Chapter 3 Retailing in Electronic Commerce Products and

Chapter 3 Retailing in Electronic Commerce: Products and Services Chapter 3 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Learning Objectives 1. 2. 3. 4. 5. Chapter 3 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 1

Learning Objectives Discuss online stock-trading services. Discuss cyberbanking and online personal finance. 8. Describe on-demand delivery of groceries and similar products/services. 9. Describe the delivery of digital products and online entertainment. 10. Discuss various e-tail consumer aids, including comparison-shopping aids. 11. Describe disintermediation and other B 2 C strategic issues. 6. 7. Chapter 3 Prentice Hall 2

Internet Marketing and Electronic Retailing l OVERVIEW OF ELECTRONIC RETAILING l electronic retailing (e-tailing) Retailing conducted online, over the Internet. Usually B 2 C e-commerce concerned with businesses selling products to customers. l e-tailers Retailers who sell over the Internet. l Manufacturer sells directly to the customer, cutting out the intermediary l Catalog sales free a retailer from the need for a physical store Chapter 3 Prentice Hall 3

Internet Marketing and Electronic Retailing l SIZE AND GROWTH OF THE B 2 C MARKET l ($70, $90 billion for 2004, 2005) = 2 - 4% of total retails in US. l Chapter 3 A growth of about 20% per annum. Prentice Hall 4

What Sells Well on the Internet? l l l Computers and electronics Sporting goods Office supplies Books and music Toys Chapter 3 l l l Prentice Hall Health and beauty Entertainment Apparel Cars Services Others 5

Considered Commerce l 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. Chapter 3 Prentice Hall 6

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. l Ensure appropriate infrastructure, particularly a stable and scalable technology infrastructure to support the online and physical aspects of EC business operations. l Chapter 3 Prentice Hall 7

Characteristics of Successful E-Tailing Characteristics of high-volume products and services: l Brand recognition and guarantees l l l 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) Chapter 3 Prentice Hall 8

E-Tailing Business Models l CLASSIFICATION BY DISTRIBUTION CHANNEL Direct marketing by mail-order retailers that go online. l Direct marketing by manufacturers l Pure-play e-tailers l Click-and-mortar retailers l Internet (online) malls l Chapter 3 Prentice Hall 9

E-Tailing Business Models Chapter 3 Prentice Hall 10

E-Tailing Business Models l 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. l Pure-Play E-Tailers (Amazon) l l virtual (pure-play) e-tailers Firms that sell directly to consumers over the Internet without maintaining a physical sales channel. Chapter 3 Prentice Hall 11

E-Tailing Business Models l l l 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). Chapter 3 Prentice Hall 12

E-Tailing Business Models l Retailing in Online Malls l l l Online Group Buying l l Referring directories Malls with shared services (find, order and pay for a product) Find people to share freights and buy in bulk to lower prices. B 2 C IN SOCIAL NETWORKS l l 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 l l Chapter 3 (3 D SW in buying furniture, LCD). Dell sells computers in virtual world Prentice Hall 13

Travel and Tourism Services Online l The Internet is an ideal place to plan, explore, and arrange almost any trip and save money l Travel-related information available at many sites including: Expedia. com l Travelocity. com l Priceline. com l Lonelyplanet. com Orbitz. com marriot. com l Chapter 3 Prentice Hall 14

Travel and Tourism Services provided: l l l l Information and bookings Travel tips Electronic Travel magazine Fare comparisons Currency conversion calculators Fare tracker Worldwide business and places locator Chapter 3 Outlet for travel accessories and books l Experts’ opinions l Major international and travel news l Driving maps and directions l Chat rooms l Frequent flier deals l Online travel auctions l Prentice Hall 15

Travel and Tourism Services l Special services Very low airfares and discount accommodations l Last-minute trips can also be booked l Special vacation destinations l l Sites that offer medical advice and services for travelers: World Health Organization (who. int) l Governments (cdc. gov/travel) l Private organizations (Healthcenter. com) l Chapter 3 Prentice Hall 16

Travel and Tourism Services Wireless services Customers with WAP cell phones can check their flight status, update frequent flyer miles, and book flights l Direct marketing Airlines sell e-tickets over the Internet l Alliances and consortia Airlines and travel companies make this to increase sales or reduce purchasing costs l Chapter 3 Prentice Hall 17

Travel and Tourism Services Benefits l Free information is tremendous l Free information is accessible anytime l Substantial discounts l Social networks (blogs) allow for additional marketing through direct and indirect methods, including word-of-mouth. l Limitations l Not all people use the Internet l It may take a long time to find what you want l People are still reluctant to provide credit card numbers l Chapter 3 Prentice Hall 18

Corporate Travel l This is a huge and rapidly growing market l Can receive additional services. l Reduce cost l Employees plan and book their own trips. Chapter 3 Prentice Hall 19

The Employment Placement and the Job Market l Job markets l Employers are looking for employees with specific skills, and individuals are looking for jobs l Very volatile market l Moved to the Internet l Millions of job seekers, hundreds of thousands of jobs Chapter 3 Prentice Hall 20

The Internet Job Market l The Internet offers a perfect environment; it is especially effective for technology-oriented jobs Job seekers l Job offerers l Recruiting firms l Government agencies and institutions l Chapter 3 Prentice Hall 21

Benefits of the Electronic Job Market l For job seekers Find very detailed and timely information on a large number of jobs world-wide l Quickly communicate with potential employers l Post resumes for large-volume distribution l Search for jobs quickly from any place at any time l Obtain several support services at no cost – career l planning l Assess their market value Chapter 3 Prentice Hall 22

Benefits of the Electronic Job Market l For employers l Advertise to a large number of job seekers l Save on advertisement costs l Lower the cost of processing (using electronic application forms) l Provide greater (‘equal opportunity’) for job seekers l Find highly skilled employees l Conduct interviews online l Describe positions in great detail l Arrange for testing online l Salary surveys Chapter 3 Prentice Hall 23

Limitations of the Electronic Job Market l Many people do not use the Internet Companies may use both traditional advertising approaches and the Internet l Clear trend: more and more of the job market are going to the Internet l l Security and Privacy Resumes and other online communications are usually not encrypted l Possibility that someone at your current place of employment (your boss) may find out that you are job hunting l Chapter 3 Prentice Hall 24

Limitations of the Electronic Job Market l Electronic job market may also create high turnover costs for employers by accelerating employees’ movement to better jobs l Finding candidates online is more complicated: There is a large number of resumes available online l Some sites offer prescreening of candidates to help alleviate this problem (jobtrak. com) l Chapter 3 Prentice Hall 25

Real Estate Online l l l 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 Chapter 3 Prentice Hall 26

Insurance Online l It allows for very low overhead and the ability to quickly compare multiple policies. l Insurance—auto, home, life, and health at a substantial discount l Insurance. com – different policies l answerfinancial. com – car Chapter 3 Prentice Hall 27

Online Stock Trading l Commission $1 and $19 per transaction vs. $25 - $100 in traditional brokerage l No waiting on busy telephone lines l No oral communication, less chance for errors l Place orders from anywhere, any time, day or night l No biased broker to push you l Considerable amount of free information l BUT there is a risk of hacking (non-secured) Chapter 3 Prentice Hall 28

Online Stock Trading Chapter 3 Prentice Hall 29

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 Chapter 3 Prentice Hall 30

Capabilities of Home Banking l l l Get current account balances any time Obtain charge and credit card statements Pay bills Download account transactions Transfer money between accounts Chapter 3 l l l Balance accounts Send e-mail to the bank Expand the meaning of “banker’s hours” Handle finances when traveling Additional services l l Prentice Hall Free phone banking Waive checking fees 31

HOME BANKING CAPABILITIES Chapter 3 Prentice Hall 32

International and Multiple-Currency Banking Some international retail purchasing can be done by credit card l Other transactions may require international banking support l Tradecard and Master. Card developed a multiplecurrency system for global transactions (tradecard. com) l A multidealer foreign exchange service that enables faster and cheaper foreign exchange transactions (fxall. com) l Chapter 3 Prentice Hall 33

Implementation Issues in Online Financial Transactions l Security of financial transaction l Fees for services (or free services) l $5 -$10 per month l Imaging systems—allow customers to view images of all: Incoming checks, invoices, …etc. l Risks of hacking Chapter 3 Prentice Hall 34

Personal Finance Online Billing and Bill Paying Automatic transfer of funds to pay monthly utility bills l e-checks l Tracking bank accounts etc. l Portfolio management l Chapter 3 l l l Prentice Hall Budget organization Record keeping Tax computations Retirement goals, planning and budgeting Stock quotes and prices (past and current) 35

On-Demand Delivery Service (ODDS) On-demand delivery service (ODDS)—express delivery made fairly quickly after an online order is received – same day delivery l On-Demand Delivery Services (ODDS) l May own a fleet of delivery vehicles for regular deliveries and delivery within short time period l Use common logistics carriers (use private shippers like Fed. Ex, UPS, DHL) l Chapter 3 Prentice Hall 36

On-Demand Delivery Services Model Chapter 3 Prentice Hall 37

The Case of E-Grocers l 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 l Some e-grocers offer free regular “unattended” weekly delivery based on a monthly subscription model l Chapter 3 Prentice Hall 38

Online Delivery of Products Chapter 3 Prentice Hall 39

ONLINE ENTERTAINMENT l l l Chapter 3 Adult Entertainment Internet Gaming Online Dating Services Prentice Hall 40

ONLINE ENTERTAINMENT Chapter 3 Prentice Hall 41

Online purchase decision aids l shopping portals Gateways to e-storefronts and e-malls; may be comprehensive or niche oriented. l shopping robots (shopping agents or shopbots) Tools that scout the Web on behalf of consumers who specify search criteria. Chapter 3 Prentice Hall 42

Online purchase decision aids l BUSINESS RATINGS SITES l l Websites to rate e-tailers based on multiple criteria TRUST VERIFICATION SITES l l The seal of TRUSTe at the bottom of e-tailers website) Recommendations from Other Shoppers and Friends l l 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 Chapter 3 Prentice Hall 43

Disintermediation & Reintermediaries Disintermediation — The removal of organizations or business process layers responsible for certain intermediary steps in a given supply chain l Reintermediation — The process whereby intermediaries (either new ones or those that had been disintermediated) take on new intermediary roles l l new intermediary roles in the digital environment offer new ways to: l l l Chapter 3 Reach new customers Bring value to customers Generate revenues Prentice Hall 44

Issues in E-Tailing Chapter 3 Prentice Hall 45

Conflict and Personalization l Channel conflict —situation in which an online marketing channel upsets the traditional channels due to real or perceived damage from competition l DETERMINING THE RIGHT PRICE l Personalization — The ability of the seller to craete an element of personalization. l l l This create a large demand for customized products Sellers can meet this by Mass customization. Examples: l l Chapter 3 Tailored to buying patterns Excellent customer service Prentice Hall 46

Leassons learned from failures l What makes click-and-mortar companies more successful: Speak with one voice l Leverage the multichannels l Empower the customer l Chapter 3 Prentice Hall 47