Pure play

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A pure play company is a company that focuses only on a particular product or activity. Investing in a pure play company can be considered as investing in a particular commodity or product of a company. [1]

Contents

Pure play firms either specialize in a specific niche, or have little to no vertical integration. For example, a coffee shop may call itself a "pure play" restaurant, and a factory that only produces goods (not design or sell to consumers) may refer to itself as a pure play manufactory.

E-commerce companies are often referred to as pure play retailers, as they sell only through the Internet.

Pure play method

In finance, the "pure play method" is an approach used to estimate the cost of equity capital of private companies, which involves examining the beta coefficient of other public and single focused companies. [2]

Here, when estimating a private company A's equity beta coefficient, the equity beta coefficient of a public company B is needed; the latter can be calculated by regressing the return on B's stock on the return on the relevant stock index. The following calculation is then applied to return the beta coefficient of company A.

Unlevered Beta of B = Equity Beta of B / (1 + DEB × (1 − Tax RateB))
Equity Beta A = Unlevered Beta of B × (1 + DEA × (1 − Tax RateA))
where DEA and DEB are the debt to equity ratios of company A and B respectively. [3]

Pure play foundries

Pure play foundries such as TSMC and GlobalFoundries are foundries who do not have any in-house design capabilities but only fabricate the Integrated Circuits (ICs) for fabless semiconductor companies such as Qualcomm, Broadcom, Xilinx, Nvidia and others.[ citation needed ][ dubious ] In contrast, Integrated Device Manufacturer (IDM) foundries such as IBM, NEC, Texas Instruments and Samsung provides both foundry design services and ICs fabrication. [4]

Pure play E-retailers

Advantages

Compared to traditional retail stores, pure play e-retailers can serve a wider audiences without physical boundaries and distance. Pure play e-retailers target specific customer groups without the high cost of obtaining information from these groups. [5]

Disadvantages

Compared to companies that integrate both offline and online, pure online internet retails do not have brand recognition and reputation at the start-up stage so it lacks customer bases. In addition, pure plays' customers are unable to touch, examine and test real products before buying them. Furthermore, online shopping experience lacks human contact with consumers which is considered as an effective way to respond to questions, provide professional advice and motivate purchases. [5]

Pure play gets physical

Beginning in 2015, Amazon.com customers in mainland UK with pickup codes can get the order at collection lockers distributed in shopping centers and commercial blocks. [6] Amazon also opened its first physical stores at Purdue University campus in Indiana in 2015. [7]

By 2015, Simply Be had sixteen physical stores. [8]

Net-a-porter Launched a pop up window shop and apply image recognition technology to enable customers to find video content of the clothes and the online shop. [9]

In 2015, Kiddicare, a childcare brand, announced plan to open 12 stores in the UK. [9]

Ocado launched a virtual shopping wall at One New Change, Birmingham's Bullring shopping center and Bristol. Customers can shop by using Ocado's “on the go” app to scan product's barcode on the wall. [10]

eBay opened an inspiration shop in New York in 2011. [11]

See also

Further reading

Related Research Articles

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Retail Sale of goods and services from individuals or businesses to the end-user

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The Modigliani–Miller theorem is an influential element of economic theory; it forms the basis for modern thinking on capital structure. The basic theorem states that in the absence of taxes, bankruptcy costs, agency costs, and asymmetric information, and in an efficient market, the value of a firm is unaffected by how that firm is financed. Since the value of the firm depends neither on its dividend policy nor its decision to raise capital by issuing stock or selling debt, the Modigliani–Miller theorem is often called the capital structure irrelevance principle.

Waitrose & Partners chain of British supermarkets

Waitrose & Partners is a chain of British supermarkets, which forms the food retail division of Britain's largest employee-owned retailer, the John Lewis Partnership. Its head office is located in Bracknell, Berkshire, England. Waitrose & Partners has 338 shops across the United Kingdom, including 65 "little Waitrose" convenience shops, and a 5.1% share of the market, making it the eighth-largest retailer of groceries in the UK. They also export products to 52 countries and have locations in the Middle East.

Adjusted present value (APV) is a valuation method introduced in 1974 by Stewart Myers. The idea is to value the project as if it were all equity financed ("unleveraged"), and to then add the present value of the tax shield of debt - and other side effects. See Leverage (finance).

Financial services economic service provided by the finance industry

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Online shopping is a form of electronic commerce which allows consumers to directly buy goods or services from a seller over the Internet using a web browser. Consumers find a product of interest by visiting the website of the retailer directly or by searching among alternative vendors using a shopping search engine, which displays the same product's availability and pricing at different e-retailers. As of 2016, customers can shop online using a range of different computers and devices, including desktop computers, laptops, tablet computers and smartphones.

Ocado British online supermarket

Ocado is a British online supermarket that describes itself as 'the world's largest dedicated online grocery retailer'. In contrast to its main competitors, the company has no chain of stores and does all home deliveries from its warehouses. The company was floated on the London Stock Exchange on 21 July 2010, and is a member of the FTSE 100 Index.

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Argos (retailer) British catalogue retailer

Argos Ltd, trading as Argos, is a British catalogue retailer operating in the United Kingdom and Ireland, and a subsidiary of Sainsbury's. It was established in November 1972 and is named after the Greek city of Argos. The company trades both through physical shops and online, with over 883 retail shops, 29 million yearly shop customers, and nearly a billion online visitors per annum, making it one of the largest high street retailers in the United Kingdom. It has also franchised overseas to countries such as China.

Wesfarmers Australian conglomerate

Wesfarmers Limited is an Australian conglomerate, headquartered in Perth, Western Australia, with interests predominantly in Australian and New Zealand retail, chemicals, fertilisers, coal mining and industrial and safety products. With AU$65.98 billion in the 2016 financial year, it is the largest Australian company by revenue, overtaking Woolworths and BHP. Wesfarmers is the largest private employer in Australia, with approximately 220,000 employees.

Alliance Boots company

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Home Bargains is a chain of discount stores founded in 1976 by Tom Morris in Liverpool as Home and Bargain. It is the trading name of TJ Morris Ltd, stocking up to 4,000 branded product lines, and employs over 17,000 people from head office staff to warehouse and shop staff.

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Phones 4u

Phones 4u was a large independent mobile phone retailer in the United Kingdom. It was part of the 4u Group based in Newcastle-under-Lyme, Staffordshire. Opening in 1996, it expanded to over 600 stores. On 14 September 2014, EE and Vodafone, the company's final remaining suppliers, ended their contracts.

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mySupermarket is an independent shopping and comparison shopping website for groceries in the United Kingdom. It retrieves price information from multiple online retailers, so that customers can compare their prices.

The term dark store, dark supermarket or dotcom centre refers to a retail outlet or distribution centre that caters exclusively for online shopping. A dark store is generally a large warehouse that can either be used to facilitate a "click-and-collect" service, where a customer collects an item they have ordered online, or as an order fulfilment platform for online sales. The format was initiated in the United Kingdom, and its popularity has also spread to France followed by the rest of the European Union.

References

  1. Law, Jonathan (2014). Dictionary of Finance and Banking. Oxford: Oxford University Press Print Publication. ISBN   9780199664931.
  2. Cox, Larry A.; Griepentrog, Gary L. (1988). "The Pure-Play Cost of Equity for Insurance Divisions". The Journal of Risk and Insurance. 55 (3): 442–452. doi:10.2307/253253. JSTOR   253253.
  3. R, Fuller; H, Kerr (1981). "Estimating the Divisional Cost of Capital: An Analysis of the Pure-Play Technique". Journal of Finance. 36 (5): 997–1009. doi:10.1111/j.1540-6261.1981.tb01071.x.
  4. Mutschler, Ann Steffora (2008). "Pure-play foundries comprise 84% of market, IC Insights says". Electronics News. Australia: Reed Business Information Pty Ltd, a division of Reed Elsevier Inc.
  5. 1 2 Kim, Eonsoo; Nam, Dae-il; Stimpert, J.L. (2004). "The Applicability of Porter's Generic Strategies in the Digital Age: Assumptions, Conjectures, and Suggestions". Journal of Management. 30 (5): 580. doi:10.1016/j.jm.2003.12.001.
  6. "Amazon.co.uk Help: About Amazon Locker". www.amazon.co.uk. Retrieved 2015-11-01.
  7. Johnston, Chris (2015-02-03). "Amazon's first bricks-and-mortar store opens in Indiana". theGuardian. Retrieved 2015-10-25.
  8. "Simply Be Store Locator". www.simplybe.co.uk. Retrieved 2015-11-01.
  9. 1 2 "Do pure-play etailers need stores?". Retail Week. 2011-11-04. ISSN   1360-8215. ProQuest   902018601.
  10. "Window Shopping..." www.ocadogroup.com. Retrieved 2015-11-01.
  11. "eBay and Jonathan Adler Partner to Open "the eBay Inspiration Shop" – 24/7 Shoppable Storefront Powered Exclusively by eBay Mobile | Business Wire". www.businesswire.com. 2011-10-20. Retrieved 2015-11-04.