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E-Commerce
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What is E-Commerce?
E-Commerce can be defined as …
• The conduct of selling, buying, logistics, or other organization-management issues via the WEB.
Exchange of information, goods, service, and payments by electronic means.
OR
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Growth of E-Commerce
1996$700M
$28.91B2000
$35.87B2001
$51.48B2002est
$743.8B
20021st Q
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History of E-Commerce• Background
E-commerce actually began in the 1970s when larger corporations started creating private networks to share information with business partners and suppliers.
• This process, called Electronic Data Interchange (EDI), transmitted standardized data that streamlined the procurement process between businesses, so that paperwork and human intervention were nearly eliminated.
• EDI is still in place, and is so effective at reducing costs and improving efficiency that an estimated 95% of Fortune 1,000 companies use it.
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History of E-Commerce
• The first documented Online sale in 1994 was what?
• Prodigy was running text ads and selling flowers in the early '80s
A CD
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History of E-Commerce
• Early EC was pioneered by Internet companies that didn't (and still don't) perform traditional retail. Called Pure Plays.– such as Amazon.com and CDNow.
• More recently click and mortar stores have moved online– like Barnes and Noble, Best Buy, the Gap, and Wal-Mart
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Product Attributes for Selling on the Web
• Digital or Knowledge-based products– Software, video games, music, movies, books– Direct-to-consumer web services– Gambling and porn
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Product Attributes for Selling on the Web
• Digital or Knowledge-based products
– Consulting services
– Information or data provider [banner ad revenue]
• Must be what your TM wants
• Must be high quality
• Must be unique
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Product Attributes for Selling on the Web
• Hard Goods– Computers and computer equipment– Books– CDs– Specialized Niche products
• Virtual Vineyard
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High Touch vs. Low Touch
Low-Touch products are typically standardized goods that do not require examination.
High-Touch products are those which consumers prefer to hold, feel, or examine closely.
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Ways to Sell High-Touch ProductsTechnology
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Ways to Sell High-Touch ProductsPhysical Solutions
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Ways to Sell High-Touch ProductsBranding
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EC Advantages/Disadvantages• EC Advantages
– Ability to reach new markets– Reduces costs (for some businesses)– Increased purchasing opportunities– More efficient (electronic payments, telecommuting, etc.)
• EC Disadvantages– Incompatibility for certain industries– Limitations of the medium– Costs!!!– Skills required– Cultural and legal issues
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Business Model
• The method by which a firm builds and uses its resources to offer its customers better value than its competitors and to make money doing so!
Two major parts of the business model:
• Value Proposition
• Financial Model
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Value Proposition
• The value your company adds that would make customers switch to you from their current provider.
Concepts involved in Value Proposition
• Choice of Segments
• Choice of Focal Customer Benefits
• Choice of Unique and Differentiating Capabilities
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Value Proposition• Choice of Segments
– market size or growth– unmet customer needs– weak or no competition
• Choice of Focal Customer Benefits– One or two KEY benefits based on the marketing mix
variables• Ex: fast delivery, high quality products, customer service,
low-prices, unique product• Choice of Unique and Differentiating Capabilities
– Also known as : Core Competencies or Unique Resources
• Tangible assets (location), Intangible (Brand name) or corporate skills and capabilities (knowledge of customers)
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Financial Models• There are four revenue models:
– Advertising (sell ads, site sponsorships, interstituals)
– Product sales (income from the sales of products, services, or information)
– Transaction (revenue from charging a fee or a taking a % of a transaction)
– Subscription (subscriber fees for magazines, information, services, …)
– Or a combination of these
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Revenue Model - Advertising
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Revenue Model – Product Sales
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Revenue Model – Transaction
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Revenue Model – Subscription