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Future of ventes privées
Private sales go through the tough competition period. As number of sites and products turnover increases, everyone adapts the initial concept to the current market response.
1. Product range tends to diversify – good way not to be dependent on one category’s sales.
Luxury sales are opening the door to more common brands.
2. To protect the concept of privacy some sites declare to stop the subscription. I think it would be interesting to monitor if they do.
3. High competition pushes the companies to create more and more sophisticated presentation, editorial and animation components. “Event” model and animation takes even greater importance than ever.
4. To gain new customer French “private sellers” launch their expansion to other European countries. A lot of spots have been already created, but the crucial point – logistic and CRM services will face a lot of work to set up an appropriate network.

More explanation for Vente Privee development is here, in the interview of the company CEO - Jacques-Antoine Granjon for Journal du Net:

http://www.journaldunet.com/itws/it-granjon-lecteurs.shtml

FREEMIUMS

The idea of FREMIUM BUSINESS MODELS is to provide basic services for free and charge for advanced or high quality options. The freemium business model was first articulated by venture capitalist Fred Wilson in 2006 (Source: wikipedia.org)

http://en.wikipedia.org/wiki/Freeemium

Here are the comments of Fred Wilson on freemium business model:

http://avc.blogs.com/a_vc/2006/03/my_favorite_bus.html

The conception is mainly applied for online services, as entertainment, web services and applications, publishing and editorial information etc.

Here are the reflections on free music business model:
http://avc.blog.com/a_vc/2007/06/the_free_music_.html

Another option for free services:
Some other companies could be mentioned in discussion of Freemiums: thier business models envisage free services but other revenue sources as payment for product.
Google provides incredibly powerful search engine for free and get paid by advertisers.
Flickr - huge photos’ data base providing photos for free during one day.

Companies using FREMIUM business model:
Skype is the most well known example of freemium: basic computers interconnection is free, other types of communication are charged. (www.skype.com)
SixApart provides with its basic blogging LiveJournal platform for free and charge for premium version an annual subscription. (www.livejournal.com)
Last.fm - free internet radio and music community portal; premium acounts are charged. (www.last.fm)
Nuvvo – branch of boiling and heating systems company, established e-learning courses for their products: up to 10 pupils and 25 mbytes are free, then – different charge options.
Stardoll – a digital doll creator and on line community for pre-teens;
MySQL – open source database soft wear;
Great number of research and editorial sites provides basic information and articles for free and detailed investigations and reports for subscription fees.
Beautiful examples are Mc Kinsey (www.mckinsey.com) and Business week review (www.businessweek.com).

Freemium advantages:
- Business model allows easily test and validate a product or service;
- Easy to introduce a product, once it has taken its niche, it is difficult to displace it;
- Encourages rapid adoption of a product or services for hesitating clients;
- At free basic products - no competition in pricing policies

Freemium disadvantages:
- The goal to convert a user from free user to paid subscriptions is hard to achieve;
- Impossible to move free features away, users will never accept that;
- Free and charged services should be balanced; clearly identify revenue sources to make profits

Easy Group miracle

The EasyGroup, founded in 1998, is the holding company controlling the "easy" ventures; it is privately owned by Stelios Haji-Ioannou. The "easy" format is to take away the frills in something to make it cheaper overall, and use the yield management system of supply and demand; so known as discounters.

Some EasyGroup subsidiaries have been more successful than others; the most actually successful division is EasyJet ; there are some less well-doing, that have been losing during the last several years such as EasyInternetcafe or Easycar.com.


1.Easy groups try to minimize costs for their customers cutting off all the supplementary services and minimizing a service package.
Here is the explanation of EasyJet policies which is cloned and adapted for other Easy groups:
http://www.easyjet.com/FR/La/Dossier/infopack_companyoverview.html

2.Targeted customers – modest price categories who could sacrifice the comfort or usual service package for the cheapest offer or accessibility.
3.Most part of reservations and services access is provided through the internet that allows avoiding the heaviness of distribution chains, reduces costs and increase customer flexibility. A lot of activities being put into the internet make known e-management profits.
Here is the example of EasyJet costs’ reduction management and considerable service flexibility for a customer:
http://www.easyjet.com/FR/La/Dossier/infopack_internet.html

4.Some services being too expensive for some clients groups are now accessible for lower price but for modest service package (as for example cruise line for young and middle aged groups, traditionally considered as vacations for seniors).
5.Strategic partnership could be very promising as Easy group implementations is well known for their limits of reasonable charging as though attract the consumers for cheap prices.
6.Yield management could offer really cutting off prices in low demand period. Flexible pricing can compensate the expenses by increasing rates in high demand period as is not evidently realized by a client.
7.Strong orientation for promoting low prices has created a strong brand, recognized by customers worldwide.
8.The business model seems sustainable as it focused to adapt sales to consumer behavior finding the possibilities for very low prices. Nevertheless a lot of Easy subsidiaries used to be not profitable or nowadays make modest revenues.
9.As to the business model growth, Easy ventures spread all over the Europe and the USA in franchisees, the form mostly used for Easy product extension.
10.A lot of business thinking introduction in Stelios’s ventures become standard and world widely used for example yield management approach (used almost everywhere in airline companies).


Yield management conception

It is defined as the process of improving corporate revenue through the implementation of strategic pricing and inventory control. The approach was elaborated in 80s in the USA by Delta Airlines and nowadays is used worldwide. Revenue management is also a widely used term for unit price optimisation according to previous sales and forecasts.

The approach is applicable for services and faces the following business peculiarities:
1.Nonflexible product inventory
2.No possibility to stock the products
3.Based on previous sales, the capacity to forecast consumer behavior and as a result - consumption.
The conception is widely used by Easygroups in its subsidiaries.
Marketing advantage of the yield management
The yield approach favors easy adaptation to the product life cycle and other marketing strategies. Flexible schemas of services rates allow to optimize easily pricing during the product life cycle, change a pricing strategy under pressure of competitors, introduce a new product with entering low price to create a consumer awareness etc.

EasyInternetCafe

Let’s have a look at EasyInternetCafe, chain of cybercafés in Europe and United States. The company was founded in 1999 in London and was later followed by several cyber cafes in New York. Originally, the EasyInternetCafes were called EasyEverything, to reflect the fact that just about everything can be found on the Internet. The name was changed EasyInternetCafe in October, 2001. Easy Internet cafe was the first online business for Stelios Haji-Ioannou.

The EasyInternetCafes opene the biggest Internet cafe in the world in New York City’s Times Square (opened in November 2000), originally with 850 PCs (it now has 648).
As is the case with other Easy group companies, EasyInternetCafe aims to deliver the best value for money services. The stores are built and operated on the principle of ‘economics of scale’: most stores are open 24 hours a day, 7 days a week, and each has an average of 350 PC’s:
http://www.easyeverything.com/mission/index.html
Even thought the cafes are ideally located (Times Square, Manhattan, NYC, for example), the rates at the cafes are very competitive and the minimum purchase may be as low as $0.50.

The EasyInternetCafes are run by individual franchisees. In fact, EasyInternetCafe is today one of the most important Internet cafe franchises in the world.
http://www.easyeverything.com/hosting/index.html

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The EasyInternetCafes were the subject of yield management approach as it answers classical criteria for that sort of services:
Cafes are large, but their capacity is nevertheless limited; the Internet services are highly perishable product, once an access hour is over, there is no possibility to regain it and put in inventory or resell it.
From the other hand there is a possibility to forecast the consumer behavior, as demand differs by time of day, day of week, but also across other time and season.
Fixed costs are stable, no matter how many persons are there in a café, the bandwidth is the same.
The chain offered a dynamically priced product, which was a breakthrough in customer service management: as the occupancy (the number of customers) in the store increases, so does the rate per hour they pay.
From the other hand that could provoke some confusion from a customer understanding how much he will pay: prices are flexible while the access is provided by days:
http://www.easyeverything.com/offer/index.html
In addition, lowest prices and franchisee management could be often a source of true neglecting the clients:
http://www.easyinternetcafe.com/forum/viewtopic.php?t=14
Meanwhile, it was reported that a very high percentage of customers thought that Easy cafes represent good or excellent value for money.
Financial issues
Nevertheless, despite the huge amount of cyber points, venture is lost an estimated USD 150 millions in the years 2000- 2003.
The analysts measured that a customer would not go out for internet purposes only, so that pushed the management to create partnerships with fast food outlets.
According to the FT, the company leased expensive freehold property.
The management is blamed as for operational faults, as the cafes were too large - economies of scale don't materialize if they are half empty; company purchased sophisticated and expensive information technology; staff overheads were excessive. By mid 2001, with cash running out and the original partners like HP being not prepared to advance further funds, immediate action was necessary:
•EIC issued 1.5bn £1 shares at a 1p (£0.01) each. This immediately devalued the holdings of the original shareholders to almost nothing. Many employee shareholders were badly affected.
•head office staff were cut from 60 to 20 and store staff by 75%.
•excess space at front of stores was sub-let.
•unprofitable stores were closed.
•a franchising plan is being developed.
The future will reveal whether the above actions are sufficient.
CyberFuture
Some points are to revise:
-there are more and more people have Internet access at home, even more - free points at their work or study places; we could expect the expansion of internet access by mobiles or affordable options of satellite access;
-targeted clients should be more attentively defined and so café’ locations could be changed;
-how the idea of internet access could be combined with other services or attractions – searching for other strategic partnerships;
-revise the customer perception of dynamic pricing? Do they accept it or they find it irritable? Do they understand that a cafe is uses dynamic pricing or are they confused at paying a different price on each visit?
-how does its pricing compares to the numerous flat rate schemes of unlimited access that becomes evidently even cheaper than any hours access?

Musicovery earnings

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