Chapter 3Retailing in Electronic Commerce:Products and Services

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Electronic CommercePrentice Hall 2006*Learning ObjectivesDescribe 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.

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Electronic CommercePrentice Hall 2006*Learning ObjectivesDiscuss the online employment market, including its participants, benefits, and limitations.Describe online real estate services.Discuss online stock-trading services.Discuss cyberbanking and online personal finance.Describe on-demand delivery by e-grocers.

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Electronic CommercePrentice Hall 2006*Learning ObjectivesDescribe the delivery of digital products and online entertainment.Discuss various e-tail consumer aids, including comparison-shopping aids.Identify the critical success factors and failure avoidance tactics for direct online marketing and e-tailing.Describe reintermediation, channel conflict, and personalization in e-tailing.

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Electronic CommercePrentice Hall 2006*Internet Marketing and Electronic RetailingOverview of Electronic Retailingelectronic retailing (e-tailing)Retailing conducted online, over the Internet

e-tailersRetailers who sell over the Internet

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Electronic CommercePrentice Hall 2006*Internet Marketing and Electronic RetailingSize and Growth of the B2C MarketReported amounts of online sales deviate substantially based on how the numbers are derivedAnnual online 2004 sales were estimated to be over $70 billion The average online shopper spent over $350 per quarterForrester Research estimates that e-tailing will reach $316 billion by 2010

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Electronic CommercePrentice Hall 2006*Internet Marketing and Electronic RetailingComputer hardware and softwareConsumer electronicsOffice suppliesSporting goodsBooks and musicToysHealth and beautyApparel and clothingJewelryCarsServicesOthers

What Sells Well on the Internet?

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Electronic CommercePrentice Hall 2006*Internet Marketing and Electronic RetailingCharacteristics of Successful E-TailingHigh brand recognitionA guarantee provided by highly reliable or well-known vendorsDigitized formatRelatively inexpensive itemsFrequently purchased items Commodities with standard specificationsWell-known packaged items that cannot be opened even in a traditional store

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Electronic CommercePrentice Hall 2006*E-Retailing Business ModelsClassification by Distribution ChannelMail-order retailers that go onlineDirect marketing from manufacturersPure-play e-tailersClick-and-mortar retailersInternet (online) malls

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Electronic CommercePrentice Hall 2006*E-Retailing Business Modelsdirect marketingBroadly, marketing that takes place without intermediaries between manufacturers and buyers; in the context of this book, marketing done online between any seller and buyer

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Electronic CommercePrentice Hall 2006*E-Retailing Business ModelsDirect Sales by ManufacturersSellers can understand their markets better because of the direct connection to consumersConsumers gain greater information about the products through their direct connection to the manufacturers

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Electronic CommercePrentice Hall 2006*E-Retailing Business Modelsvirtual (pure-play) e-tailersFirms that sell directly to consumers over the Internet without maintaining a physical sales channel

click-and-mortar retailersBrick-and-mortar retailers that offer a transactional Web site from which to conduct business

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Electronic CommercePrentice Hall 2006*E-Retailing Business Modelsbrick-and-mortar retailersRetailers who do business in the non-Internet, physical world in traditional brick-and-mortar stores

multichannel business modelA business model where a company sells in multiple marketing channels simultaneously (e.g., both physical and online stores)

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Electronic CommercePrentice Hall 2006*E-Retailing Business ModelsRetailing in Online MallsReferring DirectoriesMalls with Shared ServicesRepresentative B2C ServicesPostal ServicesServices and Products for AdultsWedding ChannelsGift Registries

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Electronic CommercePrentice Hall 2006*Travel and Tourism Services OnlineOnline travel is probably the most successful e-commerce implementationServices provided include:General information Reserving and purchasing tickets, accommodations, and entertainmentTravel tips Electronic travel magazinesFare comparisons

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Electronic CommercePrentice Hall 2006*Travel and Tourism Services OnlineBenefits of Online Travel ServicesBenefits to consumersLarge amount of free information available 24/7Substantial discounts can be foundBenefits to providersAirlines, hotels, and cruise lines are selling otherwise-empty spacesDirect selling saves the providers commission and its processing

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Electronic CommercePrentice Hall 2006*Travel and Tourism Services OnlineLimitations of Online Travel ServicesMany people do not use the InternetThe amount of time and the difficulty of using virtual travel agencies may be significantComplex trips or those that require stopovers may not be available online because they require specialized knowledge and arrangements

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Electronic CommercePrentice Hall 2006*Travel and Tourism Services OnlineCorporate TravelTo reduce corporate travel costs, companies can make arrangements that enable employees to plan and book their own trips using online optimization tools provided by travel companies, such as those offered by Rosenbluth InternationalTravel authorization software that checks availability of funds and compliance with corporate guidelines is usually provided by travel companies

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Electronic CommercePrentice Hall 2006*Travel and Tourism Services OnlineIntelligent Agents in Travel ServicesSoftware agents emulate the work and behavior of human agents in executing organizational processes like travel authorization, planning or decision makingEach agent is capable of acting autonomously, cooperatively, or collectively to achieve the stated goal

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Electronic CommercePrentice Hall 2006*Employment Placement and the Job Market OnlineThe Internet Job MarketJob seekersEmployers seeking employeesJob agenciesGovernment agencies and institutionsThe Internet is a global online portal for job seekers

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Electronic CommercePrentice Hall 2006*Employment Placement and the Job Market OnlineLimitations of the Electronic Job MarketMany people do not use the Internet. This limitation is even more serious with non-technology-oriented jobsSecurity and privacy: resumes and other online communications are usually not encrypted, so ones job-seeking activities may not be secure

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Electronic CommercePrentice Hall 2006*Exhibit 3.7 Intelligent Agents Match Resumes with Available Jobs

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Electronic CommercePrentice Hall 2006*Real Estate, Insurance, and Stock Trading OnlineReal Estate ApplicationsAdvice to consumers on buying or selling a homeCommercial real estate listingsListings of residential real estate in multiple databasesThe National Association of Realtors (realtor.com) has links to house listings in all major cities

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Electronic CommercePrentice Hall 2006*Real Estate, Insurance, and Stock Trading OnlineReal Estate ApplicationsMaps are availableInformation on current mortgage ratesMortgage brokers can pass loan applications over the Internet and receive bids from lenders who want to issue mortgagesOnline lenders can tentatively approve loans onlineAutomated closing of real estate transactions

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Electronic CommercePrentice Hall 2006*Real Estate, Insurance, and Stock Trading OnlineReal Estate ApplicationsProperty management companies (residential, commercial, and industrial) are using the Internet for many applications ranging from security to communication with tenantsSites for persons who want to sell their homes privately, without using a real estate agentRental properties are listed

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Electronic CommercePrentice Hall 2006*Real Estate, Insurance, and Stock Trading OnlineInsurance OnlineAn increasing number of companies use the Internet to offer standard insurance policies (auto, home, life, or health) at a substantial discountThird-party aggregators offer free comparisons of available policiesSeveral large insurance and risk-management companies offer comprehensive insurance contracts online

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Electronic CommercePrentice Hall 2006*Exhibit 3.8 Online Electronic Stock Trading

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Electronic CommercePrentice Hall 2006*Real Estate, Insurance, and Stock Trading OnlineInvestment Information OnlineCurrent financial newsMunicipal bond pricesMany tools are available to help investors in the bond marketFree guru (expert) adviceStock screening and evaluation tools

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Electronic CommercePrentice Hall 2006*Real Estate, Insurance, and Stock Trading OnlineInvestment Information OnlineArticles from the Journal of the American Association of Individual InvestorsSchwab Trader encourages consumers to practice trading strategiesThe latest on funding and pricing of IPOsEarnings estimatesThe major risk of online trading is security

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Electronic CommercePrentice Hall 2006*Banking and Personal Finance Onlineelectronic 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

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Electronic CommercePrentice Hall 2006*Exhibit 3.9 Online Banking Capabilities

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Electronic CommercePrentice Hall 2006*Banking and Personal Finance OnlineVirtual BanksVirtual banks have no physical location, but only conduct online transactionsInternational and Multiple-Currency BankingHong Kong and Shanghai Banking Corporation (hsbc.com.hk)Tradecard and MasterCard for global transactions (see tradecard.com)Bank of America and most other major banksFxall.com is a multidealer foreign exchange service

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Electronic CommercePrentice Hall 2006*Banking and Personal Finance OnlineImplementation Issues in Online Financial TransactionsSecuring financial transactionsAccess to banks intranets by outsidersUsing imaging systemsPricing online versus off-line servicesRisks

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Electronic CommercePrentice Hall 2006*Banking and Personal Finance OnlineOnline Billing and Bill PayingAutomatic transfer of mortgage paymentsAutomatic transfer of funds to pay monthly utility billsPaying bills from online banking accountsMerchant-to-customer direct billingUsing an intermediary for bill consolidationPerson-to-person direct paymentPay bills at bank kiosksTaxes

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Electronic CommercePrentice Hall 2006*On-Demand Delivery Services and E-grocerson-demand delivery serviceExpress delivery made fairly quickly after an online order is received

e-grocerA grocer that takes orders online and provides deliveries on a daily or other regular schedule or within a very short period of time

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Electronic CommercePrentice Hall 2006*Online Delivery of Digital Products,Entertainment, and MediaCertain goods, (software, music, or news stories) may be distributed in a physical form or they may be digitized and delivered over the InternetFor sellers, the costs associated with the manufacture, storage, and distribution of physical products can be enormousInventory management also becomes a critical cost issue, and so does delivery and distribution

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Electronic CommercePrentice Hall 2006*Online Delivery of Digital Products,Entertainment, and MediaInteractive EntertainmentWeb browsingInternet gamingFantasy sport gamesSingle and multiplayer gamesAdult entertainmentCard gamesParticipatory Web sitesReading

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Electronic CommercePrentice Hall 2006*Online Delivery of Digital Products,Entertainment, and MediaNoninteractive EntertainmentEvent ticketingRestaurantsInformation retrievalRetrieval of audio and video entertainmentLive events

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Electronic CommercePrentice Hall 2006*Online Purchase-Decision Aidsshopping portalsGateways to e-storefronts and e-malls; may be comprehensive or niche orientedshopping robots (shopping agents or shopbots)Tools that scout the Web on behalf of consumers who specify search criteriaWireless Shopping ComparisonsEnable shoppers to compare prices any time from anywhere, including from any physical store

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Electronic CommercePrentice Hall 2006*Online Purchase-Decision AidsBusiness Ratings SitesTrust Verification SitesOther Shopper ToolsEscrow servicesCommunities of consumers who offer advice and opinionsE-wallet (or e-purse)

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Electronic CommercePrentice Hall 2006*Online Purchase-Decision AidsOther Shopper ToolsAmazon.coms A9 Search EngineRemembers information A user can make notes about any Web page and search themOffers a new way to store and organize bookmarksRecommends new sites and favorite old sites specifically for the user to visit

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Electronic CommercePrentice Hall 2006*Successful Click-and-Mortar StrategiesA traditional brick-and-mortar store with a mature Web site uses a click-and-mortar strategy to:Speak with one voiceLeverage the multichannelsEmpower the customer

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Electronic CommercePrentice Hall 2006*Problems with E-tailing and Lessons LearnedDont ignore profitabilityManage new risk exposureWatch the cost of brandingDo not start with insufficient fundsThe Web site must be effectiveKeep it interesting

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Electronic CommercePrentice Hall 2006*Issues in E-Tailing disintermediationThe removal of organizations or business process layers responsible for certain intermediary steps in a given supply chain

reintermediationThe process whereby intermediaries (either new ones or those that had been disintermediated) take on new intermediary roles

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Electronic CommercePrentice Hall 2006*Exhibit 3.12 Disintermediation and Reintermediation in the B2C Supply Chain

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Electronic CommercePrentice Hall 2006*Issues in E-Tailingcybermediation (electronic intermediation)The use of software (intelligent) agents to facilitate intermediation

hypermediationExtensive use of both human and electronic intermediation to provide assistance in all phases of an e-commerce venture

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Electronic CommercePrentice Hall 2006*Issues in E-Tailingchannel conflictSituation in which an online marketing channel upsets the traditional channels due to real or perceived damage from competitionDetermining the right pricePersonalizationFraud and illegal activitiesHow to make customers happy

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Electronic CommercePrentice Hall 2006*Managerial IssuesWhat should our strategic position be?Are we financially viable?Should we recruit out of town?Are there international legal issues regarding online recruiting?Do we have ethics and privacy guidelines?How will intermediaries act in cyberspace?Should we set up alliances?

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Electronic CommercePrentice Hall 2006*SummaryThe scope of e-tailing.E-tailing business models.How online travel/tourism services operate.The online job market and its benefits.The electronic real estate market.Online trading of stocks and bonds.

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Electronic CommercePrentice Hall 2006*SummaryCyberbanking and personal finance.On-demand delivery service.Delivery of digital products.Aiding consumer purchase decisions.Critical success factors.Disintermediation and reintermediation.

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