MobShop

Key Problems:

Chicken and Egg Problem: Suppliers are not willing to give aggressive pricing until you can show
there is the demand there. Buyers will not come until they see there is a good pricing scheme and a
value proposition for them.

Competition coming from other online merchants: price competition on the Internet has become fierce
and many companies have used setting low prices as a customer acquisition strategy.

Background:

MobShop was among the first innovators in web-based online group- buying companies. The
website was named Accompany.com and was founded in October 1998 by three co-founders
whose names are Jim Rose, Salim Teja and Jonathan Ehrlich (JIM) launched its initial group-
buying website in March 1999. There were several investors including Visa International and
GE Capital and many more. This San Francisco, California-based aimed to provide group-
buying services in United States and changed its name into Mobshop.com in March 2000.

Their idea was to create an "e- shopping club" to bring people together for efficient online
transactions. Customers need to pool their purchase together with no effort needed to be put
into the bid coordination activities because the online marketing retailer would arrange them
instead. Customers access their service directly or through a partner site. After deciding
which product to purchase, customers join that product’s Buy-Cycle. It is the period of time
during which an item is open for buyers to join the purchasing process. It is updated in real
time; the more  people who join, the more the price continues to drop.

Evaluation of case:

1. by illustrating the relationship between order quantity and price using the price trajectory, it
gave potential buyer more information about how their orders would facilitate the price drop,
creating the motivation for additional orders.

2. Because of the demand externalities in the group-buying setting, a large group size shown on
the product cycle page indicates high market interest and possibly more savings by the end of
the auction cycle.

3. the “Click-and-Tell” feature on the web site leveraged the word-of-mouth effect and let
potential buyers recruit new customers for the company.

4. It saved money by not physically maintaining a warehouse and fulfilling the orders.

Solutions:
1. Focus on one side of cooperation first: Target product or service provider or target
customers
Example – Uber: If there were no drivers employed, Uber would make no sense. The
company started by attracting the drivers which was much safer for business than
attracting passengers with no one to take them to the destination.
2. Grow the business on the B2C side: Taking target customer's pain points seriously.
Show the customer how you solve the problems rather than just tell them. Use social
media to advertise the business model.