Electronic Commerce: Business Models, Strategies, Investment and Implementation in the Network Economics August, 2008 - PowerPoint PPT Presentation

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Electronic Commerce: Business Models, Strategies, Investment and Implementation in the Network Economics August, 2008. Minder Chen, Ph.D. Associate Professor of Management Information Systems E-Mail: minder.chen@csuci.edu or minderchen@hotmail.com

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Electronic Commerce: Business Models, Strategies, Investment and Implementation in the Network EconomicsAugust, 2008

Minder Chen, Ph.D.

Associate Professor of Management Information Systems

E-Mail: minder.chen@csuci.edu or minderchen@hotmail.com

Web site: http://faculty.csuci.edu/minder.chen/

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  • EC Books 

  • 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

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Course Description

This course provides an overview of Electronic Commerce and Electronic Business based on new E-conomy (network economics) and unique characteristics of underlying web technologies. Topics covered include: electronic commerce overview, network economics, EC models and strategies, EC case studies, e-business components such as Enterprise Resource Planning and Customer Relationship Management from a reengineering process viewpoint; Internet and web technologies including web technologies, electronic payment systems, and Internet security. Critical success factors for building a successful EC will be discussed.

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Seminar Leader

Dr. Minder Chen received a B.S. in Electrical Engineering from National Taiwan University in 1977, an M.B.A. from National Chiao Tung University in 1983, and a Ph.D. in Management Information Systems from the University of Arizona in 1988.

He is currently Associate Professor of Management Information Systems and Decision Science and served as the Director of Technology Program (an Executive Master Program in Information Technology Management) in the School of Management at George Mason University. He has taught Executive MBA and undergraduate level courses in electronic commerce, as well as Business Process Reengineering and Change Management; Technology Assessment, Evaluation, & Investment; Global Information Technology Management at the Executive Technology Management master program.

He is the President of Advanced Information Technology Consulting (U.S.A), a consulting firm specialized in business engineering, electronic commerce, and emerging technologies. He is also one of the founder and Chief Technology Officer of KITE E-Commerce Training and Consulting Inc. (Taiwan). His primary research interests are electronic commerce, computer-aided instruction, collaborative and organizational learning, information engineering and business reengineering, computer-aided software engineering, client/server computing, collaboration technologies (groupware), and object-oriented systems development methodology. He has published papers in Journal of Management Information Systems, Database, Journal of Organizational Computing, Expert Systems with Applications, IEEE Transactions on Knowledge and Data Engineering, IEEE Transactions on Systems, Man, and Cybernetics, Journal of Small Group Research, and IEEE Software.

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Continued ...

He has been involved in studying methods and tools for business process reengineering and software reuse for DOD's Corporate Information Management Office. He has also worked with governments and private-sector businesses, such as Fairfax County Government, US Court, Industrial Technology Research Institute, DOD Center for Information Management, American Management Systems, and Wizdom Systems Inc. in their information engineering, client/server migration, and business reengineering efforts by providing them with training and consulting services. He has given presentations and one- to three-day business reengineering and electronic commerce and other advanced IT seminars in U.S., China (for Everbright Group), Taiwan (via National Taiwan University and Corporate Synergy Development Center), Singapore, and Hong Kong. Dr. Chen is also a well-known expert in systems development methodology, integrated CASE tools, and groupware. He has provided training courses such as HTML, DHTML, XML, JavaScript, Web Site Development and User Interface Design, IIS, ASP, ColdFusion, electronic commerce, CASE tools, Information Strategy Planning, Information Engineering methodology, client/server computing using PowerBuilder and Visual Basic for many firms, such as AT&T, Logicon, PSINet, KForce.com, TRW Inc., BDM, BTG, Lockheed Martin, International Monetary Funds, Computer Sciences Corporation, and Marriot Hotel.

He is the co-guest-editor of the March 1992 IEEE Software special issue on Integrated CASE, a CASE minitrack coordinator of Hawaii International Conference on Systems Sciences for several years, a program committee member of Methods and Tools for Business Engineering 1995 Conference, an international program committee member of 1995 Pan Pacific Conference on Information Systems.

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Outline (I)

EC Introduction


The cycle of electronic commerce

EC and Business Process

EC statistics

Network Economy and Dynamic Trade

Information rules

Network externality and network economics

New supply and demand curves

Dynamic trade

EC Strategies

4Cs strategy

Content, Community, Commerce

Revenue streams

E-conomy Map and EC Strategies

EC Business Models

B2C Virtual stores: physical and digital goods and services

Infomediaries: Seller-side

Informediaries: Buyer-side

Infomediaries: B2B marketspace

EC Case Studies:

B2B: verticalnet.com

Auction: eBay

Subscription web sites: monster.com

e-tailing: 1800flowers.com

Financial investment sites: E*Trade

Other interesting web sites

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Outline (II)

E-Business and Extended Enterprise

Defining e-business and extended enterprise

Supply Chain Management

Customer Relationship Management

Business-to-business analysis

Case Studies



Federal Express


Web Technology and EC Software Overview

Internet infrastructure and services

Web technology overview

EC software

Internet Security and Electronic Payment Systems

  • EC Implementation

    Evolution of EC implementation

    EC site life cycle

    EC site design issues

    Promotion and marketing

    Net readiness evaluation

  • EC Investment and Opportunities

    Internet / EC industry analysis

    EC Firms and Stock market

    EC investment pyramid

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EC Introduction

  • Introduction

  • The cycle of electronic commerce

  • EC and business process

  • EC statistics

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Electronic Commerce: Introduction






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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.

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Market Relationships

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Microsoft expedia


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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.

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The Cycle of Electronic Commerce





Follow-on Sales


Online Ads

Online Orders

Standard Orders


Online: soft goods

Delivery: hard goods

Electronic Customer Support

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Components of Electronic Commerce



  • Marketing

  • Sales

  • Payment

  • Fulfillment

  • Support

  • Government

  • Merchants

  • Manufacturers

  • Suppliers

  • Consumers




  • Intranet

  • Extranet

  • Internet

Source: adapted from David Kosiur, Understanding Electronic Commerce, Microsoft Press, 1997.

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Generic Framework of Electronic Commerce

Electronic Commerce Applications

Supply Chain Management Online Marketing and Advertising

Procurement & Purchasing Online Shopping

Audio and Video on Demand Online Financial Transaction

Entertainment and Gaming Education and Research

Common Business Services Infrastructure

(Security/Authentication, Electronic Payment, Directories/Catalogs)

Technical standards for electronic documents, multimedia contents, business transactions, and network protocols

Public policy, legal, economical development, and privacy issues

Multimedia Content & Network Publishing Infrastructure

(Digital Video, Electronic Books, World Wide Web)

Messaging & Information Distribution Infrastructure

(EDI, E-Mail, HyperText Transfer Protocol)

Information Superhighway Infrastructure

(Telecom, Cable TV, Wireless, Internet)

Adapted from: Kalakota and Whinston, Frontiers of Electronic Commerce, Addison Wesley, 1996, p. 4.

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EC and Business Processes




fax, e-mail

Send info

Request info










Identify need

Find source

Evaluate offerings


Operate, Maintain, Repair

Data sheets, catalogs, demos

Web surfing

Web searches, web ads

Web site




Corporate Databases



Web site

Credit cards, e-cash



Deliver soft goods electronically

Web site, phone,

fax, e-mail, e-mailing list

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World Wide Internet Commerce

Forester Research, Inc. June 1999

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Business Internet Commerce Trends

B2C: Business to Consumer

B2B: Business to Business

Reference: http://cyberatlas.internet.com/

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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. 2002—grow to $114 billion—more 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)

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  • 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.

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Retailing Trends

1950s 1960s-1970s 1980s 1990s



Main street


  • Home Depot

  • CompUSA

  • Barnes and Nobles

  • Border

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AOL Findings

  • Buy brands

  • Seek convenience

  • Are increasingly time-starving

  • Are not solely motivated by price

  • Require simplicity

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Network Economy and Dynamic Trade

  • Information rules

  • Network externality and network economics

  • New supply and demand curves

  • Dynamic trade

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Changes in the Net Economy

  • Business environment

    • Local / Physical Global /Virtual

  • Business assets

    • Tangible Intangible

  • Business change

    • Periodic Continuous

  • Business production

    • Mass Production Mass Customization Mass Personalization

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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

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Internet Economy Driving Forces

  • Changing customer demands

  • Globalization

  • Internet ubiquity

  • New technology

  • New marketplace and intermediacies

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Network and Information Economy

  • Information is costly to produce but cheap to reproduce.

    • Price information according to its value not its cost.

  • Managing intellectual property.

    • Maximize the value of your intellectual property, not the terms and conditions that maximize the protection.

  • Information as an “experience good”

    • Consumers must experience it to value it.

    • Brand and trust building is critical.

  • The economics of attention

    • A wealth of information creates a poverty of attention.

Source: Information Rules

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Characteristic of Information Economy

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Information Commodity Market

  • Competition among sellers of commodity information pushes prices to zero.

  • Personalize your product and personalize your pricing

  • Know your customer

  • Differentiate your prices when possible

  • Use promotion to measure demands

  • Network effects lead to demand side economies of scale and positive feedback.

  • Information has its greatest value when it is fresh.

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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

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Supply/Demand Flip

Network Economy





Classic Economics





  • In the network economy, the supply curves slope down instead of up and demand curves slope up instead of down.

  • The accelerating expansion of knowledge and technology simultaneously pushes up the demand curve while pushing down the supply curve.

  • Upward demand curves: Network externality

  • Downward Supply Curves: Compounded learning curve, Moore's Law

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The Internet Increases Apparent Supply

Old apparent supply

New apparent supply





Internet increase apparent supply

Apparent quantity rise

Price fall

Source: Now or Never, Mary Modahl, HarperBusiness, 2000

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  • 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


Cost of a 3-minute

Long Distance Call






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Dynamic Trade: Perfect Market

  • Customer service is more important than product selling

    • Federal Express: Certainty

  • Real-time demand drives production

    • Dell: Build-To-Order

  • Pricing matches market conditions

    • Name your price (reversed auction): PriceLine.com

    • Auction: Ebay

Leveraging technology to satisfy current customer demand and with customized response.

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Traditional vs. Dynamic Trade

  • Speed from engagement to transaction

    • Weeks vs. Minutes

  • Product distribution

    • Seller-selected vs. Buyer-selected

  • Pricing

    • Product price list vs. Market-determined price

  • Production

    • Pre-sale vs. Post-sale (Dell’s BTO)

  • Customer relationships

    • Standard vs. Targeted and Customized

  • Strategic asset

    • Location vs. Visibility and Customer Database

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Dynamic Trade Self-Test

Rate each of the following criteria in your market.(3=high, 2=medium, 1=low)

  • Commodity market

  • Perishability of inventory

  • Capital intensity

  • Configurability of products

  • Customers' perceived investment level

  • Threat from new kinds of competition

  • Channel volatility

    TOTAL: _____________

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Electronic Commerce: Strategies and Business Models

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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

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Electronic Commerce Applications and the Cycle of Commerce

Seller's Cycle of Commerce






Enterprise Information Server

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Electronic Commerce Applications and the Cycle of Commerce

Buyer's Cycle of Commerce






Enterprise Information Server


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EC Strategies

  • 4Cs strategy

  • Content, Community, Commerce

  • Revenue streams

  • E-conomy Map

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EC Strategies: 4 Cs





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  • 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

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Self Assessment: Customer Caring

What do your customers need?What requests do they make of you?

How do you respond to customer’s requests?

What kind of information can they get from you?

What process do they go through?How do you produce and distribute it to them?

What are the steps that your customers have to take

to complete a purchase transactions?

How do they get shipment status?

How are exceptions handled?

What do you need from customer?What do you know about customer preferences?

What information could you use to better target your

product and service offerings?

What can you do to build relationships?How can you engage customers in an ongoing dialog?

How can you continue to provide information, products,

and services to reinforce your ongoing relationships?

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  • Consumers are increasingly engaged in an active and explicit dialogue with companies.

  • The role of the consumer is being transformed from passive buyer to active participant in co-creating value

  • The market is no longer a "target," but must be recognized as an ecosystem. It's a forum for value creation and extraction, and the company is part of an enhanced network--one that includes its suppliers and partners, and its customers. The network's fulfillment goes beyond business-to-business or business-to-consumer relationships to a consumer-to-business-to-business relationship.

  • Consumer Centricity at


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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

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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"

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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

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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

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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

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Streamline Business Processes That Impacts the Customers

  • Start identify the end customer

  • Streamline the process from the end customer's point of view

  • Streamline the process from the end customer's point of view

  • Streamline the process for key stakeholders

  • Continuously improve the process based on customer feedback

  • Give everyone involved a clear view of the process

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Customer Information

  • Processes:

    • Marketing

    • Pre-sales

    • Sales

    • Post sales support

    • Delivery

    • Field service

    • Quality control

    • Billing

    • Product development & production

  • Media

    • Web

    • Kiosh

    • E-mail

    • Phone

    • Mail

    • Fax

    • Hand-held

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Virtual Communities



  • Content

  • Hard goods

  • Games

  • Services

  • Money

  • Content

  • Demographics



  • Advertising




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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

  • 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

    • 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

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Geocities: www.geocities.com

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

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The Well: www.well.com

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Talk City: www.talkcity.com

  • LiveWorld Production Inc. hopes to create a clean, well-lighted place to chat on the Web.

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Major Portals

  • AOL/Netscape

  • Yahoo

  • Excite

  • MSN

  • Lycos

  • InfoSeek/GO: Disney's go.com

  • Snap

  • AltaVista

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Revenue Streams

  • Advertising / Sponsorship

  • Transaction

  • Subscription / Listing Fee

  • Value-added services

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Sources of Revenue on the Web

  • Transaction: Net merchants this year will hawk some $518 million worth of goods, from CDs to Computers. Total cybersales could swell to $6.6 billion by 2000, figures Forester Research.

  • Subscription: For now, most content on Web is free. Still sales of subscription services on the Web will hit $ 120 million this year, says Jupiter Communications. By 2000, the number is expected to be $966 million.

  • Advertising: The Net is emerging as a medium uniquely suitable for advertisers looking to reach target customers directly. Spending on Web ads will hit $312 million this year, growing to $5 billion by 2000, Jupiter figures.

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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





Adapted from Netscape Communications Inc., 1996.

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EC Companies Transform the Revenue Mix


The mix:

Who pays for

what and

how much.









Highly interrelated!

Source: Now or Never, 2000

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The Revenue Mix: Examples

  • Finding new customers

    • Onsale.com sales at costs

    • Buy.com creates advertising as a revenue stream

  • Offering new value

    • eBay buyers see auction as a new form of entertainment

    • At eBay there are some specialized sellers for them selling on eBay has become an official part-time job

  • Building new pricing structures

    • eBay

      • If you want to bid or browse at eBay, it's free. You don't pay a penny in fees.

      • If you're a seller, you'll be charged:

        • An insertion fee. This fee is usually between 25 cents and $2.00, depending on your opening bid.

        • A Final Value (final sale price) fee at the end of your auction. This fee generally ranges from 1.25% to 5% of your final sale price.

    • Compare eBay with classified ad

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The Revenue Mix

Why is it difficult for the traditional companies to change?

  • Finding new customers

    • "The rearview mirror trap". Existing customers reflect an industry's past more than its future. A traditional company in the market leader position makes it hard to see new customers coming.

    • "Investor want to talk to their broker on the phone!"

    • It delayed a deployment of online trading of a major brokerage house by more than two years.

  • Offering new value

    • Traditional companies have difficulty understanding new value.

    • One baby bell executive think Yahoo is just another damn yellow pages. "People want to find local businesses!"

  • Building new pricing structures

    • Equity investors hold traditional players to a higher profit standard than they do to the dotcoms.

    • In the US, venture funds and individual investors can bankroll tears of big losses of dotcoms in a bid to win market share from traditional companies.

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Consumer Technographics Segments in the US

Early Adopters

Primary Motivation





Fast Forward


New Age Nurturers


Mouse Patatoes






Digital Hopeful


Gadget Grabbers



Income Level

Attitude Toward Technology





Media Junkies




Sidelined Citizens




Source: Forrester Research Inc.

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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


Early Adopter



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Technology-Fit: Customer and Product


Second Wave

Earlier Adopter




Jenny Craig


Customer Need for Product Information

Second Wave

Web Laggards





Source: Forrester Research


Customer Demographics Match



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EC Development Process

  • Competitive and capability analysis

  • Knowledge building and market evaluation

  • EC Business model design and feature identification

  • EC technical architecture design

  • Application development and deployment

  • Continuous performance evaluation and innovation

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Opening Online Business

  • Identify a need and a niche

  • Determine what you have to offer

  • Set your business goals

  • 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

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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

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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.

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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

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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

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Five Strategies for .com-ming Your Business

1. Check Your DNA

  • Is the Net part of who you are as an enterprise? Or is it something foreign to you?

  • Are you ready to embrace the Net economy?

  • Do you have people on your team who have experience in this area? People who get it? More important, do you have people on your team who are passionate about the Net? Or are they expecting business as usual? Do you have the right people on the right projects?

  • Think about connections outside your enterprise-are you working with customers, partners and suppliers to help you retool your business. Are you learning from them and are they learning from you? Are you identifying key areas where you can make your interactions more productive and successful?

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2. Think Portal

  • Think in terms of "portal". It's not about the site per se, it's about the community you create.

  • It's about building and maintaining services that build customer and partner loyalty and make your employees more efficient in providing service to your customers and partners.

  • Examples: automobiles/enthusiasts, airlines/travel agents, insurance/health care, agricultural/food and nutrition.

  • Find and create that home on the Web, and leverage it for competitive advantage.

    3. Think Services

  • It's not enough anymore just to put information on a Web site.

  • Today you need to be offering services. What those services are will be up to you, but that's where users are finding value in the Net Economy.

  • Examples: Insurance, auto buying, auctioning, customer support, supply chain management, etc.

  • Services equal customer loyalty and retention.

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4. Think Anywhere, Anytime

  • Once you've developed those services --which ideally will grow out of your enterprise's core competencies -- you need to deliver them ubiquitously.

  • If they're only available on PCs, you're going to severely limit their utility -- and your enterprise's growth and profits.

    5. E-commerce is Not the Future. It is now!

  • The marketplace is moving now. Your competition is moving now.

  • E-commerce is not about the future; it's about today. Start doing e-commerce.

  • If you haven't prepared for holiday season 2000 for consumers, partners, and suppliers, you're already behind.

  • Convert your communication, supply chain and customer relationship channels to the Web. Many companies have had difficulty with this due to existing relationship conflict, but the reality is that you have to do it.

  • Identify one area of high leverage and start there, time is your enemy so get moving today.

  • The Web is proving to be more reliable, lower cost, and user-friendly. Use it to its full potential.

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What To Do Now

1. Define your eBusiness strategy FAST

2. Assess readiness:

  • customers

  • products/services

  • organization

  • technology

  • infrastructure

Rapid innovation

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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!

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Four Strategies to Start Online Business

  • Integration

  • Subsidiary

  • Partnership

  • Buyout






Time to Market




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Brick and Mortar

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Soruce: Harvard Business Review, Get the Right Mixes of Bricks and Clicks, May-June 2000

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In-House vs. Spin-off

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The Four Stages of E-volution

Source: Strategy + Business, From Clicks to Bricks, 3q, 2000.

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Becoming Virtual

  • Egghead to Egghead.com

  • Computer Literacy to Fatbrain.com

  • Romac International to KForce.com

Kinder Toys is Moving to


(Find us on the web after June 1st)

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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?

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E-conomy Map





Testing &












The Message

(The Content)

The Delivery Vehicle

(The Container)

COINs: Community of Interests

Adapted from: Net Ready, 2000

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GE's Destroy Your Business Approach

  • Each business unit

    • Use cross-functional team

    • Benchmark competitors'

      • Business operations

      • Products / Services

      • The economics of ordering online, sales force, and call centers

    • DYB - Destruction Your Business: Present a hypothetical internet-based business plan that a competitor could use to erode your customer base.

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GYB: Grow Your Business Approach

  • How the business unit should change their existing business model in response to the threats.

  • Find fresh ways to reach new customers and better serve existing ones.

  • Best practices:

    • Focus: Your e-business application should focus on how your customers can grow their business, streamline processes or reduce costs.

    • Speed matters: Mare sure what you are offering customers via the web, whether they are B2C or B2B, is faster, cheaper and better than any other delivery mechanism.

    • Value: New internet services should enhance value for existing customers rather than simply reaching new ones.

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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










Source: Digital Transformation, 2000

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Internet Industry






Commerce Instruments


Commerce Servers










Internet Economy

System Integration

and Design


Web Server

Application Servers



Backbone Router

Access Equipment

Server Computers






Internet Service

Consumer Services


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EC Business Models

  • B2C Virtual stores: physical and digital goods and services

  • Infomediaries: Seller-side

  • Informediaries: Buyer-side

  • Infomediaries: B2B marketspace

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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

    • Selling information (subscriptions)

      • Dating services

      • Legal and medical advice

    • Reservations and tickets

      • Airline tickets

      • Event tickets

      • Hotel and restaurant

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Is EC Appropriate for You?

Industries who set up

virtual storefronts

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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

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  • The most affected industries:

    • Books

    • Stock trading

    • PCs

    • Automobiles

    • Travel

  • The least affected industries

    • Food

    • Consumer durable goods

    • Clothing

    • Local services

    • Banking and insurance

Enterprise.com, 1998

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Three Business Models

  • Payment direction:

    • Buy-side

    • Sell-side

    • Marketplace: 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

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Sell-Side E-Commerce Model

Buyer A




Buyer B

HTML & Forms





Buyer C

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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.

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Buy-Side E-Commerce Model

Seller A



Seller B

HTML & Forms





Seller C

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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.

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Marketplace E-Commerce Model

Buyer A

Seller A



Buyer B

Seller B



HTML & Forms

HTML & Forms




Buyer C

Seller C


Infomediacy (Content Aggregator)

  • eBay.com

  • Pricelines.com

  • Egghead.com

  • Amazom.com Auction

  • www.chemdex.com

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



  • 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

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B2B Marketplace

  • 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.

  • Web Site: http://www.netmarketmakers.com/

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Direct-to-Customer (D-to-C)

  • Large, global, e-energized corporations (e.g., Fortune 1000) begin to squeeze intermediary companies.

  • Stop & Shop [a large supermarket chain] is launch its own delivery service and is expected to end its partnership with Peapod [a dotcom delivery service]. -- The Boston Globe, April 2000

  • June 20, 2000. Peapod announced online shopping and delivery services in Connecticut through grocery chain Stop & Shop. Stop & Shop is owned by Royal Ahold, which recently took a 51 percent interest in struggling Peapod.




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Channel Conflicts

  • Channel conflicts arise when a new venue for selling products - such as the Web for selling goods or services - threatens to cannibalize one or more existing conduits for selling goods within the same organization, such as a retailer or a manufacturer.

  • The company's internal e-commerce team had already recommended direct Web sales as a way to better manage its supply chain and interact more directly with customers… But when the team presented its proposals to the company's CEO, his response was terse: "We've done business with our distributors for 30 years, and I certainly don't want to sell around them. I don't even want to discuss it."

    • ComputerWorld.com Quick Study

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Case in Point

  • For example, about a year ago (1999), General Motors Corp. in Detroit attempted to buy back some car-dealer franchises as a possible step toward selling directly over the Web. Dealers protested so adamantly that both GM and Ford Motor Co. in Dearborn, Mich., spent a lot of time at a recent industry convention reassuring dealers that the automakers wouldn't sell directly to consumers. And in a recent survey by Cambridge, Mass.-based Forrester Research Inc. of 50 consumer-goods manufacturers, 66% cited channel conflict as the No. 1 obstacle to selling online.

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Channel Conflict: How About the Distributors

  • The concept of complete disintermediation - 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.

  • Distributors have to do lot of value-add and customer support to survive.

  • Fruit of Loom Inc. has 31 of its 55 distributors up on its extranet called Activewear Online.

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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.

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Extended E-conomy Business Models

  • E-buisness storefront

  • Informediary

    • Seller broker

    • Buyer broker

    • Transaction broker / Exchange

    • COINs

    • Portals

  • Trust intermediary

  • E-business enabler

  • Infrastructure providers / Communities of commerce

Source: Net Ready, 2000

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Any-to-Any Technologies Connect Everything to Everyone







Web TV



Specialty Devices














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  • 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.



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Vulnerability Grid

Risk/Opportunity Exposure

Your Risk/Opportunity

Low Medium High

Efficiency:how efficient is the relationship between buyer and seller?

  

Digitizability:How digitizable is the product or service?

  

Customizability:How customizable is the product or service?

  

Asymmetries of Information:What is the balance of power in the buyer-seller equation?

  

Commodity:How commodity-like is the product or service?

  

Fragmentation:How fragmented is the market in which you operate?

  

Attitudinal Readiness:How ready are customers to accept new ways?

  

Velocity:How critical is the need for speed in the delivery of the product or service?

  

Source: Net Ready, 2000

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Move to Consumer-Centric View



Conventional View














Consumer-Centric View

C2B2B: Customer-to-Business-to-Business

Supplier network






Adapted from: Customer Centricity, InformationWeek, April 10, 2000

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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

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Price Pressure Shrink Retail Margins

Increasing apparent supply

Increasingly price-sensitive online shoppers

Aggressive pricing for online plays

Comparison shopping engines

Average retail net margin

Economies of scale

New services and loyalty programs


Managing current demand


Source: Now or Never, 2000

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Business Models Based on the Value Chain in the Market Place

Raw material producer


  • Independent market operators

  • Consortia









  • Examples:

  • B2B: Vericalnet.com

  • B2C: Amazon.com

  • C2B: Priceline.com

  • C2C: eBay.com


  • Service Providers:

  • Logistics

  • Financial


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Business Models from a Strategic Viewpoint

  • "In the new economy, the unit of analysis for innovation is not a product or a technology-it's a business concept. ….To be an industry revolutionary, you must develop an instinctive capacity to think about business models in their entirety."

  • Hamel's business concept that comprises four major components and several subcomponents:

    • Core strategies

    • Strategic resources

    • Customer interfaces

    • Value networks

Source: Leading the Revolutionby Gary Hamel

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Business Concepts (I)

  • Core Strategy: It is the essence of how the firm chooses to compete.

    • Business Mission: This captures the overall 'objective' of the strategy-what the business model is designed to accomplish or deliver.

    • Product / Market Scope: This captures the essence of 'where' the firm competes-which customers, which geographies, and what product segments-and where, by implication, it doesn't compete.

    • Basis for Differentiation: This captures the essence of 'how' the firm competes and, in particular, how it competes 'differently' than its competitors.

  • Strategic Resources: These are unique firm-specific resources.

    • Core Competencies: This is what the firm 'knows.' (skills and unique capabilities)

    • Strategic Assets: They are what the firm owns such as brands, patents, infrastructure, proprietary standards, customer data, and anything else that is both rare and valuable.

    • Core Processes: This is what people in the firm actually 'do.' (activities)

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Business Concepts (II)

  • Customer Interface

    • Fulfillment and Support: This refers to the way the firm 'goes to market,' how it actually 'reaches' customers-which channels it uses, what kind of customer support it offers, and what level of service it provides.

    • Information and Insight: This refers to all the knowledge that is collected from and utilized on behalf of customers.

    • Relationship Dynamics: This refers to the nature of the 'interaction' between the producer and the customer.

    • Pricing Structure: This refers to the price choices depending on the traditions of your industry.

  • Value Network: It surrounds the firm, and which complements and amplifies the firm's own resources.

    • Suppliers

    • Partners

    • Coalitions

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Bridge Components

  • These four major components are linked together by three 'bridge' components:

    • Configuration: Intermediating between a company's core strategy and its strategic resources is first bridge component.

    • Customer Benefits: Intermediating between the core strategy and the customer interface is second bridge component.

    • Company Boundaries: Intermediating between a company's strategic resources and its value network is third bridge component.

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Market Structure on the Internet

Many smaller players with high rate of entry

Few large and dominate companies

Number of companies


Size of company

Source: Now or Never, 2000

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Three 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 won’t 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.

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Dynamic Trade: Perfect Market

  • Customer service is more important than product selling

    • Federal Express: Certainty

  • Real-time demand drives production

    • Dell: Build-To-Order

  • Pricing matches market conditions

    • Name your price (reversed auction): PriceLine.com

    • Auction: Ebay

Leveraging technology to satisfy current customer demand and with customized response.

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Traditional vs. Dynamic Trade

  • Speed from engagement to transaction

    • Weeks vs. Minutes

  • Product distribution

    • Seller-selected vs. Buyer-selected

  • Pricing

    • Product price list vs. Market-determined price

  • Production

    • Pre-sale vs. Post-sale

  • Customer relationships

    • Standard vs. Targeted and Customized

  • Strategic asset

    • Location vs. Visibility and Customer Database

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Dynamic Trade Self-Test

Rate each of the following criteria in your market.(3=high, 2=medium, 1=low)

  • Commodity market

  • Perishability of inventory

  • Capital intensity

  • Configurability of products

  • Customers' perceived investment level

  • Threat from new kinds of competition

  • Channel volatility

    TOTAL: _____________

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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



Pure Play

Multi-channel plays will have extraordinary power if companies elegantly blend and synchronize those channels.

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Internet Companies?

"Within five years, ALL companies will be Internet companies."

-- Andy Grove,

Intel Chairman

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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.

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All 3 Steps in One Medium

Give More Information/

Answer Questions



Get Attention


The Sale


  • TV Ads

  • Magazines

  • Brochures

  • Sales People

  • Print/editorial

  • Store

  • Telephone

  • Catalogue

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Most Visited Retailers:







7.CNet.com (software)









New Competition From Surprising Places

  • Not in Top 25:

    • Towerrecords.com

    • Borders.com

    • Toysrus.com

    • Target.com

    • Gap.com

    • Macys.com

    • Sears.com

    • Walmart.com

    • “BigCompany.com”

    • YourCompany.com??

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What is your new industry structure?

  • Powerful new intermediaries

    • travelocity.com; travel.yahoo.com; expedia.msn.com; golfclubexchange.com, eBay.com, priceline.com

  • Increasing commoditization

    • Your competitors are just a mouse click away

    • Camparison shopping: singleshop.com, mySimon.com

  • New competition from surprising places

    • realguide.real.com; headline.yahoo.com; www.nytimes.com

  • Be aware of new industry forces

    • amazon.com; yahoo.com; msn.com; etrade.com; priceline.com; etoy.com; aol.com

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What are the new economics?

  • Different revenue models

    • wsj.com; match.com; yahoo.com; monster.com

  • Different cost models

    • buy.com; dell.com

  • Different use of assets

    • Amazon.com

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What's the best E-business model for your company?

  • An online subsidiary

    • Barnesandnorbles.com by Barnes and Nobles to compete with amazon.com

    • Toysrus.com by Toys "R" Us Inc. to compete with eToys Inc.

    • MagazineOutlet.com by NewSub Services Inc.

  • Partnering with an online company

    • PetSmart Inc., invested $16 million in PetJungle.com to create PetSmart.com

    • a virtual company and a big-box retailer teaming up to attack a category

  • Converting to an online-only company

    • Egghead.com, Homebid.com

  • Integrating E-business throughout the company

    • Prudential California Realty

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EC: Case Studies

  • B2B: verticalnet.com

  • Auction: eBay

  • Subscription web sites: monster.com

  • e-tailing: 1800flowers.com

  • Financial investment sites: E*Trade

  • Other interesting web sites

Www verticalnet com l.jpg


Company background and capabilities l.jpg

Company Background and Capabilities

  • Own and operate 55 industry-specific Web sites designed as online B2B communities, known as vertical trade communities.

  • These vertical trade communities provide users with comprehensive sources of

    • Information (Content): from newswire and editorial services

    • Interaction (Communities): email, chat rooms, bulletin board

    • e-commerce: RFPs, RFQs

  • Additionally, VerticalNet provides auctions, catalogs, bookstores, career services and other e-commerce capabilities horizontally across its communities with technologies from acquired and organic sites like Industry Deals.com, IT CareerHub.com, LabX.com, and Professional Store.com.

  • Create values:

    • Individual advertising ($6,000 - $25,000)

    • Hosting sites

    • Build and design sites

    • Sponsor forums with expert guests

    • Negotiate a percentage of transaction at the online marketplace

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Auction: eBay.com

Auction ebay com143 l.jpg

Auction: eBay.com

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Slide145 l.jpg

  • Jay Walker, 43, founder and Vice Chairman of priceline.com, has created a model for buying and selling that's so original, it's been patented. Walker calls his model "buyer-driven commerce," and he's racing to build a big company around it. "

    • Fast Company

  • "It's not a traditional supply-and-demand market anymore. Priceline flips the power relationship on its head where the customer is telling you what he will pay."

    • Interactive Week

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Business Models

  • Priceline.com has pioneered a unique new type of e-commerce known as a "demand collection system" that enables consumers to use the Internet to save money on a wide range of products and services while enabling sellers to generate incremental revenue.

  • Using a simple and compelling consumer proposition--"name your price," we collect consumer demand (in the form of individual customer offers guaranteed by a credit card) for a particular product or service at a price set by the customer and communicate that demand directly to participating sellers or to their private databases.

  • Consumers agree to hold their offers open for a specified period of time to enable priceline.com to fulfill their offers from inventory provided by participating sellers. Once fulfilled, offers generally cannot be canceled.

  • By requiring consumers to be flexible with respect to brands, sellers and/or product features, we enable sellers to generate incremental revenue without disrupting their existing distribution channels or retail pricing structures.

Problems l.jpg


  • As if making a profit from online retailing were not enough of a challenge, try making money online under a system where you give your customers essentially no service, no selection and no right to return unwanted items.

  • May sound crazy, but not too long ago, investors seemed to think it was a brilliant idea.

  • Critics say the company's troubles raising money reflect some fundamental problems with its reverse auction model, which invites consumers to set their own prices. But it also requires them to commit to the purchase before they know all the details.

  • "Consumers typically look for four things: choice, service, selection and low price,'' said Tom Courtney, an analyst with Banc of America Securities. "Priceline gives up everything but the price.''

  • In hindsight, many critics say Priceline is more gimmick than solid business. Now that the novelty of the name-your-own-price model has started to wear thin, they are losing faith in its viability.

  • ``What I've seen is an intriguing model. You try it once and you feel a little uncomfortable with it. You may not get the route or the fare you wanted and at the end of the day you are not so sure about it,'' said Craig Palmer, president of eWanted, another Internet auction site. ``People come to Priceline, but they don't come back again and again and again.''

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E-Loan at eloan.com

  • IPO: 2 Billion Dollars Market Capitalization

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Compare this with:mySimon.com

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Matching Games: The Marketplace

Online Dating Service

  • $9,000 subscription fee per year for recruiting firms

  • Free for job seekers

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Internet Shopping Network: http://www.internet.net

  • Operating online since April 1994.

  • Focus on computer products which fit the demographics pretty well.

  • Customer look for a narrow focus in an online store and expect expertise in that area.

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Acquired by Cyberian Outpost

  • Kent, CT, & Sunnyvale, CA Nov. 2, 1998 - Cyberian Outpost, Inc. (NASDAQ: COOL), a leading Internet-only retailer of computer hardware, software, and peripherals for consumers worldwide, today announced it has acquired the Internet Shopping Network (ISN) Computer Superstore's customer base. Cyberian Outpost (http://www.outpost.com/) will be the new online shopping destination for the Computer Superstore's more than 160,000 customers. Prior to the acquisition, Cyberian Outpost had over 161,000 customers.

  • In addition to selling the Computer Superstore's customer list, ISN has agreed to maintain, a direct link from the ISN Computer Superstore's homepage that will lead shoppers to the Cyberian Outpost homepage (http://www.outpost.com/) for the next four months. Further, all existing URL's relating to the ISN Computer Superstore will re-direct users to Cyberian Outpost's homepage, extending Cyberian Outpost's market reach, these re-directed links will remain in place for one-year to cover residual bookmarks or links pointing to the ISN Computer Superstore.

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  • On Monday (Dec. 19, 2000), eToys watched its market value, which once topped $1.9 billion, fall to $37.2 million. It watched its customer traffic, once growing at a healthy clip, go flat compared to last year. And it watched its shares plunge 72 percent to close at 28 cents a share, miles from its 52-week high of $40.25, as a number of analysts reaffirmed their positions on the stock.

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CDNow Merged with Music Boulevard

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E-tailing CSF

  • eStrategy

  • eMerchandising

  • eArchitecture

  • eSupplyChain

  • eConnections

  • eBackOffice

  • eProperty

  • eCapital

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Time Warner's PathFinder: http:://pathfinder.com

  • Online Magazines: It was shut down in May 1999

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C|NET at cnet.com

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  • ESPN Sportszone

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  • Check out

    • http://interactive.wsj.com/

    • http://www.salon.com

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Hot Sauce: http://www.hothothot.com

  • Specialty virtual store

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1-800-FLOWERS: Http://www.1800flowers.com/

  • A real world florist with more than 20 years of experience.

  • Went on live in April 1995.

  • Also maintain sites in American Online and CompuServe.

  • Online retailing $25 million (10% of company sales) in 1996.

  • Take advantage of proven retail marketing strategies: discounts, contests, and sweepstakes, grand opening promotions, etc.

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Help Customers to Select

See also:


  • Help customer to remember:

  • Reminder services

  • Lifeminder.com

  • Personalized shopping lists at Staples.com

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Grocery Shopping: http://www.peapod.com/






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Virtual Vineyard: virtualvin.com & wine.com

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  • Set up shop at AOL in 1992

  • Launch a web site in 1995

  • 1% of sales in 1997

  • 4.5% of sales in 1998

  • Printing and mailing it 250 million catalogs each year counts for 43% of its operating cost.

  • 10% of all Internet apparel sales in 1998

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Interactive Application on the Net

  • Go to www.lendsend.com

  • Choose Oxford Express Link

Check out http://www.idreamsoftware.com/products/jio/appareldemo.htm

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My Virtual Model

  • Online catalog Landsend.com plans to outshine the competition this holiday season with a more accurate virtual model derived from a body scan, the company announced Tuesday. In the months leading up to Christmas, a Lands' End mobile unit equipped with an automated Image Twin scanning booth will offer consumers in 14 U.S. and Canadian cities a chance to obtain precise body measurements, generating a virtual twin who will try clothing online.

  • Inside the mobile scanning unit, white light flashing on and off for more than 12 seconds digitally captures 200,000 data points of a consumer's figure, creating a 3-D mirror image. A consumer can start using the model online within two hours, after the information is transmitted wirelessly to an IBM server farm located in North Carolina, said C. Cammack Morton, chairman and founder of the North Carolina-based Image Twin.

  • The dressing-room tool, My Virtual Model, is an updated version of a virtual model generated solely from a questionnaire about height, dress size, body shape, and the like. The updated tool takes additional measurements for a more realistic result and as of next week, will offer a male virtual model.

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Online Stock Brokerage Firm: E*Trade

  • Www.etrade.com

  • Received a $400 million investment from Softbank.

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E*Trade Investment Tools

  • E*TRADE has created a web-based trading system that is streamlined, efficient, and economical. As an account holder, you get free real-time market information, news and analysis and pay among the lowest commission rates and lowest margin rates in the industry.

  • One-Click Access to the Tools You Need: E*TRADE customers, get comprehensive online trading capabilities and a full set of investment and research tools such as free news, charts, in-depth company fundamentals, and online portfolio management.

  • Personal Market Page

  • E*TRADE offers a low and simple commission schedule. You pay only $14.95 for listed market orders and $19.95 for Nasdaq orders. For listed orders over 5,000 shares, add 1 cent per share to the entire order. For options, you pay just $20 plus $1.75 per contract, with a $29 minimum.

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E*Trade Commission: A Comparison

Online competitor

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  • E*TRADE added 233,000 new active accounts during first quarter 1999, an increase of 77% over the previous quarter.

  • In its second fiscal quarter, customer trades rose 63 percent in three months to approximately 70,000 per day.

  • They ended the quarter with 909,000 accounts and customer assets of $21.1 billion

    • (Source: San Jose Mercury News, 4/21/99).

  • A day trader killed 9 people at Atlanta.

    • July 28, 1999.

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E*TRADE Acquires Telebanc for $1.8 Billion

  • Calling it the first pure-play Internet company to integrate banking and brokerage services, E*TRADE Group Inc. announced Tuesday it is acquiring Internet bank Telebanc Financial Corp. for approximately $1.8 billion.

  • Terms of the agreement call for Telebanc shareholders to receive 2.1 shares of E*TRADE common stock for each share of Telebanc common stock. The merger is valued at roughly $1.8 billion based on E*TRADE's closing price on Friday, May 28. Once the merger is finalized, Telebanc shareholders will own approximately 13 percent of E*TRADE's fully diluted common stock. The transaction will be accounted for as a pooling of interests and is slated to close sometime this fall upon regulatory and shareholder approval.

  • The merger creates an Internet-based, FDIC-insured cash management account which the companies predict will change the future of personal financial services. Aimed at millions of Internet consumers, the online financial management resources of E*TRADE combined with online banking capabilities is expected to eliminate the need for multiple financial relationships.

  • The merger also will offer online consumers for the first time, access to full-featured, FDIC-insured Internet cash management accounts, including ATM access through the national Cirrus network, online bill payment and investing services, enabling them to consolidate brokerage and banking accounts.

  • By offering a central account, customers will be able to conduct a full range of transactions online, including buying mutual funds, CDs and fixed income securities, trading equities and paying bills. E*TRADE said through the integration of the companies services, a cost-effective, scalable business model will be achieved, while boosting E*TRADE's customer acquisitions and aggressively expanding its existing one million-plus customer account base.

June 01, 1999

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Internet Stock Is Also Driving The Change

Market Capitalization ($ Billions)

As of 4/16/99

Schwab: $46.6 B

Merrill: $31.0 B

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Merrill Lynch & CO.

  • Some 30 percent of chief executives and senior managers say the Internet is forcing them to revamp their strategies, according to a recent study by Booz, Allen & Hamilton and the Economist Intelligence Unit.

  • Take Merrill Lynch & Co., the biggest U.S. broker, which after long resisting trading over the Internet, said on Tuesday it planned to roll out full-scale online trading.

  • "The undeniable fact that there is a segment of the marketplace that wants to access the market through technology and through online investing was indisputable," Merrill Chairman David Komansky said.

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  • By 2003, Forrester estimates that 9.7 million US households will manage more than $3 trillion in 20.4 million on-line accounts. Deep discount firms will see their growth rates plateau. Midtier firms will prosper, capturing more households and assets than their competitors will. Full-service companies will start slow but will enjoy the greatest asset growth.

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Motley Fool: www.fool.com

  • Competitor: Quote.yahoo.com, Street.com, Cbs.Marketwatch.com, Stock247.com

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  • The world's first virtual anchor woman.

  • http://www.sonicnet.com/

    • Create your own radio station

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