Hal\'s Hardware Is a Multi-State

Hal's Hardware is a multi-state business that is expanding its reach via an upgraded website and online shopping experience. The company has a number of strengths including regional brand recognition, a good salesperson training program and a good presence in the community. Hal's has some weaknesses, however, including the company's lack of online marketing experience and the company's lack of a strong national brand. Hal's faces intense competition and also faces threats from the possibility that its suppliers will become competitors (forward integration) and from general economic factors as the hardware industry is heavily dependent on the overall health of the economy (Armour, 2009). There are opportunities, however, in that the company can expand geographically, can carve out a niche as a differentiated player in the industry and that it can capture the growing share of online sales, reaching new customers and forging better relationships with existing customers as well.

The most significant threat that HHI faces is with respect to the larger stores such as Lowe's and Home Depot. These companies are known as "category-killers" because they are able to offer such breadth of selection and low prices due to high buying volume that smaller stores are simply unable to compete and are killed off (Spector, 2005). That these stores offer both low prices and broad selection makes them very dangerous competitors. They also have a strong presence, with one or both being located in virtually any town of any size in America. This leaves the remainder of the market to regional players with a strong loyal, local following and those stores that are willing to operate in small and remote markets.

The website should not be internally managed. There are pros and cons to internal management, but for a smaller e-commerce site the cons are significant. Internal management entails significant expense. For a company like Hal's that is already forced to sell at higher price points than its competitors, the higher fixed costs associated with internal management will mean that the prices to the consumer will be even higher, or the quality of the website will be significantly reduced. Online shopping is different than the in-store experience -- most of Hal's strengths do not apply, such as its regional presence and high customer service standards. Thus, price is more important, and Hal has to choose external management to lower the cost of providing a high-quality website to a relatively small audience.

An extranet adds complexity to the user experience, but can also allow for certain high-volume customers and those customers with specific needs to maneuver through a public version of the inventory system to better find the products that meet their needs (LyrusHQ, 2011). Such interaction is likely going to increase the cost and complexity of the website, so its value will depend on the degree to which Hal's intends to court this particular customer base. If Hal's intends only to court its current customer base of local customers, then an extranet would not be required.

HHI will face a number of legal issues stemming from the interstate commerce aspect of the website. Ultimately, there are few such issues that will emerge in the normal course of business -- doing business across state lines merely shifts the legal jurisdiction to the federal realm and is by no means prohibited. The company will need to retain legal counsel with respect to ensuring that its website adheres to the Commerce Clause and subsequent rulings pertaining to Internet commerce across state lines. The company will also need to ensure that its Internet activities are conducted in accordance with local laws as well, particularly with respect to the collection and payment of taxes.

Tool demonstrations are an interesting area. On the Internet site, these will have to take the form of videos, but the in-store demonstrations with the customer using the tool open the company up to significant legal liability. Should somebody be injured testing a power tool in a Hal's location, the location is likely to face legal action. Even if the location undertook multiple forms of physical and legal protection, this would not stop a suit from being filed. There are an estimated 125,000 injuries associated with power tools each year, with a common cause being inexperience or overconfidence (Belleville.k12.wi, no date). With medical bills for such injuries running into the thousands and the potential for career-disruption as a result of such injuries, the liability for Hal's is likely to far exceed the market benefits of offering this program. It is recommended that the tool demonstrations be removed from the stores, and only trained professionals from the tool company or from Hal's demonstrate the tools.