Business to Consumer

1
Business to Consumer
e-Commerce
Presented by Carol Reavey, Kevin Keely and Martha
Harting
2
Who, What, How, When..

• Who is on the web?
• Who is the target customer?
• What vehicles can be used to reach the customer?
• How to Attract the right customer
• How to stand out amongst the pack?

3
Demographics

• Web and E-commerce Users

4
Weve got a new way to talk1
Total World Online Population 619 million
5
Everybodys Doing It!

• The Internet is in 20 nations
• E-commerce has 619 million potential customers
• This number is estimated to reach 948 million by
  2004

6
Who is doing it in the USA(2)

• The total population of internet users in the US
  is 112 million
• 94.2 million are White (4 growth vs 01)
• 7.8 million are black (3 growth vs 01)
• 7.6 million are Hispanic (13 growth vs 01)
• 2.4 million are Asian (6 growth vs 01)

7
Frequency vs. Purchase

• Only 2.8 of all surfers use the net primarily
  for purchasing product. This is an increase over
  2.6 in 4th Qtr 2001.
• The average purchase increased from 298 to 364
  in the 250 - 501 range.
• It also increase from 1,298 to 1,668 in the
  1,000 range.

8
E-Commerce Sales(10)

• E-commerce sales rose in the 2nd Qtr 3.7 over
  first quarter and 24.2 year over year
• The US Department of Commerce expects record
  e-commerce sales for the holiday season.

9
Doing it with what..(3)

• Household income is significant in the e-commerce
  game.
• 72 of the surfers in the gt75k bracket do
  product/service research

10
When Are We Surfing(4)

• 112 million Americans use the Internet
• 46 million use it primarily at work 17 higher
  than last year
• 20.4 million of the workers are women up by 23
• Men (of course) make up the remaining 25.3
  million surfers 12 increase over 2001

11
Its a mans world

• Men dominate internet usage in the USA
• Men view an average of 1900 pages versus 1700
  pages for women
• 36 of the male usage is for adult entertainment.
  This is 8 for women.

12
Mom is Surfing More(5)

• American Moms are on-line an average of 16 hours
  and 52 minutes every week.
• Teens log about 12 hours and 17 minutes per week.
• Moms and Hispanics are the fastest growing
  groups of surfers.
• This may change the way companies market and
  target customers.

13
Top 5 Activities(6)

• The primary reason for logging on is E-mail.
• Products/Services activities have increased 7
  over last year.
• Women are sending the greeting cards and entering
  the sweepstakes (61).

E-mail 93
Search Engine 79
Research products/services 63
Local Information 60
Sweepstakes 59
14
Buzz Words(7)

• To increase strikes the week of October 5th 2002
  web content could have included these
• Halloween
• Dragonball
• KaZaA
• Costumes
• NFL
• Tatoos
• Hurricane Lilli
• Britney Spears
• Yu-Gi-Oh!
• The Bible

15
What the E-Shopper Wants(8)
Courteous and respectful employees 73
Consistently good merchandise quality 70
A clean and well-maintained store 69
Unconditional return of merchandise 69
Visible prices 68
16
Service versus Price

• Honest Price is more important than lowest
  price to 64 of the American consumers
• Consistently good merchandise quality was seen
  as essential to 70 of the consumers

17
Balancing Ethical Issues

18
Mis-Trust(7)

• Many Consumers wont by on-line because they
  dont trust the process
• 68 of the consumers trust small business
• 58 trust the newspapers and television
• 55 trust financial institutions (banks,
  insurance companies)
• 54 trust charities and non-profit organizations
• 47 trust the government
• 29 trust the e-commerce community!

19
SPAM(8)

• SPAM is an ever-increasing issue
• Hotmail estimates that 10 (1.3million) of the
  daily messages sent through Hotmail are SPAM
• 10 of the working day is spent deleting SPAM

20
The Choice isnt much of a Choice
21
Selling your e-mail info(9)

• Failed dot.coms have sold private information
• They follow the letter of the Opt Out law by
  selling their web site and all the names with it.
  
• Its a common business practice to rent your
  customer database Cheryl Regan spokesperson for
  Network Solutions Inc.

22
E-Commerce Phase Two

• What can we expect to see in the sector as the
  second era of e-commerce gathers steam?

23
New Technologies

• Automating processes
• Reducing costs in customer service
• Streamlining replenishment
• Streamlining aftermarket selling opportunities

24
Spending Mix

• Initial Phase
• Computers
• Brokerages
• Travel
• Books and Music
• Auctions
• Generated 75 of Sales(1)

25
Spending Mix

• Current Phase
• Only 50 of online sales
• Clothing, pharmaceuticals, groceries,
  communication services and general merchandise
  make up the other 50.
• Groceries went through a valley last year but may
  rebound this year.

26
Multichannel Selling

• Systems allow customers to reserve product online
  for in-store pickup.
• Manufacturers sell direct
• Retailers fear of channel conflicts has faded.

27
Real-Time rules

• Investing in real-time capabilities to manage
  orders.
• Real-time order processing can increase order
  fulfillment accuracy and productivity by 50.(2)
  
• Real-time supply chain and inventory lets
  companies know what they have and when its
  coming.
• Reduce or eliminate stock-outs and overstocks.

28
Improved Profitability

• Improved profitability spurred by innovations.
• Analyst predict a 20 year-over-year growth.(3)

29
The Seven Habits of Highly Effective Web Sites(6)

• Personable
• Remembrance(4)
• Flexible Interaction
• User Profiling
• Abstract Interaction(5)
• Context Creation and Use
• Dialogue Structuring and Management

30
Five E-Commerce Trends to Watch
31
Trends

• Multichannel Retailing(7)
• Increased Customer Satisfaction(8)
• Consumers do their own thing(9)
• Death of the Mid-Size E-tailer
• More Profit 70 of the top 40 sites are
  profitable versus 30 last year.

32
Business Models on the Web(10)

• Business models are perhaps the most discussed
  and least understood aspect of the web.
• The web changed traditional business models.
• Little clear-cut evidence of exactly what this
  means.
• Auctions An old way of doing business
  popularized and broadened.(11)

33
Models Continues

• Varied Implementation
• Blended Models
• Intellectual Patents

34
Categories of Business Models
Brokerage Advertising
Infomediary Merchant
Manufacturer Affiliate
Community Subscription
Utility Utility
35
Brokerage Model

• Marketplace Exchange Orbitz
• Buy/Sell Fulfillment CarsDirect
• Demand Collection System - Priceline.com
• Auction Broker - eBay
• Transaction Broker PayPal
• Bounty Broker BountyQuest
• Distributor Quest
• Search agent - Deal time
• Virtual Mall - ChoiceMall

36
Advertising Model

• Portal Yahoo
• Personalized Portal - MyYahoo
• Niche Portal - iVillage
• Classifieds - Monster.com
• Registered Users - Anytime's Digital
• Query-based Paid Placement Google
• Contextual - Gator

37
Infomediary Model

• Advertising Networks DoubleClick
• Audience Measurement Services Nielson
• Incentive Marketing - MyPoints
• Metamediary - Edmunds

38
Merchant Model

• Virtual Merchant - Amazon.com
• Catalog Merchant - Lands End
• Click and Mortar - Barnes Noble
• Bit Vendor - Eyewire

39
Community Model

• Content Service - Netflix
• Person-to-person Networking Services Classmates
• Trust Services - Truste

40
Subscription Model

• Voluntary Contributor Model - WCPE.org
• Knowledge Networks AllExperts
• Internet Service Provider - AOL

41
Other Models

• Affiliate Model - Amazon.com
• Manufacturer Model Dell
• Utility Model - Slashdot

42
Three Different Business Models
43
(No Transcript)
44
e-Bay is 1

• e-Bay is the 1 in sales.(12)
• 1.1 billion in revenues in 2002
• Earnings .73 - .75 per share.
• Brokerage model / Auction Broker / Transaction
  Broker.

45
Holiday Strategy

• Printed Catalogs in 2001
• Amazon.com is copying the idea.
• Bidders wait to find out if they won, e-Bay
  instituted a buy it now feature.
• Also advertised on AOL Time Warner cable and
  network outlets to promote their site for holiday
  gifts. (13)

46
(No Transcript)
47
Amazon.com is 2

• Amazon.com is 2 with Online sales to U.S.
  consumers estimated between 1.7 1.9 billion.
  (14)
• Amazon made a profit for the first time, in the
  last quarter. It has not made a profit for a
  fiscal year.
• Merchant Model / Virtual Merchant

48
Product Offering

• Free electronic greeting cards
• On-line auctions
• Millions of books, CDs, videos, DVDs,
• Toys and games
• Electronics
• Kitchenware
• Computers and more(15)

49
Holiday Strategy

• Free Shipping

50
(No Transcript)
51
Quixtar.com is 7

• 400-450 million in sales in the U.S. (16)
• Privately Held
• Believed to be profitable.
• No marketing expenses
• Company world-wide sales for fiscal 2002 where
  4.5 billion. (17)
• Unique Merchant Model could be Virtual Merchant
  / Catalog Merchant

52

• Amway - Person-to-person multilevel marketing.
• In business since 1959
• Manufacture items for nutrition, wellness, beauty
  and home products. Vitamins, food supplements and
  cosmetics are among the company's leading global
  brands.
• Manufacturers pay to have products sold.
• Order a car direct from the manufacturer
  delivered to the nearest dealership.
• Bass Pro, Chevrolet, Ford, IBM, are just a few
  companies that allow direct selling from Quixtar.

53
Pay to Use and Earn

• Pay to use this site.
• IBO to purchase from this site.
• Earn bonuses or cash based on product sales.
• Currently 3.3 million distributors that teach
  their people how to shop the site.
• Infrequent catalog distribution.

54

• Could other models be used to describe this
  e-tailer? Which models?

55
e-Commerce Steps to Success

• Gain Trust
• Personalization
• Multi-channeling

56
Gaining Trust Online1

• Why dont consumers trust cyberspace?
• No close physical presence
• Incomplete, ambiguous physical location
• No people to talk to
• Reputation, size, and background unknown
• History of security and privacy problems
• Privacy invasion and abuse of customer
  information
• Potential for misrepresentation and fraud
• On the Internet nobody knows that you are a dog

57

• How to gain trust online
• Similar backgrounds
• Translate into customers language
• References regarding adherence to local
  regulations and business practices
• Promotional campaigns to stimulate repeat
  business
• Personalization
• Photos and video clips of store owners
• Order confirmation
• Stronger product warranties
• Customer support
• Reputation
• Trust can be transferred link site to other
  reputable sites
• Easier to obtain when part of a large chain

58
Level of Trust Online2
Financing/banking has successfully gained trust
online, while other uses have declined in overall
trust.3
59
The Personal Touch4

• Benefits
• Forms a relationship with the customer
• Increases trust
• Increases sales and repeat business
• Difficulties
• Gathering data
• Analyzing data
• Utilizing data
• Expense

60
Personalization on the Web5

• Virtual 3D models Lands End
• Live chat feature Lands End
• E-mail reminders Drugstore.com
• Suggestions for visitors American Greetings and
  1-800-Flowers.com
• One-click shopping Amazon.com
• Records of previous purchases Office Depot
• Smart recommendation engines Amazon.com6

61
Multi-channeling

• The Future of E-Commerce?

62
The Channels

• Web Site Click and Mortar Store
• Brick and Mortar Store
• Catalog
• The more channels a customer uses, the more
  valuable they are to a business.7
• (e.g., JC Penney found their 3-channel customers
  are worth 1000/year 2-channel customers
  700/year 1-channel customers only 300/year.)

63
The New Customer8

• Customers want old-fashioned service with all the
  new tools and convenience
• According to Brylane e-commerce, web sites have
  to Sail the Seven Cs
• You must Combine Customized Content, Community
  and Commerce to provide Control and Convenience.

64
Benefits of Multi-Channel Integration9

• Capture sales regardless of channel
• Build and strengthen customer loyalty
• Improve direct marketing efforts
• Seamless service experience
• Improved demand planning and product distribution
• Increased revenue and gross margin

65
Disadvantages of Multi-Channeling9

• Costs (specialty or medium-sized department
  store)
• Brick and mortar costs range from an average of
  8 to 28 million for startup and can expect to
  break even in about two years
• E-commerce sites cost 73 million to 1.2 billion
  break-even volume
• May not generate positive returns quickly
• May distract from core business
• Active shoppers may prove to be a liability10
• More deal driven
• Look for costly site features such as live help

66
Tier 1 - Multi-Channel Functionality Low Risk9

• Accept returns in physical store without
  exception
• Offer store pickups
• Accept retail store credit card online
• Provide basic customer service
• Frequently asked questions, how-to guides,
  warranty information, etc.
• Retail store locator information
• Coordinate logo, information, graphics, etc.
• Consistent messaging across all channels
• Use e-mail campaigns to reinforce marketing
  efforts along with direct mail, billing inserts,
  and other promotional advertising

67
Tier 2 Multi-Channel Functionality Some Risk9

• Install in-store kiosks for online ordering
• Integrate loyalty and registry programs
• Implement ERMS (e-mail response management system)

68
Tier 3 Multi-Channel Functionality
Substantial Risk9

• Web-enable point of sale (POS) systems to bring
  the Internet into the store (very expensive)
• Use hand-held/wireless devices process web/store
  orders.
• Implement guided merchandising use customer
  relationship information and blend with product
  descriptions and merchandising rules

69
Multi-Channel Leaders9

• Office Supply Retailers
• Office Depot
• OfficeMax
• Staples
• Consumer Electronic Retailers
• Circuit City
• Best Buy
• CompUSA
• Others
• Department Stores-Sears, JC Penney
• Pharmacies-Walgreens
• Discount Stores WalMart, K-Mart, Target

70
Multi-Channel Challenges8

• Plan promotions as a single company with multiple
  channels, not separately
• Integrate online into offline
• Promote web benefits and URLs in all
  communications
• Promote offline into online
• Mention in-store promotions, store locators
• Provide catalog requests
• Pay attention to time-sensitivity
• Just because e-mails can be sent quickly, this
  does not guarantee that your target market will
  be accessed immediately or that it will even be
  read at all.

71
Keys to Multi-Channel Success9

• Integrate in stages
• Evaluate the organizational impact
• Implement the right multi-channel approach for
  your business
• Get the organization ready
• Collect customer data determine target
  customers
• Focus on customer incentives
• Pricing
• Return policies
• Support

72
Most Popular Web Sites11

• Nielsen Net Ratings for Week Ending 10/13
• Top Sites Overall

73
Most Popular Web Sites11

• Sports
• Entertainment
• Music
• Movie
• TV
• News

74
Sources for Demographics

1. Global Internet Statistics (by Language)
   www.global-research.biz/globstats/index.php3
   (9/30/02)
2. Saunders, Christopher, Latinos Outpace Other
   Groups On-line growth www.cyberatlas.internet.com
   /big_picture/demographics/article/0,,5901_1428231,
   00.html 10/20/02.
3. Greenspan, Robyn, High-Speed Connects
   High-Income Homeswww.cyberatlas.internet.com/marke
   ts/article/0,,10099_1467471,00.html9/20/02.
4. Cyberatlas staff, Traffic Patterns for August
   2002 www.cyberatlas.internet.com/big picture.com
   (9/12/02).
5. Saunders, Christopher, Moms, Hispanics
   Increasing Web Use www.cyberatlas.internet.com/big
   _picture/demographics/article/0,,5901_1041581
   (05/08/02).
6. Greenspan, Robyn, American Surfers Keep It Simple
   www.cyberatlas.internet.com/big_picture/geographic
   s/article/0,,5901_1466661.html 9/19/02

75
Demographics Cont.

• 7.     Greenspan, Robyn, Consumers Rank Trust
  Above Low www.cyberatlas.internet.com/marketing/r
  etailing/article/0,60611014831.html4/23/02.
• 8.    Staff, Spam poses threat to privacy BBC
  News World Edition, Technoligies 10/16/02
• 9. Greg Sandavol, Failed dot-coms may be
  selling your private information
  www.news.com/2100-1017-242649.html 06/29/00
• 10. U.S. Commerce www.uscomerce.gov 10/20/02

76
Sources for the Second Phase

1. LeClaire, Jennifer, Phase Two for E-Commerce,
   E-Commerce Times 8.1 (2002), 26 Oct 2002,
   http//www.ecommercetimes.com/perl/story/18840.htm
   l
2. LeClaire, Jennifer, Phase Two for E-Commerce,
   E-Commerce Times 8.1 (2002), 26 Oct 2002,
   http//www.ecommercetimes.com/perl/story/18840.htm
   l
3. LeClaire, Jennifer, Phase Two for E-Commerce,
   E-Commerce Times 8.1 (2002), 26 Oct 2002,
   http//www.ecommercetimes.com/perl/story/18840.htm
   l
4. Martin, Mike, The Seven Habits of Highly
   Effective Web Sites, CRM Daily.com, 9.3 (2002),
   26 Aug. 2002, http//www.crmdaily.com/perl/story/1
   9270.html
5. Martin, Mike, The Seven Habits of Highly
   Effective Web Sites, CRM Daily.com, 9.3 (2002),
   26 Aug. 2002, http//www.crmdaily.com/perl/story/1
   9270.html

77
Phase Two Cont.

• 6. Martin, Mike, The Seven Habits of Highly
  Effective Web Sites, CRM Daily.com, 9.3 (2002),
  26 Aug. 2002, http//www.crmdaily.com/perl/story/1
  9270.html
• 7. Regan, Keith, Five E-Commerce Trends to
  Watch. E-Commerce Times, 3.3 (2002), 26 Aug
  2002, http//www.ecommercetimes.com/perl/story/169
  67.html
• 8. Regan, Keith, Five E-Commerce Trends to
  Watch. E-Commerce Times, 3.3 (2002), 26 Aug
  2002, http//www.ecommercetimes.com/perl/story/169
  67.html
• 9. Regan, Keith, Five E-Commerce Trends to
  Watch. E-Commerce Times, 3.3 (2002), 26 Aug
  2002, http//www.ecommercetimes.com/perl/story/169
  67.html 10. Rappa, Michael, Business Models on
  the Web Managing the Digital Enterprise, 27 Aug
  2002, http//www.digitalenterprise.org/models/mode
  ls_text.html
• 11. Rappa, Michael, Business Models on the Web
  Managing the Digital Enterprise, 27 Aug 2002,
  http//.digitalenterprise.org/models/models_text.h
  tml

78
Phase Two Cont.

• 12. Top 100 Internet Retailers, Russell
  Reynolds Associates, 7.6 (2002), 24 Aug 2002,
  http//www.stores.org/archives/ootop100int_.html
  
• 13. Saunders, Christopher, e-Bay Taps Catalogs
  for Holiday Push Ecommerce News, 11.27 (2001),
  26 Aug 2002, http//ecommerce.internet.com/news/ne
  ws/print/0,,10375_929661,0... 14. Top 100
  Internet Retailers, Russell Reynolds Associates,
  7.6 (2002), 24 Aug 2002, http//www.stores.org/arc
  hives/ootop100int_.html
• 15. About Amazon.com, Amazon.com, 27 Aug 2002,
  http//www.amazon.com/exec/obidos/subst/misc/compa
  ny-info.html
• 16. Top 100 Internet Retailers, Russell
  Reynolds Associates, 7.6 (2002), 24 Aug 2002,
  http//www.stores.org/archives/ootop100int_.html
• 17. Alticor Inc, 26 Aug 2002,
  http//www.alticor.com/news/pop_alticor_fact.html
  

79
Sources Step to Success

1. Jarvenpaa, S., and Grazioli, S. Surfing among
   sharks how to gain trust in cyberspaceMastering
   Informational Management. Prentice Hall, London,
   2000. pgs 197-201.
2. Greenspan, Robyn. More Users, Less Trust.
   http//www.cyberatlas.internet.com/markets/retaili
   ng/print/0,,6061_1483061,00.html, 10/24/2002.
3. Taylor, Charlie. Banking on success
   http//www.nua.ie/surveys/analysis/weekly_editoria
   l/archives/issue1no316.html, 10/30/2002.
4. Walsh, John. Websites with a personal touch
   Mastering Informational Management. Prentice
   Hall, London, 2000. pgs 201-204.
5. Regan, Keith. The Best of E-Commerce E-Commerce
   Times http//www.ecommercetimes.com/perl/story/193
   23.html, 11/5/2002.
6. Hirsh, L, and LeClaire, J. Kings of Repeat
   E-Business E-Commerce Times http//www.crmdaily.c
   om/perl/printer/19137/, 10/30/2002.

80
Step for Success Cont.

1. Bartram, Michelle. Multi-Channel Secrets to
   Success http//www.webpractices.com/slideshows/Mu
   ltichannel20Success/multi_2Tech.pdf, 10/30/2002.
2. Bartram, Michelle. Multi-Channel Secrets to
   Success http//www.webpractices.com/slideshows/Mu
   ltichannel20Success/multi_2Tech.pdf, 10/31/2002.
3. Multi-Channel Integration, A Retailers
   Perspective Escalate http//www.escalate.com/whit
   epaper3.html, 10/31/2002.
4. Cox, Beth. Are Multi-Channel Shoppers a
   Liability? http//www.internetnews.com/ec-news/ar
   ticle.php/1442631, 11/5/2002.
5. Internet Nielsen Net Ratings Nielsen Net
   Ratings for Week Ending 10/13. http//alliance.zap
   2it.com/zap2it/zp_int_nielsen_net_ratings/1,1648,1
   73__,00.html, 10/30/2002.