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Week 2 Retailing in Electronic Commerce ETailing

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Week 2. Retailing in Electronic Commerce (E-Tailing) Opening Case: Amazon.com ... PriceGrabber.com comparison shopping. E-Tailing Business Models ... – PowerPoint PPT presentation

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Title: Week 2 Retailing in Electronic Commerce ETailing


1
Week 2Retailing in Electronic Commerce
(E-Tailing)
2
Opening Case Amazon.com
  • B2C business model where customers look for a
  • Low price
  • Fast shipment
  • Good return policy
  • Helpful customer service

3
Opening Case Amazon.com (cont.)
  • Largest Bookstore in the world
  • Offers millions of items
  • Books and music
  • DVDs and videos
  • Toys and video games
  • Electronics and software
  • Home improvement products

4
Opening Case Amazon.com (cont.)
  • Started business in 1995
  • Sales
  • 1996 15.7 million
  • 2000 1.8 billion
  • Products
  • 1999 5 million titles
  • 2000 13 million books, music, DVD/video titles

5
Opening Case Amazon.com (cont.)
  • Auctions
  • Hosts and operates auctions for individuals and
    small businesses
  • zShops, Amazon marketplace, Amazon payment
    processing
  • Provide the opportunity for small businesses to
    develop custom storefront
  • Storefronts are supported by Amazons backend
    order fulfillment processing

6
Opening Case Amazon.com (cont.)
Features
  • Broad selection and low prices
  • Secure payment system (1-Click order technology)
  • Gifts department
  • Online community
  • Secured payments
  • Easy browsing and searching
  • Useful product information
  • Reviews, recommendations, and personalization

7
Opening Case Amazon.com (cont.)
  • Customer relationship management
  • Creates interesting and informative front-end
  • Highly automated and efficient back-end support
  • Personalized service
  • Return customers are welcomed back by name
  • Customer wish lists available
  • E-mails customers purchase recommendations based
    on their purchasing history

8
Opening Case Amazon.com (cont.)
  • Financial performance
  • Overall losses rather than profits
  • Ability to move into new areas of business should
    move them toward profitability, but makes money
    from books
  • High level of customer service and customer
    loyalty adds value

9
Opening Case Amazon.com (cont.)
  • Diversification through business alliances
  • Online sale of cars - greenlight.com
  • Online health and beauty aids - drugstore.com
  • Wireless phones multiple business partners
  • Toys - ToysrUs.com

10
E-Tailing and B2C Market Growth
  • Business-to-business (B2B)
  • Requires precise record keeping, trackability,
    accountability, and formal contracts, usually
    with high volume of transactions and large amount
    payments
  • Also online retailing
  • Business-to-consumer (B2C)
  • Ability to create direct relationships with
    consumer without intermediaries like
    distributors, wholesalers, or dealers

11
E-Tailing and B2C Market Growth (cont.)
  • The B2C Market success is derived from
  • Offering quality merchandise at good prices
  • Excellent customer service
  • Convenience

12
E-Tailing and B2C Market Growth (cont.)
  • Characteristics of goods leading to high online
    sales volumes
  • Brand recognition and guarantees
  • Digitized products
  • Frequently purchased, inexpensive items
  • Well-known items with standard specifications

13
Consumer Purchase Processand Marketing Plan
  • Purchase decision process
  • Prepurchase steps
  • Awareness of need for purchase
  • Identify basic need or want
  • Actual purchase
  • Establish decision criteria
  • Seek recommendations and information
  • Make purchase
  • Postpurchase steps
  • Assistance with installation or setup
  • Online help desks and instruction manuals

14
Figure 3-1The Consumer Purchase Decision Process
15
Consumer Purchase Processand Marketing Plan
(cont.)
  • Types of online shoppers
  • Traditionalists
  • Hunter-gatherers
  • Brand loyalists
  • Single shoppers
  • Time-starved consumers
  • Shopping avoiders
  • New technologists
  • Time-sensitive materialists or click-and-mortar
    consumers

16
Decision Criteria
  • Value propositioncustomer service, better
    prices, higher quality
  • Personal servicetreat the customer as a unique
    individual
  • Convenienceself-contained site that serves all
    the customers needs
  • Other criteriaservice after the sale

17
A Marketing Plan
  • Influence the consumers decision process through
    the marketing mix
  • Productportfolio of items available
  • Price of the products
  • Promotion of products (advertisements and
    giveaways)
  • Packaging and delivery

18
Online Purchasing Aids
  • Shopping portals
  • Comprehensive portals
  • Links to many different sellers
  • Shopping comparison sites
  • Comparison tools are available
  • Niche oriented
  • Specialize in a certain line of products
    (dogtoys.com)
  • Some collect referral fee only
  • Others have formal relationships with affiliates

19
Online Purchasing Aids (cont.)
  • Shopbots and agentstools that scout the Web for
    specific search criteria requested by consumers
  • Mysimon.com - best prices on multiple items
  • AutoBytel.com cars
  • Zdnet.com/computershopper computers
  • Office.com office supplies

20
Online Purchasing Aids (cont.)
  • Business ratings sitessites that rate e-tailers
  • Bizrate.comcompiles results provided by a
    network of shoppers
  • Gomez.comconsumer identifies relative importance
    of different criteria

21
Online Purchasing Aids (cont.)
Trust verification sitesevaluate and verify
trustworthiness and integrity of e-tailers
  • TRUSTe seal of assurance
  • E-tailers pay TRUSTe for use of seal
  • Hope consumers use seal as proxy for actual
    research about their site
  • BBBOnLine
  • Yearly license fees based on companys annual
    revenue
  • Secure Assure
  • Yearly license fees based on companys annual
    revenue
  • Ernst and Young
  • Created its own service for auditing e-tailers
  • Offers some guarantee of integrity of business
    practices

22
Online Purchasing Aids (cont.)
  • Other shopping tools
  • Escrow services3rd party to assure quality
  • Proper exchange of money and goods
  • Research information
  • Payment-processing support
  • Communities of consumers
  • Epinions.comsearchable recommendations on
    products
  • PriceGrabber.comcomparison shopping

23
E-Tailing Business Models
  • Subscription models charge monthly or annual
    subscription fee for service
  • Transaction fee models charge service fee based
    on the level of transaction offered
  • Advertising-supported models charge fee to
    advertisers instead of customers
  • Sponsorship models companies sponsor the
    business through donations (usually supplemental
    income)

24
Figure 3-2Disintermediation in the B2C Supply
Chain
Source M. Warkentin, et al. (2000). Used with
permission of Dr. Merrill Warkentin.
25
E-Tailing Business Models (cont.)
  • Direct marketingsell directly to consumers
  • Manufactures can sell directly to customers
  • Disintermediationremoval of business process
    layers in the value chain
  • Shortens the distribution chain
  • Eliminates inefficiencies
  • Shortens delivery time
  • Builds closer relationships with consumers
  • Click-and-mortar
  • Additional marketing channel to the conventional
    one
  • Effectively supports build-to-order requests

26
E-Tailing Business Models (cont.)
  • Pure-play e-tailerssell over the Internet
    without a physical sales channel
  • General purpose e-tailers (Amazon.com)
  • Broad range of products
  • Large number of consumers
  • Specialty or niche e-tailers (CatToys.com)
  • One specific product area
  • High demand items in the area
  • Effective practices for customer appeal

27
E-Tailing Business Models (cont.)
  • Traditional retailers with Web sites
  • Physical store
  • May include mail-order or catalog sales
  • Multichannel store operates both
  • Physical store
  • E-tail site

28
ODDS Grocery Market Case
  • On-Demand Delivery Services (ODDS)
  • Own fleet of delivery vehicles
  • Regular deliveries (weekly bases)
  • Delivery within short time period (1 hour or same
    day)

29
ODDS Grocery Market Case (cont.)
  • Potential online grocery shoppers
  • Shopping avoiders
  • Necessity userslimited by their ability to shop
  • New technologists
  • Time-starved consumers
  • Responsible consumers
  • Traditionals
  • Repeat customers
  • Example Parknshop in Hong Kong

30
Digital Delivery
  • Digital (soft) goods
  • Music, movies, videos, software, newspapers,
    magazines, graphics, etc.
  • Can be delivered in hard or soft form
  • Computer program on CD-ROM with owners manual
    and warranty card
  • Download from Web site after payment

31
Table 3-2Digital Goods
32
Digital Delivery (cont.)
  • Napster experienceperson-to-person sharing tool
  • Enables individual users to download music files
    from each others computers
  • Phenomenal growth of Napster community
  • New version of its file-swapping software
    includes a buy button linked to CDNow
  • May be beneficial to overall music sales as
    individuals easily sample a broader range of
    music

33
Digital Delivery (cont.)
  • New developments
  • Custom-publishing music CD sitescollection of
    personal favorites
  • Disintermediation of traditional print media
  • Journals and magazines
  • Newspapers (e.g., Wall Street Journal)

34
Successful Click-and-Mortar Strategies
  • Click-and-mortar hybrid strategies
  • Speak with one voicelink all back-end systems to
    create an integrated customer experience
  • Empower the customerpowerful channel for service
    and information
  • Leverage the channelsoffs advantages of each
    channel to customers from all channels
  • Return item purchased online at physical store
  • Order via the Web at the physical store items not
    available there

35
Successful Click-and-MortarStrategies (cont.)
  • Circuit City Case transform to click-and-mortar
    (CircuitCity.com)
  • Educates customers about features and
    capabilities of products
  • Customers can perform powerful searches to find
    most appropriate products
  • Offers extensive amount of information on
    electronics etc., organized very flexibly
  • Online purchases are smooth, secure and seamless

36
Successful Click-and-MortarStrategies (cont.)
  • Amazon and Toys R Us alliance of pure-play with
    traditional retailer
  • Toys R Us had limited logistics capabilities
    including distribution centers
  • Amazon failed in the toy market lacking supplier
    relationships with toy manufacturers
  • Alliance allows each partner to leverage each
    others core strengths
  • Innovative model still working out problems

37
Disintermediation Reintermediaries
  • Disintermediationmanufacturer sells directly to
    consumer
  • Reintermediariesnew intermediary roles in the
    digital environment offer new ways to
  • Reach new customers
  • Bring value to customers
  • Generate revenues

38
Channel Conflict Personalization
  • Channel conflictmembers antagonistic over
  • Incentives
  • Rewards
  • Policies
  • Support
  • Personalizationcustom designed marketing plan
  • Tailored to buying patterns
  • Appeal to sense of value
  • Excellent customer service
  • Mass customization

39
E-Tailing Lessons Learned
  • Profitabilityonline marginal sales dont lead to
    marginal profits
  • Brandingdrive to establish brand can lead to
    excessive spending
  • PerformanceWeb sites need to function in a fast,
    user-friendly manner
  • Static designdynamic sites with rich databases
    of information appeal most to customers
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