3-1 3.4: banking and personal finance online electronic banking (e-banking): –various banking...

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Module: Competing in the Network Economy

3.4: Banking and Personal Finance 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, and home banking.

• Virtual Banks– Have no physical location, but only conduct online

transactions• NetBank (netbank.com)

• First Internet Bank (firstib.com).

– Make sure that the bank is legitimate before sending money to a virtual bank

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• Online Banking Capabilities– View current account balances and history at anytime– Access to statements– Pay bills online– Download account transactions– Transfer money between accounts– Balance accounts– Communicate with the bank– Access information anytime– Access information anywhere– Use additional services


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• Implementation Issues in Online Financial Transactions:– Securing financial transactions

– Access to banks’ Intranets by outsiders

– Using imaging systems

– Differential pricing of online versus off-line services

– Potential Risks


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• Personal Finance Services Online– Bill paying and electronic check writing

– Tracking of bank accounts, expenditures, and credit cards

– Portfolio management

– Investment tracking and monitoring

– Stock quotes and past and current prices of stocks

– Personal budget organisation

– Record keeping of cash flow and profit and loss analysis

– Tax services

– Retirement goals, planning, and budgeting


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• In online bill paying, funds are taken from the user's accounts by an intermediary who then arranges payments with the user's debtor.

• Online Billing and Bill Paying – Automatic transfer of mortgage payments

– Automatic transfer of funds to pay monthly utility bills

– Paying bills from online banking accounts

– Merchant-to-customer direct billing

– Using an intermediary for bill consolidation

– Person-to-person direct payment

– Pay bills at bank kiosks

– Taxes


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3.5: On-Demand Delivery Services and E-Grocers

• E-grocer: – A grocer that will take orders

online and provide deliveries on a daily or other regular schedule or will deliver items within a very short period of time

• On-demand delivery service: – Express delivery made fairly

quickly after an online order is received

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3.5: On-Demand Delivery Services and E-Grocers

• Who are the e-grocery shoppers?– Shopping avoiders (dislike going to physical stores)

– Necessity users (e.g., disabled and elderly)

– New technologists (young and technology savvy)

– Extremely busy consumers (time-starved)

– Consumers who gain a sense of self-worth from online shopping (leading edgers)

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3.6: Online Delivery: Digital Products, Entertainment & Media

• Digital Products– Certain goods, (software and music) may be

digitised completely and delivered over the Internet.

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• Napster: Its Rise, Collapse and Revival – Consumers-to-consumers (peer-to-peer) digital distribution– Napster only shares “libraries” or lists of songs, and then

enables a peer-to-peer file-sharing environment– Sued for copyright infringement in 2002– Free file sharing is no longer allowed– Napster forced to charge customers for use of its file-sharing

service– Entered into an agreement with Bertelsmann AG (large global

music label that participated in the lawsuit against Napster)– Went into bankruptcy in 2002– Roxio purchased and reopened in late 2003 as “for fee file-

sharing service”.


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• Benefits and Limitations of Digital Delivery – There are several advantages to the use of digital

delivery including increased speed of delivery, low product cost and low distribution costs.

– The major disadvantage is that not all goods can be digitised.


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• Online Entertainment– Interactive Entertainment

• Web browsing

• Internet gaming

• Single and multiplayer games

• Adult entertainment

• Participatory Web sites

• Reading


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• Noninteractive Entertainment– Event ticketing– Restaurants– Information retrieval– Retrieval of audio and video entertainment– Live events


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3.7: Online Purchase Basics

• Shopping Portals:– Gateways to storefronts and malls; may be

comprehensive or niche-oriented. Examples: • gomez.com and shopping.yahoo.com

• Shopping Robots (Shopping Agents or Shopbots)– Tools that scout the Web looking for goods and

services that meet consumer’s specified search criteria

• Wireless Shopping Comparisons– Enable shoppers to compare prices any time from

anywhere, including from any physical store.

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3.7: Online Purchase Decision Aids

• Business Ratings Sites– Rating of e-tailers and online products based on multiple criteria.

• Trust Verification Sites– Evaluate and verify the trustworthiness of various e-tailers

• Other Shopper Tools– Escrow services: 3rd party to assure quality– Communities of consumers who offer advice and

opinions. Examples: Epinions.com, PriceGrabber.com.– e-wallet: A program that contains a shopper’s information.

Note: Escrow services and electronic wallets are useful for online purchases because they can decrease the amount of contract risk for the customer during an online purchase.

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• Business Rating Sites. Examples:– Bizrate.com

– Consumer Reports Online (consumerreports.org)

– Forrester Research (forrester.com)

– Gomez Advisors (gomez.com)

• Trust verifications sites. Examples: – TRUSTe, VeriSign, BBBOnline, WebTrust.

• The above two tools add to customers’ feelings of security in making an online purchase. They allow the customer to evaluate the quality of the merchant, and not just the price of the good, before making a purchasing decision.

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• Role of search agents to support shopping– Agents are able to aggregate information from several

sources as well as maintaining information about personal preferences to enhance the shopping experience.

– Amazon.com’s A9 Search Engine• Remembers information

• A user can make notes about any Web page and search them

• Offers a new way to store and organise bookmarks

• Recommends new sites and favorite old sites specifically for the user to visit

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• What motivates a brick-and-mortar company to sell online?– Traditional firms sell online to compete with new e-commerce

entrants and to preserve market share. Additionally, traditional firms may see e-commerce as a way to expand their existing market share.

• Click-and-mortar hybrid strategies:– Speak with one voice

• Link all backend systems to an integrated customer service– Empower the customer

• A powerful 24/7 channel for service and information– Leverage the channels

• Offers advantages of each channel to customers from all channels

3.8: Successful Click-and-Mortar Strategies

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3.8: Click-and-Mortar Strategies

• Alliance of virtual and traditional retailers: Amazon.com and ToysRUs– The alliance between these two firms allowed Amazon.com to

concentrate on its core competence of effective online logistics and customer relationship management, while Toys’R’Us could concentrate in their area of core competence–purchasing and marketing toys.

– During the 1999 Christmas season, before their alliance, both companies failed to profitably deliver toys on time

– Pooled their expertise to form a single online toy store

– The alliance allows them to leverage each other core strengths

– Revenues are split between the two companies; the risks are also equally shared.

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3.8: Click-and-Mortar Strategies

• Alliance of virtual and traditional retailers: Amazon.com and ToysRUs (cont’d)– After 4 years, the partners sued each other

– One reason for the difficulties was that the two companies had to coordinate disparate systems (operational, technological, and financial) as they merge their corporate cultures.

– For example, Toys’R’Us wanted Amazon to sell only Toys’R’Us toys, and it paid $250 million a year for this exclusivity. Amazon interpreted the contract to allow them to sell toys from any company.

– The alliance failed due to systems issues, corporate cultures and contract issues.

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3.8: Problems with E-Tailing and Lessons Learned

• Reasons retailers give for not going online include: – Product is not appropriate for web sales– Lack of significant opportunity– Too expensive– Technology not ready– Online sales conflict with core business

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• Failures in B2C dot-coms– Kozmo.com

• A creative idea for on-demand deliveries of movie rentals

• Difficulty in how to return the videos

– Furniture.com• Difficulty in delivering products in a timely manner

– eRegister.com• Registering for courses etc. online was not popular

with consumers


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• Lessons learned:– Don’t ignore profitability

• Online marginal sales don’t lead to marginal profits

– Manage new risk exposure– Watch the cost of branding

• Drive to establish brand can lead to excessive spending

– Do not start with insufficient funds– The web site must be effective and able to perform– Keep it interesting

• Dynamic sites with rich databases of information appeal most to customers


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• Disintermediation: – The removal of organisations or business process layers

responsible for certain intermediary steps in a given supply chain

– Manufacturer sells directly to consumer.

• Reintermediation: – The process whereby intermediaries (either new ones or

those that had been disintermediated) take on new intermediary roles.

• Unbundling: – Offering specialised services in small segments in order to

improve speed and efficiency.

3.9: Issues in E-Tailing

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• Cybermediation (electronic intermediation): – The use of software (intelligent) agents to facilitate

intermediation

• Hypermediation: – Extensive use of both human and electronic intermediation to

provide assistance in all phases of an e-commerce venture.

• The use of EC and IT can create changes in a traditional supply chain. These changes can remove existing players (disintermediation) and can bring them back with different roles and functions (reintermediation). Cybermediation uses intelligent agents while hypermediation uses extensive human and electronic intermediation at all stages of the value chain.


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• Channel Conflict – Occurs when an upstream member of the value chain

begins to sell directly to customers. – Can also occur when the online division of an existing

company begins to compete with its off-line division or existing third party distribution channels.

• Determining the right price– Prices need to be competitive, while still providing an

adequate margin. – EC can allow companies to segment users into different

price groups and test pricing more than was possible with only brick-and-mortar operations.


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• Personalisation– Personalisation is the ability to use technology to create

goods that meet the exact specifications of the consumer.• For example, an e-tailer can use cookie files and other technologies to

track the specific browsing and buying behavior of each consumer. Next, produce a marketing plan tailored to that consumer’s pattern

– Mass customisation is the ability to create personalised goods for a large number of customer goods based on their exact specifications. Highly risky for pure-play e-tailing.

• Fraud and illegal activities– A major problem in B2C is the increasing rate of online fraud

• How to make customers happy– Merchants can find out what customers want through market, the

topic of of our next lesson.


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Managerial Issues

1. What should our strategic position be?

2. List the B2C distribution channel models.

3. How will intermediaries act in cyberspace?

4. Should we set up alliances?

5. Describe channel and other conflicts that may appear in e-tailing.

6. Why are virtual e-tailers usually not profitable?

3-1 3.4: banking and personal finance online electronic banking (e-banking): –various banking...

Documents

online delivery

online banking capabilities

online billing

personal finance online

online order

electronic banking ebanking

virtual banking

online transactions