ECT 250: Survey of ecommerce technology

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ECT 250 Survey of e-commerce technology

• Business models for e-commerce

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Kozmo.com

• Combine the convenience of a catalog with the
  immediate gratification of in-store shopping
• Offering entertainment, food, and convenience
  products
• delivered within one hour by Kozmonauts on bikes
• no minimum order required
• no delivery charges.

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Kozmo.com

• Created a Web site that featured localized
  offerings based on customer zip code.
• An order placed on the Web site would be
  transmitted directly to Kozmos distribution
  center, packed, and delivered.

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Kozmo.com

• 250 million in Venture capital
• Rapid expansion and intensive spending to gain
  market share and brand recognition
• No concern for short-term profitability

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Kozmo.com crashes

• Painful lessons
• Hard to make money delivering low-priced
  convenience store items.
• Business model didnt work everywhere.
• Company founders are not necessarily its best
  managers.
• Difficult for a new firm to establish a
  profitable e-commerce business in an entirely new
  market niche.

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Ingredients for a business model

• Why should the costumer buy from you?
• How will you make money?
• What market (size) will you serve?
• Who are your competitors?
• What is your competitive advantage?
• What is your market strategy?
• How is your firm structured?
• What skills does you managerial team need?

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Well-suited for e-commerce

• In general, transactions that are well-suited for
  e-commerce involve commodity items, that is
  products or services that have become
  standardized.
• Sale/purchase of new books, CDs
• Online delivery of software
• Travel services
• Shipment tracking
• Auctions

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Not well-suited for e- commerce

• In general, products that the customer prefer to
  touch, smell or closely examine, are not very
  well-suited for e-commerce.
• Sale/purchase of high end fashion clothing
• Sale/purchase of perishable foods
• Sales of expensive jewelry and antiques
• Small denomination transactions
• The new trend of bricks and clicks is changing
  some of these issues.

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E-commerce revenue models

• How will the firm earn revenue, produce profits,
  and produce a superior return on invested
  capital?
• Advertising model
• Subscription model
• Transaction fee model
• Sales model
• Affiliate model

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E-commerce revenue models

• Advertising modela company provides a forum for
  advertisements and receives fees from advertisers
  (Yahoo)
• Subscription model a company offers its users
  content or services and charges a subscription
  fee for access to some or all of it offerings
  (Consumer Reports , Wall Street Journal, ESPN)

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E-commerce revenue models

• Transaction fee model a company receives a fee
  for enabling or executing a transaction (eBay,
  E-Trade, Autobytel)
• Sales model a company derives revenue by selling
  goods, information, or services (Amazon, Lands
  End, Dell, DoubleClick)
• Affiliate model a company steers business to an
  affiliate and receives a referral fee or
  percentage of the revenue from any resulting
  sales (MyPoints)

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B2C Portals

• Offers visitors a chance to find a variety of
  things news, sports, weather, search the web,
  online shopping
• Horizontal portals aggregate information about a
  broad range of topics (search engines)
  Yahoo!, MSN, Altavista
• Vertical portals offer services and products to
  specialized marketplaces
  WebMed, iBoats.com

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B2C E-tailers

• Virtual Merchants Online version of retail
  store. mazon peapod cdnow
• Bricks and clicks Online distribution channels
  for company with physical stores.Wal-Mart.com,
  barnesandnobles.com
• Catalog Merchant Online version of mail catalog.
  LandsEnd.com, One Step Ahead

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B2C E-tailers (cont.)

• Online shopping malls Online version of mall.
  Consumers use the malls shopping cart to process
  purchases from many stores in a single
  transaction. mall.com, shopnow.com
• Manufacturer direct Online sales made directly
  by manufacturer. Dell

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B2C Market Creators

• Auctions Web-based businesses the use Internet
  technology to create markets that bring buyers
  and sellers together. ebay, amazon
  auctions
• Dynamic Pricing Allows customers to choose their
  price for products and services.
  priceline, imandi
• Comparison Pricing allows customers to poll a
  variety of merchants and find a product at the
  lowest price mysimon

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More B2C models

• Content/service providers Sell and deliver news,
  services .. cnn.com, sportsline.com, xDrive
• Transaction Brokers Processors of online sales
  transactions, such as stock brokers and travel
  agents. EX E-trade.com, Expedia.com,Monster.c
  om
• Community Providers Sites where individuals with
  particular interests, hobbies can come together
  and compare notes. Ivillage.com

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B2B Hubs

• Are electronic marketplaces where suppliers and
  commercial purchaser can conduct transactions,
  gather information, check out suppliers, collect
  prices
• Vertical serve specific industries, such as
  steel , automobile, chemical, floral .EX
  Covisint (auto), Chemdex (science lab supplies)
• Horizontal sell specific products and services
  to a wide range of companies in different
  industries.EX Tradeout.com (auctions surplus
  equipment, excess inventory off the highest
  bidder in any industry) It was recently acquired
  by dovebid.com

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More B2B models

• B2B E-distributors companies that supply
  products and services directly to many individual
  businesses. The more products and services are
  available on the site the more attractive it is
  to potential costumers. Grainger
• B2B Service Providers Sell business services to
  other firms. Develop one complex product then
  sell it to many companiesSalesforce.com is an
  Application Service Provider, it sells access to
  Internet-based software applications for managing
  the sales force, for customer relation
  management etc

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More B2B models

• Matchmakers Companies that make money by linking
  other businesses and taking a cut of any business
  that occurs via a transaction or usage fee.
  Similar to transaction brokers in the B2C
  areaiship.com helps businesses find the cheapest
  shipper for their packages
• Infomediaries Gather information and sell it to
  businesses.