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Electronic Commerce Business Models and Strategies Minder Chen, Ph.D. Associate Professor of Management Information Systems and Decision Sciences School of Management, George Mason University mchen@gmu.edu Reference Net Ready , by Amir Hartman and John Sifonis, McGRaw-Hill, 2000.

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electronic commerce business models and strategies

Electronic Commerce Business Models andStrategies

Minder Chen, Ph.D.

Associate Professor of Management Information Systems and Decision Sciences

School of Management, George Mason University

mchen@gmu.edu

reference
Reference
  • 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
  • Understanding Electronic Commerce (Strategic Technology Series), by David R. Kosiur, Published by Microsoft Press, May 1, 1997.
cyber seminar outline
Cyber-Seminar Outline

 EC Introduction

 Introduction

 The cycle of electronic commerce

 EC and Business Process

 EC statistics

 EC Strategies

 4Cs strategy: Customer, Content, Community, Commerce

 Revenue streams

 EC development process

 EC Business Models

 B2C Virtual stores: physical and digital goods and services

 Infomediaries: Seller-side

 Informediaries: Buyer-side

 Infomediaries: B2B marketspace

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.
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

Source: Understanding Electronic Commerce (Strategic Technology Series), by David R. Kosiur, Published by Microsoft Press, May 1, 1997.

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.

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

Maintain, Repair,

Operate

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

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

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

Source: America Online, 1999

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
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
all 3 steps in one medium
All 3 Steps in One Medium

Give More Information/

Answer Questions

Transact/

Service

Get Attention

Branding

Selling

Informing

  • TV Ads
  • Magazines
  • Brochures
  • Sales People
  • Print/editorial
  • Store
  • Telephone
  • Catalogue
  • Web and EC allows you to integrate three major steps of markting and sales in one medium.
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 strategies
EC Strategies
  • 4Cs Strategy:
    • Customer
    • Content
    • Community
    • Commerce
  • Revenue Streams
  • EC Development Process
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??
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

Time

electronic commerce applications and the cycle of commerce28
Electronic Commerce Applications and the Cycle of Commerce

Buyer's Cycle of Commerce

Procurement

Operation

Receiving/Logistics

Shopping/Testing

Payment

Time

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?

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
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
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 (wine.com)
  • 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 (fool.com)
    • 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.

http://geocities.yahoo.com/home/

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

Source: Now or Never, 2000

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

Low

Customer Demographics Match

Source: Forrester Research

Poor

High

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

revenue streams
Revenue Streams
  • Advertising / Sponsorship
  • Transaction
  • Subscription / Listing Fee
  • Value-added services
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

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 now50
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

top three concerns
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.
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?
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.
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: Adapted from

Digital Transformation, 2000

ec development process
EC Development Process
  • Knowledge building and market evaluation to identify a need and a niche
  • Competitive and capability analysis
  • EC Business model design and feature identification
  • Determine what you have to offer (merchandizing)
  • Set your e-business goals and priorities
  • 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
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

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
ec business models
EC Business Models
  • 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
ec business models64
EC Business Models
  • Payment direction:
    • Buy-side
    • Sell-side
    • Marketspace: 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

Consumer or Business

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

Business

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

Marketspace

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 marketspace
B2B Marketspace
  • 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.
  • Examples:
    • E-Steel.com
    • verticalnet.com
channel conflict how about the distributors
Channel Conflict: How About the Distributors
  • The concept of complete dis-intermediation - 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.
  • Fruit of Loom Inc. has 31 of its 55 distributors up on its extranet called Activewear Online. Distributors have to do lot of value-add and customer support to survive.
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.
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

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.

business models based on the value chain in the marketplace
Business Models Based on the Value Chain in the Marketplace

Exchange

Raw material producer

Manufacturer

C2B

Distributor

Retailer

New

Middleman

B2C

C2C

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

Consumer

B2C

business models multiple dimensions
Business Models: Multiple Dimensions
  • Buy-sell direction: Buyer-side, seller side, and marketplace
  • Industry covered: single vs. multiple (Vertical vs. Horizontal)
  • Ownership: Buyer, seller, independent, software vendor, consortia
  • Service: Core vs. extended services
  • Products: Core vs. MRO; Direct vs. Indirect;
  • Pricing: Fixed price, Auction, Reversed auction, negotiated
  • Timing of purchase: Contact vs. spot vs. ad hoc
portfolio of buying selling strategies
Portfolio of Buying & Selling Strategies

e-Procurement

Net

Market

Small Suppliers

Small Suppliers

Small Suppliers

Size of Buyers and Seller

Big

Supplier

Direct Sales

Big Buyer

Small Buyers

Small Buyers