Analyze Case Study II-5: “The CliptomaniaTM Web Store” (on pp. 308-320 in the textbook).MBA 5401, Management Information Systems 3
Discuss the strategic issues faced by the company in launching and developing their e-business venture.
Provide your recommendations and analysis.
Summarize your findings in a two-page paper using proper APA formatting
The Cliptomania TM Web Store at a competitive price with outstanding customer service. They have worked diligently to provide quality, honesty, and friendliness through the Kleptomania Web site. For example, Kleptomania has a very liberal return or exchange policy that allows customers to return or exchange anytime within 30 days for any reason without question. Less than one percent of their customers return any items. First established as a Yahoo! store in November of1999, Kleptomania has had spectacular growth in sales during a very difficult period for retailing. Although it sells only clip-on earrings, by June 2003 Kleptomania was the fifth largest jewelry store on Yahoo! in terms of gross sales. Yahoo! store customers are encouraged to rate their satisfaction (or lack thereof) with their experience with the store. If they choose to rate the store, in two weeks (by which time they should have received their purchases) they are sent an e-mail pointing to an online rating form to complete. The ratings are on the following scale: Excellent Better than I expected. Tell everyone thatCliptomania is a great store. Good everything went just fine. OK There were a few problems, but I would probably still order from Kleptomania again. Bad There were real problems. I would be reluctant to order from Kleptomania again. Awful I had such a bad experience that I want toward everyone about Cliptomania.Although the default rating (already checked) is good, an amazing 81 percent of Kleptomania’s ratings have been Excellent! Ninety-eight percent of Kleptomania’s ratings have been either Excellent or Good, so Cliptomaniaquickly earned a five-star Yahoo! rating for service. In addition to a numerical rating, the rating form provides space for customers to submit specific comments that are available to the store through a database.Cliptomania has received a great deal of effusive praise such as the following: I am very pleased and satisfied with the service I received from Kleptomania. The customer service representative was polite, helpful, and patient with me being a new customer ordering with a credit card.Cliptomania, LLC, a limited liability corporation, sells cliponearrings on the Internet at www.cliptomania.com.Cliptomania is owned and operated by the Santo family—father Jim, mother Candy, and daughter Christy. Its businesses conducted from the lower level of the Santo home in Indiana, but it sells non pierced earrings throughout the United States, Canada, Ireland, Australia, and New Zealand. Most people who wear earrings have pierced ears, so stores offer a limited assortment of non-pierced earrings. Those who want clip-ons have a very difficult time finding appealing choices. Kleptomania sells nothing but non pierced earrings, and it offers its customers a choice of hundreds of different styles of clip-ons.Although the percentage of people who want clip-ons is small, the total number of potential customers available toCliptomania on the Web is huge. The Santos have found an underserved market niche. According to Candy: A lot of our buyers are first-time buyers on the Internet, and some of them are older women. But you would be surprised how many teens and young twenties buy because for one reason or another they have had trouble with pierced ears. There are young mothers whose babies ripped the earrings out of their ears and their ears cannot be pierced again. And there are people like me who have problems with scarring forming keloids and don’t want any unnecessary scars. There are people for whom piercing their ears is against their religious beliefs. Some women are so thrilled to find us—they will tell me that they have this problem or that problem and ask which of the earrings will work best for them. Because there are several different types of clip mechanisms, I can often help them out. Our customers are pretty evenly distributed by age from pre-teens to the elderly. We had not anticipated it, but we estimate that we get some 5 percent of our sales from the cross-dresser and transgender population. The Santos want Kleptomania to become the first name someone thinks of when looking for non-pierced earrings. They concentrate on providing a quality product Copyright © 2010 by E. W. Martin. This updated case replaces an earlier version © 2007.Case Study II-5 • The Kleptomania TM Web Store 309The service was superb! I am also very pleased with the earrings. They are light, comfortable, and no pinching of my ears. And the cost you cannot beat. I am so thrilled with this. I plan on ordering more earrings from them, and have told several of my friends about this Web site. It is hard to find good quality clips, and I found just what I was looking for, and more. Working with the customer service representative was just like talking to a friend. I appreciated that.HistoryIn the mid-1990s, Jim and Candy Santo were living in New Jersey near New York City. Candy was the development director for a large nonprofit organization that provided abroad continuum of care for the homeless, and before that she had been executive director of a crisis line. Jim had along-time career in insurance sales that he still continues. According to Jim: In 1998 I went out to buy earrings for an anniversary present for Candy, and I could not find a good selection of nice clip-on earrings anywhere. I looked everywhere I could think of in the New York metropolitan area. I could find plenty of earrings for pierced ears, but it was clear that all the stores had decided that they could not sell enough clip-ons to justify carrying an adequate stock in their stores. I knew that there must be millions of people in the world who wanted clip-ons and could not find what they wanted, so this appeared to be a great opportunity to sell them on the Internet. This intrigued me, but I knew little about the Internet or jewelry so I started staying up at night and working weekends doing research on jewelry and how to sell via the Internet. After 13 months of research I concluded that the Internet was the ideal medium for this type of business. Earrings had a high markup, you could get started with little capital, and the Internet was the way to access the widely distributed market for clip-on earrings. The Santos decided to try to sell clip-ons on the Web, and Candy came up with the name Kleptomania for their new Web store. They decided that if the URL Cliptomania.comwas available and the name Kleptomania had not been registered as a corporate name, they would go forward with the endeavor. They employed a patent and trademark attorney who checked and found that the corporate name appeared to be available. And they were able to purchase the URL Cliptomania.com from Network Solutions, so they decided to go ahead. On Thanksgiving Day, 1999, traditionally the beginning of the Christmas holiday sales season in the United States, they went live with the Kleptomania store on the Web, operating out of one small room of their home in New Jersey. Their total capital investment was $10, 000, which came from their savings. Although Jim had hopes that Kleptomania would grow, they expected it to be a sideline activity that they would take care of in their spare time while continuing their regular jobs. Setting up the Web Store Neither Jim nor Candy had any expertise in the creation of Web site, so Jim had devoted a lot of time and effort to determining how they would go about setting up theCliptomania Web site. Jim found that one way would be to contract with an Internet service provider (ISP) for the computer resources required, purchase several software pa