E-Commerce

What is E-Commerce? E-Commerce can be defined as … The conduct of selling, buying, logistics, or other organization-management issues via the WEB. OR Exchange of information, goods, service, and payments by electronic means.

Growth of E-Commerce $743.8B 2002 1st Q $28.91B 2000 $35.87B 2001 2002est 1996 $700M

History of E-Commerce Background E-commerce actually began in the 1970s when larger corporations started creating private networks to share information with business partners and suppliers. This process, called Electronic Data Interchange (EDI), transmitted standardized data that streamlined the procurement process between businesses, so that paperwork and human intervention were nearly eliminated. EDI is still in place, and is so effective at reducing costs and improving efficiency that an estimated 95% of Fortune 1,000 companies use it.

History of E-Commerce Prodigy was running text ads and selling flowers in the early '80s The first documented Online sale in 1994 was what? A CD

History of E-Commerce Early EC was pioneered by Internet companies that didn't (and still don't) perform traditional retail. Called Pure Plays. such as Amazon.com and CDNow. More recently click and mortar stores have moved online like Barnes and Noble, Best Buy, the Gap, and Wal-Mart

Product Attributes for Selling on the Web Digital or Knowledge-based products Software, video games, music, movies, books Direct-to-consumer web services Gambling and porn

Product Attributes for Selling on the Web Digital or Knowledge-based products Consulting services Information or data provider [banner ad revenue] Must be what your TM wants Must be high quality Must be unique

Product Attributes for Selling on the Web Hard Goods Computers and computer equipment Books CDs Specialized Niche products Virtual Vineyard

High Touch vs. Low Touch High-Touch products are those which consumers prefer to hold, feel, or examine closely. Low-Touch products are typically standardized goods that do not require examination.

Ways to Sell High-Touch Products Technology

Ways to Sell High-Touch Products Physical Solutions

Ways to Sell High-Touch Products Branding

EC Advantages/Disadvantages Ability to reach new markets Reduces costs (for some businesses) Increased purchasing opportunities More efficient (electronic payments, telecommuting, etc.) EC Disadvantages Incompatibility for certain industries Limitations of the medium Costs!!! Skills required Cultural and legal issues

Business Model The method by which a firm builds and uses its resources to offer its customers better value than its competitors and to make money doing so! Two major parts of the business model: Value Proposition Financial Model

Value Proposition The value your company adds that would make customers switch to you from their current provider. Concepts involved in Value Proposition Choice of Segments Choice of Focal Customer Benefits Choice of Unique and Differentiating Capabilities

Value Proposition Choice of Segments market size or growth unmet customer needs weak or no competition Choice of Focal Customer Benefits One or two KEY benefits based on the marketing mix variables Ex: fast delivery, high quality products, customer service, low-prices, unique product Choice of Unique and Differentiating Capabilities Also known as : Core Competencies or Unique Resources Tangible assets (location), Intangible (Brand name) or corporate skills and capabilities (knowledge of customers)

Financial Models There are four revenue models: Advertising (sell ads, site sponsorships, interstituals) Product sales (income from the sales of products, services, or information) Transaction (revenue from charging a fee or a taking a % of a transaction) Subscription (subscriber fees for magazines, information, services, …) Or a combination of these

Revenue Model - Advertising

Revenue Model – Product Sales

Revenue Model – Transaction

Revenue Model – Subscription