Ebags
MBA 638-002: Operations Management
eBags: Managing Growth
Case Study 5
Patrick Johnson, Amina Mirzohoshim, Frank Park, Raja Pattamatta, Rita Thakur
4/25/2011
Introduction: eBags, the online luggage- and travel-products store, started as a business idea by Jon Nordmark in the spring of 1998. Nordmark convinced Peter and Eliot Cobb, Frank Steed, and Andy Youngs to join his venture, using their collective industry knowledge from being top executives with Samsonite USA and American Tourister. With a personal investment of $50k from each of them to startup and $6.8M in funding early the following year from venture capitalists, such as Benchmark Capital, they were able to launch eBags.com in March of 1999. With continued venture capital investments eBags raised over $30M in funding that same year, averaging a monthly sales growth of 98% and broadening “their product offering from six to fifty-six brands. By early 2004, eBags was the largest online provider of bags and accessories…” (Schroeder, Goldstein, & Rungtusanatham, 2010) (Schroeder, Goldstein, & Rungtusanatham, 2010) (Schroeder, Goldstein, & Rungtusanatham, 2010) (Schroeder, Goldstein, & Rungtusanatham, 2010)
Business Model: eBags’ business model provided a diverse collection of products in one online retail location. Their website made it possible for customers to search for products without spending time and money on traveling to different stores and locations. eBags’ online storefront shortened their supply chain and therefore offered the opportunity for significant cost-savings. Two types of processes were incorporated into the business model: drop –ship fulfillment and private label supply chain.
In the drop-ship model, inventory was managed at the manufacturer or distributor level. eBags was serving as the intermediary for the customer. The customer placed orders on the website, and eBags electronically transmitted the order to the vendor. The vendor, in turn, shipped orders directly to the customer
eBags: Managing Growth
Case Study 5
Patrick Johnson, Amina Mirzohoshim, Frank Park, Raja Pattamatta, Rita Thakur
4/25/2011
Introduction: eBags, the online luggage- and travel-products store, started as a business idea by Jon Nordmark in the spring of 1998. Nordmark convinced Peter and Eliot Cobb, Frank Steed, and Andy Youngs to join his venture, using their collective industry knowledge from being top executives with Samsonite USA and American Tourister. With a personal investment of $50k from each of them to startup and $6.8M in funding early the following year from venture capitalists, such as Benchmark Capital, they were able to launch eBags.com in March of 1999. With continued venture capital investments eBags raised over $30M in funding that same year, averaging a monthly sales growth of 98% and broadening “their product offering from six to fifty-six brands. By early 2004, eBags was the largest online provider of bags and accessories…” (Schroeder, Goldstein, & Rungtusanatham, 2010) (Schroeder, Goldstein, & Rungtusanatham, 2010) (Schroeder, Goldstein, & Rungtusanatham, 2010) (Schroeder, Goldstein, & Rungtusanatham, 2010)
Business Model: eBags’ business model provided a diverse collection of products in one online retail location. Their website made it possible for customers to search for products without spending time and money on traveling to different stores and locations. eBags’ online storefront shortened their supply chain and therefore offered the opportunity for significant cost-savings. Two types of processes were incorporated into the business model: drop –ship fulfillment and private label supply chain.
In the drop-ship model, inventory was managed at the manufacturer or distributor level. eBags was serving as the intermediary for the customer. The customer placed orders on the website, and eBags electronically transmitted the order to the vendor. The vendor, in turn, shipped orders directly to the customer
Bibliography: Laseter, T., Rabinovich, E., & Huang, A. (2006, 28 February). The Hidden Costs of Clicks. Retrieved April 24, 2011, from Strategy + Business: http://www.strategy-business.com/article/06103?pg=0 Schroeder, R. G., Goldstein, S. M., & Rungtusanatham, M. J. (2010). Operations Management. mcGraw-Hill/Irwin.