retailing in ecommerce

Overview Ch. 2 Define e-marketplaces and their components List the major types of e-markets and their features Define supply chains and value chains and understand

their roles Describe the role of intermediaries in EC Describe electronic catalogs, shopping carts, and

search engines Describe the various types of auctions and list their

characteristics Discuss the benefits, limitations and impacts of

auctions Describe bartering and negotiating online Describe the impact of e-marketplaces on organizations Define m-commerce and explain its role as a market

mechanism

Group Assignment

Companies:1.Dell.com2.Ebay.com + paypal.com3.Amazon.com4.Bestbuy.com5.Walmart.com6.Monster.com7.Hotwire.com/priceline.com8.Bluenile.com9.Etrade.com10.Netflix.com11.Alibaba.com12.Yahoo.com

Companies:13.Cisco.com (SC or e-learning)14.Facebook.com15.Skype.com16.Apple.com + the iTunes store17.Fedex18.Google.com19.Craigslist.com

Retailing in Electronic Commerce (E-Tailing)

Learning Objectives

Define and describe the primary business models of e-tailing

Discuss various e-tail consumer aids, including comparison-shopping aids

Discuss various e-tail markets, such as groceries, music, cars, and others

Identify the critical success factors of direct marketing and e-tailing, along with mistakes to avoid

Identify the principles of “click-and-mortar” strategies for traditional retailers

Describe the issue of disintermediation, reintermediation, and channel conflicts in e-tailing

Internet Marketing and Electronic Retailing

A retailer is a sales intermediary, a seller that operates between manufacturers and customers

electronic retailing (e-tailing)Retailing conducted online, over the Internet

e-tailersRetailers who sell over the Internet

The concept of retailing and e-tailing implies sales of goods and/or services to customers; B2C and B2B


Travel Computer Hardware

and Software Consumer Electronics Office Supplies Sport and Fitness

Goods Books and Music Toys

Health and Beauty Entertainment Apparel and

Clothing Jewelry Cars Services Pet Supplies

What Sells Well on the Internet?


Characteristics of Successful E-Tailing High brand recognition A guarantee provided by highly reliable or well-known

vendors Digitized format Relatively inexpensive items Frequently purchased items Commodities with standard specifications Well-known packaged items that cannot be opened

even in a traditional store

Opening Case: Amazon.com

Opening Case: Amazon.com

B2C business model where customers look for a: Low price Fast shipment Good return policy Helpful customer service

Opening Case: Amazon.com [2]

Largest Bookstore in the worldOffers millions of items

Books and music DVDs and videos Toys and video games Electronics and software Home improvement products


Started business in 1995 Sales

• 1996 = $15.7 million• 2000 = $1.8 billion

Products • 1999 = 5 million titles• 2000 = 13 million books, music, DVD/video titles


Auctions Hosts and operates auctions for individuals

and small businesses Shops service, Amazon marketplace,

Amazon payment processing• Provide the opportunity for small businesses to

develop custom storefront• Storefronts are supported by Amazon’s backend

order fulfillment processing


Easy browsing and searching

Useful product information

Reviews, recommendations, and personalization

Broad selection and low prices

Secure payment system (1-Click order technology)

Gifts department Online community

Features

Opening Case: Amazon.com [6]Customer relationship management

Creates interesting and informative front-end Highly automated and efficient back-end

support Personalized service

• Return customers are welcomed back by name• Customer wish lists available• E-mails customers purchase recommendations

based on their purchasing history

Did they Make Profits?


Financial performance Overall losses rather than profits Ability to move into new areas of business

should move them toward profitability, but makes money from books

High level of customer service and customer loyalty adds value


Diversification through business alliances Online sale of cars - greenlight.com Online health and beauty aids - drugstore.com Wireless phones – multiple business partners Toys - ToysrUs.com

E-Tailing Business Models

E-Tailing and B2C Market Growth

Business-to-business (B2B) Requires precise record keeping, trackability,

accountability, and formal contracts, usually with high volume of transactions and large amount payments

Business-to-consumer (B2C) Ability to create direct relationships with

consumer without intermediaries like distributors, wholesalers, or dealers

E-Tailing & B2C Market Growth [2]The B2C Market success is derived from:

Offering quality merchandise at good prices Excellent customer service Convenience

Characteristics of goods leading to high online sales volumes Brand recognition and guarantees Digitized products Frequently purchased, inexpensive items Well-known items with standard specifications

Define How You Make a choice of desired goods?

Consumer Purchase Processand Marketing Plan

Purchase decision process Prepurchase steps

• Awareness of need for purchase• Identify basic need or want

Actual purchase• Establish decision criteria• Seek recommendations and information• Make purchase

Postpurchase steps• Assistance with installation or setup• Online help desks and instruction manuals

The Consumer Purchase Decision Process

Consumer Purchase Processand Marketing Plan [2]

Time-starved consumers

Shopping avoiders New technologists Time-sensitive

materialists or click-and-mortar consumers

Hunter-gatherers Brand loyalists Single shoppers

Types of online shoppers

Decision Criteria

Value proposition customer service, better prices, higher quality

Personal service treat the customer as a unique individual

Convenience self-contained site that serves all the customer’s

needsOther criteria

service after the sale

A Marketing Plan

Influence the consumer’s decision process through the “marketing mix” Product—portfolio of items available Price of the products Promotion of products (advertisements and

giveaways) Packaging and delivery

Online Purchasing Aids

Shopping portals Comprehensive portals

• Links to many different sellers• Shopping comparison sites• Comparison tools are available

Niche oriented• Specialize in a certain line of products

(dogtoys.com)• Some collect referral fee only• Others have formal relationships with affiliates

Online Purchasing Aids [2]

Shopbots and agents tools that scout the Web for specific search

criteria requested by consumers• Mysimon.com - best prices on multiple items• AutoBytel.com – cars• Zdnet.com/computershopper – computers• Office.com – office supplies


Business ratings sites Sites that rate e-tailers

• Bizrate.com—compiles results provided by a network of shoppers

• Gomez.com—consumer identifies relative importance of different criteria


Other shopping tools Escrow services

• 3rd party to assure quality• Proper exchange of money and goods• Research information• Payment-processing support

Communities of consumers• Epinions.com: searchable recommendations on

products• PriceGrabber.com: comparison shopping

E-Tailing Business ModelsSubscription models

charge monthly or annual subscription fee for service

Transaction fee models charge service fee based on the level of

transaction offeredAdvertising-supported models

charge fee to advertisers instead of customersSponsorship models

companies sponsor the business through donations (usually supplemental income)

Disintermediation in the B2C Supply Chain

Source: M. Warkentin, et al. (2000). Used with permission of Dr. Merrill Warkentin.

E-Tailing Business Models [2]

Direct marketing sell directly to consumers

• Manufactures can sell directly to customers– Disintermediation—removal of business process layers in

the value chain– Shortens the distribution chain

» Eliminates inefficiencies» Shortens delivery time» Builds closer relationships with consumers

• Click-and-mortar– Additional marketing channel to the conventional one– Effectively supports build-to-order requests


Pure-play e-tailers sell over the Internet without a physical sales

channel• General purpose e-tailers (Amazon.com)

– Broad range of products– Large number of consumers

• Specialty or niche e-tailers (CatToys.com)– One specific product area– High demand items in the area– Effective practices for customer appeal


Traditional retailers with Web sites Physical store May include mail-order or catalog sales Multichannel store operates both

• Physical store• E-tail site

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E-Tailing Business ModelsClassification by Distribution Channel

Mail-order retailers that go online Direct marketing from manufacturers Pure-play e-tailers Click-and-mortar retailers Internet (online) malls

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E-Tailing Business Modelsdirect marketing

Broadly, marketing that takes place without intermediaries between manufacturers and buyers; in the context of this book, marketing done online between any seller and buyer

virtual (pure-play) e-tailersFirms that sell directly to consumers over the Internet without maintaining a physical sales channel

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E-Tailing Business Modelsclick-and-mortar retailers

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

brick-and-mortar retailersRetailers who do business in the non-Internet, physical world in traditional brick-and-mortar stores

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E-Tailing Business Modelsmultichannel business model

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

Retailing in Online Malls Referring directories Malls with shared services

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E-Tailing Business ModelsOther B2C Models and Special

Retailing Representative special B2C services

• Postal services• Services and products for adults• Wedding channels• Gift registries

Digital Delivery

Digital (“soft”) goods Music, movies, videos, software, newspapers,

magazines, graphics, etc. Can be delivered in “hard” or “soft” form

• Computer program on CD-ROM with owner’s manual and warranty card

• Download from Web site after payment

Digital Goods

Digital Delivery [2]

Napster experience—person-to-person sharing tool Enables individual users to download music

files from each other’s computers Phenomenal growth of Napster community New version of its file-swapping software

includes a “buy button” linked to CDNow May be beneficial to overall music sales as

individuals easily sample a broader range of music

Digital Delivery [3]

New developments Custom-publishing music CD sites—

collection of personal favorites Disintermediation of traditional print media

• Journals and magazines• Newspapers (e.g., Wall Street Journal)

Successful Click-and-Mortar Strategies

Click-and-mortar hybrid strategies Speak with one voice—link all back-end

systems to create an integrated customer experience

Empower the customer—powerful channel for service and information

Leverage the channels—offs advantages of each channel to customers from all channels

• Return item purchased online at physical store• Order via the Web at the physical store items not

available there• 2014: Mobile Supported Apps

Successful Click-and-MortarStrategies [2]

Circuit City Case: transform to click-and-mortar (CircuitCity.com) Educates customers about features and

capabilities of products Customers can perform powerful searches to

find most appropriate products Offers extensive amount of information on

electronics etc., organized very flexible Online purchases are smooth, secure and

seamless

What can be taken from this? User Experience

Successful Click-and-MortarStrategies [3]

Amazon and Toys R Us: alliance of pure-play with traditional retailer Toys R Us had limited logistics capabilities

including distribution centers Amazon failed in the toy market lacking

supplier relationships with toy manufacturers Alliance allows each partner to leverage each

others core strengths Innovative model still working out problems

What can be taken from this? Joint Alliance is Good

Disintermediation & Reintermediaries

Disintermediation Manufacturer sells directly to consumer

Reintermediaries New intermediary roles in the digital environment

offer new ways to:• Reach new customers• Bring value to customers• Generate revenues

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

intermediation

Issues in E-Tailing disintermediation

The 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

Issues in E-Tailing

Issues in E-Tailing cybermediation (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

Issues in E-Tailing channel conflict

Situation in which an online marketing channel upsets the traditional channels due to real or perceived damage from competition

Issues in E-Tailing Determining the Right PricePersonalizationFraud and Other Illegal ActivitiesHow to Make Customers Happy

IF you are a decision maker in a company, what would you do to e-commerce threat?

(Imagine your company produce retail goods)

Managerial Issues

1. What should our strategic position be?2. Are we financially viable?3. How should we introduce wireless

shopping?4. Are there international legal issues

regarding online recruiting?

Managerial Issues

5. Do we have ethics and privacy guidelines?6. How will intermediaries act in cyberspace?7. Should we set up alliances?

E-Tailing: Lessons LearnedProfitability

online marginal sales don’t lead to marginal profits

Branding drive to establish brand can lead to excessive

spendingPerformance

Web sites need to function in a fast, user-friendly manner

Design dynamic sites with rich databases of

information appeal most to customers

Summary

The major e-tailing business models can be classified as a manufacturer selling direct to consumers, pure-play e-tailing and a click-and-mortar strategy

Critical success factors for direct online sales to consumers and e-tailing are managing risk properly, creating a profitable site and watching the cost of branding

Group Exercise

Discuss some of the advantages of online banks. Would you prefer an online or physical bank? Why?

Explain cybermediation. Give an example of a business or process that would benefit from it.

What are some of the benefits of online bill paying over traditional methods? What are some of the disadvantages?

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retailing in ecommerce

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