THE CASE: AN E-RETAIL SUCCESS?  EGGHEAD.COM............................................................. 2

ANALYSIS AND RECOMMENDATIONS...................................................................................... 11

APPENDIX AND EXHIBITS............................................................................................................. 13

 

 

 

 

 

 

Cohort MBA- Class of 2001

MKT 6222: Internet Marketing

Dr. B.P.S. Murthy

 

 

Vikram R. Arora

Alexander Golov

Sarah Moores

Peter Reynolds

 

 

THE CASE: AN E-RETAIL SUCCESS?  EGGHEAD.COM

 

 

Introduction

 

Egghead.com is a leading Internet direct marketer of technology and related products targeting Small Office/ Home Office (SOHO) and Small- to Medium-sized Business (SMB) customers. They offer a wide range of products from computer hardware, peripherals and software, consumer electronics and office products, to sporting goods and vacation packages. In addition to providing competitive prices on new goods, the company offers bargains on surplus and closeout goods and services through its 'Clearance', 'After Work' and 'Auction' formats. Egghead.com provides convenient shopping aids such as technical tutorials, advanced product searching, bid/order status and order tracking, and 24/7 online customer service. They combine broad selection, low prices, and excellent service to provide an outstanding online shopping experience for businesses and consumers.

 

As Jeff Sheahan and his team (see Exhibit 1) sat in their Menlo Park office in early 2001, the wrecks of many internet retailers scattered within a few blocks of the Egghead office, they knew they had survived one major downturn; but this relief could not give way to complacency.  The battle they felt had not really begun in earnest.  Egghead was well positioned; had built up a good brand, and had shown good growth over the last few years.  But now they needed to look to the future.  As a pure play online retailer could they prove the skeptics wrong and emerge as force to be reckoned with in the next decade?

 

History

I would split this section into smaller subsections…..

 

 

Early history

 

Egghead.com began as Egghead Software in 1984 - a bricks-and-mortar storefront for mass retail of computer software and to a lesser degree, computer hardware. By the early1990s, it grew to an extensive chain of 205 stores all over the US. The company changed its name from Egghead Software to Egghead Computer and the sales of computer hardware formed 32% of its total revenues. However, since 1992, Egghead’s sales had been declining. Combined with high overheads from operating retail outlets, this decline was pushing the company into financial trouble.  On a positive note though, its Internet sales during the last quarter of 1997 increased to $11.8 million, up from $9.3 million in the comparable year-ago period.  In a somewhat revolutionary move in 1998, the CEO George Orban decided to move the company to a web only retailer.  All the retail outlets were closed, and company embarked on a new phase in its development. In the Internet Age, given the promised efficiencies and boundless scalability of direct Internet distribution of digital products, there seemed to be logic in “ditching the bricks” rather than seek some sum-greater-than-the-parts strategy of a skillful combination of clicks and mortar.

 

 

 

A dramatic shift online

 

So in 1998, Egghead Computer shut down the last of its 80 stores and moved its entire business online to http://www.egghead.com. This was history in the making. The Internet world had seen the birth of exclusive online resellers like Amazon.com and Onsale.com, but it was for the first time that a $700 million bricks and mortar business had shut its operations and moved to the Internet. The company's ambition was and is, to become "a major value-oriented on-line retail enterprise". The Egghead brand was more widely known than many of the online startups like buycomp.com and webauction.com and had the advantage perhaps of having been cultivated in the bricks-and-mortar economy, where, research indicates, it is easier to develop a strong brand than it is online.  But even so, Orban had taken a bold step.

 

Before going online, Orban added to his Internet stable by taking over two existing online resellers, Surplus Auction and Surplus Direct, paid for with 5 million shares of newly minted stock.  In the go-go dot.com environment, the issuance of shares represented a painless way to proceed, with both issuer and recipient of the shares free to make some assumptions concerning “valuation” that were somewhat free from old-economy discipline. 

 

Surplus Direct, formerly a catalog company, and Surplus Auction, a live Internet-auction service, sold refurbished, outmoded, and surplus computer equipment.  With the purchase of these, the company aimed to reduce inefficiencies, reduce losses, tap economies of scale and benefit from the combined website traffic.

 

By the mid of 1998, the three sites combined did more than $2 million in sales per week. . In its third fiscal quarter ended December 26, 1998, the company reported more than 23 million unique visits to its Web sites and revenues of $41.9 million.

 

 

Low prices and excellent customer service

 

Egghead’s traditional target market had been the 7.4 million small businesses and 18.6 million income-generating home offices in the U.S.  But the major draw online was access directly to individuals.  1998 was the year of the Internet B2C bubble, and Egghead wanted a piece of this market.

 

As with many upstarts at the time, Egghead’s early value proposition was low prices.  PC sales in particular had not yet neared saturation, and with the forces of Moore’s Law still resulting in predictable declines in hardware prices as the manufacturers ran down their experience curves, prospects looked good for continuing to benefit from even more reductions.  On the software side, high fixed costs also tended to motivate price competition.  While Egghead counted on these benefits, it knew also that it had to find other means to define its business model to ensure its long-term viability.

 With IBM ThinkPads, Kodak digital cameras, and Windows 98 upgrade software selling for 25 to 40 percent below discount catalog prices; bargain-hunters flocked to the live auctions. Registered bidders jumped from 29,000 to 168,000 at the end of June 1998. More than a dozen auctions were typically held each week. Some had generated as much as $770,000 in revenue and sold up to 1,500 copies of a single product. In July, Egghead.com boasted that total auction sales had nearly doubled in the space of one quarter — from $7 million to $13.7 million — and investors dutifully boosted the stock from $9 to $21 a share. In reality, though, loss leader auction pricing didn’t add much to Egghead.com's bottom line.

 

Egghead knew that low prices could not be a sustainable business model.  They quickly started to build their reputation as offering excellent customer service in an effort to build a differentiation that they could sustain against the competition and use to support higher prices.  When the company went online, it established rigorous practices for handling e-mail to ensure that its virtual customer service remained as personal as it was in the real world. “When we went online, we somehow needed to transfer our commitment to customer service onto the Internet," said Norman Hullinger, vice president of sales and operations for Egghead.com.1  The company realized that e-mail was the answer. "Call centers are expensive to staff and not what most customers prefer," Hullinger said.  So in addition to its call center, Egghead.com built an e-mail response team of about a dozen people and installed e-mail routing software from Brightware Inc.. The Brightware system not only routes e-mail, it also has helped Egghead build a database of customer inquiries and responses that further automated customer service.

 

By the end of 1998, Egghead’s Internet business comprised of three websites, Egghead.com surplusdirect.com, and surplusauction.com. Egghead.com offered over 40,000 products such as PC hardware, software and peripherals. A few software products were offered as electronic software downloads. To keep their inventory costs low, Egghead.com took advantage of their long-standing relationships with software vendors like Ingram and Merisel.

Through the Surplusdirect.com website they sold surplus products, excess and refurbished hardware and off-price software and peripherals. They also added sporting equipment and jewelry. By the end of the year, the site added more than 20% to Egghead.com’s overall revenue. The surplusauction.com website offered an interactive auction site for the buyers of pre-specified products where the buyers could bid online 24 hours a day for one to more than 1500 of each items. These surplus auctions initially accounted for more than 60% of Egghead.com’s sales.  By the end of the year, Egghead.com, along with its other two websites was doing more than 12,000 transactions a day!  And not only were they driving transaction volumes, they also led the industry in average transaction size for the Christmas 1999 season – a key metric for the retailing industry (see Exhibit 2).

 

 

Early marketing activity

 

In line with it’s new B2C focus, Egghead realized quickly that they needed to build a brand.  Their strategy of low prices combined with good customer service had built a reputation with a small following.  But now they needed to expand their reach.

 

They moved quickly to nail down marketing alliances with friendly portals: CNET, GeoCities, InfoBeat, theglobe.com, USA.net, and Yahoo! The CNET deal includes click-through Egghead.com banners alongside relevant editorial content, while Yahoo! places them on computer-related search categories. Where, when, and how often click-throughs are converted to customers — down to specific times of day — was being watched closely. “The ability to measure online is unlimited," points out Egghead.com spokesperson John Hough. "You can track how many visitors become customers to the thousandth of a percentile. That's a major change in how business is conducted."2

 

 

Growth through acquisition

 

Egghead also began to look around for further possible acquisition targets to enhance their brand, product offering, customer base etc.  In July 1999 Egghead decided to merge with Onsale, Inc.  Onsale, Inc., founded by well-known Silicon Valley player Jerry Kaplan (see Exhibit 1) in May 1995, was the pioneer of online auctions. Initially, the company specialized in selling excess merchandise, such as refurbished and closeout products. By January 1999, Onsale had successfully entered the new technology product market with the launch of its ‘atCost’ program. With this merger both companies expected to be able to boost traffic, eliminate duplicate expenses and ultimately improve gross margins. Estimates were for savings of $30m on he combined bottom line.  Research conducted prior to the merger showed that Egghead had one of the most recognized brands on the Internet, so the combined company chose to operate under the strong Egghead brand name.

 

The "New" Egghead.com featured:

·        Four "Superstores" offering the latest in technology and office products

·        "Smart Deals" section offering closeout, refurbished, and end-of-life deals

·        Three "Onsale auctions", for anything ranging from vacation packages through excess personal computers (see Exhibit 3).

 

After the merger, Jeffrey Sheahan took over from Orban as President and CEO.  Sheahan had previously been COO of Onsale.

 

 

 

 

 

A shift back to their core

 

After the merger with Onsale.com in 1999, and the revamping of the site, it was time for Egghead to focus on he financial side of its operations.  Surprisingly, despite their desire to tap into the B2C market, almost 63% of sales were attributable to business customers.  It became clear that if the company wanted to achieve its goal of reaching profitability this would have to be the focus. Business customers are key to the success of online e-tailers because they tend to shop more frequently and spend more money than traditional consumers. By focusing on these high value business customers, Egghead.com believed it would be able to more efficiently and quickly amortize the cost of customer acquisition. So back they switched to their core small business target.  And their focus became providing a full range of solutions for their small business customers.  Over the course of the next year they made several enhancements and product additions to their web site:

 

·        On June 19, 2000, Egghead.com announced the opening of the new “Office Super Store”- which featured everything from office machines, furniture to paper clips.  Today Egghead.com features more than 70,000 products on its website. It categorizes its offerings into Hardware, Software, Networking, Accessories, Office, Electronics, Clearance, After-work, and Auctions sections. It has also diversified into consumer electronics and “after-work” offerings like sports goods, vacation and travel packages etc.

·        On June 28, 2000 Egghead announced the offering of leasing options and software licensing services to its business and government customers.  In addition, it also provided them with online learning and training workshops on over 500 web based tutorials.

·        In September 2000, Egghead - again - completely revamped its website, this time clearly focusing on the better-know Egghead.com brand name. The "New" was dropped, as was the mentioning of the 'Onsale' auctions (see Exhibit 4).

 

Alongside these product enhancements, Egghead continued to push for ward on the customer service elements of its business.  It changed it’s payment terms to allow business customer to open an ‘account’ – i.e. buy on credit (30 day terms) rather than cash up front with a credit card.  Although this was an essential step to secure business customers, it increased Egghead’s cash to cash cycle, a key issue for a rapidly growing company. In addition, Egghead.com also added an online reference desk, where users could get referential and technical information, quick guides, how-to’s and FAQs on various products. All this enhanced value and the online experience of the website surfer, building up goodwill and encouraging purchases. 

 

 

An intensely competitive environment

 

Egghead’s business is characterized by a target market focus (SMEs) rather than a specific sector focus.  Although they did begin in technology (hardware and software), they are starting to branch out to other areas.  In addition they offer a number of purchase options – retail or auction.  For this reason they face threats to segments of their business from a number of players.  “There are a lot of companies vying for the same space," points out Charles Smulders, a senior industry analyst at San Jose, Calif.-based Dataquest.  Egghead’s primary competition comes from four directions:

Other e-reatilers

 

 

 

 

Auction sites

 

·        Ebay.com is the largest Person2Person auction site on the web. Founded in September 1995, today, the eBay community includes 18.9 million registered users, and is the number one most popular shopping site on the Internet when measured by total user minutes according to the Media Metrix September 2000 web report.3. In 2000, the eBay community transacted over $5 billion in annualized gross merchandise sales (value of goods traded on the eBay site). eBay enables trade on a local, national and international basis. It features a variety of specialty sites, categories and services that aim to provide users with the necessary tools for efficient online trading.

·         Founded in the December of 1997, ubid.com claims more than 2 million registered users, 24-hour live action bidding daily and more than 10,000 brand name products. uBid has experienced exceptional growth since its inception, generating revenue of $48.2 million in its first full year of operations and revenue of $204.9 million for the year ending December 1999. In April 2000, uBid was acquired by CMGI, Inc., the world's largest and most diversified network of Internet companies, in a stock-for-stock transaction. Since CMGI's acquisition of uBid, the Company has entered into agreements with several CMGI network companies, leading to new sources of unique merchandise, as well as powerful new distribution outlets for the auction technology platform.  Ubid.com has also designed a Vendor Exchange site to aid smaller suppliers that would typically not have the scale and technology to create and operate their own auction sites.

·        On March 30, 1999, the world’s largest e-tailer Amazon.com announced the launch of its online auction site, Amazon! Auctions.  The site, which includes person-to-person and small-merchant auctions, includes thousands of items in 800 categories for auction by more than 100 merchants. Amazon's auction service could be as big as eBay's current business by the end of the year, Merrill Lynch analyst Henry Blodget said. eBay generated $47.35 million in sales last year, compared with $610 million for Amazon.4. With a current subscriber base of 17 million, Amazon.com is undoubtedly--one of the largest online auctioneers on the web.

 

Traditional PC manufacturers

 

For example, Dell, IBM and Compaq who have moved away from the traditional catalogue/brick and mortar model of business to selling on the online world. These corporations typically have large cash reserves, stronger brand names and greater customer loyalty than the purely electronic merchants.

 

 

New Emerging software ASPs businesses

 

Particularly on the software side, this new model poses a threat to Egghead over the longer term. These companies allow companies to outsource software and services without having to purchase products outright. For example Citrix Systems, Inc provides server hosting software like Metaframe, Winframe and Videoframe, management software like Citrix extranet and Citrix Resource Management Software and portal products like nFuse. Another company, Eledger (www.eledger.com) provides a state of the art online accounting and management software for small businesses.  Obviously as companies start to lease software in this way, the market for a retailer declines.  In his interview with zdnet.com in August 2000, Jeff Sheahan acknowledged the emerging threat posed by the Application Service Providers or ASPs, who sell pay-per-use software over the Internet.

 

 

And this may not be the end.  For new entrants, it has never been easier to start up a business and emerge as a major competitor as it is today, over the Internet. The costs of setting up a website are considerably less than setting up a chain of stores. “Floor space” over the Internet is no longer measured in square-feet, but in megabytes, which is a lot cheaper and easier to obtain. In the last two years, many smaller companies like Axiontech, PcBay and Unicom6 have made their presence visible over the World Wide Web. These firms have are characterized by lower operating costs and lower inventory costs. Many of them resort to severe price competition and are loss leaders in the beginning. These are “price breakers” who alter the industry price mechanism – perhaps even threaten to destroy it in the short term.  Although difficult to predict with any accuracy, margins are undoubtedly going to be pushed down.

 

 

And an increasingly discerning customer

 

And as the competition fights for market share, the customers become more powerful (and more knowledgeable).  Around 70% of Egghead’s customers are male between the ages of 25 and 54. They are professionals having a mean income of approximately $79,000. 80% of their purchases are for personal use or gifts. They spend an estimated average of $800 dollars a year on such purchases, which on the higher side compared with the industry standard of $250 to $1200 a year7.  Most are experiences web users and well aware of the plethora of potential retailers they can go to online.

 

To try and build loyalty amongst a core user base, Egghead.com has begun using Informative’s relationship optimization solutions to better service its customers, and to optimize the effectiveness of its website. Egghead uses sophisticated software to understand customer demographics, and to obtain input from website visitors on product offerings, website usability and satisfaction. Informative’s products collect business intelligence across the web, e-mail and other channels. The software enables Egghead to understand customer perceptions when they first enter the website, and what they would like to see on the site. Understanding these elements helps Egghead provide their customers with content that is tailored to their needs and interests — a critical factor for successfully selling on the web. As a result, listening to customers has enabled Egghead to produce a more competitive website.

 

Steven Weinstein, a research analyst at Pacific Crest Securities, believes that customer relationships will be key in the future.  He predicts that within 12 months, web retailers will have to be proficient at one-to-one marketing. "Everyone is still learning how to do this, and no one is good yet, except maybe Amazon.com, who picked up on it right away."

 

 

Supply chain issues

 

In addition to fierce competition and more powerful customers, Egghead faces issues throughout its supply chain.  As a retailer, Egghead relies on vendors to supply them with merchandise. For the year ended December 31, 1999, purchases from Tech Data, a distributor of computers and related products, accounted for approximately 24% of their aggregate merchandise purchases. Egghead has no long-term contracts or arrangements with vendors that guarantee the availability of merchandise. They may not be able to obtain sufficient quality and quantities of merchandise at competitive prices. There’s no assurance that the current vendors will continue to supply merchandise or that they will be able to establish new vendor relationships that will ensure that merchandise will be available.

 

Another major problem faced by the online merchants is that of customer service and sales returns. Egghead had built a large part of its reputation on customer service, but was now facing problems with customer wanting to return items.  Since, Egghead relies on its suppliers for the shipment of the products to the customers, it has limited control over the shipping/handling process.  At times, they have to accept returns from the customers for which they receive no reimbursement from the suppliers. 

 

 

But so far financials look strong

 

Egghead has posted good financial results over the past few year (see Exhibit 5).  Online revenue increased $150.7 million, or 42.7%, for the year ended 1999 compared with 1998, and $206.8 million, or 141.9%, for the year ended 1998 compared with 1997.   For the year ended December 31, 1999, revenue from the online superstores constituted 32% of total revenue, and revenue from auction and smart deal web pages constituted 66% of the total revenue. For the comparable period in 1998, revenue from superstores and auction and smart deal web pages were 5% and 94%, respectively, of the total revenue.

 

Sales and marketing expenses as a percentage of revenue were 19.8%, 17.4% and 17.0% for the years ended 1999, 1998 and 1997, respectively. The increase from 1998 to 1999 was primarily attributable to increased spending on radio, print and online marketing and advertising programs, including marketing of Onsale - atCost site. Additionally, they expanded our customer service department during 1999. Sales and marketing expense in 1999 and 1998 primarily reflect online advertising and sales and marketing personnel related to the online business. Though such expenses have a negative impact on the bottom line performance in the short run, they were (and will continue to be) crucial to building the Egghead brand.

 

Profitability declined from 1998 to 2000, mainly due to heavy competition, and price erosion. But Egghead is still projected to break even by the end of 20018. According to ActivMedia Research, majority of the online businesses, in both B2B and B2C segments, are expected to break even and head in the black by the end of 2000 (see Exhibit 6).  Gross margin for online revenue was 4.6%, 3.0% and 8.6%, respectively, for 2000, 1999 and 1998.

 

As of 31st December 2000, Egghead’s cash balance is at $31 million.  With an average annual run rate of $74m in operating cash flow, this is unlikely to be sufficient to last them through to profitability later this year.  However, they have secured special credit line financing with IBM, who has agreed to provide Egghead.com with working capital for the next 12 months. In addition, in February 2001, they have also entered into an inventory financing agreement with IBM, who will provide an additional $20 million credit financing for purchases of inventory. The agreement expires in February 2002, and on current projections, it looks to give them sufficient short-term funds.

 

 

Looking to the future

 

Today, Egghead.com is one of the few successful e-tailers - with over 2000 auctions a day, 70,000 product offerings, 3.8 million registered users, 2 million unique monthly visits.  They have high average purchase rating (see Exhibit 2), a reach of 1.8%, 75% repeat buyers and  $500 million in annual sales.  Today Egghead.com is the 4th largest online retailer, and has been rated as the no. 2 tech shopping sites by inter@ctive week9.

 

Yet as Sheahan considered the company’s future, he knew the he still faced a difficult challenge.  He wondered what issues he should focus on.  The intensity of competition was only likely to get worse as competitors fought for market share.  Against this backdrop he still had to attract new customers, and couldn’t foresee a reduction in marketing costs any time soon.  The Street would be looking for a profit very soon.  Their strategy had to be aggressive, and he had to act quickly.

 

 

 

 

Footnotes:

 

1.      Source, www.internetweek.com , Egghead.com: E-Mail Handles Many Queries, By RICHARD KARPINSKI

2.      Source, http://www.business2.com/, Egghead.com: Not Over, Not Easy. James Ryan 09/01/1998

3.      Source, www.ebay.com

4.      Source, news.cnet.com, Amazon auction launch boosts shares By Kora McNaughton, March 30, 1999.

5.      For year ended – 2000

6.      Smaller companies have sales < 20 million)

7.      Neilsen, 6/00, PC Data, 5/00

8.      “The time is right”, 8/2/00 Interview with Jeff Sheahan, http://www.on24.com/

9.      Inter@ctive week, June 16, 1999

 

 

 

ANALYSIS AND RECOMMENDATIONS

 

Unfortunately the environment for Egghead is likely to get tougher in the short term.  The industry is fragmented, and despite some shakeout over the last few months, there are still a number of players vying for the top spots.  Some have deep pockets (Dell, Compaq), some have strong internet brands (Amazon, and Buy.com), and some of the newer companies perhaps bring innovative new models that threaten the establishment.

 

Using Porter’s model to analyze the industry they are in, we can highlight the challenges they face:

 

 

We believe Egghead are in a good position to be a leader in their industry.  However, their success is by no means a guarantee.  They have survived one major downturn, but the shakeout, particularly in the retail sector is likely to continue.  In light of their current situation, we recommend Egghead focus in three areas:

 

1.      Focus on costs that are controllable:

We agree that in the near term, Egghead is going to have to continue to spend heavily on marketing.  However, they should focus on streamlining other areas:

·        Ensure overhead reductions are realized. As a result of the merger with Onsale, Egghead claims to be realizing substantial savings by eliminating duplicated functions, combining departments, and unifying their promotional efforts. They anticipate saving about $30 million this year from what the pre-merger companies had separately projected.

·        Review supply chain management.  Egghead needs to leverage its position with its suppliers.  It should focus on developing relationships with partners – looking for longer-term relationships, and more guarantees on product availability and pricing.

 

2.      Continue to build on customer service angle to try and limit price erosion:

·        Verifiably Fair Pricing. Egghead should ensure that the Superstores, Auction and Smart Deals web pages provide customers with verifiably fair pricing. The auction allows customers to set the prices they are willing to pay, while the superstore prices can be compared with the same products sold by our competitors. Though, Egghead should avoid selling at a loss, it should ensure that their prices are within an acceptable range, since high prices will deter traffic away from their website.

·        Convenience. Online shopping brings retail shopping directly into customers’ homes and offices. Customers do not need to travel to fixed locations during limited hours to purchase items. The web sites enable customers to browse merchandise, place bids and order merchandise 24 hours a day, 7 days a week, in an un-intimidating atmosphere and without the pressure of salespeople or auctioneers. Egghead should focus on making this experience as simple and pleasant as possible. Close attention should be paid to site aesthetics and ease of navigation.

 

3        Leverage large base of business customers and increase niche ‘ownership’:

·        Enter new product categories. With a focus on the small- to medium-sized business and home office customer, Egghead should try to expand their offerings beyond technology products into related higher-margin categories and services of interest to their audience.

·        Improve customers’ experience.  Egghead should see every customer contact as an opportunity to enhance and extend their relationship. It is currently planning numerous improvements in the pre- and post-sales process to encourage our customers to visit frequently, provide them with useful information about topics of interest, help them quickly locate the products and services they need, process their orders efficiently, and service them after the sale.

 

 

APPENDIX AND EXHIBITS

 

Exhibit 1: Profile of the Founders

 

Jeff Sheahan is now president and CEO of Egghead.com, Inc. Jerry Kaplan, founder and former CEO of Onsale, Inc., and George Orban, formerly CEO of Egghead.com, serves as active Co-Chairmen of the board for Egghead.com, Inc.

 

J. F. Sheahan

President and Chief Executive Officer

Jeffrey F. Sheahan is president and chief executive officer of Egghead.com, Inc. Previously, Mr. Sheahan was president and chief operating officer of the company. Prior to the merger between Onsale, Inc. and Egghead.com, Inc., Mr. Sheahan was chief operating officer of Onsale, Inc. Mr. Sheahan has more than 14 years of management experience in high-growth, computer-related companies. Mr. Sheahan plays a leading role in establishing and building the company’s operations as it continues to expand the franchise.

Before joining Onsale in 1998, Mr. Sheahan served as president for MicroWarehouse Europe, where he had sole P&L responsibility for the leading European direct-marketer of a broad range of microcomputer products. Mr. Sheahan established Microwarehouse’s European presence as general manager, growing annual sales to over $500 million in less than four years, with more than 1100 employees in eight countries. Prior to MicroWarehouse, Mr. Sheahan served as a sales manager for Inmac Corporation, where he managed all sales operations for the eastern region. Mr. Sheahan received a bachelor's degree in political science and economics from the University of Massachusetts

 

J. Kaplan

Jerry Kaplan was the co-founder of Onsale, an online software site. He became CEO of Egghead.com when the two companies merged in 1999. Jerry is widely known in the computer industry as an entrepreneur and technical innovator. Onsale was one of the earliest successful auction sites. His pen computing start-up, Go Corp., went under in 1994. Kaplan holds a BA from the University of Chicago and a PhD from the University of Pennsylvania.

 

G. Orban

George Orban served as chief executive officer of Egghead.com, Inc. from January 1997 to November 1999. During his tenure as CEO, Mr. Orban has led the company's unprecedented transformation from a national bricks and mortar retail chain to one of the leading Internet commerce Web Sites with annual revenues of $700 million. This work has been recognized by the Harvard Graduate School of Business, in a case study published in March 1999; and by the MIT Sloan School of Management, which selected Egghead.com for its prestigious Web Transformation Award in May 1999. Prior to becoming a private investor and entrepreneur Mr. Orban was a venture capitalist with the Sprout Group of Donaldson, Lufkin & Jenrette. As a private investor and entrepreneur, he has been actively involved in the creation and development or turnaround of several retail companies in various sectors.

Mr. Orban is a graduate of McGill University B.Sc. (Chemistry) 1966; L'Institut d'Etudes Politiques, Universite de Paris, Diplome 1968; Columbia University, MBA 1979.

 

 

Exhibit 2: December 1999- Analysis of the Holiday Season

 

Rank                                               Site                             Average Purchase Price

 

1.                          AMAZON                 $36.00
2.                         BUY.COM                 $64.63
3.                    BARNESANDNOBLE.COM           $22.16
4.                          CD NOW                 $25.91
5.                          ETOYS                  $60.31
6.                         REEL.COM                $19.53
7.                       EGGHEAD.COM              $144.51
8.                        KBKIDS.COM               $52.32
9.                         MORE.COM                 $7.42
10.                     DRUGSTORE.COM              $18.65

 

Source: www.flooz.com, http://www.flooz.com/homesub/inthenews/010600.shtml

Note: The Average Purchase Price for Egghead is highest.

 

 

 

 

Exhibit 2b: Dec 2000

Ernst & Young's post-holiday survey reveals the following top five shopping sites, by average dollar amount spent:

·  Best Buy - $283

·  Egghead.com - $217

·  1800flowers.com - $173

·  Disney - $172

·  Wal-Mart - $167

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit 3: A screenshot of the New Egghead.com website (August 2000)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit 4: A screenshot of the latest Egghead.com website (September 2000)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit 5-i

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit 5-ii

 

 

 

 

 

 

Exhibit 5-iii

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit 5-iv

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit 6

 

 

 

The future of B2C looks very promising, with 69% websites projected towards profitability by the end of 2000.

Egghead.com aims at breaking into the black by the end of 2001.

Source, ActivMedia Research, 2000.