Presentation on theme: "TOPIC 3: ELECTRONIC RETAILING (E-TAILING) BUSINESS MODELS"— Presentation transcript:
1 TOPIC 3: ELECTRONIC RETAILING (E-TAILING) BUSINESS MODELS 3.1 E-tailing, its characteristics and business models3.2 Online travel & tourism services and industry impact3.3 Online real estate, insurance and stock trading3.4 Cyberbanking and online personal finance.3.5 On-demand delivery services and e-grocers.3.6 Online delivery of digital products and entertainment.3.7 Online purchase aids & comparison-shopping aids3.8 Critical success factors and problems with e-tailing and lessons learned3.9 Reintermediation, channel conflict, and personalisation in e-tailing.
2 Case Study: : The King of E-Tailing The OpportunityJuly 1995, e-tailing pioneer Amazon.com, offered books via an electronic catalog from its Web site (amazon.com)The company has continually enhanced its business models and electronic store by:expanding product selectionimproving the customer’s experienceadding services and alliancesrecognising the importance of order fulfillment and warehousing
3 Case Study: : The King of E-Tailing Technology usedAmazon.com has expanded in a variety of directions:Offers specialty stores (professional and technical store)Expands its editorial content through partnerships with experts in certain fieldsIncreases product selection with the (used and out-of-print titles)Expands its offerings beyond books (June 2002 became an authorised dealer of Sony Corporation selling Sony products online)Today: a diversified retailer of products and services
4 Case Study: : The King of E-Tailing Key features of Amazon.com:Easy browsing, searching, and orderingUseful product information, reviews, recommendations, and personalisationBroad selectionLow pricesSecure payment systemsEfficient order fulfillmentPersonalisationEnjoyable features:“Gift Ideas” section features seasonally appropriate gift ideas and services“Community” section provides product information and recommendations shared by customers“E-Cards” section, free animated electronic greeting
5 Case Study: : The King of E-Tailing Marketplace services:Hosts and operates auctionszShops service hosts electronic storefronts for a monthly feeAllowing small businesses the opportunity to have customised storefronts supported by the richness of Amazon.com’s order-fulfillment processing
6 Case Study: : The King of E-Tailing Amazon.com is an online leader in CRMInformative marketing front endsOne-to-one advertisementsFree posting of menus from thousands of restaurants“Welcome back, Sarah Shopper” with recommendations of new books from the customers preferred genre based on previous purchases.Sends buy recommendations via to cultivate repeat buyersEfficient search engine and other shopping aidsCustomers can personalise their accounts and manage orders online with the patented “One-Click” order feature including an electronic wallet
7 Case Study: : The King of E-Tailing In 1997, Amazon.com started an extensive affiliates programBy 2002, the company had more than 500,000 partners that refer customers to Amazon.comAmazon pays a 3 to 5% commission on any resulting saleAlliances with major “trusted partners” provide knowledgeable entry into new marketsCarsdirect.com allows it to sell cars onlineDrugstore.com connects to health and beauty aidsAT&T, Nextel and others suggest service plans for wireless phones
8 Case Study: : The King of E-Tailing The ResultsNumber one e-tailer since 2001 generated $3.12BVery successful in reducing its costs and increasing its profitabilityAnnual sales have trended upward (over $5B in 2003)$15.7 million in 1996 to $600 million in 1998 to about $4 billion by 2002In 2003 the site offers over 17 million book, music, and DVD/video titles to some 20 million customersOffers several features for international customersIn January 2002, Amazon.com declared its first ever profit—for the 2001 fourth quarter
9 Case Study: : The King of E-Tailing What can we learn…demonstrates the evolution of e-tailingsome of the problems encountered by e-tailerssolutions employed by Amazon.com to expand its businessthe opportunities for e-tailing
10 3.1: Internet Marketing and E-Tailing Overview of e-tailingElectronic retailing (e-tailing):Retailing conducted online, over the InternetE-tailers:Those who conduct retail business over the InternetThe concept of retailing and e-tailing implies sales of products/services to customers, that is B2C EC.
11 3.1: Internet Marketing and E-Tailing Size 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 billionThe average online shopper spent over $350 per quarterForrester Research estimates that e-tailing will reach $316 billion by 2010
12 3.1: Internet Marketing and E-Tailing What Sells Well on the Internet?ToysHealth and beauty productsApparel and clothingJewelryCarsServicesOthersComputer hardware and softwareConsumer electronicsSporting goodsOffice suppliesBooks and musicEntertainment
13 3.1: Internet Marketing and E-Tailing Characteristics of successful e-tailingHigh brand recognition (eg., Lands’ end, Dell)Guarantee provided by highly reliable or well-known vendors (eg., Dell)Digitised format (eg., software, music, videos)Relatively inexpensive items (eg., office supplies)Frequently purchased items (eg., groceries)Commodities with standard specifications (eg., books, airline tickets), physical inspection unimportant.Well-known packaged items that cannot be opened even in a traditional store (eg., vitamins, chocolates)
14 3.1: Primary E-Tailing Business Models Classification by Distribution Channel1. Mail-order retailers that go onlineRetailers leveraging on existing infrastructures by using direct online marketing as their main distribution channel2. Direct marketing from manufacturersManufacturers market directly online to customers3. Pure-play e-tailersNo physical stores, only online presence4. Click-and-mortar retailersTraditional retailers with supplementary Web sites5. Internet (online) mallsMany independent online merchants in one location.
16 3.1: Classification by Distribution Channel Direct marketing by mail order companiesBroadly, marketing that takes place without intermediaries between manufacturers and buyers;In our context, marketing done online between any seller and buyerFor a successful Mail-Order company to have a distinct advantage in online sales, it must have good payment processing, inventory management and order-fulfillment operations as shown in the following Lands’ End case study.
17 Case Study: Lands’ EndLands’ End: How a mail-order company moved onlineSuccessful because of the logistics system already in placeA subsidiary of Sears, Roebuck and CompanyInternet sales in 2000—10% of the company’s $1.3B totalProjected Internet sales are 20 percent in 2003In 1995 it offered only 100 products online; as of 2002, all of its products are onlineGlobal presence in Japan, Germany, and the United KingdomOrders generated online are shipped from these distribution outlets—U.S. customers usually receive their orders in 2 days
18 Case Study: Lands’ EndWomen customers can build and store a three-dimensional model of their body (Personal Model) that recommends outfits that flatter certain body profiles and suggests sizes based upon customer’s measurementsMale customers can use a feature called “Oxford Express” to sort through hundreds of fabrics, styles, collar and cuff options, and sizes within minutesCustomers can track their order status online and request catalogs using the InternetMaintains a B2B “store” where companies can customise clothing such as polo shirts with their logo for use as company uniforms, incentives, or gifts.
19 3.1: Classification by Distribution Channel Direct sales by manufacturersSellers understand their markets better because of the direct connection to consumersConsumers gain greater information about the products through direct connection to the manufacturersExample: Dell Computers: build-to-order customisationVirtual (pure-play) e-tailersFirms that sell directly to customers over the Internet without maintaining a physical sales channel. Example: cattoys.com.
20 3.1: Classification by Distribution Channel Click-and-mortar retailersBrick-and-mortar retailers with a transactional Web site from which to conduct business.Multichannel business modelA business model where a company sells in multiple marketing channels simultaneouslyExample: A company conducting its business using both physical stores and online stores.
21 3.1: Classification by Distribution Channel Retailing in online malls or e-mallReferring directoriesDirectory organised by product typeCatalog listings or banner ads at the mall site advertise the products or storesMalls with shared servicesConsumer can find the product, order and pay for it, and arrange for shipmentHosting mall provides these services, but they are executed by each store independently.Ideally, the customer would like to go to different stores in the e-mall, use one shopping cart, and pay only once. This integrated services (with a single checkout for many merchants) is possible in Yahoo!store (smallbusiness.yahoo.com/merchant).
22 3.1: Representative B2C Services Of the many other B2C services, four of interest are those that deliver physical products, digital products and services:Postal ServicesServices and Products for AdultsWedding ChannelsGift Registries
24 3.2: Travel and Tourism Services Online Online travel is probably the most successful e-commerce implementationOnline services provided include:General informationReserving and purchasing tickets, accommodations, and entertainmentTravel tipsElectronic travel magazinesFare comparisonsTravel products storeExpert opinionFrequent-flyer deals
25 3.2: Travel and Tourism Services Online Benefits of Online Travel ServicesBenefits to consumersLarge amount of free information available 24/7Potential for for substantial discounts in priceBenefits to providersAirlines, hotels, and cruise lines are selling otherwise-empty spacesDirect selling saves the provider’s commission and its processing. (Otherwise it has to sell via a transaction broker which charges fees for its services)
26 3.2: Travel and Tourism Services Online Role of software (intelligent) agents in travel servicesIntelligent agents could provide a service to travel customers by providing buyer-seller negotiations.Future applications would allow greater information flow for better pricing and decision making.
27 3.3: Real Estate, Insurance & Stock Trading Online Real Estate ApplicationsAdvice to consumers on buying or selling a homeDirectory and new sitesProperty listings (commercial and residential)Links to realtorsMaps are availableInformation on current mortgage ratesMortgage comparisonsMortgage brokersOnline lendersSites for persons who want to sell their homes privately, without using a real estate agentRental properties are listed.
28 3.3: Real Estate, Insurance & Stock Trading Online Insurance OnlineAn increasing number of companies use the Internet to offer standard insurance policies (automobile, home, life, or health) at a substantial discountThird-party aggregators offer free comparisons of available policiesMany large insurance companies are using a dual distribution strategy, by adding online distribution of standard insurance policies to their traditional agency distribution system.
29 3.3: Real Estate, Insurance & Stock Trading Online
30 3.3: Real Estate, Insurance & Stock Trading Online Investment Information OnlineCurrent financial news (money.cnn.com)Bond prices (bloomberg.com)Free (expert) advice (thestreet.com)Stock screening and evaluation tools (MultexInvestor)Trading strategies (Schwab Trader)The latest on funding and pricing of IPOsFinancial information (earnings estimates)
31 3.3: Real Estate, Insurance & Stock Trading Online Advantages of Trading Stocks OnlineEase-of-useAccess to large amounts of informationConvenienceReduced costs.Risk of Trading Stocks OnlineThe major risk of online trading is securityThe risks of delayed information as well as the relative ease of trading (increasing the amount of trading overall).
32 Case Study: Dangers of Online Stocks Trading Almost 55% of stock trading in Korea is done onlineFraudulent online stock trading—August 2002A criminal used a PC in an Internet cafe to place a buy order at a high price for 5 millions shares of “Delta Information & Communication”. He used the trust company’s stolen account number and passwordIn 90 seconds, over 100 people sold more than 10,000 shares each for a total of 2.7 million shares pushing the price of the shares way upHacker stopped buying and disappearedWithout buyers the price of Delta’s shares started to declineIn 2 days, Daewoo Securities (manager of the Hyundai account) suffered U.S. $5 million paper losses