Electronic Commerce Business Models and Strategies

1
Electronic Commerce Business Models and
Strategies

• Minder Chen, Ph.D.
• Associate Professor of Management Information
  Systems and Decision Sciences
• School of Management, George Mason University
• mchen_at_gmu.edu

2
Reference

• Net Ready, by Amir Hartman and John Sifonis,
  McGRaw-Hill, 2000.
• Now or Never, by Mary Modahl, Harper Business,
  2000
• Designing Systems for Internet Commerce by G.
  Winfield Treese, Lawrence C. Stewart (May 1998)
  Addison-Wesley Pub Co ISBN 0201571676
• Net Results Web Marketing that Works by Rick E.
  Bruner (Editor), Cybernautics, Usweb
  Corporation Hayden Books ISBN 1568304145 
• E-Business Roadmap for Success by Ravi
  Kalakota, Marcia Robinson, Don Tapscott  (June
  1999)  Addison-Wesley Pub Co (C) ISBN
  0201604809 
• Customers.Com How to Create a Profitable
  Business Strategy for the Internet and Beyond by
  Patricia B. Seybold (Contributor), R. T. Marshak,
  Ronni Marshak 1 Ed edition (November 1998) Times
  Books ISBN 0812930371
• Net Success 24 Leaders in Web Commerce Show You
  How to Put the Web to Work for Your Business by
  Christina Ford Haylock, Len Muscarella, Ron
  Schultz, Steve Case  (May 1999) Adams Media
  Corporation ISBN 1580621147 
• Creating the Virtual Store Taking Your Web Site
  from Browsing to Buying, by Magdalena Yesil,
  Published by John Wiley Sons, November 1, 1996
• Understanding Electronic Commerce (Strategic
  Technology Series), by David R. Kosiur, Published
  by Microsoft Press, May 1, 1997.

3
Cyber-Seminar Outline

• ? EC Introduction
• ? Introduction
• ? The cycle of electronic commerce
• ? EC and Business Process
• ? EC statistics
• ? EC Strategies
• ? 4Cs strategy Customer, Content, Community,
  Commerce
• ? Revenue streams
• ? EC development process
• ? EC Business Models
• ? B2C Virtual stores physical and digital goods
  and services
• ? Infomediaries Seller-side
• ? Informediaries Buyer-side
• ? Infomediaries B2B marketspace

4
EC Introduction

• Introduction
• The cycle of electronic commerce
• EC and business process
• EC statistics

5
Electronic Commerce Introduction
6
Electronic Commerce

• Electronic commerce is broadly as the ability to
  execute business activities (transactions,
  contracts, and partnership) over a computer
  network. The execution of these activities lead
  to the exchange of goods, services, and money.
• Online business activities are changing market
  dynamics and structures of various industries.
• Electronic commerce adds a new dimension
  "information" to business activities involving
  information goods, information services, and
  electronic money.

7
The Low-Friction Market

• "The Internet will carry us into a new world of
  low friction, low-overhead capitalism, in which
  market information will be plentiful and
  transaction costs low."
• -- Bill Gates, The Road Ahead
• "Where there is a friction, there is
  opportunity!"
• -- Net Ready.

8
The Cycle of Electronic Commerce
Access
Searches Queries Surfing
Follow-on Sales
Customers
Online Ads
Online Orders
Standard Orders
Distribution
Online soft goods Delivery hard goods
Electronic Customer Support
Source Understanding Electronic Commerce
(Strategic Technology Series), by David R.
Kosiur, Published by Microsoft Press, May 1,
1997.
9
Components of Electronic Commerce
Processes
Institution

• Marketing
• Sales
• Payment
• Fulfillment
• Support

• Government
• Merchants
• Manufacturers
• Suppliers
• Consumers

Electronic Commerce
Networks

• Intranet
• Extranet
• Internet

Source adapted from David Kosiur, Understanding
Electronic Commerce, Microsoft Press, 1997.
10
EC and Business Processes
Seller
Customer
Phone, fax, e-mail
Send info
Request info
Provide Info Get customer Provide
info Fulfill order Support
Identify need Find source Evaluate
offerings Purchase Maintain,
Repair, Operate
Data sheets, catalogs, demos
Web surfing
Web searches, web ads
Web site
Newsgroups
Net communities
Corporate Databases
Demos, reviews
Web site
Credit cards, e-cash
P.O.s
EDI
Deliver soft goods electronically
Web site, phone, fax, e-mail, e-mailing list
Source adapted from David Kosiur, Understanding
Electronic Commerce, Microsoft Press, 1997.
11
World Wide Internet Commerce
Forester Research, Inc. June 1999
12
Business Internet Commerce Trends
B2C Business to Consumer B2B Business to
Business
Reference http//cyberatlas.internet.com/
13
Business-to-Business E-Commerce

• International Data Corporation forecasts that
  business-to-business e-commerce revenue will jump
  from 80 billion worldwide in 1998 to 1.1
  trillion in 2003. Forrester Research believes
  that number will go even higher to 1.3 trillion
  by 2003.
• Business-to-Business -- Vertical Industries
• Computing and Electronics For this year,
  businesses will invest 50 billion in computers
  and other electronic equipment online. Increase
  to 319 billion by 2002.
• Motor vehicles Companies will spend 9 billion
  online to purchase fleets of cars and trucks this
  year. 2002grow to 114 billionmore than a 1000
  increase.
• Online utilities Online trades of 15 billion in
  1999 will grow to 110 billion by 2002.
• Food and agriculture Expected to be about 3
  billion in 1999--20 billion by 2002.
• Pharmaceutical and medical Forecasted 1 billion
  this year. Increase 20-fold by 2002.
• Source Business 2.0, March, 1999 re Forrester
  Research

14
Statistics

• Holiday Season 1998
• 2.1 million households shopped online for the
  first time
• Generated 2.3 billion
• Virtually all (98) of AOL shoppers said they
  would shop online again in the next 6 months
  (Source Jupiter Communications)
• By 2003 . . .
• Consumers on the Web will spend more than 177
  billion worldwide.
• There will be an eight-fold increase in Web
  buyers worldwide to 143 million (International
  Data Corporation, March 1999)
• In Europe, 43 million households will be online.
  (Source Nua Internet Surveys 12/98 re
  DataMonitor)
• In Japan, buyers will spend one trillion Yen
  online. (Source Nikkei Multimedia, 12/98)
• 1 of 5 million US merchants are able to collect
  payments via the Internet in 1999.
• 10 E-merchants by year 2003.

15
Retailing Trends
1950s 1960s-1970s 1980s 1990s
Malls
Web
Main street
Superstores

• Home Depot
• CompUSA
• Barnes and Nobles
• Border

16
AOL Findings

• Buy brands
• Seek convenience
• Are increasingly time-starving
• Are not solely motivated by price
• Require simplicity

Source America Online, 1999
17
Net Economy

• 1940s - 1980s
• Manufacturing to information economy
• Local - regional - national - multinational
• Tangible brick-and-mortar assets offices, shops,
  service centers, and warehouse
• 1990s - 21st Century
• Net economy
• Information Knowledge
• Communication and interactions
• Global and virtual
• Business Focus Information, channel, flow,
  customer loyalty, reliable service, relationship
• Intangible assets Knowledge, experiences,
  relationships

18
Internet Economy Driving Forces

• Changing customer demands
• Globalization
• Internet ubiquity
• New technology
• New marketplace and intermediacies

19
Selling Points of Virtual Stores

• "The Internet is going to become a channel of
  distribution." -- The president of a major U.S.
  advertising agency
• Another firm advertise its virtual store as "The
  parking is easy, there are no checkout lines, we
  are open 24 hours a day, and we deliver right to
  your door."
• The trend toward point-of-sale moving into the
  home is accelerating.

20
Benefits to the Merchants

• Increased sales of existing products to generate
  additional revenues
• Use the web to target their offers to a niche
  market
• "The store is always open!"
• Establish better relationships with customers.
• Low cost information distribution
• Increased speed to market
• Expanded delivery channels
• Global exposure and reach

21
Benefits to the Consumers

• Convenience
• Informative
• Value presented upfront Demo and free download
• No long wait times
• Easy flow and navigation
• Search capabilities
• Engaging presentation
• Constant updates
• Easy to buy

22
All 3 Steps in One Medium

• Web and EC allows you to integrate three major
  steps of markting and sales in one medium.

23
Internet Industry
Sports Malls Entertainment Newsfeed Publications
Commerce Instruments Portals Commerce Servers
Content and Activity
Electronic Commerce Infrastructure
Client/Server Software
Consulting
Internet Economy
System Integration and Design
Browsers Web Server Application
Servers Security Tools
Backbone Router Access Equipment Server Computers
ISP Network Services
Internet Equipment
Internet Service Consumer Services Carriers
24
EC Strategies

• 4Cs Strategy
• Customer
• Content
• Community
• Commerce
• Revenue Streams
• EC Development Process

25
New Competition From Surprising Places

• Most Visited Retailers
• 1. Bluemountainarts.com
• 2. Amazon.com
• 3. AOL.com
• 4. Ebay.com
• 5. Etoys.com
• 6. Barnesandnoble.com
• 7. CNet.com (software)
• 8. Egghead.com
• 9. CDNow.com
• 10. Musicblvd.com
• 11. ColumbiaHouse.com
• 12. Classifieds2000.com
• 13. Beyond.com
• 14. Coolsavings.com
• 15. Valupage.com

• Not in Top 25
• Towerrecords.com
• Borders.com
• Toysrus.com
• Target.com
• Gap.com
• Macys.com
• Sears.com
• WalMart.com
• BigCompany.com
• YourCompany.com??

26
Moving Your Business Online

• Companies are motivated by either fear or greed
  to move to their businesses to the net.
• To .com your company is becoming an imperative.
• They have to obsolete their current business
  models and work very hard to search a new
  business model.

Your competitor is just one-click away
27
Electronic Commerce Applications and the Cycle of
Commerce
Seller's Cycle of Commerce
Service
Sales
Billing/Collections
Marketing
Production/Logistics
Time
28
Electronic Commerce Applications and the Cycle of
Commerce
Buyer's Cycle of Commerce
Procurement
Operation
Receiving/Logistics
Shopping/Testing
Payment
Time
29
EC Strategies 4 Cs
Customers
Commerce
Community
Content
30
Customers

• Obsess over your customers
• Remember that the Web is an infant
• What do you have to offer that the physical world
  cannot in order to attract customers?
• If you make one customer unhappy, he won't tell
  five friends -- he'll tell 5,000 on newsgroups,
  list servers, and so on.
• "Word of mouth" factor gets amplified on the Net
• The shifts of balance of power away from business
  and toward customer.
• - Jeff Bezos

31
Self Assessment Customer Caring
32
5 Steps to Success in EC

• Set strategy
• Make it easy for customers to do business with
  you!
• Focus on the end-customer
• Identify end-customers and their needs
• Distinguish from channel partners
• Identify other internal and external stakeholders
• Redesign customer-facing business processes
• Wire your company for profit and success
• Foster customer loyalty
• Determine and prioritize objectives
• Decide what to measure and how to measure
• Measure profitability and other critical success
  indicators

Source Adapted from Customer.com by Patricia
Seybold, 1998
33
Foster Customer Loyalty

• The key to profitability in EC
• Achieving higher revenues via customer
  acquisition and customer retention
• Acquisition costs
• Base profit
• Revenue growth
• Cost savings
• Referrals
• Price premium
• Benefits
• No-cost acquisition
• Experienced customer
• Strategies
• Increase customer "inventory"
• Increase customer "tenure"

34
8 Critical Success Factors

• Target the right customers
• Own customer's total experience
• Streamline business processes that impact the
  customer
• Provide a 360-degree view of relationships with
  your customers
• Let customers help themselves
• Help customers do their jobs
• Deliver personalized services
• Foster community

35
Target the Right Customers

• Know who your customers and prospects are
• Find out which customers are profitable
• Decide which customers you want to attract (or
  keep from losing)
• Decide which customers influence key purchases
• Find out which customers generate referrals
• Don't confuse customers, partners, and
  stakeholders

36
Own the Customer's Total Experience

• Deliver a consist and branded experience
• Focus on saving customer time and irritation
• Offer a peace of mind
• Work with partner to deliver consistent service
  and quality
• Respect the customer individuality
• Give customers control over their experience

37
Creating Sustainable Value in EC

• Develop a brand based on consumer experiences
• The brand emerges as the two-way communication on
  the net and off the net.
• Develop superior physical distribution
• Physical distribution is a choke point in EC
• Leverage customer information
• Use personal information to more convenience
  shopping and customized services
• Privacy issue
• Ask customer explicitly for such data
• Require a more subtle approach
• Use collective data
• Use it to adjust pricing, product offering, and
  target market

38
Virtual Communities
Virtual Community

• Content
• Hard goods
• Games
• Services

• Money
• Content
• Demographics

Providers
Users

• Advertising

Other Websites
Advertisers
39
Consumers' Needs for Community

• Communities of transaction Facilitate the buying
  and selling of products and services and deliver
  information related to those transactions.
• Bring in a critical mass of sellers and buyers to
  facilitate certain types of transactions.
• Virtual Vineyards (wine.com)
• Communities of Interest Bring together
  participants who interact extensively with one
  another on specific topics.
• Higher degree of interpersonal communication.
• GardenWeb www.gardenweb.com
• Motley Fool created by David and Tom Gardners on
  AOL (fool.com)
• Parents Place www.parentsplace.com
• Communities of Fantasy
• Chat rooms Red Dragon Inn
• Virtual Team competition at ESPNet
  espnet.sportszone.com
• Communities of Relationship People come together
  around certain life experiences that are very
  intense and can lead to the formation of deep
  personal connections.
• Cancer Forum on CompuServe

40
www.parentsoup.com
41
www.iVillage.com
42
Geocities www.geocities.com

• This collection of themes cyberhoods is populated
  by a half-million "homesteaders" who get free
  home pages.

http//geocities.yahoo.com/home/
43
Quick Test for Technographics
More Men More Women
More Educated Less Educated
High Income
Low Income
Have Children No Children
Younger Age Older
Number of new users
Mainstreams
Early Adopter
Laggards

Time
Source Now or Never, 2000
44
Technology-Fit Customer and Product
High
Earlier Adopter
Second Wave
AA FedExp Microsoft
Jenny Craig Chrysler
Customer Need for Product Information
Second Wave
Web Laggards
Nike Pepsi
Tide Denny's
Low
Customer Demographics Match
Source Forrester Research
Poor
High
45
Challenge

• Consumers Everything on the Internet should to
  be free.
• Merchant How can I make a profit if everything
  is free.
• Examples
• Free web browsers Netscape Communicator and
  Internet Explorer
• Free email Juno, mail.yahoo.com and hotmail.com
• Free Internet Access Freeserve in Britain
• Free PC eMachine and CompuServe Free-PC
• Free web hosting Geocities, Angelfire, Zoom
• Free ...

All tangible and intangible items that can be
copied adhere to the law of inverted pricing and
become cheaper as they improve. Anticipate this
cheapness in your pricing strategy and
product/service development strategy
Gilder's Law
250
Cost of a 3-minute Long Distance Call
Price
0
1999
Year
1930
46
Revenue Streams

• Advertising / Sponsorship
• Transaction
• Subscription / Listing Fee
• Value-added services

47
Multifaceted Model for Web-Based EC Design

• ATTRACT Hits
• Communities of interest
• Changing topics for repeat customers
• Features that encourage customers to explore
• ENGAGE Leads
• Special areas encourage customer to register
  (i.e. selection of articles customized for
  visitors interests)
• PARTICIPATE Sales revenue
• Free download (video, audio, software)
• Shopping
• Chat and News
• Subscription
• JUMP Advertising revenue
• Other products of interest to customer
• Other sites of interest to customer

Attract
Jump
Engage
Participate
Adapted from Netscape Communications Inc., 1996.
48
EC Companies Transform the Revenue Mix
Pricing
The mix Who pays for what and how much.
Value
Customers
New Pricing
New Values
New Customers
Highly interrelated!
Source Now or Never, 2000
49
What To Do Now

• 1. Define your eBusiness strategy FAST
• 2. Assess readiness
• customers
• products/services
• organization
• technology
• infrastructure

Rapid innovation
50
What To Do Now

• 3. Identify the target
• Business objectives
• Customer segment
• Application area
• 4. Build it in less than 6 months
• -- Flexibility
• -- Scalability
• -- Extendibility
• 5. Keep extending the function -- new products
  and services, new customer interfaces, enhance
  performance, security and capability
• 6. START NOW !
• You are never done!

51
Four Strategies to Start Online Business

• Integration
• Subsidiary
• Partnership
• Buyout

Slow
Low
Low
Cost
Risk
Time to Market
Fast
High
High
52
Top Three Concerns

• Retailers
• Conflict with investment in physical stores
• Technology issues and
• Lack of distribution and fulfillment network.
• Manufacturers
• Products not appropriate for online sales
• Potential risk to channel relationships and
• Consumers wont buy online
• Many manufacturers simply weren't capable of
  shipping a single box of Tide or a bottle of
  Advil. They had no experience in dealing directly
  with consumers.

53
Becoming Virtual

• Egghead to Egghead.com
• Computer Literacy to Fatbrain.com
• Romac International to KForce.com

Kinder Toys is Moving to www.toydomain.com (Find
us on the web after June 1st)
54
Your 3 Biggest Problems/Opportunities

• What should our strategy be?
• How do we build it in 3 to 6 months?
• How do we stay on the edge of innovation for
  life?

55
Web Experiences for Consumers

• A many-to-many rather a one-to-many experience
• Fresh content
• Access to detail information
• Communities unbounded by space and time
• The multimedia appeal of TV
• A redefinition of privacy and identity
• Hyper-impulsivity The web permits a closer
  conjunction of desire, transaction, and payment
  than any other environment.

56
E-Business Creation Process

• Customer feedback
• Benchmark data
• Competitive analysis
• Market forces
• Usage statistics
• Customer needs
• Current capabilities

• Personalization
• ROI
• Profiling
• Segmentation
• Experience modeling
• Expanded business opportunities

• Systems and networks
• Web architecture
• Business infrastructure
• Technology components
• Web technology strategy

E-Vision
Business Drivers
Technology Drivers
Rapid Implementation
E-Business Strategy
Source Adapted from Digital Transformation, 2000
57
EC Development Process

• Knowledge building and market evaluation to
  identify a need and a niche
• Competitive and capability analysis
• EC Business model design and feature
  identification
• Determine what you have to offer (merchandizing)
• Set your e-business goals and priorities
• Design your EC architecture
• Assemble your EC teams
• Build your web site
• Set up a system to handle sales
• Provide customer services
• Advertise your online business (online and
  offline)
• Evaluate your performance and moving on

58
Popularity Adds Value in a Network
Virtuous cycle
Positive Network Externality
Vicious cycle
Value to User

• Networks
• Real LAN, Internet, Fax
• Virtual Virtual community, Chat room, Instant
  messenger

Number of Compatible User
59
Keys to Long Term Success

• Fast deployment
• Evolutionary implementation
• First mover advantages
• Promotion, promotion, promotion
• Customer focus and services
• Interaction with customers
• Integrating emerging technologies
• Redefining and redesigning business models
• Comprehensive database and data warehouse design
• Integrating back office operations with the
  virtual store fronts

60
EC Business Models

• Virtual stores physical and digital goods and
  services
• Infomediaries Seller-side
• Informediaries Buyer-side
• Infomediaries B2B marketspace

61
Types of Virtual Stores

• Hard goods
• Food
• Clothes
• Computer hardware and Electronics
• Packaged software
• Soft goods (Bits delivered on-line)
• Information
• Database
• Publishing
• Research
• Software
• Computer games
• Java applets
• Application software
• Services
• Selling time
• Computer game play
• Consulting
• Legal and medical services

62
Is EC Appropriate for You?
Industries who set up virtual storefronts
63
What Consumers Are Buying Online

• Computer-related products 49
• Books 35
• Consumer electronics 34
• Travel Reservations 28
• Cars, boats 19
• Clothing and apparel 18
• Recorded music, CDs 18
• Larger household goods (furniture, major
  appliances) 15
• Filmed entertainment, videos 13
• Gifts delivered by mail (flowers, candy) 12
• Publication subscriptions 8
• Investment or financial services 8
• Food and drink 8
• Artwork, poster, etc 4
• Other 13
• Source Ernst Young Internet Shopping Study
  1998

64
EC Business Models

• Payment direction
• Buy-side
• Sell-side
• Marketspace Business is being transacted with
  both suppliers and customers.
• Trading parties Most analysts predict the B2B
  model will have a more rapid adoption rate, but
  that the volume of transactions in the B2C model
  will, in the long run, greatly surpass that of
  B2B.
• Business to Business
• Business to Consumer
• Type of product or service that is being
  provided.
• Physical goods and services
• Digital goods (contents)
• Digital services

65
Sell-Side E-Commerce Model
Buyer A
EDI
Selling Merchant
Buyer B
HTML Forms
Consumer or Business
HTML XML
Online Selling
OBI
Buyer C
66
Sell-Side Storefront

• Primary model used in current business-to-consumer
  scenarios
• Single seller, typically a distributor,
  constructs a Web storefront to sell to many
  consumers (i.e. Amazon.com)
• Unless a single distributor can aggregate all the
  suppliers in a given industry, the buyer remains
  responsible for comparison shopping between
  stores
• Expensive for buyer does not meet the needs of
  corporate procurement organizations.

67
Buy-Side E-Commerce Model
Seller A
EDI
Buyer
Seller B
HTML Forms
Business
HTML XML
Online Procurement
OBI
Seller C
68
Buy-Side eProcurement

• Buy-side applications generally consisting of a
  browser-based self-service front end to ERP and
  legacy purchasing systems
• Corporate procurement aggregates many supplier
  catalogs into a single universal catalog and
  allows end-user requisitioning from the desktop,
  facilitating standard procurement for the
  organization and cutting down on maverick
  purchasing
• Purchases made through this system are linked to
  the back-office ERP or accounting system, cutting
  time and expense from the transaction and
  avoiding potential bookkeeping errors
• Model yields reduced transaction costs but not
  lower purchase costs no impact on size of
  supplier base, no enablement of dynamic trade
  buying organizations must set-up and maintain
  catalogs for each of their suppliers too costly
  and technically demanding for most medium and
  small-sized businesses.

69
Marketplace E-Commerce Model
Buyer A
Seller A
EDI
EDI
Buyer B
Seller B
Virtual Marketspace
HTML Forms
HTML Forms
HTML XML
HTML XML
OBI
Buyer C
Seller C
OBI
Infomediacy (Content Aggregator)

• eBay.com
• Pricelines.com
• Egghead.com
• Amazom.com Auction
• www.chemdex.com

70
Business-to-Business vs. Business-to-Consumer
Business-to-Consumer
Business-to-Business

• No vendor loyally
• No switching costs
• Time-insensitive
• Short-term
• Casual
• Many vendors
• Products differentiated on price, image

• Relationship-based
• Very high switching costs
• Extremely time-sensitive
• Long-term
• Mission-critical
• Few partners
• Partners differentiated on reliability,
  flexibility

71
B2B Marketspace

• Latest evolution of B2B eCommerce, enabling a
  many-to-many relationship between buyers and
  suppliers
• Buyers and suppliers leverage economies of scale
  in their trading relationships and access a more
  liquid marketplace
• Sellers find buyers for their goods, buyers find
  suppliers with goods to sell
• Many-to-many liquidity allows the use of dynamic
  pricing models such as auctions and exchanges,
  further improving the economic efficiency of the
  market.
• Examples
• E-Steel.com
• verticalnet.com

72
Channel Conflict How About the Distributors

• The concept of complete dis-intermediation - the
  elimination of the middleman - remains a theory.
  New intermediaries are emerging.
• Cisco System has 2 billion dollars annual sales
  on the Web.
• 70 of Cisco online business comes from VARs and
  distributors.
• Fruit of Loom Inc. has 31 of its 55 distributors
  up on its extranet called Activewear Online.
  Distributors have to do lot of value-add and
  customer support to survive.

73
Retailers and Manufacturers Co-exist on the Web

• US retail sales revenues 1998
• Brick-and-mortar stores 93
• Catalog sales 6
• E-commerce 1
• Cases
• Levi Strauss sells jeans at www.levis.com but
  won't allow retailers to sell them online.
• Estee Lauder sells Clinique cosmetics at
  www.clinque.com but doesn't offer retail
  promotion.
• Waterford sells a limited selection at
  www.waterford.com like chandeliers and corporate
  gifts.
• Strategies
• Manufacturers want to maintain channels while
  stay in direct touch with their customers.
• Provide online dealer locators.
• Share customers information back and forth.

74
Clicks-and-Mortar

• Clicks-and-mortar has become the new buzzword in
  retailing circles.
• It means having an integrated, multi-touchpoint
  strategy that takes advantage of your physical
  retail outlets and integrates them seamlessly
  into your Web strategy.
• A good clicks-and-mortar strategy uses the Web to
  drive traffic to your stores and uses your stores
  to drive traffic to the Web.

Brick-and-Click
YourSherpa.com
75
Business Channel Multi-Channel Presence

• Brick-and-mortar
• Face-to-Face
• Mail order
• Mail
• Printed catalog
• Phone order
• Telex
• Phone
• Fax
• Electronic commerce
• EDI
• Email
• Web

Click and Mortar
Seller
Buyer

Pure Play
Multi-channel plays will have extraordinary power
if companies elegantly blend and synchronize
those channels.
76
Business Models Based on the Value Chain in the
Marketplace
Exchange
Raw material producer
Manufacturer
C2B
Distributor
Retailer
New Middleman
B2C
C2C

• B2B Vericalnet.com
• B2C Amazon.com
• C2B Priceline.com
• C2C eBay.com

Consumer
B2C
77
Business Models Multiple Dimensions

• Buy-sell direction Buyer-side, seller side, and
  marketplace
• Industry covered single vs. multiple (Vertical
  vs. Horizontal)
• Ownership Buyer, seller, independent, software
  vendor, consortia
• Service Core vs. extended services
• Products Core vs. MRO Direct vs. Indirect
• Pricing Fixed price, Auction, Reversed auction,
  negotiated
• Timing of purchase Contact vs. spot vs. ad hoc

78
Portfolio of Buying Selling Strategies
Size of Buyers and Seller
Big Supplier
Direct Sales
Big Buyer
Small Buyers
Small Buyers
79
Number of Sellers and Buyers
80
The GoldmanSachs B2B Windmill in the Age of
Consortia