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Journal of Cases on Information Technology, 8(4), 1-12, October-December 2006 1
The Snakes and Ladders Game

in E-Business:
Digital Transformation at
American Hardware Depot
C. Ranganathan, University of Illinois, USA
Dong Back Seo, University of Illinois, USA
ExECUTIVE SUMMARY
American Hardware Depot (AHD), a retailer of hardware and home improvement products,
sells over 65,000 products through its network of 4,500 stores nationwide that are operated by
owner-dealers. While rivals such as Home Depot were quick to launch their e-business efforts,
AHD was late to embrace technology as well as electronic retailing. Though some of the AHD’s
e-business efforts met with moderate success, others faced severe challenges. AHD invested over
$5 million as a minority equity stake in Americanhome.com in return for this dot-com firm acting
as an online front-end store for AHD—however, this effort failed within a year. AHD was at a
critical inflexion point. AHD seeks to enhance its e-business efforts in at least three major areas:
(1) to connect its dealers who had varied business processes and technologies, (2) to market
and sell its products through the Web, and (3) to streamline its supply chain operations. A newly
appointed vice president of e-business has to find solutions to the challenges facing AHD.
Keywords: B2B e-commerce; business models; e-business; e-commerce implementation;

e-commerce management issues; e-commerce strategy; electronic retailing; or-
ganizational strategies; partnerships; Web-based supply chain management; Web
systems implementation
ORGANIzATIONAL BACKGROUND
Sri Nathan, vice president of e-Business at the American Hardware Depot (AHD) looked
out her office window at the gardens sprawling the seven-acre campus of AHD. The lush green
foliage reminded her of her ancestral home in India. She thought back to the meeting she had
just left on the future of e-business at AHD. Nathan had joined AHD only six months ago after
leaving her successful consulting career at Accenture. AHD had gone through a rough phase after
its e-business venture failed to deliver on its intended promises. Nathan was hired to resurrect
and steer AHD ahead on its e-business efforts.
Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc.
is prohibited.
2 Journal of Cases on Information Technology, 8(4), 1-12, October-December 2006
Nathan faced three key issues: First, AHD needed an intranet to electronically connect its
4,500 owner-dealer operated stores nationwide. Such a system will not only facilitate electronic
ordering and inventory management, but also help alert stores with special offers, trends and
product information. AHD had deployed a legacy system that linked only a proportion of its
stores—this system had several limitations in providing real time information and was also
outdated. Second, AHD needed to quickly step up its online retailing efforts in order to respond
to its competitors’ Web-based e-commerce endeavors. This was crucial as AHD’s e-business
venture with Americanhome.com, which had over $5 million as equity investment, had failed.
Third, in order to expand its online initiatives, AHD had to work out a strategy to partner with
other companies that had online experience.
Nathan wondered how long it would take AHD to finalize its technology plan. The company’s
recent experience with the Web had created considerable cynicism and skepticism among some
senior executives as well as dealers of AHD. However, the CEO and some senior managers were
strongly committed to e-business. Given these sharp differences among the rank-and-file of AHD,
considerable ambiguity had surfaced about the course of action to be adopted.
Relaxing for a rare moment, Nathan pondered: Is it worthwhile for a hardware retail
company to think about e-business? At a time when other hardware retailers and rivals have been
effective in using the Web for increasing their sales, how could AHD utilize this opportunity
and become a retail leader? How do you make a once-bitten-twice-shy company continue with
its online initiatives? These issues highlighted some of the major challenges facing the senior
management at AHD.
Nathan was reminded of the traditional Indian game of snakes and ladders, in which the
players roll a dice and run a race on a board featuring multiple squares. There are various amounts
of snakes and ladders of differing lengths on the board—the varying lengths of snakes and ladders
will move a player backward or forward, slowing down or speeding up their race to the end of
the board. If one should land at the base of a ladder, they advance to the top of the ladder, surging
ahead of rivals. If the top of the snake is reached, a player descends down to the bottom and will
have to attempt to move up again. AHD was going back and forth on some of its e-business efforts
and in some cases, had to even restart and rebuild. While AHD had attempted major strides, all
of its efforts have not paid off, forcing many of AHD’s rivals to surge ahead. .
Home Improvement Retail Industry

The home improvement industry caters to a variety of customer needs—supplying tools,
materials and the know-how to build, repair, maintain, and improve residential homes. The in-
dustry boomed right after World War II, and within a decade, the do-it-yourself concept started
becoming popular.
Prior to the 1970s, the industry was dominated by small and mid-sized retailers and spe-
cialty stores that sold specific home improvement products. However, during the 70s, hardware
stores expanded their product line to include building material and lumber to become “home
centers.” Lumberyards expanded their offerings to move into the home center category. This
led to the emergence of regional and national hardware retail chains. By the 1990s, these chains
had opened large stores, 100,000 square feet or more in size, that operated across several states
and territories.
Home improvement retail sales grew steadily in the 1990s, with a compounded annual
growth of 5 to 7%. The home improvement retail market generated total sales of about $187
billion in 2001 and was expected to reach $250 billion by 2006 (Exhibit 1 in the Appendix). The
demand for home improvement products is largely driven by the maintenance needs of several
thousands of homes all across U.S. It is estimated that over 85% of homes built prior to 1980
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will require frequent maintenance, thus driving up the demand for home improvement goods.
Home improvement retailers typically deal with several categories of products such as hardware,
tools, lumber and building materials, plumbing supplies, electrical supplies, lawn and garden
equipment, hard-surface floor coverings, paints and preservatives, and so forth.
The demand for home improvement products are also driven by do-it-yourself (DIY)
consumers. DIY home improvement is a prevalent hobby for several millions of customers all
around the world. The popularity of DIY projects and the growth in the population of DIY cus-
tomers have been so significant that special cable networks like Home & Garden Television and
Do-It-Yourself network have arisen to specifically cater to this group. DIY retailers made up the
largest segment of the home improvement industry (80.7% of market share in 2003).
By the turn of the millennium, the U.S. home improvement industry was dominated by a
few national chains such as Home Depot and Lowe’s, some regional co-operatives, and a very
small set of independent stores. The two large national chains, Home Depot and Lowe’s, together
accounted for about 30% of the market share in 2003. Apart from exclusive hardware retailers,
general merchandise chains such as Sears and Wal-Mart also carried many hardware and home
improvement goods, leading to intensified competition in this industry. Most national and regional
hardware chains started expanding their presence by opening stores in new geographical areas
and by moving into foreign markets.
E-Commerce Trends and Home Improvement Industry

When the World Wide Web became popular in the early 1990s, companies and individual
customers started looking to the Web as a definitive source of information, products, services,
and communication. As the amount of business transacted between firms and customers over
the Web grew, the Internet emerged as a fruitful channel for conducting business-to-consumer
(B2C) commerce. U.S. online retail spending has been growing steadily over the last decade. The
annual online B2C spending in the U.S. was about $65.1 billion dollars in 2004, and is projected
to rise to more than $117.3 billions by 2008 (Source: Jupiter Research1). Lured by the potential
growth in online commerce, several pureplay Internet firms (more popularly known as dot-com
firms, who relied primarily on the Internet to conduct their business without having a storefront
or other traditional business channels) also emerged.
By the late 1990s, at the height of the dot-com boom, the online marketplace was crowded
with traditional brick-and-mortar companies that were trying to expand into e-business as well
as relatively new pureplay Internet firms. Despite the dot-com bust that led to the collapse of
several pureplay firms, online retailing and commerce grew at a steady pace. For several brick-
and-mortar firms, the Web became an additional channel for conducting business. Moreover,
many firms also started utilizing the Web for connecting with their suppliers, dealers, and other
businesses, thus leading to an increase in business-to-business (B2B) e-commerce efforts.
E-commerce in the home improvement industry started with several leading retailers de-
signing passive, informational Web sites that were converted into transactional, retail-oriented
Web sites over a period of time. In the mid-1990s, national chains like Home Depot quickly
revamped their technology infrastructures to open Web shops. General merchandisers like Sears
also moved their hardware tools online. In addition to these traditional brick-and-mortar retail-
ers, a number of pureplay Internet merchants such as builderdepot.com, cornerhardware.com,
and ebuild.com also entered the industry. These Internet players added to the already intensified
competition in online hardware retailing.
Exhibit 2 (see the Appendix) presents the total (off-line and online) sales of different
categories of home improvement goods from 1998 to 2001. Online sales represented only a
small fraction of total retail sales in the fairly undifferentiated hardware products. For hardware
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retailers, this could imply two possibilities: (1) e-commerce represented a relatively untapped
opportunity, or (2) several hardware products may not be suitable for online selling. Despite
these figures, national hardware retailers such as Home Depot and Lowe’s had stepped up their
e-commerce initiatives in 2001. Exhibit 3 (in the Appendix) presents some details of the online
activities of Home Depot and Lowe’s.
American Hardware Depot: Company Background

American Hardware Depot (AHD), a 75-year-old business, is one of the leading players
in the U.S. hardware retailing industry. AHD follows a cooperative business model by which
dealer-owners operate more than 4,500 stores throughout the U.S. From about 25 warehouses,
AHD distributes over 65,000 products such as electrical and plumbing supplies, garden equip-
ment, hand tools, housewares, power tools, and other hardware. In 2003, AHD employed over
5,000 personnel, and had sales of $3 billion and profits amounting to over $100 million.
AHD operates in a highly competitive industry that is dominated by national hardware chains
such as Home Depot and Lowe’s, and other wholesalers and cooperative businesses. National
chains such as Home Depot and Lowe’s enjoy higher bargaining power with suppliers, and benefit
from standardization of business processes and systems across their stores nationwide.
AHD caters to both DIY as well as general customers. Most DIY customers have some
kind of prior knowledge or experience to do their home improvement projects. However, AHD
places special focus on customers who may not possess the required skills or expertise to carry
out their home improvement products. In line with this emphasis, AHD has positioned itself as
a “friendly place,” where the know-how and skills on home improvement as well as the required
hardware supplies can be readily obtained.
Traditionally, AHD’s expansion strategy has been to recruit newer dealers in un- and under-
represented geographical areas. These dealers could be first time store operators with no prior
retail experience or those who wish to convert their existing stores under AHD’s brand name.
A new dealer typically spends between $800,000 to $1,500,000 to open a new store. AHD’s
corporate office provides support and training on all aspects of business from sales and inven-
tory management to day-to-day operations of the store. Apart from such dealer-owned stores,
AHD also runs its own large retail centers (numbering over 15), primarily to counter the threat
of national hardware retail chains.
Despite the increase in geographical expansion, AHD’s sales registered a decline from
1999 to 2001. The net income also fell from $90 million to $70 million in this period (Exhibit
4 in the Appendix). A number of issues pertaining to the business model and technology had to
be tackled for reversing the decline.
SETTING THE STAGE
AHD and Dealers: The Tenuous Relationship

The cooperative business model adopted by AHD poses considerable administrative and
managerial challenges. The corporate AHD plays an advisory role, whereas the dealers have con-
siderable flexibility in running their stores. The primary roles of AHD include wholesaling home
improvement products, supplier management (includes identification, negotiation, contracting, and
supply chain management), rationalizing procurement for dealers, and running their distribution
centers where goods coming from suppliers are stocked and redistributed to dealers.
Due to the historic legacy that accompanied the evolution of AHD and its resultant co-
operative business model, dealers have a great deal of freedom in running their retail stores.
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This implies that the dealers are free to choose the product lines they want to carry, pricing of
these products, promotion and discount schemes, choice of local suppliers, and so forth. AHD
provides advisory services in terms of recommending product lines, prices, monthly rebates and
so on—however, the final decisions are made by the respective dealers. This style of functioning
results in differential pricing of products and varied promotion schemes across multiple AHD
stores. A customer could find different prices for the same product at two different AHD stores.
Moreover, a customer could find specific promotions available in one store to be absent in an-
other. Product returns and price adjustments also get complicated as one store may not honor
the purchase transactions made in a different store. The key benefits that dealers get from their
AHD affiliation are the brand name, prenegotiated agreements with suppliers, and streamlined
distribution and logistics.
Dealers typically procure and replenish their inventory in three different ways (Exhibit
5 in the Appendix). First is the Direct-Drop-Ship method. Here, a dealer maintains direct re-
lationship with selected local suppliers and places orders directly with them. The paperwork,
billing and payments are also handled by the dealer. The corporate AHD has no role to play in
this transaction. The second method is AHD-Drop-Ship where the dealer places orders to AHD.
AHD negotiates the prices with suppliers and takes care of orders and paperwork, and takes a
commission from the dealer based on the orders placed and delivered. The third method is the
Retail-Support-Purchase. Here the dealer places orders to the national suppliers preselected by
AHD, who directly ship the orders to the dealer. AHD handles all of the paperwork, including
price negotiation, invoicing, and payments.
Obstacles to IT and E-Business at AHD

While most of AHD’s stores are owned and operated by independent dealers, a few stores
are corporate-owned and managed. Since many of AHD’s dealers operate independently in terms
of supply procurement and pricing as well as sales, the corporate office had little information on
dealer activity. AHD relied on a legacy system that linked its stores to the corporate office, but
it had a significant lag time for data updates, and provided little help for the senior management
to have a corporatewide view of inventory as well as sales. Moreover, implementing a corpo-
ratewide system became challenging given the differences in how different dealers managed
their supply, stores, and sales.
The complex relationship between AHD and its dealers posed several challenges for infor-
mation technology management at AHD. The primary ones were:
1. Lack of comprehensive data on inventory and sales

2. Lack of integration of store-level data
3. Diversity in hardware and software at dealer locations leading to nonstandardization and
systems-integration problems
4. Inability to do any real-time information processing
AHD did not have a comprehensive intranet-like system in place that would allow elec-
tronic connectivity with its stores. This inhibited its ability to move its dealer-interactions to
a Web-oriented channel. Moreover, the cooperative business model implied considerable flex-
ibility at the store level in terms of product lines, prices, and promotions. This flexibility poses
considerable challenges to implementing an integrated system across the entire enterprise. Any
system implemented across the store would have to recognize, accommodate, and possibly even
incorporate the flexibility.
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CASE DESCRIPTION: E-BUSINESS INITIATIVES AT AHD
Business-to-Business Efforts (AHD-Dealers)

When other national hardware and home improvement retailers caught on to the e-busi-
ness wave that was sweeping corporate America, AHD was caught in a quandary over moving
its business online. There were significant business challenges (e.g., varied dealer management
processes, disparity in pricing and sales programs, etc.) as well as technological bottlenecks
(e.g., lack of integrated databases, nonavailability of real time information, lack of standardized
IT architecture, etc).
Prior to its online debut, AHD sent huge catalogs containing the product information to
all of its dealers. These catalogs contained detailed information on over 70,000 different home
improvement items. Dealers placed their orders via telephone, fax, or mail. These catalogs cost
$10 per copy to produce, and an additional $1.00 per mailing. The print catalog system suffered
from several problems. As the number of products and items grew, so did the size and com-
plexity of the catalog. Moreover, telephone orders were prone to errors due to the manual data
entry. Multiple orders from dealers (rather than a single comprehensive order) complicated order
processing. Due to the increased size of the catalogs, dealers also found it difficult to search and
locate the items. The catalogs had to be produced and distributed frequently, especially whenever
the specifications of any of the items changed. Given the drawbacks of a catalog-order process,
AHD started looking for other alternatives.
Electronic catalogs presented a nice opportunity for AHD to initiate its online activities.
AHD decided to supply an electronic version of its catalogs using compact discs to all the deal-
ers. The electronic version of its catalog, though limited in its functionality, was received well
by the dealers. This measure reduced the costs of producing and distributing the catalogs by
over 80%.
Encouraged by its initial attempts at an electronic catalog, AHD decided to expand its
e-catalog with several features. AHD hired an external vendor to develop a Web-based online
catalog application. This application provided information on over 70,000 items with different
options for searching—by item, commodity, department, vendor or other specifications. Moreover,
the electronic catalog also included graphic pictures of the items as well as cost information.
AHD offered this electronic catalog via the electronic network it had with its dealers. Moving to
online e-catalogs provided several benefits for AHD as well as its dealers. Product searches were
faster and better. AHD could update its catalog with new prices or specifications and provide
real time information to dealers.
Another important e-business initiative was AHD’s effort to establish an electronic network
among all of its dealers. Traditionally, many dealers had little contact with AHD as they oper-
ated independently—they sold AHD’s as well as others’ products but didn’t exclusively work
for AHD, although they carried the AHD name. In 2000, the company launched an extranet,
AHDCONNECT, to link all of its dealers. Some of the dealers, especially those who were not
too technically savvy, expressed their apprehensions about joining the electronic network. Some
others felt it was an extra burden to use the network for transmitting and exchanging information.
However, the senior management made it mandatory for dealers to join the network. AHD initially
piloted the network with 300 of its dealers. The feedback from these dealers was overwhelming
that it helped convince other dealers about the potential benefits of electronic integration. Once
the network was in place, AHD created an intranet application to facilitate information sharing
and exchange among dealers. While AHD provided some basic information and advice to its
dealers at the site, the main attraction was that the dealers could communicate and collaborate
with others, as well as with AHD’s corporate headquarters. Dealers could post queries and get
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a quick response from other dealers and corporate executives. The application helped AHD
develop such a productive community of mutual advisers that AHD decided to extend the idea
to link all of its 5,000 plus retail stores.
Despite making AHDCONNECT mandatory, many of the dealers were slow in adopting
and using the intranet applications. Therefore, AHD took several steps to promote its usage
among dealers. To entice dealers to participate and use the site frequently, leads from prospective
customers were posted on the intranet. In the past, AHD used to mail such inquiries to dealers
and try to distribute them equitably based on dealer’s geographic locations. Posting information
on prospective leads on the intranet not only kindled dealers’ interest to use the site, but also
had the added benefit of reducing the time it took earlier to match dealers and prospects. Other
measures like featuring “Dealer of the Month,” and online training courses also made dealers
embrace the Web more quickly. Gradually, AHD moved most of its dealer-communications like
newly negotiated discounts, price changes, policies and procedural changes, and changed product
listings over to its intranet. This effort eliminated the paper-based mailing and telecommunica-
tion expenses, apart from greatly improving the effectiveness of AHD-dealer communications.
Business-to-Consumer Efforts (AHD-Customers)

AHD made an online debut in 1996 with a passive information-only Web site. Incremental
improvements were made over time by including a retailer directory and online rebate coupons.
Later, the site offered an option for customers to register with a $10 gift certificate as an incen-
tive. Most of the Web site development work was outsourced to external vendors.
Despite these incremental efforts, AHD lagged behind its traditional rivals as well as new
dot-com entities that posed a serious threat. National chains had created advanced Web sites
with interactive features. Pure-play Internet hardware retail sites also had more sophisticated
features. Sensing that it might lose out to these early movers, AHD decided to adopt a different
approach towards enhancing its digital presence.
In mid-1999, AHD announced a major e-commerce venture through a minority equity
partnership with Americanhome.com. AHD decided to invest over $5 millions in a start-up firm
focused on online retailing of home improvement products. This equity partnership was aimed at
creating an industry-first “home solutions portal” that combined products, projects, information,
service, installation, and online community. Through this partnership, Americanhome.com was
to take care of all the electronic transactions of AHD, acting as the online front-end. AHD was
expected to provide Americanhome.com with a back-end infrastructure for fulfillment including
supplies, logistics, and distribution. Moreover, AHD was to be the exclusive hardware supplier
for the new venture. Americanhome.com obtained additional venture capital financing to supple-
ment the initial equity funding by AHD. The CEO of AHD joined the board of directors of the
venture Americanhome.com.
AHD saw Americanhome.com as a quick, fast and easy way to ramp up its e-business to
ultimately become a leader in online hardware retailing. Moreover, an initial public offering by
Americanhome.com in the future would also prove lucrative for AHD with its minority stakeholder
status. AHD offered stock options of Americanhome.com for its dealers. By early 2000, over
25,000 of AHD’s products were offered through Americanhome.com, but this number increased
in subsequent months. AHD and Americanhome.com launched a joint-marketing campaign to
promote their online offering. AHD also decided to install in-store kiosks in its dealer locations
so that the customers would be able to place electronic orders during their store visits. The kiosk
program was intended to generate traffic for both the retail stores and the Web site, leveraging
AHD’s brand name. Kiosks were also expected to enable selling of products that was not ordi-
narily stocked at AHD’s retail stores.
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Though the AHD-Americanhome.com deal started off on a good note and showed signs of
a great partnership, strains appeared in their relationship within the first year. Americanhome.
com morphed into a site that sold several other products ranging from drawer pulls to electronic
toothbrushes as well as appliances such as dishwashers. Americanhome.com also expanded its
offerings into categories such as cooking, gardening, and home décor. Further, Americanhome.com
added online features for connecting customers with contractors, handymen, movers, plumbers,
and other home improvement service providers. These product and service line expansions were
partly prompted by the less-than-expected hardware sales that were generated in the first year of
operations. Expanding products and services at Americanhome.com meant that the company had
to get into relationships with other manufacturers and distributors, some of whom were direct
competitors for AHD. This also conflicted with some provisions of the contractual fulfillment
agreement between AHD and Americanhome.com.
AHD and Americanhome.com terminated their co-marketing agreement. AHD also stalled
the plans for in-store kiosks. Americanhome.com altered its logo (which closely reflected AHD’s
logo) and also dropped the link to AHD’s name and Web link from its site. This was followed
by AHD’s CEO resigning from the Americanhome.com’s board of directors.
Expanding E-Business Initiatives

There were other significant technology and e-business initiatives that happened at AHD
during the period 2000-2001. AHD formed strategic partnerships with a B2B marketplace for
lawn and garden products. Through this partnership, the dealers of AHD got the ability to make
online purchases for various lawn and garden products. AHD also joined a global retail exchange
with retail giants from all over the world to increase its online presence. AHD also entered into
an alliance with FindMRO.com, a Web site launched by W.W.Grainger to have access to over
$5 million hard-to-find maintenance, repair, and operating supplies. Through this partnership,
AHD’s dealers could access and order MRO supplies by simply accessing AHD’s intranet.
CURRENT CHALLENGES
By 2003, AHD was at a crucial inflexion point in its digital transformation efforts. The
business-to-business e-commerce efforts had proven to be fairly successful. AHDCONNECT
provided AHD as well as its dealers with several benefits. It helped streamline the supply chain,
rationalize inventories, reduce transaction costs, and enhance AHD-dealer communications. On
the other hand, AHD’s efforts to directly sell to end customers did not produce desired results.
The partnership approach that AHD took to Web retailing was a total failure.
Nathan had several issues buzzing over her mind. Should AHD try to continue its efforts
to sell hardware products online? If so, how should it go about establishing its Web presence?
How should the shipment and returns be handled for online orders? While hardware sales on
the Web have been limited, the Internet has emerged as a key medium for consumer research
and knowledge base for DIY projects. Failing to have a retail presence on the Web might prove
costly in the long run as other hardware retailers have established a significant presence on the
Web and continue to sell home improvement goods online. However, questions still remain about
customer preferences for buying home improvement goods online. Some of Nathan’s colleagues
had suggested winding up online retail operations and refocusing on in-store selling.
A few colleagues had pointed out other business-to-business applications that could benefit
AHD. Having built a foundation through AHDCONNECT, AHD could invest in advanced data
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Journal of Cases on Information Technology, 8(4), 1-12, October-December 2006
warehouses and business intelligence systems to capitalize on the vast sales data that could be
captured through its 4,500 stores. Further, AHD could use the Web to enhance its procurement
and supplier relationships.
AHD’s voyage in e-business has been marked by both ascending and descending moves,
placing it at the crossroads. Like the snakes and ladders game, while some of the e-business
initiatives have helped AHD ascend, some others had failed, forcing AHD to go back to scratch.
AHD has to plan its future moves carefully, in light of its own past experience as well as the
position of its rivals.
ENDNOTE
1
Press release available at http://www.jupitermedia.com/corporate/releases/04.01.20-newju-
presearch.html.
APPENDIx
Exhibit 1. Sales trends in home improvement industry
(Source: National Retail Hardware Association Market Measure, 2004)
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Exhibit 2. Sales of home improvement products
2001 2000 1999 1998

Description E- E- E- E-
Total Total Total Total
commerce commerce commerce commerce
Total
Merchant
2,708,666 272,183 2,742,53 241,10 2,541,564 204,546 2,37,824 171,646
Wholesale
Trade
Lumber
and other
73,553 2,236 70,778 2,183 71,33 1,63 63,661 1,82
construction
material
Professional
and
commercial 24,81 30,04 26,12 30,827 273,848 27,127 254,06 20,461
equipment
and supplies
Electrical
214,312 12,111 240,362 11,117 208,355 ,345 186,721 8,03
goods
Hardware,
plumbing
64,864 6,47 67,108 5,88 63,444 5,3 60,352 5,426
and heating
equipment
Machinery,
equipment 243,312 7,47 252,34 7,51 245,453 6,80 242,531 5,400
and supplies
(Source: U.S. Census Bureau, Annual Trade Survey)
Exhibit 3. E-commerce activities of national hardware retailers: Home Depot vs. Lowe’s
Key e-Commerce
home depot lowe’s
statistics
Launched April 2001 (pilot program in select November 2000
nationwide cities started August 2000)
Products sold online/ 14,000 / 40,000
20,000 / 50,000
in stores
Visitors
1,063,000 907,000
(March 2001)
From stores and distribution centers;
From stores in various cities; items
Fulfillment items can be shipped or picked up
are then shipped via UPS.
at stores.
$4.91 for first 15 pounds; $0.43 each As low as $4.93; increases with
Delivery charge
additional pound. distance.
(Source: Young, E. (2001, May 21). Home improvement chains battle online. The Industry
Standard.)
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Exhibit 4. AHD’s annual sales and net income (1999 to 2001)
AHD Annual Sales ($ m illion) AHD Annual Net Incom e ($ m illion)
3150 100
3100 90
3050 80
3000 70
2950 60
2900 50
2850 40
2800 30
2750 20
2700 10
2650 0
1999 2000 2001 1999 2000 2001
Exhibit 5. Order fulfillment process
direct-drop-ship
Order/Billing
Supplier Dealer
(local)
Delivery
Retail-support-purchase
Billing Billing
AHD
Supplier Dealer
(Pre-selected) Order
Delivery
Ahd-drop-ship
Order/Billing Order/Billing
AHD
Supplier Dealer
(Pre-selected)
Delivery Delivery
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C. Ranganathan is an assistant professor in the Department of Information & Decision Sci-

ences at the University of Illinois at Chicago. His current research interests include e-business,
information systems strategies and strategic issues pertaining to managing IS. His academic
recognitions include the best doctoral dissertation award and the best teaching case award
at the International Conference on Information Systems, and best paper awards given by the
Society for Information Management. His work has been published in Communications of the
ACM, Decision Sciences Journal, Information & Management, Information Systems Manage-
ment, International Journal of Electronic Commerce, Journal of Strategic Information Systems,
and MIS Quarterly Executive, among others. He holds a doctorate from the Indian Institute of
Management, Ahmedabad, and master’s degree from BITS, Pilani (India).
Dong Back Seo is a doctoral student at the Department of Information & Decision Sciences in
the University of Illinois at Chicago. Her research interests include e-business, mobile commerce
and understanding competitive dynamics in rapidly changing industries. Prior to her PhD, she
worked as a software engineer in a wireless communications firm and as a small business owner
in Korea. Her publications include two books in Korean and papers in the Proceedings of the
Information Resources Management Association International Conference and Proceedings
of the International Symposium on Research Methods. She holds a master’s in management
information systems from University of Illinois at Chicago.
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Journal of Cases on Information Technology, 8(4), 1-12, October-December 2006 1

The Snakes and Ladders Game

Keywords: B2B e-commerce; business models; e-business; e-commerce implementation;

Home Improvement Retail Industry

E-Commerce Trends and Home Improvement Industry

American Hardware Depot: Company Background

SETTING THE STAGE

AHD and Dealers: The Tenuous Relationship

Obstacles to IT and E-Business at AHD

1. Lack of comprehensive data on inventory and sales

CASE DESCRIPTION: E-BUSINESS INITIATIVES AT AHD

Business-to-Business Efforts (AHD-Dealers)

Business-to-Consumer Efforts (AHD-Customers)

Expanding E-Business Initiatives

Exhibit 1. Sales trends in home improvement industry

(Source: National Retail Hardware Association Market Measure, 2004)

Exhibit 2. Sales of home improvement products

2001 2000 1999 1998

(Source: U.S. Census Bureau, Annual Trade Survey)

Exhibit 4. AHD’s annual sales and net income (1999 to 2001)

AHD Annual Sales ($ m illion) AHD Annual Net Incom e ($ m illion)

Exhibit 5. Order fulfillment process

C. Ranganathan is an assistant professor in the Department of Information & Decision Sci-

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