1430 Words6 Pages
MBA 638-002: Operations Management

eBags: Managing Growth
Case Study 5

Patrick Johnson, Amina Mirzohoshim, Frank Park, Raja Pattamatta, Rita Thakur

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
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Bags come in boxes that manufacturers use for shipping via small package delivery to a fragmented base of retail customers. But shoes ship to retailers in bulk packaging rather than individual boxes ( (Laseter, Rabinovich, & Huang, 2006)). So when companies like eBags use drop-ship order process, there is an additional shipping cost to the manufacturer to repackage shoes and ship shoes to the customer. Shoes have a short product life cycle and also suffer a high return rate. Some customers order more than one pair with an idea to return the pair that does not fit. Thus shoes carry a much higher cost-to-serve and selling them online requires a different business model. A comparison of a potential acquisition candidate for eBags in footwear, Shodeni, shows that the SKU count is very high for shoes compared to luggage or bags and eBags should be extremely efficient if it has to handle that high SKU. eBags should add call centers to handle calls from customers in addition to support through the website. They should continue with the strategy of having manufacturers send the shipment directly to the customer.

European Expansion:
The European market was considered to be just as highly fragmented as the US Market and luggage retailers mainly consisted of small, family-owned stores with many limitations. These stores didn’t meet the demands of many customers who were looking for a wider array of selection and styles. In Europe,
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