ITB6227 - Web programming for E- Commerce 1 ITB6227 Programming for E-COMMERCE Lecture E-Tailing Revenue Models

ITB6227 - Web programming for E-Commerce 1

ITB6227 Programming for E-COMMERCE

LectureE-Tailing Revenue Models


Objectives

• Describe the role of e-commerce• Business models and how they relate to e-commerce• Difference between business models and revenue models• Types of B2C Revenue models• Describe Traditional Retailing and transference to E-Retailing• Benefits of E-Retailing • Differentiate between core components and additional

components of an E-Retailing system• Overview of an E-Commerce development methodology


E-commerce Basics

• The basic process for e-commerce from a customer viewpoint (applicable to B2B, B2C)– Identify the Need– Search for potential products or services that

meet requirements– Select a vendor– Make payment arrangements– Make payment– Maintenance and Warranty issues


Consumer Goods• Intangible goods (services)• Tangible goods

• Digital products• Physical products

– Perishable– Non-perishable

• Some “products” involve tangible and intangible goods

• You contract someone to create a design and that design is delivered via internet


The Role of Electronic Commerce

• Reduce transaction costs– Some typical costs• Search costs – customers can easily locate and analyze

product or service information• Transaction processing costs – (management of

invoices, purchase orders, payment schemes)– The Process can be automated

• Improve information flow– To customers, business partners etc


The Role of Electronic Commerce

• Increase coordination of actions for an organization

• Between departments, or other external organizations

• Improve existing markets• Enhance current markets

– Focused marketing campaigns based on hard data – Additional technology based services to “encourage” purchase

• Create entirely new markets• Development of new online markets, tapping in to the

global internet market, overseas markets


Source: http://www.trademe.co.nz/motors


Source: http://www.autotrader.co.nz/


Source: http://www.liveplasma.com


Business Models

• What is a Business Model– A working description that includes details about

the operation of a business. • Expenses• Revenues• Operating strategies• Sales and marketing procedures

– Can describe all activities related to the day to day function of the business

– Collection and description of all business processes (typical processes: dispatching goods, processing orders etc)


Revenue Models

• What is a Revenue Model?– The way in which a business’ processes are

arranged to generate income– Used as a method to group a companies business

processes– Will also typically involve• Identifying customers• Marketing to those customers• Generating sales to those customers


Business Models vs Revenue Models

• Business Model• The architectural configuration of components of

transactions designed to exploit business opportunities• The description and setup of the “environment” a

business creates to create business opportunities

• Revenue Model• The specific ways in which a business model enables

revenue generation• It is about the different methods used to get the

money!


Use of Business Models• Early days of E-commerce– One approach for many companies was to simply copy the

business model of a successful existing online company– This practice led to many E-commerce failures– A Better way: businesses analyze their own business

model and look for opportunities to apply Internet technologies to enhance or replace business processes

– Although two businesses may work in the same industry, they can still have unqiue ways of doing things

– Not all business models easily or successfully translate to the web


Use of Business Models– Some business models are quite simple• A company produces a good or service and sells it to

customers

– And others quite complex• Other models can be more intricately woven, and there

are several issues involved in translating it to the web. • Consider Radio and Television programming

– Radio and later television programming has been broadcasted over the airwaves free to anyone with a receiver for much of the past century. The broadcaster is part of a complex network of distributors, content creators, advertisers (and their agencies), and listeners or viewers. Who makes money and how much is not always clear at the outset. The bottom line depends on many competing factors.


Revenue Models in B2C• Publicity

• Company establishes a website for publicity purposes

• Advertising• Effective for sites with significant number of site visitors

• Sale of goods/services• Sales transactions on the web

• Subscription• Certain sections of a website only available via subscription• “Knowledge based” websites for instance

• In other e-commerce categories• Transaction fee

– Fee charged for C2C by intermediary business


Source: https://www.mturk.com/mturk/welcome



Traditional Retailing

• Sales to a customer using either a physical location or direct communication

• Types include– Malls• Collection of individual stores, individually managed

with Mall management providing the physical location for the retailer to sell from

– Generalized store• Unified management but will carry different product

lines


Traditional Retailing

– Specialized Stores• Sell a specific product line

– Franchise Store• Stores that come under a single marketing and

branding effort, each store may be under different management, with a fee paid back to the franchisee

– Direct Mailing• Catalogue sent to customers who purchase using mail

order

– Others• Telemarketing, door-to-door sales


E-Retailing

• E-Retailing (Or E-tailing) is a result of mapping traditional retailing models to the Internet and internet associated technologies

• Specialized stores specialized e-stores• Generalized stores generalized e-stores• Malls E malls• Franchise Stores ???


New E-Retailing Models

• The Internet and Natural evolution of e-commerce has led to the development of new e-retailing models

• E-Brokers• Do not sell directly• Match a customers request to e-retailers• Search is based on attributes supplied by the consumer

e.g. price, brand, location etcExample: PriceSpy (www.pricespy.co.nz)

• Direct Selling by ManufacturerExample: Dell Computers (www.dell.co.nz)

http://www.pricespy.co.nz/

http://www.dell.co.nz/


Benefits of E-Retailing• For Customers:

• Convenience– Delivered goods, multiple payment methods

• Better information• Competitive pricing

– Ability to easily perform price comparisons, leads to price transparency. You can determine the fair price for an item

• Can shop anywhere, anytime(equipment needed)• More value added services

– Simple Example: A customer can define product a search by specifying product attributes in order of importance

• Personalization/Customisation• What other benefits might there be?


Source: https://www.mturk.com/mturk/welcome

Personalization – Amazon.com


Benefits of E-Retailing• For E-Retailer:– Global reach, new markets– Targeted marketing– Low setup costs (compared to physical store etc)– More value added services

• Besides being able to provide value added services to customers to better fulfill their needs, another example can be the ability to market and sell a large number of products in an online store, more than would be physically possible in a physical store

– Personalization/Customisation– What other benefits might there be?


Traditional Customization - Showrooms


Traditional Customization – Shop Layout


Shop Layout Customisation


E-Retailing System (e-shop) Components

Core Components (must haves) for this are:-– Online catalog for goods tied to the order process– Search facility for product evaluation and

selection – Ordering subsystem • shopping cart

– Order status checking facility– “Checkout” facility for capture of delivery and

payment details, connection to a payment gateway


E-Retailing System Components

Additional Components• A customer handling system

– Customer authentication, capturing of customer details, marketing, managing customer complaints

• Online delivery system (for digital products)– Delivery by direct download, streaming etc– Mechanisms for “protecting” digital products (good luck… )

• Forums and other systems for developing online communities– What are they for?

• Further software systems as are necessary: -– Often customised to the specific types of product or service

being marketed



E-Retailing System Components

Another aspect indirectly related to system components – Personalization of system layouts (interface)

By the e-retailer– For marketing and promotion purposes– Offline retail involves a lot of planning in physical store design

and layout as well as how and what products are placed where on shelves, displays that are placed around checkouts etc. Customers may not be consciously aware of this…

By the customer– To suite customer preferences for interaction within an e-

commerce system


E-Commerce Development Methodology

Basic summary of steps– Develop detailed description of existing business model (and revenue

models)– Develop an e-business model

• A Model of the system in an online e-commerce environment. This may reflect all or parts of an organization's current business model. A critical step because not all aspects of a business may easily translate to this environment

– Development system requirements – Choose system architecture and implementation platforms– Design and develop software structure and model– Detailed design – web UI, databases, integration with legacy systems

(back end systems we may need to work with)– Implementation– Testing and piloting the e-commerce system

Documents

ITB6227 - Web programming for E- Commerce 1 ITB6227 Programming for E-COMMERCE Lecture E-Tailing Revenue Models