Chapter 4 How the digital butterflies share the work

Understanding the value-added chain on Internet

If you think you can sell on Internet without the aid of an intermediary, let's get one thing clear : you're going to be disappointed. There are more intermediaries than in the real world. The idea of direct sales will probably be a mirage for the majority of cyber-salesmen !

To be able to sell on Internet or in other virtual environments, we must analyse the added value chain, in order to find where to position yourself among the different companies which are increasing the value of a product on Internet. The commercial development of your business really depends of your ability to create and hold on to competitive advantages, which will make you an essential link in your chosen chain of value.

Analysis of hybrid added value

The chain of added value has seen radical changes on Internet. To understand properly what this means, the following pages describe the impact of Internet on the added value chain in a particular industry (the T-shirt), which will help us to understand how a T-shirt manufacturer can adapt to the new environment of Internet. This is followed by an analysis of the multimedia added value chain, which will help us to understand the strategic control points of the organisations which run the technical aspects of electronic commerce.

Example of the T-shirt industry

Manufacturer ------> Wholesaler ------> Retailer -------> Final customer

The T-shirt industry is fairly representative of the consumer goods industry : a manufacturer produces a large quantity of goods, sells to wholesalers who are often close to the market, and who have retailers as customers, who in turn resell the T-shirts to the consumers. The value of the wholesaler consists in identifying T-shirt manufacturers throughout the world, choosing high-quality merchandise, negotiating a good price and taking delivery of thousands or tens of thousands of T-shirts. As for the retailer, he will choose the T-shirts which are best suited to his regular customers' tastes, organise the delivery of the goods to the point of sale, promote and manage the commercial transaction with the final customer, bank the payment and offer an after-sales service.

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