Retailing in Electronic Commerce: Products and Services

1. Chapter 3 Retailing in Electronic Commerce: Products and Services

2. Learning Objectives • Describe electronic retailing (e-tailing) and its characteristics. • Define and describe the primary e-tailing business models. • Describe how online travel and tourism services operate and their impact on the industry. • Discuss the online employment market, including its participants, benefits, and limitations. • Describe online real estate services. Prentice Hall

3. Learning Objectives • Discuss online stock-trading services. • Discuss cyberbanking and online personal finance. • Describe on-demand delivery of groceries and similar products/services. • Describe the delivery of digital products and online entertainment. • Discuss various e-tail consumer aids, including comparison-shopping aids. • Describe disintermediation and other B2C strategic issues. Prentice Hall

4. Internet Marketing and Electronic Retailing • OVERVIEW OF ELECTRONIC RETAILING • electronic retailing (e-tailing) Retailing conducted online, over the Internet. Usually B2C e-commerce concerned with businesses selling products to customers. • e-tailers Retailers who sell over the Internet. • Manufacturer sells directly to the customer, cutting out the intermediary • Catalog sales free a retailer from the need for a physical store Prentice Hall

5. Internet Marketing and Electronic Retailing • SIZE AND GROWTH OF THE B2C MARKET • ($70,$90 billion for 2004, 2005) = 2- 4% of total retails in US. • A growth of about 20% per annum. Prentice Hall

6. Computers and electronics Sporting goods Office supplies Books and music Toys Health and beauty Entertainment Apparel Cars Services Others What Sells Well on the Internet? Prentice Hall

7. Considered Commerce • Considered commerce Conducting e-commerce where the online channel of a business is integrated with the physical retail business as opposed to being a separate channel. Prentice Hall

8. CHARACTERISTICS AND ADVANTAGES OF SUCCESSFUL E-TAILING Basic Principles for E-TAILING Success • Sound business thinking, visionary leadership, thorough competitive analysis and financial analysis, and the articulation of a well-thought-out EC strategy are essential. • Ensure appropriate infrastructure, particularly a stable and scalable technology infrastructure to support the online and physical aspects of EC business operations. Prentice Hall

9. Characteristics of high-volume products and services: Brand recognition and guarantees Guarantee provided by highly reliable or well-known vendors Digitized products Inexpensive items (office supplies, vitamins) Frequently purchased (prescription drugs) Commodities with standard specifications (books, CDs) Well-known packaged items that cannot be opened even in a traditional store (chocolates, foods) Characteristics of Successful E-Tailing Prentice Hall

10. E-Tailing Business Models • CLASSIFICATION BY DISTRIBUTION CHANNEL • Direct marketing by mail-order retailers that go online. • Direct marketing by manufacturers • Pure-play e-tailers • Click-and-mortar retailers • Internet (online) malls Prentice Hall

11. E-Tailing Business Models Prentice Hall

12. E-Tailing Business Models • Direct marketing by mail-order retailers that go online. (QVC) Companies are attempting to leverage their existing infrastructures by using a new marketing system (online), in addition to their existing method (catalogs, etc.). No intermediaries. • Direct marketing by manufacturers (Dell) The direct marketing model takes place without intermediaries between manufacturers and buyers. • Pure-Play E-Tailers (Amazon) • virtual (pure-play) e-tailers Firms that sell directly to consumers over the Internet without maintaining a physical sales channel. Prentice Hall

13. E-Tailing Business Models • click-and-mortar retailers (Wallmart) the firm sells to customers through the Internet and through physical sales locations. • brick-and-mortar retailers Retailers who do business in the non-Internet, physical world in traditional brick-and-mortar stores. • multichannel business model A business model where a company sells in multiple marketing channels simultaneously (e.g., both physical and online stores). Prentice Hall

14. E-Tailing Business Models • Retailing in Online Malls • Referring directories • Malls with shared services (find, order and pay for a product) • Online Group Buying • Find people to share freights and buy in bulk to lower prices. • B2C IN SOCIAL NETWORKS • Social networks can be used as a platform to advertise and support purchases, as well as acting as a review center (customers can leave reviews about the products they bought). • Virtual Shopping • (3D SW in buying furniture, LCD). • Dell sells computers in virtual world Prentice Hall

15. Travel and Tourism Services Online • The Internet is an ideal place to plan, explore, and arrange almost any trip and save money • Travel-related information available at many sites including: • Expedia.com Orbitz.com • Travelocity.com marriot.com • Priceline.com • Lonelyplanet.com Prentice Hall

16. Information and bookings Travel tips Electronic Travel magazine Fare comparisons Currency conversion calculators Fare tracker Worldwide business and places locator Outlet for travel accessories and books Experts’ opinions Major international and travel news Driving maps and directions Chat rooms Frequent flier deals Online travel auctions Travel and Tourism Services Services provided: Prentice Hall

17. Travel and Tourism Services • Special services • Very low airfares and discount accommodations • Last-minute trips can also be booked • Special vacation destinations • Sites that offer medical advice and services for travelers: • World Health Organization (who.int) • Governments (cdc.gov/travel) • Private organizations (Healthcenter.com) Prentice Hall

18. Travel and Tourism Services • Wireless services Customers with WAP cell phones can check their flight status, update frequent flyer miles, and book flights • Direct marketing Airlines sell e-tickets over the Internet • Alliances and consortia Airlines and travel companies make this to increase sales or reduce purchasing costs Prentice Hall

19. Travel and Tourism Services • Benefits • Free information is tremendous • Free information is accessible anytime • Substantial discounts • Social networks (blogs) allow for additional marketing through direct and indirect methods, including word-of-mouth. • Limitations • Not all people use the Internet • It may take a long time to find what you want • People are still reluctant to provide credit card numbers Prentice Hall

20. Corporate Travel • This is a huge and rapidly growing market • Can receive additional services. • Reduce cost • Employees plan and book their own trips. Prentice Hall

21. The Employment Placement and the Job Market • Job markets • Employers are looking for employees with specific skills, and individuals are looking for jobs • Very volatile market • Moved to the Internet • Millions of job seekers, hundreds of thousands of jobs Prentice Hall

22. The Internet Job Market • The Internet offers a perfect environment; it is especially effective for technology-oriented jobs • Job seekers • Job offerers • Recruiting firms • Government agencies and institutions Prentice Hall

23. Benefits of the Electronic Job Market • For job seekers • Find very detailed and timely information on a large number of jobs world-wide • Quickly communicate with potential employers • Post resumes for large-volume distribution • Search for jobs quickly from any place at any time • Obtain several support services at no cost – career planning • Assess their market value Prentice Hall

24. Benefits of the Electronic Job Market • For employers • Advertise to a large number of job seekers • Save on advertisement costs • Lower the cost of processing (using electronic application forms) • Provide greater (‘equal opportunity’) for job seekers • Find highly skilled employees • Conduct interviews online • Describe positions in great detail • Arrange for testing online • Salary surveys Prentice Hall

25. Limitations of the Electronic Job Market • Many people do not use the Internet • Companies may use both traditional advertising approaches and the Internet • Clear trend: more and more of the job market are going to the Internet • Security and Privacy • Resumes and other online communications are usually not encrypted • Possibility that someone at your current place of employment (your boss) may find out that you are job hunting Prentice Hall

26. Limitations of the Electronic Job Market • Electronic job market may also create high turnover costs for employers by accelerating employees’ movement to better jobs • Finding candidates online is more complicated: • There is a large number of resumes available online • Some sites offer prescreening of candidates to help alleviate this problem (jobtrak.com) Prentice Hall

27. Real Estate Online • Advice systems for customers • You can view many properties on the screen (residential, commercial) • links to realtors, maps, …etc • You can find detailed information about the properties • You can search, compare and apply for loans (online lenders) and montages • Examples: Zillow.com : make me move function Craigslist.org : ads for realestate Prentice Hall

28. Insurance Online • It allows for very low overhead and the ability to quickly compare multiple policies. • Insurance—auto, home, life, and health at a substantial discount • Insurance.com – different policies • answerfinancial.com – car Prentice Hall

29. Online Stock Trading • Commission $1 and $19 per transaction vs. $25 - $100 in traditional brokerage • No waiting on busy telephone lines • No oral communication, less chance for errors • Place orders from anywhere, any time, day or night • No biased broker to push you • Considerable amount of free information • BUT there is a risk of hacking (non-secured) Prentice Hall

30. Online Stock Trading Prentice Hall

31. Banking Online • Electronic banking (e-banking)—various banking activities conducted from home or the road using an Internet connection; also known as: • Cyberbanking Virtual banking • Online banking Home banking • Electronic banking • Saves time and money for users • Offers an inexpensive alternative to branch banking Prentice Hall

32. Get current account balances any time Obtain charge and credit card statements Pay bills Download account transactions Transfer money between accounts Balance accounts Send e-mail to the bank Expand the meaning of “banker’s hours” Handle finances when traveling Additional services Free phone banking Waive checking fees Capabilities of Home Banking Prentice Hall

33. HOME BANKING CAPABILITIES Prentice Hall

34. International and Multiple-Currency Banking • Some international retail purchasing can be done by credit card • Other transactions may require international banking support • Tradecard and MasterCard developed a multiple-currency system for global transactions (tradecard.com) • A multidealer foreign exchange service that enables faster and cheaper foreign exchange transactions (fxall.com) Prentice Hall

35. Implementation Issues in Online Financial Transactions • Security of financial transaction • Fees for services (or free services) • $5-$10 per month • Imaging systems—allow customers to view images of all: Incoming checks, invoices, …etc. • Risks of hacking Prentice Hall

36. Automatic transfer of funds to pay monthly utility bills e-checks Tracking bank accounts etc. Portfolio management Budget organization Record keeping Tax computations Retirement goals, planning and budgeting Stock quotes and prices (past and current) Personal Finance Online Online Billing and Bill Paying Prentice Hall

37. On-Demand Delivery Service (ODDS) • On-demand delivery service (ODDS)—express delivery made fairly quickly after an online order is received – same day delivery • On-Demand Delivery Services (ODDS) • May own a fleet of delivery vehicles for regular deliveries and delivery within short time period • Use common logistics carriers (use private shippers like FedEx, UPS,DHL) Prentice Hall

38. On-Demand Delivery Services Model Prentice Hall

39. The Case of E-Grocers • E-grocer—a grocer that will take orders online and provide regular deliveries on a daily or other regular schedule or will deliver items within a very short period of time • All e-grocers offer consumers the ability to order items online and have them delivered to their house • Some e-grocers offer free regular “unattended” weekly delivery based on a monthly subscription model Prentice Hall

40. Online Delivery of Products Prentice Hall

41. ONLINE ENTERTAINMENT • ONLINE ENTERTAINMENT • Adult Entertainment • Internet Gaming • Online Dating Services Prentice Hall

42. ONLINE ENTERTAINMENT Prentice Hall

43. Online purchase decision aids • shopping portals Gateways to e-storefronts and e-malls; may be comprehensive or niche oriented. • shopping robots (shopping agents or shopbots) Tools that scout the Web on behalf of consumers who specify search criteria. Prentice Hall

44. Online purchase decision aids • BUSINESS RATINGS SITES • Websites to rate e-tailers based on multiple criteria • TRUST VERIFICATION SITES • The seal of TRUSTe at the bottom of e-tailers website) • Recommendations from Other Shoppers and Friends • referral economy The effect upon sales of consumers receiving a referral or recommendation from other consumers. (used in blogs) • OTHER SHOPPING TOOLS • Escrow: third party to facilitate exchange • Wallets: a program that contains shoppers information. No need to enter info with each shopping Prentice Hall

45. Disintermediation & Reintermediaries • Disintermediation — The removal of organizations or business process layers responsible for certain intermediary steps in a given supply chain • Reintermediation — The process whereby intermediaries (either new ones or those that had been disintermediated) take on new intermediaryroles • new intermediary roles in the digital environment offer new ways to: • Reach new customers • Bring value to customers • Generate revenues Prentice Hall

46. Issues in E-Tailing Prentice Hall

47. Conflict and Personalization • Channel conflict —situation in which an online marketing channel upsets the traditional channels due to real or perceived damage from competition • DETERMINING THE RIGHT PRICE • Personalization — The ability of the seller to craete an element of personalization. • This create a large demand for customized products • Sellers can meet this by Mass customization. • Examples: • Tailored to buying patterns • Excellent customer service Prentice Hall

48. Leassons learned from failures • What makes click-and-mortar companies more successful: • Speak with one voice • Leverage the multichannels • Empower the customer Prentice Hall