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Part 1 - Introduction to Ecommerce I Perry & W Robson
2
B2B eCommerceThe Profit Pool Concept
• Increasing the total amount of business done with a particular customer means that firms need to take advantage of opportunities to add products and services that fit well with current customer purchases and add profit to the firm
• Alliance partners can help to make this happen
• The profit pool is a useful tool to identify and evaluate potential online online partners
• A profit pool identifies the different products in an industry and calculates their industry share of revenue and their profitability
Part 1 - Introduction to Ecommerce I Perry & W Robson
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B2B eCommerce
3 Categories of profit pools
1. Anchor Services – Service providers that form the basis of an e-commerce Web site
2. Extension Services – Alliance partners with an anchor service
3. Neutral Services – Profit pool components without high profits or customer contact frequency
Desirable Features of Online E-Commerce Allies Anchor Service Extension Service
High customer acquisition cost Profitable pool component
Frequent customer content High profit/revenue ratio
Strong positioning Consistent position to anchor
Trusted Effective, reliable
Part 1 - Introduction to Ecommerce I Perry & W Robson
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Distribution Strategies
Figure 12.13
Alternative Channel Responses
Channel Division
Electronic
CommercePhysical
Distribution
Manufacturer
DirectCybermediary
Existing
Retailers
Online
Traditional
Retailers
Experience
Economy
Channel Structure Options
• Shift sales entirely to manufacturer direct (Dell, Cisco)
• Use existing retailers and their web sites (autos, perfume)
Part 1 - Introduction to Ecommerce I Perry & W Robson
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Distribution Strategies
• Three sources of channel conflict
1. Goal divergence – objectives of manufacturer or service provider differ
2. Responsibility disputes – pertain to customer handling, territorial assignments, functions to be served and technology to be used
3. Differing perceptions of reality – actions may be misconstrued and lead to conflict
Channel ConflictTraditional distribution channels are
threatened by online commerce
Part 1 - Introduction to Ecommerce I Perry & W Robson
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Distribution Strategies
Figure 12.14 Likelihood of Channel Conflict
12.7%
I ndustrial Manuf acturers
I ndustrial Customers
Manuf acturer's
Representative
I ndustrial
Distributor
Manuf acturer's
Sales Branches
I ndustrial
Distributor
Manuf acturer's
Sales Branches
Manuf acturer's
Representative
I ndustrial
DistributorDirect
Sales
Low
16.8%
3.6% 48.7%
8.6%
9.6%
Part 1 - Introduction to Ecommerce I Perry & W Robson
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Distribution StrategiesE-Commerce and the Proper Distribution
System
• Build-to-Order
– Direct selling enables mass customization
– Allows companies to manufacture unique products quickly and cost effectively
– Lowers the cost of holding inventory
Part 1 - Introduction to Ecommerce I Perry & W Robson
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Distribution StrategiesReal-Time Marketing
• Personally customized goods or services continuously update themselves – Continuously track changing customer
needs– Without intervention by corporate
personnel– Often without conscious or overt input
from the customer
• Requires direct sales and direct distribution
Part 1 - Introduction to Ecommerce I Perry & W Robson
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Distribution Strategies
However, intermediaries reduce the total number of contacts a firm has
Channel Contacts and Learning
• Advantages of using intermediaries
– They know more about customers
– They have greater knowledge of local markets
– They carry a broader product line within a category
– They carry multiple product categories
Part 1 - Introduction to Ecommerce I Perry & W Robson
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Distribution StrategiesData-Driven Intermediaries
• Advantages of using intermediaries– They can build a profile of customer choices
based on a much wider array of business than a direct seller would acquire
• Incentives for using intermediaries– Customer coalitions – customers join
intermediaries that protect their privacy while sharing appropriate knowledge to vendors
– Seller scope – a multi-product vendor can learn much more about customers and use this info across product categories
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Distribution StrategieseCommerce and the Proper Distribution
System
• Disintermediation occurs when layers of a distribution channel are dropped
Example – online brokerages substituting for stock brokers• Reintermediation occurs when
layers of a distribution channel are added
Example – services such as auto-locating that combine multi-vendor information and comparison shopping
Part 1 - Introduction to Ecommerce I Perry & W Robson
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Disintermediation & Re-intermediation
• Disintermediation —removal of orgs or business process layers responsible for certain intermediary steps in given value chain
• eliminating traditional intermediaries, such as wholesalers, distributors, & retailers, to reduce cost
• Re-intermediation —shifting or transfer of intermediary functions, not elimination
• intermediation such as electronic shopping malls, directory & search engine service, & comparison aids using agents creates role of re-intermediation
Part 1 - Introduction to Ecommerce I Perry & W Robson
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Disintermediation
• Internet bypasses classical intermediate stages; it offers supplier a direct channel to their customers
• Danger: Cannibalising of the prior sales channels (intermediate trade)
CustomerEnterprises
Suppliers Wholesale Retail Trade
Part 1 - Introduction to Ecommerce I Perry & W Robson
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Disintermediation ‘collapses’ the
distribution chain
Grower Jobber$8.00
Wholesaler$12.00
Florist$24.00
Customer$60.00
Customer$54.00
Part 1 - Introduction to Ecommerce I Perry & W Robson
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New Forms of Intermediaries
• ISPs • Guarantor / Certificate Authorities / Trusted
Third Parties • Directories, search services • e-Malls • Web site Evaluation / recommendation service • Financial intermediary• Market organiser (auctions, stock
exchanges...) • etc..
Part 1 - Introduction to Ecommerce I Perry & W Robson
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Trade Vertical Supply Chains efficiently move spare parts from Manufacturer to End User.
Manufacturer
SupplierSupplier
Industrial End Users
Manuf’s & Supp’s maximise profit by fast stock turn & small inventory. Stock must be visible & accessible to sell.
Eventually, uneconomic support older equip as demand, & hence stock turnover, slows. Then trade Vertical Supply Chain fails - may mean expensive plant closure.
Insurance spares held by End Users have low stock turn. May hold for many years (is where in Supply Chain majority spare parts). Inter-company visibility poor though what for disposal for 1 firm heavily sought by another.
sparesFinder.com opens up the Horizontal Supply Chain for internal and inter-company trade of surplus engineering
parts
Re-intermediation creates Horizontal Supply Chains
Website Marketing and Design
Session 16: The Future of the Web, Final Discussion and
Assessment 1
Poitiers, September 23-27
Part 1 - Introduction to Ecommerce I Perry & W Robson
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The Future … ?
• Web evolve to a 3-D medium– Virtual communities– Gaming
• Interactivity– True Global ‘web’ in real-time
• Ubiquitous Devices– Mobile, 3G, Continuous Access– ‘Wearable’ computing
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The Future … ?
• Interfaces– HCI – voice, digital, Medical
• Data Aggregation and Analysis– Analytics
• Impact on Healthcare– Bio-informatics
• The ‘Digital Divide’– Impact on socio-economic status– eCommerce influence via IP, Portable
transactions, Service Economy, etc.
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Final Grade
• First Half:– Group project– See Link Here for Grading Criteria:
• http://www.leuchtner.com/course2002/webdesign/final.ppt
• Second Half:– Exam
• Course presentations• 1 or 2 documents provided to Peter• Short essay answer