E-Commerce

What is E-Commerce?

E-Commerce can be defined as …

• The conduct of selling, buying, logistics, or other organization-management issues via the WEB.

Exchange of information, goods, service, and payments by electronic means.

OR

Growth of E-Commerce

1996$700M

$28.91B2000

$35.87B2001

$51.48B2002est

$743.8B

20021st Q

History of E-Commerce• Background

E-commerce actually began in the 1970s when larger corporations started creating private networks to share information with business partners and suppliers.

• This process, called Electronic Data Interchange (EDI), transmitted standardized data that streamlined the procurement process between businesses, so that paperwork and human intervention were nearly eliminated.

• EDI is still in place, and is so effective at reducing costs and improving efficiency that an estimated 95% of Fortune 1,000 companies use it.

History of E-Commerce

• The first documented Online sale in 1994 was what?

• Prodigy was running text ads and selling flowers in the early '80s

A CD

History of E-Commerce

• Early EC was pioneered by Internet companies that didn't (and still don't) perform traditional retail. Called Pure Plays.– such as Amazon.com and CDNow.

• More recently click and mortar stores have moved online– like Barnes and Noble, Best Buy, the Gap, and Wal-Mart

Product Attributes for Selling on the Web

• Digital or Knowledge-based products– Software, video games, music, movies, books– Direct-to-consumer web services– Gambling and porn

Product Attributes for Selling on the Web

• Digital or Knowledge-based products

– Consulting services

– Information or data provider [banner ad revenue]

• Must be what your TM wants

• Must be high quality

• Must be unique

Product Attributes for Selling on the Web

• Hard Goods– Computers and computer equipment– Books– CDs– Specialized Niche products

• Virtual Vineyard

High Touch vs. Low Touch

Low-Touch products are typically standardized goods that do not require examination.

High-Touch products are those which consumers prefer to hold, feel, or examine closely.

Ways to Sell High-Touch ProductsTechnology

Ways to Sell High-Touch ProductsPhysical Solutions

Ways to Sell High-Touch ProductsBranding

EC Advantages/Disadvantages• EC Advantages

– Ability to reach new markets– Reduces costs (for some businesses)– Increased purchasing opportunities– More efficient (electronic payments, telecommuting, etc.)

• EC Disadvantages– Incompatibility for certain industries– Limitations of the medium– Costs!!!– Skills required– Cultural and legal issues

Business Model

• The method by which a firm builds and uses its resources to offer its customers better value than its competitors and to make money doing so!

Two major parts of the business model:

• Value Proposition

• Financial Model

Value Proposition

• The value your company adds that would make customers switch to you from their current provider.

Concepts involved in Value Proposition

• Choice of Segments

• Choice of Focal Customer Benefits

• Choice of Unique and Differentiating Capabilities

Value Proposition• Choice of Segments

– market size or growth– unmet customer needs– weak or no competition

• Choice of Focal Customer Benefits– One or two KEY benefits based on the marketing mix

variables• Ex: fast delivery, high quality products, customer service,

low-prices, unique product• Choice of Unique and Differentiating Capabilities

– Also known as : Core Competencies or Unique Resources

• Tangible assets (location), Intangible (Brand name) or corporate skills and capabilities (knowledge of customers)

Financial Models• There are four revenue models:

– Advertising (sell ads, site sponsorships, interstituals)

– Product sales (income from the sales of products, services, or information)

– Transaction (revenue from charging a fee or a taking a % of a transaction)

– Subscription (subscriber fees for magazines, information, services, …)

– Or a combination of these

Revenue Model - Advertising

Revenue Model – Product Sales

Revenue Model – Transaction

Revenue Model – Subscription