EC_ch03.ppt

Pearson/Prentice Hall & Dr. Chen, Dr. Chen, Electronic CommerceElectronic Commerce

Learning Objectives

1. Describe electronic retailing (e-tailing) and its characteristics.

2. Define and describe the primary e-tailing business models.

3. Describe how online travel and tourism services operate and their impact on the industry.

4. Discuss the online employment market, including its participants, benefits, and limitations.

5. Describe online real estate services.6. Discuss online stock-trading services.


Learning Objectives

7. Discuss cyberbanking and online personal finance.8. Describe on-demand delivery by e-grocers.9. Describe the delivery of digital products and online

entertainment.10. Discuss various e-tail consumer aids, including

comparison-shopping aids.11. Identify the critical success factors and failure avoidance

tactics for direct online marketing and e-tailing.

12. Describe reintermediation, channel conflict, and personalization in e-tailing.


OPENING VIGNETTE Amazon.com: The King of E-Tailing


OPENING VIGNETTE : Amazon.com: The King of E-Tailing

• The opportunity (Problems)– July 1995, e-tailing pioneer Amazon.com, offered

books via an electronic catalog from its Web site (amazon.com)

– The company has continually enhanced its business models and electronic store by:expanding product selectionimproving the customer’s experienceadding services and alliancesrecognizing the importance of order fulfillment and

warehousing


Amazon.com: The King of E-Tailing (cont.)

• Technology used (Solutions)– Amazon.com has expanded in a variety of directions:

offers specialty stores (professional and technical store)

expands its editorial content through partnerships with experts in certain fields

increases product selection with the used and out-of-print titles

expands its offerings beyond books (June 2002 became an authorized dealer of Sony Corp. selling Sony products online)

today: a diversified retailer of products and services



– Key features of the Amazon.com superstore are:easy browsing, searching, and ordering useful product information, reviews,

recommendations, and personalization broad selectionlow pricessecure payment systemsefficient order fulfillmentpersonalization



– Enjoyable features:“Gift Ideas” section features seasonally

appropriate gift ideas and services“Community” section provides product

information and recommendations shared by customers

“E-Cards” section, free animated electronic greeting



– Marketplace services:hosts and operates auctions zShops service hosts electronic storefronts for a

monthly feeallowing small businesses the opportunity to

have customized storefronts supported by the richness of Amazon.com’s order-fulfillment processing



– Amazon.com is recognized as an online leader in CRMinformative marketing front endsone-to-one advertisements free posting of restaurant menus from thousands of

restaurants“Welcome back, Sarah Shopper” with recommendations of

new books from the customers preferred genre based on previous purchases

Sends purchase recommendations via e-mail to cultivate repeat buyers

Efficient search engine and other shopping aidsCustomers can personalize their accounts and manage orders

online with the patented “One-Click” order feature including an electronic wallet



– In 1997, Amazon.com started an extensive affiliates programby 2002, the company had more than 500,000

partners that refer customers to Amazon.comAmazon pays a 3 to 5% commission on any resulting

salealliances with major “trusted partners” provide

knowledgeable entry into new marketsCarsdirect.com allows it to sell cars onlineDrugstore.com connects to health and beauty aidsAT&T, Nextel and others suggest service plans for

wireless phones



– September 2001 Amazon signed an agreement with Borders Group Incallows Amazon.com’s users to pick up books,

CDs, and other merchandise at Borders’ physical bookstores

– It is becoming a Web fulfillment contractor for national chains such as: Target Circuit City



• The Results– Is the number one e-tailer since 2001

generated $3.12 billion ($3,12 billion – Italian way)

– Is becoming very successful in reducing its costs and increasing its profitability

– Annual sales for Amazon.com have trended upward (over $5 billion in 2003)



– $15.7 million in 1996 to $600 million in 1998 to about $4 billion by 2002

– In 2003 the site offers over 17 million book, music, and DVD/video titles to some 20 million customers

– Offers several features for international customers

– In January 2002, Amazon.com declared its first ever profit—for the 2001 fourth quarter



• What can we learn…– demonstrates the evolution of e-tailing– some of the problems encountered by

e-tailers– solutions employed by Amazon.com to expand

its business– the opportunities for e-tailing– Affiliate marketing


Affiliate Marketing

• Affiliate marketing can be simply defined as– A commission based arrangement where

referring sites (affiliates or publishers) receive a commission on sales or leads by merchants (retailers)


3.1 Internet Marketing and Electronic Retailing

• Overview and definitions of e-tailing– Electronic retailing (e-tailing):

Retailing conducted online, over the Internet

– E-tailers: Those who conduct retail business over the Internet


Internet Marketing and Electronic Retailing

• Consumer Electronics

• Office Supplies

• Sport and Fitness Goods

• Books and Music

• Toys

• Health and Beauty

• Entertainment

• Apparel and Clothing

• Jewelry

• Cars

• Services

• Pet Supplies

What Sells Well on the Internet?

• Travel

• Computer Hardware and Software


Internet Marketing and E-Tailing (cont.)

• Characteristics of successful e-tailing–

– guarantee provided by highly reliable or well-known vendors (Dell)

– digitized format (software)

– relatively inexpensive items (office supplies)

– frequently purchased items (groceries)

– commodities with standard specifications (books), physical inspection unimportant (unlike “Diamond”)

–

high brand recognition (Lands’ End)

well-known packaged items that cannot be opened even in a traditional store (vitamins)



3.2 E-Tailing Business Models

• Classification by distribution channel1. Mail-order retailers that go online

2. Direct marketing from manufacturers

3. Pure-play e-tailers

4. Click-and-mortar retailers

5. Internet (online) malls


Exhibit 3.3: E-Tailing Business Models – E-tailing an Enterprise EC System

Supplier

Supplier

Supplier

BusinessPartners

Supplier

Supplier

Supplier

BusinessPartners

Enterprise ResourcePlanning (ERP)“The Backbone”

Our Company

The E-Tailer Enterprise Finance,

Accounting, HRM, IT

Facing supplier distributor/Business PartnerObjective: OptimizeRelationships with businesspartners and reduce cost ofgoods sold

Internal OperationsObjective: Facilitate internaloperations & increase productivity

B2C and Customer-FacingApplicationsObjectives: Optimize businessrelationships with customers;increase serviceeffectiveness and sales

BusinessPartners

Distributor

B2B andSupply ChainManagement

(SCM)

B2C Sales,Marketing,and CRM

Customers


E-Tailing Business Models

• direct marketing

Broadly, marketing that takes place without intermediaries between manufacturers and buyers; in the context of this book, marketing done online between any seller and buyer

• virtual (pure-play) e-tailers

Firms that sell directly to consumers over the Internet without maintaining a physical sales channel



• click-and-mortar retailers

Brick-and-mortar retailers that offer a transactional Web site from which to conduct business

• brick-and-mortar retailers

Retailers who do business in the non-Internet, physical world in traditional brick-and-mortar stores



• multichannel business model

A business model where a company sells in multiple marketing channels simultaneously (e.g., both physical and online stores)

• Retailing in Online Malls– Referring directories– Malls with shared services



• Other B2C Models and Special Retailing– Representative special B2C services

Postal servicesServices and products for adultsWedding channelsGift registries


3.3 Travel and Tourism Services Online

• Major travel-related Web sites are:– expedia.com– orbitz.com– travelocity.com– asiatravel.com– hotwire.com– travelweb.com– eurovacations.com– priceline.com


Travel and Tourism Services Online (cont.)

• Revenue models of online travel services include:– – Revenue from advertising– Consultancy fees– Subscription or membership fees– Revenue-sharing fees– Others

Direct revenues (commissions)



• Services provided:– Traditional services

providing general information

reserving and purchasing tickets, accommodations, and entertainment


Travel and Tourism Services Online

• Special Services– Wireless services– Direct marketing– Alliances and consortia



• Unique services from virtual travel agencies– travel tips (a visa

problem)– electronic travel

magazines– fare comparisons– currency conversion

calculators– worldwide business

and place locators

– outlet for travel accessories and books

– experts’ opinions– major international and

travel news– detailed driving maps

and directions – chat rooms and bulletin

boards– frequent-flier deals– online travel auctions



• Benefits of Online Travel Services– To travelers

Free information accessible at any time from any place

Substantial discounts are available

– To travel services providersAirlines, hotels, and cruise lines sell otherwise-

empty spacesDirect selling saves the provider’s commission and

its processing



• Limitations of Online Travel Services– Many people do not use the Internet– The amount of time and the difficulty of using

virtual travel agencies may be significant, especially for complex trips and for inexperienced Internet surfers

– Complex trips or those that require stopovers may not be available online because they require specialized knowledge and arrangements



• Corporate Travel– To reduce corporate travel costs, companies can make

arrangements that enable employees to plan and book their own trips

• Impact of EC on the Travel Industry– The Internet may be contributing to a sharp reduction in

the number of travel agents– It has also driven the rise of intermediaries—third-party

online sellers and portals provide price comparisons and a range of other value-adding services for the consumer


Travel and TourismServices Online (cont.)

• Intelligent (software) agents in travel services– Agent is capable of acting autonomously,

cooperatively, and collectively to achieve the stated goal

– Involved in buyer-seller negotiations

– Agents may activate other agents to make special arrangements, cooperate with each other, activate multimedia presentations, or make special inquiries


3.4 Employment, Placement, and the Job Market Online


Employment, Placement, and the Job Market Online

• THE INTERNET JOB MARKET– Job seekers– Employers seeking employees– Job agencies– Government agencies and institutions

• A consortium of large employers and college careers advisors

• Global online portals





• Limitations of the Electronic Job Market– The gap between those with skills and access to the

Internet and those without

– Companies find that they are flooded with applicants when they advertise online, screening is a time-consuming and costly process

– Security and privacy

– High turnover costs for employers by accelerating employees’ movement to better jobs



• Intelligent Agents in the Electronic Job Market– Intelligent agents for job seekers– Intelligent agents for employers


Exhibit 3.7 Intelligent Agents Match Resumes with Available Jobs

Create “Job SearchAgent” giving thesearch keywords andfrequency of receivinge-mails

Create Resume(objective, target job, & company, location, work status, experience,education, affiliations,skills, reference, etc.)

Post Jobs(category, locations,job title & description,career level, positiontype, salary range)

Create “Resume Search Agents” giving the search keywords andfrequency of receiving e-mails

Generate e-mails to Job Seekers

Generate e-mails to Recruiters

Matching aroundthe clock

Base Base

Job Seeker Recruitere-mails e-mails

Employment Placement and the Job Market

Resume Job

Agent 1 Agent 2

Agent 3


BREAK-1

• EC Application Case 3.1: Lands’ Littlewoods Shop Direct Group: From Mail-Order Catalogue to High Street to the Web (p.101)


3.5 Real Estate, Insurance, and Stock Trading Online

• Potential homebuyers can:– view many properties online, at any time and from

anywhere, saving time for the buyer and the broker– sort and organize properties according to specific

criteria and preview the exterior and interior design of the properties, shortening the search process

– potential homebuyers can find detailed information about the properties and frequently get larger real estate listings than brokers will provide.


Real Estate, Insurance, and Stock Trading Online

• Real Estate– E-commerce and the Internet are slowly but surely having

an ever increasing impact on the real estate industry

• Real Estate Applications– Advice for consumers on buying or selling– Commercial real estate listings– Links to house listings in all major cities– Maps– Information on current mortgage rates



– Real Estate Applications (cont.)Real Estate Mortgages

– Many sites offer loan calculators

– Mortgage brokers can pass loan applications over the Internet and receive bids from lenders that want to issue mortgages

– “Name your own price” model

– Aggregation of loan seekers package placed for bid on the Internet



• Insurance Online– Standard insurance policies are available online at a substantial

discount :Auto HomeLifeHealth

– Third-party aggregators offer free comparisons of available policies

– Several large insurance and risk-management companies offer comprehensive insurance contracts onlineinsurate.com; quotesmith.com; insurance.com; quicken.com



• Online Stock Trading– Investment information– Related financial markets– The risk of having an online stock account


Online Stock Trading (cont.)

• Investment information– money.cnn.com: current financial news– bloomberg.com: municipal bond prices– investorguide.com: overall market information

with many links to other financial sites– thestreet.com: free “guru” (expert) advice– marketguide.com: stock screening and

evaluation tools (MultexInvestor)




Online Stock Trading (cont.)

• Well-known companies that offer online trading:– E*TRADE– Ameritrade– TD Waterhouse– Suretrade– Discover– Lombard


3.6 Banking and Personal Finance Online

• electronic banking (e-banking): Various banking activities conducted from home or the road using an Internet connection; also known as cyberbanking, virtual banking, online banking, and home banking

• Consumers can use e-banking to pay bills online or to secure a loan electronically.


Banking and Personal Finance Online (cont.)

• Home banking capabilities– View current account balances and history at anytime– Obtain charge and credit card statements– Pay bills– Download account transactions– Transfer money between accounts– Balance accounts– Send e-mail to the bank– Expand the meaning of “banker’s hours”– Handle finances when traveling– Use additional services


Banking and Personal Finance Online



• International and Multiple-Currency Banking– Some international retail purchasing can be

done by providing a credit card number, other transactions may require international banking support



• Online Financial Transaction Implementation Issues– Securing financial transactions– Access to banks’ intranets by outsiders– Imaging systems– Pricing online versus offline services– Risks

risk of hackers; liquidity risk; susceptible to panic withdrawals



• Personal Finance Online– Online Billing and Bill Paying

Automatic transfer of mortgage paymentsAutomatic transfer of funds to pay monthly utility

billsPaying bills from online banking accounts.Merchant-to-customer direct billingUsing an intermediary for bill consolidationPerson-to-person direct paymentPay bills at bank kiosks

– Taxes


Banking and Personal Finance Online (cont.)

• banks– Have no physical location, but only conduct

online transactionsNetBank (netbank.com)First Internet Bank (firstib.com)

– Caution

Virtual

Make sure that the bank is legitimate before sending money to a virtual bank


3.7 On-Demand Delivery Services and E-Grocers

• E-grocer: – A grocer that will take orders online and

provide deliveries on a daily or other regular schedule or will deliver items within a very short period of time

• On-demand delivery service: – Express delivery made fairly quickly after an

online order is received


On-Demand Delivery Services Model


On-Demand Delivery Services and E-Grocers (cont.)

• Who are e-grocery shoppers?– Shopping avoiders

– Necessity users

– New technologists

– Time-starved consumers

• Webvan.com vs. Safeway– Webvan case will be discussed in

Week#11


3.8 Online Delivery of Digital Products, Entertainment, and Media

• Digital products: products that can be transformed to digital format and delivered over the Internet


Online Delivery of Digital Products, Entertainment, and Media

• Online Entertainment– Examples of online entertainment

Web browsing; Internet gamingFantasy sports gamesSingle and multiplayer gamesAdult entertainment; Card gamesSocial networking sitesParticipatory Web sitesReading; Live events

– Entertainment-related servicesEvent ticketingRestaurantsInformation retrievalRetrieval of audio and video entertainment


3.9 Online Purchase Decision Aids

• Shopping portals: Gateways to storefronts and malls; may be comprehensive or niche oriented

– dealtime.com; - shopping.yahoo.com

– eshop.msn.com; - webcenter.shop.aol.com

• shopping robots (shopping agents or shopbots): Tools that scout the Web on behalf of consumers who specify search criteria– “Spy” services

– Wireless Shopping comparisons

– e.g. autobytel.com; Zdnet.com/computershopper; office.com; - dealtime.com


Online Purchase-Decision Aids

• Business Ratings Sites

• Trust Verification Sites

• Other Shopping Tools– Amazon.com’s A9 Search Engine– Answers.com


Online Purchase Decision Aids

• Business rating sites– Bizrate.com– Consumer Reports Online (consumerreports.org)– Forrester Research (forrester.com)– Gomez Advisors (gomez.com)

• Trust verifications sites:evaluate and verify the trustworthiness of various e-tailers

– TrustE– Versign– BBB online– Webtrust

• Other Shopping Tools– Amazon.com’s A9 Search Engine– Answers.com


3.10 Problems with E-Tailing and Lessons Learned

• The reasons that retailers give for not going online include: – Their product is not appropriate for Web sales– Lack of significant opportunity– High cost– Technological immaturity– Online sales conflict with core business


Problems with E-Tailing and Lessons Learned

• Lessons Learned– Don’t ignore profitability– Manage new risk exposure– Watch the cost of branding– Do not start with insufficient funds– The web site must be effective– Keep it interesting


Problems with E-Tailing and Lessons Learned

• Successful Click-and-Mortar Strategies– Speak with one voice– Leverage the multichannels– Empower the customer


3.11 Issues in E-Tailing

• disintermediation

The removal of organizations or business process layers responsible for certain intermediary steps in a given supply chain

• reintermediation

The process whereby intermediaries (either new ones or those that had been disintermediated) take on new intermediary roles


Issues in E-Tailing


Issues in E-Tailing

• cybermediation (electronic intermediation)

The use of software (intelligent) agents to facilitate intermediation

• hypermediation

Extensive use of both human and electronic intermediation to provide assistance in all phases of an e-commerce venture

• Unbundling


Issues in E-Tailing

• channel conflict

Situation in which an online marketing channel upsets the traditional channels due to real or perceived damage from competition


Issues in E-Tailing (cont.)

• Determining the right price– prices competitive on the Internet– prices should be in line with the corporate policy on

profitability

• Personalization– use cookie files and other technologies to track the specific

browsing and buying behavior of each consumer– marketing plan tailored to that consumer’s pattern

• Fraud and Other Illegal Activities• How to Make Customers Happy


(EXTRA) Successful Click-and-Mortar Strategies

• Mature transactional systems include features for payment processing, order fulfillment, logistics, inventory management, and a host of other services.

• A traditional brick-and-mortar store with a mature Web site uses a click-and-mortar strategy to do the following:– Speak with one voice– Empower the customer– Leverage the multichannels


Example: Circuit City

• Transformation to click-and-mortar: Circuit City– 1999, Circuit City’s Web site largely a

brochureware site capable only of selling gift certificates

– EC system credit card authorization and inventory-management systems were in place


Circuit City (cont.)

• Features of the circuitcity.com site:– educates customers about the various features

and capabilities of different products– customers gain valuable knowledge to assist

them in the purchase decision– extensive amount of information about

electronics and other products, organized in a very flexible way


Circuit City (cont.)

– Online purchase to be smooth, secure, and seamless

– Order fulfillment method is flexiblereceive the purchase via common carrier pay a larger shipping charge for overnight

deliverypick up the item at the nearby brick-and-mortar

store


Managerial Issues

1. What should our strategic position be?

2. Are we financially viable?

3. How should we introduce wireless shopping?

4. Are there international legal issues regarding online recruiting?

5. Do we have ethics and privacy guidelines?

6. How will intermediaries act in cyberspace?

7. Should we set up alliances?


BREAK-2

• Application Case 3.4: Online Security at a Bank (p.123)