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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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slide1

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/

reference
Reference
  • 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
course description
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.

seminar leader
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.

continued
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.

outline i
Outline (I)

 EC Introduction

 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

outline ii
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

 Amazon.com

 Dell

 Federal Express

 Cisco

 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

ec introduction
EC Introduction
  • Introduction
  • The cycle of electronic commerce
  • EC and business process
  • EC statistics
electronic commerce introduction
Electronic Commerce: Introduction

E-Business

E-Commerce

Commerce

Internet

Commerce

electronic commerce
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.
slide12

Travelocity

Microsoft expedia

Priceline.com

the low friction market
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.

the cycle of electronic commerce
The Cycle of Electronic Commerce

Access

Searches

Queries

Surfing

Follow-on Sales

Customers

Online Ads

Online Orders

Standard Orders

Distribution

Online: soft goods

Delivery: hard goods

Electronic Customer Support

components of electronic commerce
Components of Electronic Commerce

Processes

Institution

  • Marketing
  • Sales
  • Payment
  • Fulfillment
  • Support
  • Government
  • Merchants
  • Manufacturers
  • Suppliers
  • Consumers

Electronic

Commerce

Networks

  • Intranet
  • Extranet
  • Internet

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

generic framework of electronic commerce
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.

ec and business processes
EC and Business Processes

Seller

Customer

Phone,

fax, e-mail

Send info

Request info

Provide

Info

Get

customer

Provide

info

Fulfill

order

Support

Identify need

Find source

Evaluate offerings

Purchase

Operate, Maintain, Repair

Data sheets, catalogs, demos

Web surfing

Web searches, web ads

Web site

Newsgroups

Net

communities

Corporate Databases

Demos,

reviews

Web site

Credit cards, e-cash

P.O.s

EDI

Deliver soft goods electronically

Web site, phone,

fax, e-mail, e-mailing list

world wide internet commerce
World Wide Internet Commerce

Forester Research, Inc. June 1999

business internet commerce trends
Business Internet Commerce Trends

B2C: Business to Consumer

B2B: Business to Business

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

business to business e commerce
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)
statistics
Statistics
  • 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.
retailing trends
Retailing Trends

1950s 1960s-1970s 1980s 1990s

Malls

Web

Main street

Superstores

  • Home Depot
  • CompUSA
  • Barnes and Nobles
  • Border
aol findings
AOL Findings
  • Buy brands
  • Seek convenience
  • Are increasingly time-starving
  • Are not solely motivated by price
  • Require simplicity
network economy and dynamic trade
Network Economy and Dynamic Trade
  • Information rules
  • Network externality and network economics
  • New supply and demand curves
  • Dynamic trade
changes in the net economy
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
net economy
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
internet economy driving forces
Internet Economy Driving Forces
  • Changing customer demands
  • Globalization
  • Internet ubiquity
  • New technology
  • New marketplace and intermediacies
network and information economy
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

information commodity market
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.
popularity adds value in a network
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

supply demand flip
Supply/Demand Flip

Network Economy

Supply

Price

Demand

Quantity

Classic Economics

Demand

Price

Supply

Quantity

  • 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
the internet increases apparent supply
The Internet Increases Apparent Supply

Old apparent supply

New apparent supply

Price

Actual

supply

Quantity

Internet increase apparent supply

Apparent quantity rise

Price fall

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

challenge
Challenge
  • 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

$250

Cost of a 3-minute

Long Distance Call

Price

$0

1999

1930

Year

dynamic trade perfect market
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.

traditional vs dynamic trade
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
dynamic trade self test
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: _____________

moving your business online
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

electronic commerce applications and the cycle of commerce
Electronic Commerce Applications and the Cycle of Commerce

Seller's Cycle of Commerce

Service

Sales

Billing/Collections

Marketing

Production/Logistics

Enterprise Information Server

electronic commerce applications and the cycle of commerce42
Electronic Commerce Applications and the Cycle of Commerce

Buyer's Cycle of Commerce

Procurement

Operation

Receiving/Logistics

Shopping/Testing

Payment

Enterprise Information Server

Time

ec strategies
EC Strategies
  • 4Cs strategy
  • Content, Community, Commerce
  • Revenue streams
  • E-conomy Map
ec strategies 4 cs
EC Strategies: 4 Cs

Customers

Commerce

Community

Content

customers
Customers
  • 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

self assessment customer caring
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?

slide47
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

http://www.informationweek.com/781/prahalad.

5 steps to success in ec
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

foster customer loyalty
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"
8 critical success factors
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
target the right customers
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
own the customer s total experience
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
streamline business processes that impacts the customers
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
customer information
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
virtual communities
Virtual Communities

Virtual

Community

  • Content
  • Hard goods
  • Games
  • Services
  • Money
  • Content
  • Demographics

Providers

Users

  • Advertising

Other

Websites

Advertisers

consumers needs for community
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
geocities www geocities com
Geocities: www.geocities.com
  • This collection of themes cyberhoods is populated by a half-million "homesteaders" who get free home pages.
talk city www talkcity com
Talk City: www.talkcity.com
  • LiveWorld Production Inc. hopes to create a clean, well-lighted place to chat on the Web.
major portals
Major Portals
  • AOL/Netscape
  • Yahoo
  • Excite
  • MSN
  • Lycos
  • InfoSeek/GO: Disney's go.com
  • Snap
  • AltaVista
revenue streams
Revenue Streams
  • Advertising / Sponsorship
  • Transaction
  • Subscription / Listing Fee
  • Value-added services
sources of revenue on the web
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.
multifaceted model for web based ec design
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

Attract

Jump

Engage

Participate

Adapted from Netscape Communications Inc., 1996.

ec companies transform the revenue mix
EC Companies Transform the Revenue Mix

Pricing

The mix:

Who pays for

what and

how much.

Value

Customers

New

Pricing

New

Values

New

Customers

Highly interrelated!

Source: Now or Never, 2000

the revenue mix examples
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
the revenue mix
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.
consumer technographics segments in the us
Consumer Technographics Segments in the US

Early Adopters

Primary Motivation

Mainstreams

Career

Family

Entertainment

Fast Forward

12%

New Age Nurturers

8%

Mouse Patatoes

9%

High

Optimists

Techno-strivers

7%

Digital Hopeful

7%

Gadget Grabbers

9%

Low

Income Level

Attitude Toward Technology

Handshakers

7%

Traditionalists

8%

Media Junkies

5%

High

Pessimists

Sidelined Citizens

28%

Low

Laggards

Source: Forrester Research Inc.

quick test for technographics
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

Mainstreams

Early Adopter

Laggards

Time

technology fit customer and product
Technology-Fit: Customer and Product

High

Second Wave

Earlier Adopter

AA

FedExp

Microsoft

Jenny Craig

Chrysler

Customer Need for Product Information

Second Wave

Web Laggards

Nike

Pepsi

Tide

Denny's

Source: Forrester Research

Low

Customer Demographics Match

Poor

High

ec development process
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
opening online business
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
keys to long term success
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
selling points of virtual stores
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.
benefits to the merchants
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
benefits to the consumers
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
five strategies for com ming your business
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?
slide78
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.
slide79
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.
what to do now
What To Do Now

1. Define your eBusiness strategy FAST

2. Assess readiness:

  • customers
  • products/services
  • organization
  • technology
  • infrastructure

Rapid innovation

what to do now81
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!

four strategies to start online business
Four Strategies to Start Online Business
  • Integration
  • Subsidiary
  • Partnership
  • Buyout

Slow

Low

Low

Cost

Risk

Time to Market

Fast

High

High

the four stages of e volution
The Four Stages of E-volution

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

becoming virtual
Becoming Virtual
  • Egghead to Egghead.com
  • Computer Literacy to Fatbrain.com
  • Romac International to KForce.com

Kinder Toys is Moving to

www.toydomain.com

(Find us on the web after June 1st)

your 3 biggest problems opportunities
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?
e conomy map
E-conomy Map

COINs

VerticalNet

Testandmeasurement.com

HP

Testing &

Measurement

Business

Enterprise

Affinity

Groups

HomeCare

Products

HomeCare

InfoCenter

Consumers

Individual

The Message

(The Content)

The Delivery Vehicle

(The Container)

COINs: Community of Interests

Adapted from: Net Ready, 2000

ge s destroy your business approach
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.
gyb grow your business approach
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.
e business creation process
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

E-Vision

Technology

Drivers

Business

Drivers

Rapid

Implementation

E-Business

Strategy

Source: Digital Transformation, 2000

internet industry
Internet Industry

Sports

Malls

Entertainment

Newsfeed

Publications

Commerce Instruments

Portals

Commerce Servers

Content

and

Activity

Electronic

Commerce

Infrastructure

Client/Server

Software

Consulting

Internet Economy

System Integration

and Design

Browsers

Web Server

Application Servers

Security

Tools

Backbone Router

Access Equipment

Server Computers

ISP

Network

Services

Internet

Equipment

Internet Service

Consumer Services

Carriers

ec business models
EC Business Models
  • B2C Virtual stores: physical and digital goods and services
  • Infomediaries: Seller-side
  • Informediaries: Buyer-side
  • Infomediaries: B2B marketspace
types of virtual stores
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
is ec appropriate for you
Is EC Appropriate for You?

Industries who set up

virtual storefronts

what consumers are buying online
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
slide99
Why?
  • 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

three business models
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
sell side e commerce model
Sell-Side E-Commerce Model

Buyer A

EDI

Selling

Merchant

Buyer B

HTML & Forms

HTML & XML

Online

Selling

OBI

Buyer C

sell side storefront
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.
buy side e commerce model
Buy-Side E-Commerce Model

Seller A

EDI

Buyer

Seller B

HTML & Forms

HTML & XML

Online

Procurement

OBI

Seller C

buy side eprocurement
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.
marketplace e commerce model
Marketplace E-Commerce Model

Buyer A

Seller A

EDI

EDI

Buyer B

Seller B

Virtual

Marketplace

HTML & Forms

HTML & Forms

HTML & XML

HTML & XML

OBI

Buyer C

Seller C

OBI

Infomediacy (Content Aggregator)

  • eBay.com
  • Pricelines.com
  • Egghead.com
  • Amazom.com Auction
  • www.chemdex.com
business to business vs business to consumer
Business-to-Business vs. Business-to-Consumer

Business-to-Consumer

Business-to-Business

  • 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
b2b marketplace
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/
direct to customer d to c
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.

D-to-C

B-to-C

B-to-B

channel conflicts
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
case in point
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.
channel conflict how about the distributors
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.
retailers and manufacturers co exist on the web
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.
extended e conomy business models
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

any to any technologies connect everything to everyone
Any-to-Any Technologies Connect Everything to Everyone

Banks

Consumers

HighValue

Solutions

Brokerage

PCs

Web TV

PDA

Smartcards

Specialty Devices

Other

Insurance

Businesses

Retail

Transactions

and

Payments

Distributors

Institutions

Transport

Physical

Infrastructure

Other

clicks and mortar
Clicks-and-Mortar
  • 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.

Brick-and-Click

YourSherpa.com

vulnerability grid
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

move to consumer centric view
Move to Consumer-Centric View

Customer

Firewall

Conventional View

Target

Consumers

Supply

Base

My

Company

Distribution

Channel

Supply-chain

management

CRM

SCM

ERP

Consumer-Centric View

C2B2B: Customer-to-Business-to-Business

Supplier network

Channel

Consumer

Communities

Virtual

Enterprise

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

creating sustainable value in ec
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
price pressure shrink retail margins
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

Auctions

Managing current demand

Time

Source: Now or Never, 2000

business models based on the value chain in the market place
Business Models Based on the Value Chain in the Market Place

Raw material producer

Exchange

  • Independent market operators
  • Consortia

Manufacturer

Distributor

C2B

New

Middleman

Retailer

B2C

C2C

  • Examples:
  • B2B: Vericalnet.com
  • B2C: Amazon.com
  • C2B: Priceline.com
  • C2C: eBay.com

Consumer

  • Service Providers:
  • Logistics
  • Financial

B2C

business models from a strategic viewpoint
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

business concepts i
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)
business concepts ii
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
bridge components
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.
market structure on the internet
Market Structure on the Internet

Many smaller players with high rate of entry

Few large and dominate companies

Number of companies

Transition

Size of company

Source: Now or Never, 2000

three top three concerns
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.
dynamic trade perfect market127
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.

traditional vs dynamic trade128
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
dynamic trade self test129
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: _____________

business channel multi channel presence
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

Seller

Buyer

Pure Play

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

internet companies
Internet Companies?

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

-- Andy Grove,

Intel Chairman

web experiences for consumers
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.
all 3 steps in one medium
All 3 Steps in One Medium

Give More Information/

Answer Questions

Transact/

Service

Get Attention

Branding

The Sale

Information

  • TV Ads
  • Magazines
  • Brochures
  • Sales People
  • Print/editorial
  • Store
  • Telephone
  • Catalogue
new competition from surprising places
Most Visited Retailers:

1. Bluemountainarts.com

2. Amazon.com

3. AOL.com

4. Ebay.com

5. Etoys.com

6. Barnesandnoble.com

7. CNet.com (software)

8. Egghead.com

9. CDNow.com

10. Musicblvd.com

11. ColumbiaHouse.com

12. Classifieds2000.com

13. Beyond.com

14. Coolsavings.com

15. Valupage.com

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??
what is your new industry structure
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
what are the new economics
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
what s the best e business model for your company
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
ec case studies
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
company background and capabilities
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
slide145
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
business models
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
Problems?!
  • 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.''
e loan at eloan com
E-Loan at eloan.com
  • IPO: 2 Billion Dollars Market Capitalization
singleshop com
Singleshop.com

Compare this with:mySimon.com

matching games the marketplace
Matching Games: The Marketplace

Online Dating Service

  • $9,000 subscription fee per year for recruiting firms
  • Free for job seekers
internet shopping network http www internet net
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.
acquired by cyberian outpost
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.
slide156
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.
e tailing csf
E-tailing CSF
  • eStrategy
  • eMerchandising
  • eArchitecture
  • eSupplyChain
  • eConnections
  • eBackOffice
  • eProperty
  • eCapital
time warner s pathfinder http pathfinder com
Time Warner's PathFinder: http:://pathfinder.com
  • Online Magazines: It was shut down in May 1999
espn go com
espn.go.com
  • ESPN Sportszone
www slate com
www.slate.com
  • Check out
    • http://interactive.wsj.com/
    • http://www.salon.com
1 800 flowers http www 1800flowers com
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.
help customers to select
Help Customers to Select

See also:

Gifts.com

  • Help customer to remember:
  • Reminder services
  • Lifeminder.com
  • Personalized shopping lists at Staples.com
grocery shopping http www peapod com
Grocery Shopping: http://www.peapod.com/

Homegrocer.com

NetGrocer.com

Streamline

WebVan

Priceline.com

landsend com
Landsend.com
  • 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
interactive application on the net
Interactive Application on the Net
  • Go to www.lendsend.com
  • Choose Oxford Express Link

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

my virtual model
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.
online stock brokerage firm e trade
Online Stock Brokerage Firm: E*Trade
  • Www.etrade.com
  • Received a $400 million investment from Softbank.
e trade investment tools
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.
updates
Updates
  • 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.
e trade acquires telebanc for 1 8 billion
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

internet stock is also driving the change
Internet Stock Is Also Driving The Change

Market Capitalization ($ Billions)

As of 4/16/99

Schwab: $46.6 B

Merrill: $31.0 B

merrill lynch co
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.
slide184
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.
motley fool www fool com
Motley Fool: www.fool.com
  • Competitor: Quote.yahoo.com, Street.com, Cbs.Marketwatch.com, Stock247.com
http www ananova com
http://www.ananova.com/
  • The world's first virtual anchor woman.
  • http://www.sonicnet.com/
    • Create your own radio station