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Electronic Commerce: Business Models, Strategies, Investment and Implementation in the Network Economics August, 2008 Minder Chen, Ph.D. Associate Professor.

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Presentation on theme: "Electronic Commerce: Business Models, Strategies, Investment and Implementation in the Network Economics August, 2008 Minder Chen, Ph.D. Associate Professor."— Presentation transcript:

1 Electronic Commerce: Business Models, Strategies, Investment and Implementation in the Network Economics August, 2008 Minder Chen, Ph.D. Associate Professor of Management Information Systems or Web site:

2 EC(I) - 2 © Minder Chen, Reference EC Books 1.Net Ready, by Amir Hartman and John Sifonis, McGRaw-Hill, Now or Never, by Mary Modahl, Harper Business, Designing Systems for Internet Commerce by G. Winfield Treese, Lawrence C. Stewart (May 1998) Addison-Wesley Pub Co; ISBN: Designing Systems for Internet Commerce 4.Net Results: Web Marketing that Works by Rick E. Bruner (Editor), Cybernautics, Usweb Corporation Hayden Books; ISBN: Net Results: Web Marketing that Works 5.E-Business : Roadmap for Success by Ravi Kalakota, Marcia Robinson, Don Tapscott (June 1999) Addison-Wesley Pub Co (C); ISBN: E-Business : Roadmap for Success 6.Customers.Com: How to Create a Profitable Business Strategy for the Internet and Beyond by Patricia B. Seybold (Contributor), R. T. Marshak, Ronni Marshak 1 Ed edition (November 1998) Times Books; ISBN: Customers.Com: How to Create a Profitable Business Strategy for the Internet and Beyond 7.Net Success : 24 Leaders in Web Commerce Show You How to Put the Web to Work for Your Business by Christina Ford Haylock, Len Muscarella, Ron Schultz, Steve Case (May 1999) Adams Media Corporation; ISBN: Net Success : 24 Leaders in Web Commerce Show You How to Put the Web to Work for Your Business 8.Creating the Virtual Store: Taking Your Web Site from Browsing to Buying, by Magdalena Yesil, Published by John Wiley & Sons, November 1, 1996Creating the Virtual Store: Taking Your Web Site from Browsing to Buying

3 EC(I) - 3 © Minder Chen, Course Description This course provides an overview of Electronic Commerce and Electronic Business based on new E-conomy (network economics) and unique characteristics of underlying web technologies. Topics covered include: electronic commerce overview, network economics, EC models and strategies, EC case studies, e-business components such as Enterprise Resource Planning and Customer Relationship Management from a reengineering process viewpoint; Internet and web technologies including web technologies, electronic payment systems, and Internet security. Critical success factors for building a successful EC will be discussed.

4 EC(I) - 4 © Minder Chen, Seminar Leader Dr. Minder Chen received a B.S. in Electrical Engineering from National Taiwan University in 1977, an M.B.A. from National Chiao Tung University in 1983, and a Ph.D. in Management Information Systems from the University of Arizona in He is currently Associate Professor of Management Information Systems and Decision Science and served as the Director of Technology Program (an Executive Master Program in Information Technology Management) in the School of Management at George Mason University. He has taught Executive MBA and undergraduate level courses in electronic commerce, as well as Business Process Reengineering and Change Management; Technology Assessment, Evaluation, & Investment; Global Information Technology Management at the Executive Technology Management master program. He is the President of Advanced Information Technology Consulting (U.S.A), a consulting firm specialized in business engineering, electronic commerce, and emerging technologies. He is also one of the founder and Chief Technology Officer of KITE E- Commerce Training and Consulting Inc. (Taiwan). His primary research interests are electronic commerce, computer-aided instruction, collaborative and organizational learning, information engineering and business reengineering, computer-aided software engineering, client/server computing, collaboration technologies (groupware), and object- oriented systems development methodology. He has published papers in Journal of Management Information Systems, Database, Journal of Organizational Computing, Expert Systems with Applications, IEEE Transactions on Knowledge and Data Engineering, IEEE Transactions on Systems, Man, and Cybernetics, Journal of Small Group Research, and IEEE Software.

5 EC(I) - 5 © Minder Chen, Continued... He has been involved in studying methods and tools for business process reengineering and software reuse for DOD's Corporate Information Management Office. He has also worked with governments and private-sector businesses, such as Fairfax County Government, US Court, Industrial Technology Research Institute, DOD Center for Information Management, American Management Systems, and Wizdom Systems Inc. in their information engineering, client/server migration, and business reengineering efforts by providing them with training and consulting services. He has given presentations and one- to three-day business reengineering and electronic commerce and other advanced IT seminars in U.S., China (for Everbright Group), Taiwan (via National Taiwan University and Corporate Synergy Development Center), Singapore, and Hong Kong. Dr. Chen is also a well-known expert in systems development methodology, integrated CASE tools, and groupware. He has provided training courses such as HTML, DHTML, XML, JavaScript, Web Site Development and User Interface Design, IIS, ASP, ColdFusion, electronic commerce, CASE tools, Information Strategy Planning, Information Engineering methodology, client/server computing using PowerBuilder and Visual Basic for many firms, such as AT&T, Logicon, PSINet, KForce.com, TRW Inc., BDM, BTG, Lockheed Martin, International Monetary Funds, Computer Sciences Corporation, and Marriot Hotel. He is the co-guest-editor of the March 1992 IEEE Software special issue on Integrated CASE, a CASE minitrack coordinator of Hawaii International Conference on Systems Sciences for several years, a program committee member of Methods and Tools for Business Engineering 1995 Conference, an international program committee member of 1995 Pan Pacific Conference on Information Systems.

6 EC(I) - 6 © Minder Chen, Outline (I) EC Introduction Introduction The cycle of electronic commerce EC and Business Process EC statistics Network Economy and Dynamic Trade Information rules Network externality and network economics New supply and demand curves Dynamic trade EC Strategies 4Cs strategy Content, Community, Commerce Revenue streams E-conomy Map and EC Strategies EC Business Models B2C Virtual stores: physical and digital goods and services Infomediaries: Seller-side Informediaries: Buyer-side Infomediaries: B2B marketspace EC Case Studies: B2B: verticalnet.com Auction: eBay Subscription web sites: monster.com e-tailing: 1800flowers.com Financial investment sites: E*Trade Other interesting web sites

7 EC(I) - 7 © Minder Chen, Outline (II) E-Business and Extended Enterprise Defining e-business and extended enterprise Supply Chain Management Customer Relationship Management Business-to-business analysis Case Studies Amazon.com Dell Federal Express Cisco Web Technology and EC Software Overview Internet infrastructure and services Web technology overview EC software Internet Security and Electronic Payment Systems EC Implementation Evolution of EC implementation EC site life cycle EC site design issues Promotion and marketing Net readiness evaluation EC Investment and Opportunities Internet / EC industry analysis EC Firms and Stock market EC investment pyramid

8 EC(I) - 8 © Minder Chen, EC Introduction Introduction The cycle of electronic commerce EC and business process EC statistics

9 EC(I) - 9 © Minder Chen, Electronic Commerce: Introduction E-Business E-Commerce Internet Commerce

10 EC(I) - 10 © Minder Chen, Electronic Commerce Electronic commerce is broadly as the ability to execute business activities (transactions, contracts, and partnership) over a computer network. The execution of these activities lead to the exchange of goods, services, and money. Online business activities are changing market dynamics and structures of various industries. Electronic commerce adds a new dimension "information" to business activities involving information goods, information services, and electronic money.

11 EC(I) - 11 © Minder Chen, Market Relationships

12 Travelocity Microsoft expedia Priceline.com

13 EC(I) - 13 © Minder Chen, The Low-Friction Market "[The Internet] will carry us into a new world of low friction, low- overhead capitalism, in which market information will be plentiful and transaction costs low." -- Bill Gates, The Road Ahead "Where there is a friction, there is opportunity!" -- Net Ready.

14 EC(I) - 14 © Minder Chen, The Cycle of Electronic Commerce Customers Online AdsOnline Orders Standard Orders Access Searches Queries Surfing Distribution Online: soft goods Delivery: hard goods Electronic Customer Support Follow-on Sales

15 EC(I) - 15 © Minder Chen, Components of Electronic Commerce Institution Government Merchants Manufacturers Suppliers Consumers Processes Marketing Sales Payment Fulfillment Support Networks Intranet Extranet Internet Source: adapted from David Kosiur, Understanding Electronic Commerce, Microsoft Press, Electronic Commerce

16 EC(I) - 16 © Minder Chen, Generic Framework of Electronic Commerce Common Business Services Infrastructure (Security/Authentication, Electronic Payment, Directories/Catalogs) Messaging & Information Distribution Infrastructure (EDI, , HyperText Transfer Protocol) Multimedia Content & Network Publishing Infrastructure (Digital Video, Electronic Books, World Wide Web) Information Superhighway Infrastructure (Telecom, Cable TV, Wireless, Internet) Electronic Commerce Applications Supply Chain Management Online Marketing and Advertising Procurement & Purchasing Online Shopping Audio and Video on Demand Online Financial Transaction Entertainment and Gaming Education and Research Public policy, legal, economical development, and privacy issues Technical standards for electronic documents, multimedia contents, business transactions, and network protocols Adapted from: Kalakota and Whinston, Frontiers of Electronic Commerce, Addison Wesley, 1996, p. 4.

17 EC(I) - 17 © Minder Chen, EC and Business Processes Seller Customer Corporate Databases Provide Info Get customer Provide info Fulfill order Support Identify need Find source Evaluate offerings Purchase Operate, Maintain, Repair Phone, fax, Web site Newsgroups Net communities Web site EDI Web site, phone, fax, , e- mailing list Credit cards, e-cash P.O.s Demos, reviews Send info Data sheets, catalogs, demos Request info Web surfing Web searches, web ads Deliver soft goods electronically

18 EC(I) - 18 © Minder Chen, World Wide Internet Commerce Forester Research, Inc. June 1999

19 EC(I) - 19 © Minder Chen, Business Internet Commerce Trends B2C: Business to Consumer B2B: Business to Business Reference:

20 EC(I) - 20 © Minder Chen, Business-to-Business E-Commerce International Data Corporation forecasts that business-to- business e-commerce revenue will jump from $80 billion worldwide in 1998 to $1.1 trillion in Forrester Research believes that number will go even higher to $1.3 trillion by Business-to-Business -- Vertical Industries –Computing and Electronics: For this year, businesses will invest $50 billion in computers and other electronic equipment online. Increase to $319 billion by –Motor vehicles: Companies will spend $9 billion online to purchase fleets of cars and trucks this year. 2002grow to $114 billionmore than a 1000% increase. –Online utilities: Online trades of $15 billion in 1999 will grow to $110 billion by –Food and agriculture: Expected to be about $3 billion in $20 billion by –Pharmaceutical and medical: Forecasted $1 billion this year. Increase 20-fold by (Source: Business 2.0, March, 1999 re: Forrester Research)

21 EC(I) - 21 © Minder Chen, Statistics Holiday Season 1998 –2.1 million households shopped online for the first time –Generated $2.3 billion –Virtually all (98%) of AOL shoppers said they would shop online again in the next 6 months (Source: Jupiter Communications) By –Consumers on the Web will spend more than $177 billion worldwide. –There will be an eight-fold increase in Web buyers worldwide to 143 million (International Data Corporation, March 1999) –In Europe, 43 million households will be online. (Source: Nua Internet Surveys 12/98 re: DataMonitor) –In Japan, buyers will spend one trillion Yen online. (Source: Nikkei Multimedia, 12/98) 1% of 5 million US merchants are able to collect payments via the Internet in % E-merchants by year 2003.

22 EC(I) - 22 © Minder Chen, Retailing Trends 1950s 1960s-1970s 1980s 1990s Main street Malls Superstores Web Home Depot CompUSA Barnes and Nobles Border

23 EC(I) - 23 © Minder Chen, AOL Findings Buy brands Seek convenience Are increasingly time-starving Are not solely motivated by price Require simplicity

24 EC(I) - 24 © Minder Chen, Network Economy and Dynamic Trade Information rules Network externality and network economics New supply and demand curves Dynamic trade

25 EC(I) - 25 © Minder Chen, Changes in the Net Economy Business environment –Local / Physical Global /Virtual Business assets –Tangible Intangible Business change –Periodic Continuous Business production –Mass Production Mass Customization Mass Personalization

26 EC(I) - 26 © Minder Chen, Net Economy 1940s s –Manufacturing to information economy –Local - regional - national - multinational –Tangible brick-and-mortar assets: offices, shops, service centers, and warehouse 1990s - 21st Century –Net economy: »Information & Knowledge »Communication and interactions –Global and virtual –Business Focus: Information, channel, flow, customer loyalty, reliable service, relationship –Intangible assets: Knowledge, experiences, relationships

27 EC(I) - 27 © Minder Chen, Internet Economy Driving Forces Changing customer demands Globalization Internet ubiquity New technology New marketplace and intermediacies

28 EC(I) - 28 © Minder Chen, Network and Information Economy Information is costly to produce but cheap to reproduce. –Price information according to its value not its cost. Managing intellectual property. –Maximize the value of your intellectual property, not the terms and conditions that maximize the protection. Information as an experience good –Consumers must experience it to value it. –Brand and trust building is critical. The economics of attention –A wealth of information creates a poverty of attention. Source: Information Rules

29 EC(I) - 29 © Minder Chen, Characteristic of Information Economy

30 EC(I) - 30 © Minder Chen, Information Commodity Market Competition among sellers of commodity information pushes prices to zero. Personalize your product and personalize your pricing Know your customer Differentiate your prices when possible Use promotion to measure demands Network effects lead to demand side economies of scale and positive feedback. Information has its greatest value when it is fresh.

31 EC(I) - 31 © Minder Chen, Popularity Adds Value in a Network Value to User Number of Compatible User Vicious cycle Virtuous cycle Networks Real: LAN, Internet, Fax Virtual: Virtual community, Chat room, Instant messenger Positive Network Externality

32 EC(I) - 32 © Minder Chen, Supply/Demand Flip Price Quantity Demand Supply Classic Economics Price Quantity Demand Supply Network Economy In the network economy, the supply curves slope down instead of up and demand curves slope up instead of down. The accelerating expansion of knowledge and technology simultaneously pushes up the demand curve while pushing down the supply curve. Upward demand curves: Network externality Downward Supply Curves: Compounded learning curve, Moore's Law

33 EC(I) - 33 © Minder Chen, The Internet Increases Apparent Supply Old apparent supply New apparent supply Actual supply Internet increase apparent supply Apparent quantity rise Price fall Price Quantity Source: Now or Never, Mary Modahl, HarperBusiness, 2000

34 EC(I) - 34 © Minder Chen, Challenge Consumers: Everything on the Internet should to be free. Merchant: How can I make a profit if everything is free. Examples: –Free web browsers: Netscape Communicator and Internet Explorer –Free Juno, mail.yahoo.com and hotmail.com –Free Internet Access: Freeserve in Britain –Free PC: eMachine and CompuServe; Free-PC –Free web hosting: Geocities, Angelfire, Zoom –Free... Price Year $250 $ Cost of a 3-minute Long Distance Call Gilder's Law All tangible and intangible items that can be copied adhere to the law of inverted pricing and become cheaper as they improve. Anticipate this cheapness in your pricing strategy and product/service development strategy All tangible and intangible items that can be copied adhere to the law of inverted pricing and become cheaper as they improve. Anticipate this cheapness in your pricing strategy and product/service development strategy

35 EC(I) - 35 © Minder Chen, Dynamic Trade: Perfect Market Customer service is more important than product selling –Federal Express: Certainty Real-time demand drives production –Dell: Build-To-Order Pricing matches market conditions –Name your price (reversed auction): PriceLine.com –Auction: Ebay Leveraging technology to satisfy current customer demand and with customized response.

36 EC(I) - 36 © Minder Chen, Traditional vs. Dynamic Trade Speed from engagement to transaction –Weeks vs. Minutes Product distribution –Seller-selected vs. Buyer-selected Pricing –Product price list vs. Market-determined price Production –Pre-sale vs. Post-sale (Dells BTO) Customer relationships –Standard vs. Targeted and Customized Strategic asset –Location vs. Visibility and Customer Database

37 EC(I) - 37 © Minder Chen, Dynamic Trade Self-Test Rate each of the following criteria in your market. (3=high, 2=medium, 1=low) Commodity market Perishability of inventory Capital intensity Configurability of products Customers' perceived investment level Threat from new kinds of competition Channel volatility TOTAL: _____________

38 EC(I) - 38 © Minder Chen, Electronic Commerce: Strategies and Business Models

39 EC(I) - 39 © Minder Chen,

40 EC(I) - 40 © Minder Chen, Moving Your Business Online Companies are motivated by either fear or greed to move to their businesses to the net. To.com your company is becoming an imperative. They have to obsolete their current business models and work very hard to search a new business model. Your competitor is just one-click away

41 EC(I) - 41 © Minder Chen, Electronic Commerce Applications and the Cycle of Commerce Enterprise Information Server Marketing Sales Production/Logistics Billing/Collections Service Seller's Cycle of Commerce

42 EC(I) - 42 © Minder Chen, Electronic Commerce Applications and the Cycle of Commerce Shopping/Testing Procurement Receiving/Logistics Payment Operation Enterprise Information Server Buyer's Cycle of Commerce Time

43 EC(I) - 43 © Minder Chen, EC Strategies 4Cs strategy Content, Community, Commerce Revenue streams E-conomy Map

44 EC(I) - 44 © Minder Chen, EC Strategies: 4 CsCommerce Content Community Customers

45 EC(I) - 45 © Minder Chen, Customers Obsess over your customers Remember that the Web is an infant –What do you have to offer that the physical world cannot in order to attract customers? If you make one customer unhappy, he won't tell five friends -- he'll tell 5,000 on newsgroups, list servers, and so on. –"Word of mouth" factor gets amplified on the Net The shifts of balance of power away from business and toward customer. - Jeff Bezos

46 EC(I) - 46 © Minder Chen, Self Assessment: Customer Caring What do your customers need? What requests do they make of you? How do you respond to customers requests? What kind of information can they get from you? What process do they go through? How do you produce and distribute it to them? What are the steps that your customers have to take to complete a purchase transactions? How do they get shipment status? How are exceptions handled? What do you need from customer? What do you know about customer preferences? What information could you use to better target your product and service offerings? What can you do to build relationships? How can you engage customers in an ongoing dialog? How can you continue to provide information, products, and services to reinforce your ongoing relationships?

47 EC(I) - 47 © Minder Chen, Consumers are increasingly engaged in an active and explicit dialogue with companies. The role of the consumer is being transformed from passive buyer to active participant in co-creating value The market is no longer a "target," but must be recognized as an ecosystem. It's a forum for value creation and extraction, and the company is part of an enhanced network--one that includes its suppliers and partners, and its customers. The network's fulfillment goes beyond business-to-business or business-to- consumer relationships to a consumer-to-business-to- business relationship. Consumer Centricity at

48 EC(I) - 48 © Minder Chen, Steps to Success in EC Set strategy –Make it easy for customers to do business with you! Focus on the end-customer –Identify end-customers and their needs –Distinguish from channel partners –Identify other internal and external stakeholders Redesign customer-facing business processes Wire your company for profit and success Foster customer loyalty –Determine and prioritize objectives –Decide what to measure and how to measure –Measure profitability and other critical success indicators Source: Adapted from Customer.com by Patricia Seybold, 1998

49 EC(I) - 49 © Minder Chen, Foster Customer Loyalty The key to profitability in EC Achieving higher revenues via customer acquisition and customer retention –Acquisition costs –Base profit –Revenue growth –Cost savings –Referrals –Price premium Benefits: –No-cost acquisition –Experienced customer Strategies –Increase customer "inventory" –Increase customer "tenure"

50 EC(I) - 50 © Minder Chen, Critical Success Factors Target the right customers Own customer's total experience Streamline business processes that impact the customer Provide a 360-degree view of relationships with your customers Let customers help themselves Help customers do their jobs Deliver personalized services Foster community

51 EC(I) - 51 © Minder Chen, Target the Right Customers Know who your customers and prospects are Find out which customers are profitable Decide which customers you want to attract (or keep from losing) Decide which customers influence key purchases Find out which customers generate referrals Don't confuse customers, partners, and stakeholders

52 EC(I) - 52 © Minder Chen, Own the Customer's Total Experience Deliver a consist and branded experience Focus on saving customer time and irritation Offer a peace of mind Work with partner to deliver consistent service and quality Respect the customer individuality Give customers control over their experience

53 EC(I) - 53 © Minder Chen, Streamline Business Processes That Impacts the Customers Start identify the end customer Streamline the process from the end customer's point of view Streamline the process for key stakeholders Continuously improve the process based on customer feedback Give everyone involved a clear view of the process

54 EC(I) - 54 © Minder Chen, Customer Information Processes: –Marketing –Pre-sales –Sales –Post sales support –Delivery –Field service –Quality control –Billing –Product development & production Media –Web –Kiosh – –Phone –Mail –Fax –Hand-held

55 EC(I) - 55 © Minder Chen, Virtual Communities Virtual Community Users Money Content Demographics Providers Content Hard goods Games Services Other Websites Advertisers Advertising

56 EC(I) - 56 © Minder Chen, Consumers' Needs for Community Communities of transaction: Facilitate the buying and selling of products and services and deliver information related to those transactions. –Bring in a critical mass of sellers and buyers to facilitate certain types of transactions. –Virtual Vineyards Communities of Interest: Bring together participants who interact extensively with one another on specific topics. –Higher degree of interpersonal communication. –GardenWeb: –Motley Fool created by David and Tom Gardners on AOL –Parents Place: Communities of Fantasy –Chat rooms: Red Dragon Inn –Virtual Team competition at ESPNet: espnet.sportszone.com Communities of Relationship: People come together around certain life experiences that are very intense and can lead to the formation of deep personal connections. –Cancer Forum on CompuServe

57 EC(I) - 57 © Minder Chen,

58 EC(I) - 58 © Minder Chen, Geocities: This collection of themes cyberhoods is populated by a half-million "homesteaders" who get free home pages.

59 EC(I) - 59 © Minder Chen, The Well:

60 EC(I) - 60 © Minder Chen, Talk City: LiveWorld Production Inc. hopes to create a clean, well- lighted place to chat on the Web.

61 EC(I) - 61 © Minder Chen, Major Portals AOL/Netscape Yahoo Excite MSN Lycos InfoSeek/GO: Disney's go.com Snap AltaVista

62 EC(I) - 62 © Minder Chen, Revenue Streams Advertising / Sponsorship Transaction Subscription / Listing Fee Value-added services

63 EC(I) - 63 © Minder Chen, Sources of Revenue on the Web Transaction: Net merchants this year will hawk some $518 million worth of goods, from CDs to Computers. Total cybersales could swell to $6.6 billion by 2000, figures Forester Research. Subscription: For now, most content on Web is free. Still sales of subscription services on the Web will hit $ 120 million this year, says Jupiter Communications. By 2000, the number is expected to be $966 million. Advertising: The Net is emerging as a medium uniquely suitable for advertisers looking to reach target customers directly. Spending on Web ads will hit $312 million this year, growing to $5 billion by 2000, Jupiter figures.

64 EC(I) - 64 © Minder Chen, Multifaceted Model for Web-Based EC Design ATTRACT: Hits –Communities of interest –Changing topics for repeat customers –Features that encourage customers to explore ENGAGE: Leads –Special areas encourage customer to register (i.e. selection of articles customized for visitors interests) PARTICIPATE: Sales revenue –Free download (video, audio, & software) –Shopping –Chat and News –Subscription JUMP: Advertising revenue –Other products of interest to customer –Other sites of interest to customer Adapted from Netscape Communications Inc., Attract Engage Participate Jump

65 EC(I) - 65 © Minder Chen, EC Companies Transform the Revenue Mix Pricing Value Customers New Customers New Values New Pricing The mix: Who pays for what and how much. Highly interrelated! Source: Now or Never, 2000

66 EC(I) - 66 © Minder Chen, The Revenue Mix: Examples Finding new customers –Onsale.com sales at costs –Buy.com creates advertising as a revenue stream Offering new value –eBay buyers see auction as a new form of entertainment –At eBay there are some specialized sellers for them selling on eBay has become an official part-time job Building new pricing structures –eBay »If you want to bid or browse at eBay, it's free. You don't pay a penny in fees. »If you're a seller, you'll be charged: An insertion fee. This fee is usually between 25 cents and $2.00, depending on your opening bid. A Final Value (final sale price) fee at the end of your auction. This fee generally ranges from 1.25% to 5% of your final sale price. –Compare eBay with classified ad

67 EC(I) - 67 © Minder Chen, The Revenue Mix Why is it difficult for the traditional companies to change? Finding new customers –"The rearview mirror trap". Existing customers reflect an industry's past more than its future. A traditional company in the market leader position makes it hard to see new customers coming. –"Investor want to talk to their broker on the phone!" –It delayed a deployment of online trading of a major brokerage house by more than two years. Offering new value –Traditional companies have difficulty understanding new value. –One baby bell executive think Yahoo is just another damn yellow pages. "People want to find local businesses!" Building new pricing structures –Equity investors hold traditional players to a higher profit standard than they do to the dotcoms. –In the US, venture funds and individual investors can bankroll tears of big losses of dotcoms in a bid to win market share from traditional companies.

68 EC(I) - 68 © Minder Chen, Consumer Technographics Segments in the US Fast Forward 12% New Age Nurturers 8% Mouse Patatoes 9% Techno-strivers 7% Digital Hopeful 7% Gadget Grabbers 9% Handshakers 7% Traditionalists 8% Media Junkies 5% Sidelined Citizens 28% Primary Motivation Career Family Entertainment Attitude Toward Technology Pessimists Income Level High Low Source: Forrester Research Inc. Early Adopters Laggards Optimists Mainstreams

69 EC(I) - 69 © Minder Chen, Quick Test for Technographics More Men More Women More Educated Less Educated High Income Low Income Have Children No Children Younger Age Older Laggards Early Adopter Mainstreams Time Number of new users

70 EC(I) - 70 © Minder Chen, Technology-Fit: Customer and Product Customer Need for Product Information High Low Customer Demographics Match PoorHigh Earlier Adopter Second Wave Web Laggards Tide Denny's AA FedExp Microsoft Nike Pepsi Jenny Craig Chrysler Source: Forrester Research

71 EC(I) - 71 © Minder Chen, EC Development Process Competitive and capability analysis Knowledge building and market evaluation EC Business model design and feature identification EC technical architecture design Application development and deployment Continuous performance evaluation and innovation

72 EC(I) - 72 © Minder Chen, Opening Online Business Identify a need and a niche Determine what you have to offer Set your business goals Design your EC architecture Assemble your EC teams Build your web site Set up a system to handle sales Provide customer services Advertise your online business (online and offline) Evaluate your performance and moving on

73 EC(I) - 73 © Minder Chen, Keys to Long Term Success Fast deployment Evolutionary implementation First mover advantages Promotion, promotion, promotion Customer focus and services Interaction with customers Integrating emerging technologies Redefining and redesigning business models Comprehensive database and data warehouse design Integrating back office operations with the virtual store fronts

74 EC(I) - 74 © Minder Chen, Selling Points of Virtual Stores "The Internet is going to become a channel of distribution." -- The president of a major U.S. advertising agency Another firm advertise its virtual store as "The parking is easy, there are no checkout lines, we are open 24 hours a day, and we deliver right to your door." The trend toward point-of-sale moving into the home is accelerating.

75 EC(I) - 75 © Minder Chen, Benefits to the Merchants Increased sales of existing products to generate additional revenues Use the web to target their offers to a niche market "The store is always open!" Establish better relationships with customers. Low cost information distribution Increased speed to market Expanded delivery channels Global exposure and reach

76 EC(I) - 76 © Minder Chen, Benefits to the Consumers Convenience Informative Value presented upfront: Demo and free download No long wait times Easy flow and navigation Search capabilities Engaging presentation Constant updates Easy to buy

77 EC(I) - 77 © Minder Chen, Five Strategies for.com-ming Your Business 1. Check Your DNA –Is the Net part of who you are as an enterprise? Or is it something foreign to you? –Are you ready to embrace the Net economy? –Do you have people on your team who have experience in this area? People who get it? More important, do you have people on your team who are passionate about the Net? Or are they expecting business as usual? Do you have the right people on the right projects? –Think about connections outside your enterprise-are you working with customers, partners and suppliers to help you retool your business. Are you learning from them and are they learning from you? Are you identifying key areas where you can make your interactions more productive and successful?

78 EC(I) - 78 © Minder Chen, Think Portal –Think in terms of "portal". It's not about the site per se, it's about the community you create. –It's about building and maintaining services that build customer and partner loyalty and make your employees more efficient in providing service to your customers and partners. –Examples: automobiles/enthusiasts, airlines/travel agents, insurance/health care, agricultural/food and nutrition. –Find and create that home on the Web, and leverage it for competitive advantage. 3. Think Services –It's not enough anymore just to put information on a Web site. –Today you need to be offering services. What those services are will be up to you, but that's where users are finding value in the Net Economy. –Examples: Insurance, auto buying, auctioning, customer support, supply chain management, etc. –Services equal customer loyalty and retention.

79 EC(I) - 79 © Minder Chen, Think Anywhere, Anytime –Once you've developed those services --which ideally will grow out of your enterprise's core competencies -- you need to deliver them ubiquitously. –If they're only available on PCs, you're going to severely limit their utility -- and your enterprise's growth and profits. 5. E-commerce is Not the Future. It is now! –The marketplace is moving now. Your competition is moving now. –E-commerce is not about the future; it's about today. Start doing e- commerce. –If you haven't prepared for holiday season 2000 for consumers, partners, and suppliers, you're already behind. –Convert your communication, supply chain and customer relationship channels to the Web. Many companies have had difficulty with this due to existing relationship conflict, but the reality is that you have to do it. –Identify one area of high leverage and start there, time is your enemy so get moving today. –The Web is proving to be more reliable, lower cost, and user- friendly. Use it to its full potential.

80 EC(I) - 80 © Minder Chen, What To Do Now 1. Define your eBusiness strategy FAST 2. Assess readiness: –customers –products/services –organization –technology –infrastructure Rapid innovation

81 EC(I) - 81 © Minder Chen, What To Do Now 3. Identify the target: –Business objectives –Customer segment –Application area 4. Build it in less than 6 months -- Flexibility -- Scalability -- extendibility 5. Keep extending the function -- new products and services, new customer interfaces, enhance performance, security and capability 6. START NOW ! You are never done!

82 EC(I) - 82 © Minder Chen, Four Strategies to Start Online Business Integration Subsidiary Partnership Buyout Cost Low High Time to Market Slow Fast Risk Low High

83 EC(I) - 83 © Minder Chen, Brick and Mortar

84 EC(I) - 84 © Minder Chen, Soruce: Harvard Business Review, Get the Right Mixes of Bricks and Clicks, May-June 2000

85 EC(I) - 85 © Minder Chen, In-House vs. Spin-off

86 EC(I) - 86 © Minder Chen, The Four Stages of E-volution Source: Strategy + Business, From Clicks to Bricks, 3q, 2000.

87 EC(I) - 87 © Minder Chen,

88 EC(I) - 88 © Minder Chen, Becoming Virtual Egghead to Egghead.com Computer Literacy to Fatbrain.com Romac International to KForce.com Kinder Toys is Moving to (Find us on the web after June 1st) Kinder Toys is Moving to (Find us on the web after June 1st)

89 EC(I) - 89 © Minder Chen, Your 3 Biggest Problems/Opportunities What should our strategy be? How do we build it in 3 to 6 months? How do we stay on the edge of innovation for life?

90 EC(I) - 90 © Minder Chen, E-conomy Map Consumers Business Individual Affinity Groups Enterprise COINs The Delivery Vehicle (The Container) The Message (The Content) Adapted from: Net Ready, 2000 HP Testing & Measurement VerticalNet Testandmeasurement.com HomeCare Products HomeCare InfoCenter COINs: Community of Interests

91 EC(I) - 91 © Minder Chen, GE's Destroy Your Business Approach Each business unit –Use cross-functional team –Benchmark competitors' »Business operations »Products / Services »The economics of ordering online, sales force, and call centers –DYB - Destruction Your Business: Present a hypothetical internet-based business plan that a competitor could use to erode your customer base.

92 EC(I) - 92 © Minder Chen, GYB: Grow Your Business Approach How the business unit should change their existing business model in response to the threats. Find fresh ways to reach new customers and better serve existing ones. Best practices: –Focus: Your e-business application should focus on how your customers can grow their business, streamline processes or reduce costs. –Speed matters: Mare sure what you are offering customers via the web, whether they are B2C or B2B, is faster, cheaper and better than any other delivery mechanism. –Value: New internet services should enhance value for existing customers rather than simply reaching new ones.

93 EC(I) - 93 © Minder Chen, E-Business Creation Process E-Vision Business Drivers Technology Drivers E-Business Strategy Rapid Implementation Customer feedback Benchmark data Competitive analysis Market forces Usage statistics Customer needs Current capabilities Personalization ROI Profiling Segmentation Experience modeling Expanded business opportunities Systems and networks Web architecture Business infrastructure Technology components Web technology strategy Source: Digital Transformation, 2000

94 EC(I) - 94 © Minder Chen, Internet Industry Internet Economy Consulting Content and Activity Electronic Commerce Infrastructure Client/Server Software ISP Network Services Internet Equipment Commerce Instruments Portals Commerce Servers Sports Malls Entertainment Newsfeed Publications System Integration and Design Browsers Web Server Application Servers Security Tools Internet Service Consumer Services Carriers Backbone Router Access Equipment Server Computers

95 EC(I) - 95 © Minder Chen, EC Business Models B2C Virtual stores: physical and digital goods and services Infomediaries: Seller-side Informediaries: Buyer-side Infomediaries: B2B marketspace

96 EC(I) - 96 © Minder Chen, Types of Virtual Stores Hard goods: –Food –Clothes –Computer hardware and Electronics –Packaged software Soft goods (Bits delivered on-line) –Information »Database »Publishing »Research –Software »Computer games »Java applets »Application software Services –Selling time: »Computer game play »Consulting »Legal and medical services –Selling information (subscriptions) »Dating services »Legal and medical advice –Reservations and tickets »Airline tickets »Event tickets »Hotel and restaurant

97 EC(I) - 97 © Minder Chen, Is EC Appropriate for You? Industries who set up virtual storefronts

98 EC(I) - 98 © Minder Chen, What Consumers Are Buying Online Computer-related products 49% Books 35% Consumer electronics 34% Travel Reservations 28% Cars, boats 19% Clothing and apparel 18% Recorded music, CDs 18% Larger household goods (furniture, major appliances) 15% Filmed entertainment, videos 13% Gifts delivered by mail (flowers, candy) 12% Publication subscriptions 8% Investment or financial services 8% Food and drink 8% Artwork, poster, etc 4% Other 13% »Source: Ernst & Young Internet Shopping Study 1998

99 EC(I) - 99 © Minder Chen, Why? The most affected industries: –Books –Stock trading –PCs –Automobiles –Travel The least affected industries –Food –Consumer durable goods –Clothing –Local services –Banking and insurance Enterprise.com, 1998

100 EC(I) © Minder Chen, Three Business Models Payment direction: –Buy-side –Sell-side –Marketplace: Business is being transacted with both suppliers and customers. Trading parties: Most analysts predict the B2B model will have a more rapid adoption rate, but that the volume of transactions in the B2C model will, in the long run, greatly surpass that of B2B. –Business to Business –Business to Consumer Type of product or service that is being provided. –Physical goods and services –Digital goods (contents) –Digital services

101 EC(I) © Minder Chen, Sell-Side E-Commerce Model Selling Merchant Buyer A Buyer C Buyer B EDI HTML & Forms HTML & XML OBI Online Selling

102 EC(I) © Minder Chen, Sell-Side Storefront Primary model used in current business-to- consumer scenarios Single seller, typically a distributor, constructs a Web storefront to sell to many consumers (i.e. Amazon.com) Unless a single distributor can aggregate all the suppliers in a given industry, the buyer remains responsible for comparison shopping between stores Expensive for buyer; does not meet the needs of corporate procurement organizations.

103 EC(I) © Minder Chen, Buy-Side E-Commerce Model Buyer Seller A Seller C Seller B EDI HTML & Forms HTML & XML OBI Online Procurement

104 EC(I) © Minder Chen, Buy-Side eProcurement Buy-side applications generally consisting of a browser-based self-service front end to ERP and legacy purchasing systems Corporate procurement aggregates many supplier catalogs into a single universal catalog and allows end-user requisitioning from the desktop, facilitating standard procurement for the organization and cutting down on maverick purchasing Purchases made through this system are linked to the back-office ERP or accounting system, cutting time and expense from the transaction and avoiding potential bookkeeping errors Model yields reduced transaction costs but not lower purchase costs; no impact on size of supplier base, no enablement of dynamic trade; buying organizations must set-up and maintain catalogs for each of their suppliers; too costly and technically demanding for most medium and small-sized businesses.

105 EC(I) © Minder Chen, Marketplace E-Commerce Model Virtual Marketplace Seller A Seller C Seller B EDI HTML & Forms HTML & XML OBI Buyer A Buyer C Buyer B EDI HTML & Forms HTML & XML OBI eBay.com Pricelines.com Egghead.com Amazom.com Auction Infomediacy (Content Aggregator)

106 EC(I) © Minder Chen, No vendor loyally No switching costs Time-insensitive Short-term Casual Many vendors Products differentiated on price, image Relationship-based Very high switching costs Extremely time-sensitive Long-term Mission-critical Few partners Partners differentiated on reliability, flexibility Business-to-ConsumerBusiness-to-Business Business-to-Business vs. Business-to-Consumer

107 EC(I) © Minder Chen, B2B Marketplace Latest evolution of B2B eCommerce, enabling a many-to-many relationship between buyers and suppliers Buyers and suppliers leverage economies of scale in their trading relationships and access a more liquid marketplace Sellers find buyers for their goods, buyers find suppliers with goods to sell Many-to-many liquidity allows the use of dynamic pricing models such as auctions and exchanges, further improving the economic efficiency of the market. Web Site:

108 EC(I) © Minder Chen, Direct-to-Customer (D-to-C) Large, global, e-energized corporations (e.g., Fortune 1000) begin to squeeze intermediary companies. Stop & Shop [a large supermarket chain] is launch its own delivery service and is expected to end its partnership with Peapod [a dotcom delivery service]. -- The Boston Globe, April 2000 June 20, Peapod announced online shopping and delivery services in Connecticut through grocery chain Stop & Shop. Stop & Shop is owned by Royal Ahold, which recently took a 51 percent interest in struggling Peapod.Peapod B-to-C B-to-B D-to-C

109 EC(I) © Minder Chen, Channel Conflicts Channel conflicts arise when a new venue for selling products - such as the Web for selling goods or services - threatens to cannibalize one or more existing conduits for selling goods within the same organization, such as a retailer or a manufacturer. The company's internal e-commerce team had already recommended direct Web sales as a way to better manage its supply chain and interact more directly with customers … But when the team presented its proposals to the company's CEO, his response was terse: "We've done business with our distributors for 30 years, and I certainly don't want to sell around them. I don't even want to discuss it." -ComputerWorld.com Quick Study

110 EC(I) © Minder Chen, Case in Point For example, about a year ago (1999), General Motors Corp. in Detroit attempted to buy back some car-dealer franchises as a possible step toward selling directly over the Web. Dealers protested so adamantly that both GM and Ford Motor Co. in Dearborn, Mich., spent a lot of time at a recent industry convention reassuring dealers that the automakers wouldn't sell directly to consumers. And in a recent survey by Cambridge, Mass.-based Forrester Research Inc. of 50 consumer-goods manufacturers, 66% cited channel conflict as the No. 1 obstacle to selling online.

111 EC(I) © Minder Chen, Channel Conflict: How About the Distributors The concept of complete disintermediation - the elimination of the middleman - remains a theory. New intermediaries are emerging. Cisco System has 2 billion dollars annual sales on the Web. 70% of Cisco online business comes from VARs and distributors. Distributors have to do lot of value-add and customer support to survive. Fruit of Loom Inc. has 31 of its 55 distributors up on its extranet called Activewear Online.

112 EC(I) © Minder Chen, Retailers and Manufacturers Co-exist on the Web US retail sales revenues 1998: –Brick-and-mortar stores 93% –Catalog sales: 6% –E-commerce 1% Cases: –Levi Strauss sells jeans at but won't allow retailers to sell them online. –Estee Lauder sells Clinique cosmetics at but doesn't offer retail promotion. –Waterford sells a limited selection at like chandeliers and corporate gifts. Strategies: –Manufacturers want to maintain channels while stay in direct touch with their customers. –Provide online dealer locators. –Share customers information back and forth.

113 EC(I) © Minder Chen, Extended E-conomy Business Models E-buisness storefront Informediary –Seller broker –Buyer broker –Transaction broker / Exchange –COINs –Portals Trust intermediary E-business enabler Infrastructure providers / Communities of commerce Source: Net Ready, 2000

114 EC(I) © Minder Chen, Any-to-Any Technologies Connect Everything to Everyone Consumers Businesses Institutions PCs Web TV PDA Smartcards Specialty Devices Other High Value Solutions Transactions and Payments Physical Infrastructure Banks Brokerage Insurance Retail Distributors Transport Other

115 EC(I) © Minder Chen, Clicks-and-Mortar Clicks-and-mortar has become the new buzzword in retailing circles. It means having an integrated, multi-touchpoint strategy that takes advantage of your physical retail outlets and integrates them seamlessly into your Web strategy. A good clicks-and-mortar strategy uses the Web to drive traffic to your stores and uses your stores to drive traffic to the Web. YourSherpa.com Brick-and-Click

116 EC(I) © Minder Chen, Vulnerability Grid Source: Net Ready, 2000 Velocity: How critical is the need for speed in the delivery of the product or service? Attitudinal Readiness: How ready are customers to accept new ways? Fragmentation: How fragmented is the market in which you operate? Commodity: How commodity-like is the product or service? Asymmetries of Information: What is the balance of power in the buyer-seller equation? Customizability: How customizable is the product or service? Digitizability: How digitizable is the product or service? Efficiency: how efficient is the relationship between buyer and seller? Your Risk/Opportunity Low Medium High Risk/Opportunity Exposure

117 EC(I) © Minder Chen, Move to Consumer-Centric ViewSupplyBaseMyCompanyDistributionChannel TargetConsumers ERP CRM Supply-chain management Customer Firewall SCM Conventional View Consumer-Centric View VirtualEnterprise Supplier network Channel ConsumerCommunities C2B2B: Customer-to-Business-to-Business Adapted from: Customer Centricity, InformationWeek, April 10, 2000

118 EC(I) © Minder Chen, Creating Sustainable Value in EC Develop a brand based on consumer experiences –The brand emerges as the two-way communication on the net and off the net. Develop superior physical distribution –Physical distribution is a choke point in EC Leverage customer information –Use personal information to more convenience shopping and customized services »Privacy issue »Ask customer explicitly for such data »Require a more subtle approach –Use collective data »Use it to adjust pricing, product offering, and target market

119 EC(I) © Minder Chen, Price Pressure Shrink Retail Margins Average retail net margin Time Increasing apparent supply Managing current demand New services and loyalty programs Auctions Economies of scale Aggressive pricing for online plays Comparison shopping engines Increasingly price-sensitive online shoppers Source: Now or Never, 2000

120 EC(I) © Minder Chen, Business Models Based on the Value Chain in the Market Place Raw material producer Manufacturer Distributor Retailer Consumer Exchange Examples: B2B: Vericalnet.com B2C: Amazon.com C2B: Priceline.com C2C: eBay.com C2B B2C C2C New Middleman Independent market operators Consortia Service Providers: Logistics Financial

121 EC(I) © Minder Chen, Business Models from a Strategic Viewpoint "In the new economy, the unit of analysis for innovation is not a product or a technology-it's a business concept. ….To be an industry revolutionary, you must develop an instinctive capacity to think about business models in their entirety." Hamel's business concept that comprises four major components and several subcomponents: –Core strategies –Strategic resources –Customer interfaces –Value networks Source: Leading the Revolution by Gary HamelGary Hamel

122 EC(I) © Minder Chen, Business Concepts (I) Core Strategy: It is the essence of how the firm chooses to compete. –Business Mission: This captures the overall 'objective' of the strategy- what the business model is designed to accomplish or deliver. –Product / Market Scope: This captures the essence of 'where' the firm competes-which customers, which geographies, and what product segments-and where, by implication, it doesn't compete. –Basis for Differentiation: This captures the essence of 'how' the firm competes and, in particular, how it competes 'differently' than its competitors. Strategic Resources: These are unique firm-specific resources. –Core Competencies: This is what the firm 'knows.' (skills and unique capabilities) –Strategic Assets: They are what the firm owns such as brands, patents, infrastructure, proprietary standards, customer data, and anything else that is both rare and valuable. –Core Processes: This is what people in the firm actually 'do.' (activities)

123 EC(I) © Minder Chen, Business Concepts (II) Customer Interface –Fulfillment and Support: This refers to the way the firm 'goes to market,' how it actually 'reaches' customers-which channels it uses, what kind of customer support it offers, and what level of service it provides. –Information and Insight: This refers to all the knowledge that is collected from and utilized on behalf of customers. –Relationship Dynamics: This refers to the nature of the 'interaction' between the producer and the customer. –Pricing Structure: This refers to the price choices depending on the traditions of your industry. Value Network: It surrounds the firm, and which complements and amplifies the firm's own resources. –Suppliers –Partners –Coalitions

124 EC(I) © Minder Chen, Bridge Components These four major components are linked together by three 'bridge' components: –Configuration: Intermediating between a company's core strategy and its strategic resources is first bridge component. –Customer Benefits: Intermediating between the core strategy and the customer interface is second bridge component. –Company Boundaries: Intermediating between a company's strategic resources and its value network is third bridge component.

125 EC(I) © Minder Chen, Market Structure on the Internet Number of companies Size of company Many smaller players with high rate of entry Few large and dominate companies Transition Source: Now or Never, 2000

126 EC(I) © Minder Chen, Three Top Three Concerns Retailers –Conflict with investment in physical stores; –Technology issues; and –Lack of distribution and fulfillment network. Manufacturers –Products not appropriate for online sales; –Potential risk to channel relationships; and –Consumers wont buy online –Many manufacturers simply weren't capable of shipping a single box of Tide or a bottle of Advil. They had no experience in dealing directly with consumers.

127 EC(I) © Minder Chen, Dynamic Trade: Perfect Market Customer service is more important than product selling –Federal Express: Certainty Real-time demand drives production –Dell: Build-To-Order Pricing matches market conditions –Name your price (reversed auction): PriceLine.com –Auction: Ebay Leveraging technology to satisfy current customer demand and with customized response.

128 EC(I) © Minder Chen, Traditional vs. Dynamic Trade Speed from engagement to transaction –Weeks vs. Minutes Product distribution –Seller-selected vs. Buyer-selected Pricing –Product price list vs. Market-determined price Production –Pre-sale vs. Post-sale Customer relationships –Standard vs. Targeted and Customized Strategic asset –Location vs. Visibility and Customer Database

129 EC(I) © Minder Chen, Dynamic Trade Self-Test Rate each of the following criteria in your market. (3=high, 2=medium, 1=low) Commodity market Perishability of inventory Capital intensity Configurability of products Customers' perceived investment level Threat from new kinds of competition Channel volatility TOTAL: _____________

130 EC(I) © Minder Chen, Business Channel: Multi-Channel Presence Buyer Seller Brick-and-mortar –Face-to-Face Mail order –Mail –Printed catalog Phone order –Telex –Phone –Fax Electronic commerce EDI Web Multi-channel plays will have extraordinary power if companies elegantly blend and synchronize those channels. Click and Mortar Pure Play

131 EC(I) © Minder Chen, Internet Companies? "Within five years, ALL companies will be Internet companies." -- Andy Grove, Intel Chairman

132 EC(I) © Minder Chen, Web Experiences for Consumers A many-to-many rather a one-to-many experience Fresh content Access to detail information Communities unbounded by space and time The multimedia appeal of TV A redefinition of privacy and identity Hyper-impulsivity: The web permits a closer conjunction of desire, transaction, and payment than any other environment.

133 EC(I) © Minder Chen, All 3 Steps in One Medium Get Attention Give More Information/ Answer Questions Information The Sale TV Ads Magazines Brochures Sales People Print/editorial Store Telephone Catalogue Transact/ Service Branding

134 EC(I) © Minder Chen, Most Visited Retailers: 1.Bluemountainarts.com 2.Amazon.com 3.AOL.com 4.Ebay.com 5.Etoys.com 6.Barnesandnoble.com 7.CNet.com (software) 8.Egghead.com 9.CDNow.com 10.Musicblvd.com 11.ColumbiaHouse.com 12.Classifieds2000.com 13.Beyond.com 14.Coolsavings.com 15.Valupage.com Not in Top 25: Towerrecords.com Borders.com Toysrus.com Target.com Gap.com Macys.com Sears.com Walmart.com BigCompany.com YourCompany.com?? New Competition From Surprising Places

135 EC(I) © Minder Chen, What is your new industry structure? Powerful new intermediaries –travelocity.com; travel.yahoo.com; expedia.msn.com; golfclubexchange.com, eBay.com, priceline.com Increasing commoditization –Your competitors are just a mouse click away –Camparison shopping: singleshop.com, mySimon.com New competition from surprising places –realguide.real.com; headline.yahoo.com; Be aware of new industry forces –amazon.com; yahoo.com; msn.com; etrade.com; priceline.com; etoy.com; aol.com

136 EC(I) © Minder Chen, What are the new economics? Different revenue models –wsj.com; match.com; yahoo.com; monster.com Different cost models –buy.com; dell.com Different use of assets –Amazon.com

137 EC(I) © Minder Chen, What's the best E-business model for your company? An online subsidiary –Barnesandnorbles.com by Barnes and Nobles to compete with amazon.com –Toysrus.com by Toys "R" Us Inc. to compete with eToys Inc. –MagazineOutlet.com by NewSub Services Inc. Partnering with an online company –PetSmart Inc., invested $16 million in PetJungle.com to create PetSmart.com –a virtual company and a big-box retailer teaming up to attack a category Converting to an online-only company –Egghead.com, Homebid.com Integrating E-business throughout the company –Prudential California Realty

138 EC(I) © Minder Chen, EC: Case Studies B2B: verticalnet.com Auction: eBay Subscription web sites: monster.com e-tailing: 1800flowers.com Financial investment sites: E*Trade Other interesting web sites

139 EC(I) © Minder Chen,

140 EC(I) © Minder Chen, Company Background and Capabilities Own and operate 55 industry-specific Web sites designed as online B2B communities, known as vertical trade communities. These vertical trade communities provide users with comprehensive sources of –Information (Content): from newswire and editorial services –Interaction (Communities): , chat rooms, bulletin board –e-commerce: RFPs, RFQs Additionally, VerticalNet provides auctions, catalogs, bookstores, career services and other e-commerce capabilities horizontally across its communities with technologies from acquired and organic sites like Industry Deals.com, IT CareerHub.com, LabX.com, and Professional Store.com. Create values: –Individual advertising ($6,000 - $25,000) –Hosting sites –Build and design sites –Sponsor forums with expert guests –Negotiate a percentage of transaction at the online marketplace

141 EC(I) © Minder Chen,

142 EC(I) © Minder Chen, Auction: eBay.com

143 EC(I) © Minder Chen, Auction: eBay.com

144 EC(I) © Minder Chen, Priceline.com

145 EC(I) © Minder Chen, Jay Walker, 43, founder and Vice Chairman of priceline.com, has created a model for buying and selling that's so original, it's been patented. Walker calls his model "buyer-driven commerce," and he's racing to build a big company around it. " –Fast Company "It's not a traditional supply-and-demand market anymore. Priceline flips the power relationship on its head where the customer is telling you what he will pay." –Interactive Week

146 EC(I) © Minder Chen, Business Models Priceline.com has pioneered a unique new type of e-commerce known as a "demand collection system" that enables consumers to use the Internet to save money on a wide range of products and services while enabling sellers to generate incremental revenue. Using a simple and compelling consumer proposition--"name your price," we collect consumer demand (in the form of individual customer offers guaranteed by a credit card) for a particular product or service at a price set by the customer and communicate that demand directly to participating sellers or to their private databases. Consumers agree to hold their offers open for a specified period of time to enable priceline.com to fulfill their offers from inventory provided by participating sellers. Once fulfilled, offers generally cannot be canceled. By requiring consumers to be flexible with respect to brands, sellers and/or product features, we enable sellers to generate incremental revenue without disrupting their existing distribution channels or retail pricing structures.

147 EC(I) © Minder Chen, Problems?! As if making a profit from online retailing were not enough of a challenge, try making money online under a system where you give your customers essentially no service, no selection and no right to return unwanted items. May sound crazy, but not too long ago, investors seemed to think it was a brilliant idea. Critics say the company's troubles raising money reflect some fundamental problems with its reverse auction model, which invites consumers to set their own prices. But it also requires them to commit to the purchase before they know all the details. "Consumers typically look for four things: choice, service, selection and low price,'' said Tom Courtney, an analyst with Banc of America Securities. "Priceline gives up everything but the price.'' In hindsight, many critics say Priceline is more gimmick than solid business. Now that the novelty of the name-your-own-price model has started to wear thin, they are losing faith in its viability. ``What I've seen is an intriguing model. You try it once and you feel a little uncomfortable with it. You may not get the route or the fare you wanted and at the end of the day you are not so sure about it,'' said Craig Palmer, president of eWanted, another Internet auction site. ``People come to Priceline, but they don't come back again and again and again.''

148 EC(I) © Minder Chen, E-Loan at eloan.com IPO: 2 Billion Dollars Market Capitalization

149 EC(I) © Minder Chen, Insweb.com

150 EC(I) © Minder Chen, Singleshop.com Compare this with: mySimon.com

151 EC(I) © Minder Chen, Matching Games: The Marketplace $9,000 subscription fee per year for recruiting firms Free for job seekers Online Dating Service

152 EC(I) © Minder Chen, Internet Shopping NetworkInternet Shopping Network: Operating online since April Focus on computer products which fit the demographics pretty well. Customer look for a narrow focus in an online store and expect expertise in that area.

153 EC(I) © Minder Chen, Acquired by Cyberian Outpost Kent, CT, & Sunnyvale, CA Nov. 2, Cyberian Outpost, Inc. (NASDAQ: COOL), a leading Internet-only retailer of computer hardware, software, and peripherals for consumers worldwide, today announced it has acquired the Internet Shopping Network (ISN) Computer Superstore's customer base. Cyberian Outpost (http://www.outpost.com/) will be the new online shopping destination for the Computer Superstore's more than 160,000 customers. Prior to the acquisition, Cyberian Outpost had over 161,000 customers. In addition to selling the Computer Superstore's customer list, ISN has agreed to maintain, a direct link from the ISN Computer Superstore's homepage that will lead shoppers to the Cyberian Outpost homepage (http://www.outpost.com/) for the next four months. Further, all existing URL's relating to the ISN Computer Superstore will re-direct users to Cyberian Outpost's homepage, extending Cyberian Outpost's market reach, these re-directed links will remain in place for one-year to cover residual bookmarks or links pointing to the ISN Computer Superstore.

154 EC(I) © Minder Chen, Outpost.com

155 EC(I) © Minder Chen, eToys.com

156 EC(I) © Minder Chen, On Monday (Dec. 19, 2000), eToys watched its market value, which once topped $1.9 billion, fall to $37.2 million. It watched its customer traffic, once growing at a healthy clip, go flat compared to last year. And it watched its shares plunge 72 percent to close at 28 cents a share, miles from its 52-week high of $40.25, as a number of analysts reaffirmed their positions on the stock.

157 EC(I) © Minder Chen, CDNow

158 EC(I) © Minder Chen, CDNow Merged with Music Boulevard

159 EC(I) © Minder Chen, E-tailing CSF eStrategy eMerchandising eArchitecture eSupplyChain eConnections eBackOffice eProperty eCapital

160 EC(I) © Minder Chen, Time Warner's PathFinderTime Warner's PathFinder: Online Magazines: It was shut down in May 1999

161 EC(I) © Minder Chen, C|NET at cnet.com

162 EC(I) © Minder Chen, espn.go.com ESPN Sportszone

163 EC(I) © Minder Chen, Check out –http://interactive.wsj.com/ –http://www.salon.com

164 EC(I) © Minder Chen, Hot SauceHot Sauce: Specialty virtual store

165 EC(I) © Minder Chen, FLOWERS1-800-FLOWERS: A real world florist with more than 20 years of experience. Went on live in April Also maintain sites in American Online and CompuServe. Online retailing $25 million (10% of company sales) in Take advantage of proven retail marketing strategies: discounts, contests, and sweepstakes, grand opening promotions, etc.

166 EC(I) © Minder Chen,

167 EC(I) © Minder Chen, Help Customers to Select Help customer to remember: Reminder services Lifeminder.com Personalized shopping lists at Staples.com See also: Gifts.com

168 EC(I) © Minder Chen, Grocery Shopping: Homegrocer.com NetGrocer.com Streamline WebVan Priceline.com

169 EC(I) © Minder Chen, Virtual Vineyard: virtualvin.com & wine.com

170 EC(I) © Minder Chen, Landsend.com Set up shop at AOL in 1992 Launch a web site in % of sales in % of sales in 1998 Printing and mailing it 250 million catalogs each year counts for 43% of its operating cost. 10% of all Internet apparel sales in 1998

171 EC(I) © Minder Chen, Interactive Application on the Net Go to Choose Oxford Express Link Check out

172 EC(I) © Minder Chen, My Virtual Model Online catalog Landsend.com plans to outshine the competition this holiday season with a more accurate virtual model derived from a body scan, the company announced Tuesday. In the months leading up to Christmas, a Lands' End mobile unit equipped with an automated Image Twin scanning booth will offer consumers in 14 U.S. and Canadian cities a chance to obtain precise body measurements, generating a virtual twin who will try clothing online.Landsend.comImage Twin Inside the mobile scanning unit, white light flashing on and off for more than 12 seconds digitally captures 200,000 data points of a consumer's figure, creating a 3-D mirror image. A consumer can start using the model online within two hours, after the information is transmitted wirelessly to an IBM server farm located in North Carolina, said C. Cammack Morton, chairman and founder of the North Carolina-based Image Twin. The dressing-room tool, My Virtual Model, is an updated version of a virtual model generated solely from a questionnaire about height, dress size, body shape, and the like. The updated tool takes additional measurements for a more realistic result and as of next week, will offer a male virtual model.My Virtual Model

173 EC(I) © Minder Chen, Online Stock Brokerage Firm: E*Trade Received a $400 million investment from Softbank.

174 EC(I) © Minder Chen, Portfolio

175 EC(I) © Minder Chen, Trading

176 EC(I) © Minder Chen, Analysis

177 EC(I) © Minder Chen, E*Trade Investment Tools E*TRADE has created a web-based trading system that is streamlined, efficient, and economical. As an account holder, you get free real-time market information, news and analysis and pay among the lowest commission rates and lowest margin rates in the industry. One-Click Access to the Tools You Need: E*TRADE customers, get comprehensive online trading capabilities and a full set of investment and research tools such as free news, charts, in-depth company fundamentals, and online portfolio management. Personal Market Page E*TRADE offers a low and simple commission schedule. You pay only $14.95 for listed market orders and $19.95 for Nasdaq orders. For listed orders over 5,000 shares, add 1 cent per share to the entire order. For options, you pay just $20 plus $1.75 per contract, with a $29 minimum.

178 EC(I) © Minder Chen, E*Trade Commission: A Comparison Online competitor

179 EC(I) © Minder Chen, Updates E*TRADE added 233,000 new active accounts during first quarter 1999, an increase of 77% over the previous quarter. In its second fiscal quarter, customer trades rose 63 percent in three months to approximately 70,000 per day. They ended the quarter with 909,000 accounts and customer assets of $21.1 billion –(Source: San Jose Mercury News, 4/21/99). A day trader killed 9 people at Atlanta. –July 28, 1999.

180 EC(I) © Minder Chen, E*TRADE Acquires Telebanc for $1.8 Billion Calling it the first pure-play Internet company to integrate banking and brokerage services, E*TRADE Group Inc. announced Tuesday it is acquiring Internet bank Telebanc Financial Corp. for approximately $1.8 billion. Terms of the agreement call for Telebanc shareholders to receive 2.1 shares of E*TRADE common stock for each share of Telebanc common stock. The merger is valued at roughly $1.8 billion based on E*TRADE's closing price on Friday, May 28. Once the merger is finalized, Telebanc shareholders will own approximately 13 percent of E*TRADE's fully diluted common stock. The transaction will be accounted for as a pooling of interests and is slated to close sometime this fall upon regulatory and shareholder approval. The merger creates an Internet-based, FDIC-insured cash management account which the companies predict will change the future of personal financial services. Aimed at millions of Internet consumers, the online financial management resources of E*TRADE combined with online banking capabilities is expected to eliminate the need for multiple financial relationships. The merger also will offer online consumers for the first time, access to full-featured, FDIC-insured Internet cash management accounts, including ATM access through the national Cirrus network, online bill payment and investing services, enabling them to consolidate brokerage and banking accounts. By offering a central account, customers will be able to conduct a full range of transactions online, including buying mutual funds, CDs and fixed income securities, trading equities and paying bills. E*TRADE said through the integration of the companies services, a cost-effective, scalable business model will be achieved, while boosting E*TRADE's customer acquisitions and aggressively expanding its existing one million- plus customer account base. June 01, 1999

181 EC(I) © Minder Chen,

182 EC(I) © Minder Chen, Internet Stock Is Also Driving The Change Market Capitalization ($ Billions) As of 4/16/99 Schwab: $46.6 B Merrill: $31.0 B

183 EC(I) © Minder Chen, Merrill Lynch & CO. Some 30 percent of chief executives and senior managers say the Internet is forcing them to revamp their strategies, according to a recent study by Booz, Allen & Hamilton and the Economist Intelligence Unit. Take Merrill Lynch & Co., the biggest U.S. broker, which after long resisting trading over the Internet, said on Tuesday it planned to roll out full-scale online trading. "The undeniable fact that there is a segment of the marketplace that wants to access the market through technology and through online investing was indisputable," Merrill Chairman David Komansky said.

184 EC(I) © Minder Chen, By 2003, Forrester estimates that 9.7 million US households will manage more than $3 trillion in 20.4 million on-line accounts. Deep discount firms will see their growth rates plateau. Midtier firms will prosper, capturing more households and assets than their competitors will. Full-service companies will start slow but will enjoy the greatest asset growth.

185 EC(I) © Minder Chen, Motley Fool: Competitor: Quote.yahoo.com, Street.com, Cbs.Marketwatch.com, Stock247.com

186 EC(I) © Minder Chen, The world's first virtual anchor woman. –Create your own radio station


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