer: D Difficulty: Difficult AACSB: Application of knowledge Learning Objective: 9.4: Describe the major features of the online service sector. 60) Which of the following is not an example of a transaction broker? A) a stockbroker B) a real estate agent C) an accountant D) an employment agency Answer: C Difficulty: Moderate AACSB: Application of knowledge Learning Objective: 9.4: Describe the major features of the online service sector. 61) All of the following services require extensive personalization except: A) financial services. B) legal services. C) medical services. D) accounting services. Answer: A Difficulty: Moderate AACSB: Application of knowledge Learning Objective: 9.4: Describe the major features of the online service sector. 62) Which of the following best explains why the service sector is a natural avenue for ecommerce? A) The service sector is less geographically reliant and more globally oriented. B) The service sector has historically been more technology-reliant. C) Much of the value in services is based on the collection, storage, and exchange of information. D) It is not; services are difficult to translate to e-commerce because they rely on face-to-face communication and barter. Answer: C Difficulty: Moderate 16 AACSB: Application of knowledge Learning Objective: 9.4: Describe the major features of the online service sector. 63) Which of the following statements about online banking is not true? A) Top mobile banking activities include checking balances and bank statements and viewing recent transactions. B) Online and mobile banking transactions provide significant costs savings for banks. C) Millennials are adopting mobile banking at a much higher rate than those who are older. D) More people use a tablet for mobile banking than a mobile phone. Answer: D Difficulty: Difficult AACSB: Application of knowledge Learning Objective: 9.5: Discuss the trends taking place in the online financial services industry. 64) In ________, all of a customer's financial (and even nonfinancial) data are pulled together into a single, personalized website. A) account aggregation B) a financial portal C) integrated financial services D) EBPP systems Answer: A Difficulty: Moderate AACSB: Application of knowledge Learning Objective: 9.5: Discuss the trends taking place in the online financial services industry. 65) The Internet has resulted in lower search costs, increased price comparison, and lower prices to consumers for which insurance product line? A) term life insurance B) automobile insurance C) health insurance D) property and casualty insurance Answer: A Difficulty: Moderate AACSB: Application of knowledge Learning Objective: 9.5: Discuss the trends taking place in the online financial services industry. 66) All of the following statements about the online insurance industry are true except: A) the Internet has lowered search costs, increased price comparison, and decreased prices to consumers for all forms of insurance. B) websites of almost all the major firms provide the ability to obtain an online quote. C) the wave of interest in fintech companies has not yet reached the insurance industry. D) the industry has been very successful in attracting visitors searching for information about prices and terms of insurance policies. Answer: A Difficulty: Moderate AACSB: Application of knowledge Learning Objective: 9.5: Discuss the trends taking place in the online financial services industry. 17 67) All of the following statements about the online real estate services market are true except: A) the first step in the home buying process for nearly all ages of home buyers is to look online. B) the major impact of Internet real estate sites has been in influencing offline decisions. C) the primary service offered by real estate sites is a listing of houses available. D) the Internet and e-commerce have created a revolution in the real estate value chain. Answer: D Difficulty: Moderate AACSB: Application of knowledge Learning Objective: 9.5: Discuss the trends taking place in the online financial services industry. 68) Craigslist is most involved in which of the following online services market(s)? A) real estate services and career services B) insurance services and brokerage services C) travel services D) online accounting services Answer: A Difficulty: Easy AACSB: Application of knowledge Learning Objective: 9.5: Discuss the trends taking place in the online financial services industry. 69) In 2018, almost 60% of the adult U.S. population was expected to use online banking. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Learning Objective: 9.5: Discuss the trends taking place in the online financial services industry. 70) The online mortgage industry has transformed the process of obtaining a mortgage. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Learning Objective: 9.5: Discuss the trends taking place in the online financial services industry. 71) The term fintech applies only to tech companies that are seeking use technology to unbundle traditional institutional financial services industries and instead deliver targeted solutions. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Learning Objective: 9.5: Discuss the trends taking place in the online financial services industry. 72) Define the term insurtech and give an example of an insurtech company. Answer: The wave of interest in fintech companies previously discussed is also starting to filter into the insurance industry, with a subset labeled “insurtech” companies, who are seeking to use technologies such as big data, machine learning, and artificial intelligence to disrupt the traditional insurance industry. For example, a company named Lemonade, founded in 2015, is attempting to reinvent the homeowners and renters’ insurance market by cutting out agents, offering competitive rates, and using a mobile app featuring a chatbot and powered by artificial intelligence. Lemonade is initially focused on the Millennial market, with 75% of its users under the age of 35. Lemonade has raised over $180 million. 18 Difficulty: Difficult AACSB: Analytical thinking; Written and oral communication Learning Objective: 9.5: Discuss the trends taking place in the online financial services industry. 73) ________ has introduced a tool known as Consumer Alerts to inform readers when a review is likely to be fraudulent? A) Yelp B) TripAdvisor C) Angie's List D) TripExpert Answer: A Difficulty: Moderate AACSB: Application of knowledge Learning Objective: 9.6: Describe the major trends in the online travel services industry today. 74) What is the largest sector of the online travel services market in terms of revenue? A) hotel reservations B) car reservations C) cruise/tour reservations D) airline reservations Answer: D Difficulty: Moderate AACSB: Application of knowledge Learning Objective: 9.6: Describe the major trends in the online travel services industry today. 75) Which of the following statements is not true? A) Price competition among online travel services is difficult as comparison shopping for better prices is easy. B) The online travel services sector is one of the few in which extensive disintermediation has occurred. C) The ability of travel products and services to be commoditized is a significant factor in the explosive growth of the online travel services industry. D) The online travel services industry has gone through a period of consolidation. Answer: B Difficulty: Difficult AACSB: Application of knowledge Learning Objective: 9.6: Describe the major trends in the online travel services industry today. 76) Bookings Holdings owns all of the following except: A) Priceline. B) Orbitz. C) Booking.com D) Lowestfare.com Answer: B Difficulty: Easy AACSB: Application of knowledge Learning Objective: 9.6: Describe the major trends in the online travel services industry today. 19 77) Discuss the issue of consolidation in the online travel services industry. Answer: The online travel services industry has gone through a period of intense consolidation. Expedia now owns Travelocity, Orbitz, CheapTickets, Hotels.com, Hotwire, HomeAway, and meta-search engine Trivago. Its primary competition consists of Bookings Holdings, which owns Priceline, Booking.com, Lowestfare.com, and Kayak. Together, Expedia and Bookings Holdings control a whopping 95% of the online travel agency booking market. However, Google is also poised to become a player in the market, with its Google Flights that also provides booking functionality. The U.S. Department of Justice also cited the TripAdvisor's Instant Booking service as a factor in its approval of Expedia's acquisition of Orbitz. Difficulty: Moderate AACSB: Application of knowledge; Written and oral communication Learning Objective: 9.6: Describe the major trends in the online travel services industry today. 78) Which of these job recruitment sites is not a job listing aggregator? A) Indeed B) SimplyHired C) Glassdoor D) CareerBuilder Answer: D Difficulty: Easy AACSB: Application of knowledge Learning Objective: 9.7: Identify current trends in the online career services industry. 79) Which of the following is not a major trend in the online recruitment services industry? A) disintermediation B) Millennials and GenX primarily use mobile devices to search for jobs C) social recruiting D) use of big data technologies in the hiring process Answer: A Difficulty: Moderate AACSB: Application of knowledge Learning Objective: 9.7: Identify current trends in the online career services industry. 80) Almost all recruiting professionals now use social networks in the recruiting process. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Learning Objective: 9.7: Identify current trends in the online career services industry. 81) Explain why online career services are so well suited to the Web. Answer: Next to travel services, job-hunting services have been one of the Internet's most successful online services because they save money for both job hunters and employers. Job resumes can be posted for free, many other career-related services can be easily accessed, and for a fee, job hunters can access lists of job openings that have been posted by companies. Online recruiting provides an efficient and cost-effective means of linking employers and job hunters and reduces the total time-to-hire. Job hunters can easily build, update, and distribute their resumes, conduct job searches, and gather information on employers at their convenience 20 and leisure. They can also take skills assessment tests, fill out personality assessment questionnaires, and access such services as personalized account management for job hunters, job search tools, employer blocking tools, organizational culture assessments, and e-mail notifications when an appropriate job is newly listed on the site. Career recruitment is an information-intense business process that the Internet can automate, thus reducing search time and costs for all parties. In addition to matching job applicants with available positions, online sites also serve the larger function of automating this informationintense business process. Difficulty: Moderate AACSB: Analytical thinking; Written and oral communication Learning Objective: 9.7: Identify current trends in the online career services industry. 82) Which of the following is not true about on-demand service firms? A) The growth of on-demand service firms is supported using online reputation systems based on peer review. B) It is not likely that on-demand service firms will totally escape government regulation. C) On-demand service firms facilitate access to resources. D) On-demand service firms are a totally new phenomenon without precedent in the history of ecommerce. Answer: D Difficulty: Moderate AACSB: Application of knowledge Learning Objective: 9.8: Understand the business models of on-demand service companies. 83) Which of the following is an on-demand service company focused on lodging? A) Uber B) Lyft C) Airbnb D) Task Rabbit Answer: C Difficulty: Easy AACSB: Application of knowledge Learning Objective: 9.8: Understand the business models of on-demand service companies. 84) All of the following are terms used to describe on-demand service companies except: A) mesh economy. B) collaborative commerce. C) we-commerce. D) omni-channel commerce. Answer: D Difficulty: Easy AACSB: Application of knowledge Learning Objective: 9.8: Understand the business models of on-demand service companies. 85) On-demand service companies collect a fee from both sellers and buyers who use the platform. Answer: TRUE 21 Difficulty: Moderate AACSB: Application of knowledge Learning Objective: 9.8: Understand the business models of on-demand service companies. 22