Sears Business Model

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SEARS BUSINESS MODEL People involved:  Before mid 20’s: mainly focused on farmers in countryside who were largely isolated from the urban markets.  After Mid 20’s: focus shifted to urban population who acquired wealth and migrated from low income class to middle class; the farmers who were enabled with increased mobility due to automobiles. Motivation:  Sears, Roebuck and company: an untapped segment of population with specific needs which were till then not addressed.  Customers: 1) Farmers: • Convenience – wide range of quality products could be ordered and obtained from a customized catalogue at a lower price. • Cost effective- eliminated the cost of travelling to the city. 2) Urban middle class: wide variety of value for money products under one roof in retail outlets.  Company: • Elimination of mediators led to reasonable pricing and also increased profits. • Goodwill, prestige: as the provider of solution to a serious need of large number of people at a reasonable cost. Assumptions:  Existence of adequate number of farmers whose needs remained unaddressed till then.  Absence of organized retail supply chain in urban areas till mid 1920’s.  Emergence of middle class who were eager to buy high end products, but at a reasonable price. Revenue model:  Profits from volume sales of products at retail outlets, which were produced at their own manufacturing units.  Profits from huge sales in the untapped rural markets. Cost model:  Delivery charges payable to postal department for mail-order.  Cost of raw materials for manufacturing.  Expenses incurred for hiring employees and maintaining retail outlets.  Huge costs are involved in the location, construction and arrangement of the retail stores.  Transportation cost for transporting goods from factory to retail

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