Title: Week 2 Retailing in Electronic Commerce ETailing
1Week 2Retailing in Electronic Commerce
(E-Tailing)
2Opening Case Amazon.com
- B2C business model where customers look for a
- Low price
- Fast shipment
- Good return policy
- Helpful customer service
3Opening 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
4Opening 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
5Opening 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
6Opening 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
7Opening 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
8Opening 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
9Opening 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
10E-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
11E-Tailing and B2C Market Growth (cont.)
- The B2C Market success is derived from
- Offering quality merchandise at good prices
- Excellent customer service
- Convenience
12E-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
13Consumer 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
14Figure 3-1The Consumer Purchase Decision Process
15Consumer Purchase Processand Marketing Plan
(cont.)
- Traditionalists
- Hunter-gatherers
- Brand loyalists
- Single shoppers
- Time-starved consumers
- Shopping avoiders
- New technologists
- Time-sensitive materialists or click-and-mortar
consumers
16Decision 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
17A 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
18Online 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
19Online 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
20Online 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
21Online 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
22Online 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
23E-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)
24Figure 3-2Disintermediation in the B2C Supply
Chain
Source M. Warkentin, et al. (2000). Used with
permission of Dr. Merrill Warkentin.
25E-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
26E-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
27E-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
28ODDS 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)
29ODDS 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
30Digital 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
31Table 3-2Digital Goods
32Digital 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
33Digital 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)
34Successful 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
35Successful 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
36Successful 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
37Disintermediation 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
38Channel 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
39E-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