Learning Objectives Describe electronic retailing (e-tailing) and its characteristics. Define and describe the primary e-tailing business models. Describe.

Learning Objectives Describe electronic retailing (e-tailing) and its characteristics. Define and describe the primary e-tailing business models. Describe how online travel and tourism services operate and their impact on the industry. Discuss the online employment market, including its participants, benefits, and limitations. Describe online real estate services. Discuss online stock-trading services.

Learning Objectives Discuss cyberbanking and online personal finance.
Describe on-demand delivery by e-grocers. Describe the delivery of digital products and online entertainment. Discuss various e-tail consumer aids, including comparison-shopping aids. Identify the critical success factors and failure avoidance tactics for direct online marketing and e-tailing. Describe reintermediation, channel conflict, and personalization in e-tailing.

OPENING VIGNETTE Amazon.com: The King of E-Tailing

OPENING VIGNETTE : Amazon.com: The King of E-Tailing
The opportunity (Problems) July 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 selection improving the customer’s experience adding services and alliances recognizing the importance of order fulfillment and warehousing

Amazon.com: The King of E-Tailing (cont.)
Technology used (Solutions) Amazon.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 fields increases product selection with the used and out-of-print titles expands its offerings beyond books (June 2002 became an authorized dealer of Sony Corp. selling Sony products online) today: a diversified retailer of products and services

Key features of the Amazon.com superstore are: easy browsing, searching, and ordering useful product information, reviews, recommendations, and personalization broad selection low prices secure payment systems efficient order fulfillment personalization

Enjoyable 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

Marketplace services: hosts and operates auctions zShops service hosts electronic storefronts for a monthly fee allowing small businesses the opportunity to have customized storefronts supported by the richness of Amazon.com’s order-fulfillment processing

Amazon.com is recognized as an online leader in CRM informative marketing front ends one-to-one advertisements free posting of restaurant menus from thousands of restaurants “Welcome back, Sarah Shopper” with recommendations of new books from the customers preferred genre based on previous purchases Sends purchase recommendations via to cultivate repeat buyers Efficient search engine and other shopping aids Customers can personalize their accounts and manage orders online with the patented “One-Click” order feature including an electronic wallet

In 1997, Amazon.com started an extensive affiliates program by 2002, the company had more than 500,000 partners that refer customers to Amazon.com Amazon pays a 3 to 5% commission on any resulting sale alliances with major “trusted partners” provide knowledgeable entry into new markets Carsdirect.com allows it to sell cars online Drugstore.com connects to health and beauty aids AT&T, Nextel and others suggest service plans for wireless phones

September 2001 Amazon signed an agreement with Borders Group Inc allows Amazon.com’s users to pick up books, CDs, and other merchandise at Borders’ physical bookstores It is becoming a Web fulfillment contractor for national chains such as: Target Circuit City

The Results Is the number one e-tailer since 2001 generated $3.12 billion ($3,12 billion – Italian way) Is becoming very successful in reducing its costs and increasing its profitability Annual sales for Amazon.com have trended upward (over $5 billion in 2003)

$15.7 million in 1996 to $600 million in 1998 to about $4 billion by 2002 In 2003 the site offers over 17 million book, music, and DVD/video titles to some 20 million customers Offers several features for international customers In January 2002, Amazon.com declared its first ever profit—for the 2001 fourth quarter

What can we learn… demonstrates the evolution of e-tailing some of the problems encountered by e-tailers solutions employed by Amazon.com to expand its business the opportunities for e-tailing Affiliate marketing Others New business opportunities New business models diversification

Affiliate Marketing Affiliate marketing can be simply defined as
A commission based arrangement where referring sites (affiliates or publishers) receive a commission on sales or leads by merchants (retailers)

3.1 Internet Marketing and Electronic Retailing
Overview and definitions of e-tailing Electronic retailing (e-tailing): Retailing conducted online, over the Internet E-tailers: Those who conduct retail business over the Internet

Internet Marketing and Electronic Retailing
What Sells Well on the Internet? Consumer Electronics Office Supplies Sport and Fitness Goods Books and Music Toys Travel Health and Beauty Entertainment Apparel and Clothing Jewelry Cars Services Pet Supplies Computer Hardware and Software

Internet Marketing and E-Tailing (cont.)
Characteristics of successful e-tailing guarantee provided by highly reliable or well-known vendors (Dell) digitized format (software) relatively inexpensive items (office supplies) frequently purchased items (groceries) commodities with standard specifications (books), physical inspection unimportant (unlike “Diamond”) high brand recognition (Lands’ End) well-known packaged items that cannot be opened even in a traditional store (vitamins)

3.2 E-Tailing Business Models
Classification by distribution channel Mail-order retailers that go online Direct marketing from manufacturers Pure-play e-tailers Click-and-mortar retailers Internet (online) malls 1.Mail-order retailers that go online:Traditional mail-order retailers (e.g., Land’s End) simply added another distribution channel, the Internet. 2. Direct marketing from manufacturers: direct 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; e.g., DELL 3. Pure-play e-tailers: Virtual (pure-play) e-tailers: Firms that sell directly to consumers over the Internet without maintaining a physical sales channel (No physical store) e.g., amazon.com; cattoys.com 4. Click-and-mortar retailers: traditional retailers with a supplementary Web site (walmart.com, homedeport.com) 5. Internet (online) malls: the malls include large numbers of independent storefonts.

The E-Tailer Enterprise Finance, Accounting, HRM, IT
Exhibit 3.3: E-Tailing Business Models – E-tailing an Enterprise EC System Business Partners Distributor Customers Supplier Supplier B2B and Supply Chain Management (SCM) B2C Sales, Marketing, and CRM Our Company The E-Tailer Enterprise Finance, Accounting, HRM, IT Supplier Supplier Supplier Supplier Enterprise Resource Planning (ERP) “The Backbone” Business Partners Business Partners Facing supplier distributor/ Business Partner Objective: Optimize Relationships with business partners and reduce cost of goods sold Internal Operations Objective: Facilitate internal operations & increase productivity B2C and Customer-Facing Applications Objectives: Optimize business relationships with customers; increase service effectiveness and sales

E-Tailing Business Models
direct 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-tailers Firms that sell directly to consumers over the Internet without maintaining a physical sales channel

click-and-mortar retailers Brick-and-mortar retailers that offer a transactional Web site from which to conduct business brick-and-mortar retailers Retailers who do business in the non-Internet, physical world in traditional brick-and-mortar stores

multichannel 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

Other B2C Models and Special Retailing Representative special B2C services Postal services Services and products for adults Wedding channels Gift registries

3.3 Travel and Tourism Services Online
Major travel-related Web sites are: expedia.com orbitz.com travelocity.com asiatravel.com hotwire.com travelweb.com eurovacations.com priceline.com

Travel and Tourism Services Online (cont.)
Revenue models of online travel services include: Revenue from advertising Consultancy fees Subscription or membership fees Revenue-sharing fees Others Direct revenues (commissions)

Services provided: Traditional services providing general information reserving and purchasing tickets, accommodations, and entertainment

Travel and Tourism Services Online
Special Services Wireless services Direct marketing Alliances and consortia

Unique services from virtual travel agencies travel tips (a visa problem) electronic travel magazines fare comparisons currency conversion calculators worldwide business and place locators outlet for travel accessories and books experts’ opinions major international and travel news detailed driving maps and directions chat rooms and bulletin boards frequent-flier deals online travel auctions

Benefits of Online Travel Services To travelers Free information accessible at any time from any place Substantial discounts are available To travel services providers Airlines, hotels, and cruise lines sell otherwise-empty spaces Direct selling saves the provider’s commission and its processing

Limitations of Online Travel Services Many people do not use the Internet The amount of time and the difficulty of using virtual travel agencies may be significant, especially for complex trips and for inexperienced Internet surfers Complex trips or those that require stopovers may not be available online because they require specialized knowledge and arrangements

Corporate Travel To reduce corporate travel costs, companies can make arrangements that enable employees to plan and book their own trips Impact of EC on the Travel Industry The Internet may be contributing to a sharp reduction in the number of travel agents It has also driven the rise of intermediaries—third-party online sellers and portals provide price comparisons and a range of other value-adding services for the consumer

Intelligent (software) agents in travel services Agent is capable of acting autonomously, cooperatively, and collectively to achieve the stated goal Involved in buyer-seller negotiations Agents may activate other agents to make special arrangements, cooperate with each other, activate multimedia presentations, or make special inquiries The agents emulate the work and behavior of human agents in executing organizational processes, such as travel authorization and planning. The system increases organizational productivity by carrying out several tedious watchdog activities, thereby freeing humans to work on more challenging and creative tasks.

3.4 Employment, Placement, and the Job Market Online

Employment, Placement, and the Job Market Online
THE INTERNET JOB MARKET Job seekers Employers seeking employees Job agencies Government agencies and institutions A consortium of large employers and college careers advisors Global online portals

Limitations of the Electronic Job Market The gap between those with skills and access to the Internet and those without Companies find that they are flooded with applicants when they advertise online, screening is a time-consuming and costly process Security and privacy High turnover costs for employers by accelerating employees’ movement to better jobs

Intelligent Agents in the Electronic Job Market Intelligent agents for job seekers Intelligent agents for employers

Employment Placement and the Job Market
Exhibit 3.7 Intelligent Agents Match Resumes with Available Jobs s s Job Seeker Recruiter Agent 1 Agent 2 Create “Job Search Agent” giving the search keywords and frequency of receiving s Create Resume (objective, target job, & company, location, work status, experience, education, affiliations, skills, reference, etc.) Post Jobs (category, locations, job title & description, career level, position type, salary range) Create “Resume Search Agents” giving the search keywords and frequency of receiving s Base Base Resume Job Agent 3 Matching around the clock Generate s to Job Seekers Generate s to Recruiters

BREAK-1 EC Application Case 3.1: Lands’ Littlewoods Shop Direct Group: From Mail-Order Catalogue to High Street to the Web (p.101)

3.5 Real Estate, Insurance, and Stock Trading Online
Potential homebuyers can: view many properties online, at any time and from anywhere, saving time for the buyer and the broker sort and organize properties according to specific criteria and preview the exterior and interior design of the properties, shortening the search process potential homebuyers can find detailed information about the properties and frequently get larger real estate listings than brokers will provide.

Real Estate, Insurance, and Stock Trading Online
E-commerce and the Internet are slowly but surely having an ever increasing impact on the real estate industry Real Estate Applications Advice for consumers on buying or selling Commercial real estate listings Links to house listings in all major cities Maps Information on current mortgage rates

Real Estate Applications (cont.) Real Estate Mortgages Many sites offer loan calculators Mortgage brokers can pass loan applications over the Internet and receive bids from lenders that want to issue mortgages “Name your own price” model Aggregation of loan seekers package placed for bid on the Internet

Insurance Online Standard insurance policies are available online at a substantial discount : Auto Home Life Health Third-party aggregators offer free comparisons of available policies Several large insurance and risk-management companies offer comprehensive insurance contracts online insurate.com; quotesmith.com; insurance.com; quicken.com

Online Stock Trading Investment information Related financial markets The risk of having an online stock account

Online Stock Trading (cont.)
Investment information money.cnn.com: current financial news bloomberg.com: municipal bond prices investorguide.com: overall market information with many links to other financial sites thestreet.com: free “guru” (expert) advice marketguide.com: stock screening and evaluation tools (MultexInvestor) Others: ipodata.com: latest on funding and pricing of initial public offerings (IPOs) bigcharts.com: chart lovers will enjoy morningstar.com: mutual fund evaluation tools and other interesting investment information firstcall.com: earnings estimates and more finance.yahoo.com: anything that anyone would need to know about finance and stocks fool.com: The Motley Fool is a comprehensive site that tries to educate, amuse, and enrich; a portal for individual investors

Online Stock Trading (cont.)
Well-known companies that offer online trading: E*TRADE Ameritrade TD Waterhouse Suretrade Discover Lombard

3.6 Banking and Personal Finance Online
electronic banking (e-banking): Various banking activities conducted from home or the road using an Internet connection; also known as cyberbanking, virtual banking, online banking, and home banking Consumers can use e-banking to pay bills online or to secure a loan electronically.

Banking and Personal Finance Online (cont.)
Home banking capabilities View current account balances and history at anytime Obtain charge and credit card statements Pay bills Download account transactions Transfer money between accounts Balance accounts Send to the bank Expand the meaning of “banker’s hours” Handle finances when traveling Use additional services

Banking and Personal Finance Online

International and Multiple-Currency Banking Some international retail purchasing can be done by providing a credit card number, other transactions may require international banking support

Online Financial Transaction Implementation Issues Securing financial transactions Access to banks’ intranets by outsiders Imaging systems Pricing online versus offline services Risks risk of hackers; liquidity risk; susceptible to panic withdrawals

Online Billing and Bill Paying Automatic transfer of mortgage payments Automatic transfer of funds to pay monthly utility bills Paying bills from online banking accounts. Merchant-to-customer direct billing Using an intermediary for bill consolidation Person-to-person direct payment Pay bills at bank kiosks Taxes

Banking and Personal Finance Online (cont.)
banks Have no physical location, but only conduct online transactions NetBank (netbank.com) First Internet Bank (firstib.com) Caution Virtual Make sure that the bank is legitimate before sending money to a virtual bank

3.7 On-Demand Delivery Services and E-Grocers
A grocer that will take orders online and provide deliveries on a daily or other regular schedule or will deliver items within a very short period of time On-demand delivery service: Express delivery made fairly quickly after an online order is received E-grocers offer consumers the ability to order items online and have them delivered to their houses free regular “unattended” weekly delivery based on a monthly subscription model on-demand deliveries - a surcharge and additional delivery charge nonperishable items shipped via common carrier - dry-cleaning pickup and delivery “don’t run out” automatic reordering fresh flower delivery movie rentals meal planning recipe tips multimedia features nutritional information

On-Demand Delivery Services Model

On-Demand Delivery Services and E-Grocers (cont.)
Who are e-grocery shoppers? Shopping avoiders Necessity users New technologists Time-starved consumers Webvan.com vs. Safeway Webvan case will be discussed in Week#11 Shopping avoiders – those dislike going to the grocery store Necessity users – those are limited in their ability to shop (disabled and elderly people or no cars) New technologists – who are young and comfortable with technology Time-starved consumers – those are extremely busy and are willing to shop online in order to free up time in their schedules. Webvan.com – with a goal of delivering anything (esp. grocery), any time and anywhere in an efficient manner. It folded in 2001 because it was unable to secure more funds and declining demands due to economic conditions. Safeway – successfully acquire Groceryworks.com

3.8 Online Delivery of Digital Products, Entertainment, and Media
Digital products: products that can be transformed to digital format and delivered over the Internet Certain goods, such as software, music, or news stories, may be distributed in a physical form or they may be digitized and delivered over the Internet. Delivery, distribution and inventory management: Buyers (customers) prefer the formats available through physical distribution Sellers, the costs associated with the manufacture, storage, and distribution of physical products can be enormous.

Online Delivery of Digital Products, Entertainment, and Media
Online Entertainment Examples of online entertainment Web browsing; Internet gaming Fantasy sports games Single and multiplayer games Adult entertainment; Card games Social networking sites Participatory Web sites Reading; Live events Entertainment-related services Event ticketing Restaurants Information retrieval Retrieval of audio and video entertainment

3.9 Online Purchase Decision Aids
Shopping portals: Gateways to storefronts and malls; may be comprehensive or niche oriented dealtime.com; shopping.yahoo.com eshop.msn.com; - webcenter.shop.aol.com shopping robots (shopping agents or shopbots): Tools that scout the Web on behalf of consumers who specify search criteria “Spy” services Wireless Shopping comparisons e.g. autobytel.com; Zdnet.com/computershopper; office.com; dealtime.com Many sites and tools are available to help consumers with online purchasing decisions. Consumers must decide: which product or service to purchase, which site to use for the purchase (a manufacturer site, a general purpose e-tailer, a niche intermediary) what other services to employ. Some sites offer price comparisons as their primary tool, others evaluate services, trust, quality, and other factors. Shopbots: find other stores with good service and policies that sell similar items at lower prices etc.. Some software agents specialize in certain product categories or niches.

Online Purchase-Decision Aids
Business Ratings Sites Trust Verification Sites Other Shopping Tools Amazon.com’s A9 Search Engine Answers.com

Online Purchase Decision Aids
Business rating sites Bizrate.com Consumer Reports Online (consumerreports.org) Forrester Research (forrester.com) Gomez Advisors (gomez.com) Trust verifications sites: evaluate and verify the trustworthiness of various e-tailers TrustE Versign BBB online Webtrust Other Shopping Tools Amazon.com’s A9 Search Engine Answers.com Trust

3.10 Problems with E-Tailing and Lessons Learned
The reasons that retailers give for not going online include: Their product is not appropriate for Web sales Lack of significant opportunity High cost Technological immaturity Online sales conflict with core business

Problems with E-Tailing and Lessons Learned
Don’t ignore profitability Manage new risk exposure Watch the cost of branding Do not start with insufficient funds The web site must be effective Keep it interesting

Problems with E-Tailing and Lessons Learned
Successful Click-and-Mortar Strategies Speak with one voice Leverage the multichannels Empower the customer

3.11 Issues in E-Tailing disintermediation
The removal of organizations or business process layers responsible for certain intermediary steps in a given supply chain reintermediation The 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 hypermediation Extensive use of both human and electronic intermediation to provide assistance in all phases of an e-commerce venture Unbundling

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 (cont.)
Determining the right price prices competitive on the Internet prices should be in line with the corporate policy on profitability Personalization use cookie files and other technologies to track the specific browsing and buying behavior of each consumer marketing plan tailored to that consumer’s pattern Fraud and Other Illegal Activities How to Make Customers Happy Determining the right price -- Pricing a product or service on the Internet, especially by a click-and-mortar company, is complicated. -- in line with off-line channel’s pricing strategy -- To avoid price conflict, some companies created independent online subsidiaries. Personalization -- Online marketing business models is the ability of the seller to create an element of personalizaiton for each individual consumer. -- marketing plan tailored to that consumer’s pattern by showing items of interest, offering incentives that appeal to that consumer’s sense of value, or providing certain services that will attract that consumer back to the Web site. Although pure-play e-tailing is risky, and its future is unclear, e-tailing is growing rapidly as complementary distribution channel to traditional stores and catalogs. In other words, the click-and-mortar model currently is winning.

(EXTRA) Successful Click-and-Mortar Strategies
Mature transactional systems include features for payment processing, order fulfillment, logistics, inventory management, and a host of other services. A traditional brick-and-mortar store with a mature Web site uses a click-and-mortar strategy to do the following: Speak with one voice Empower the customer Leverage the multichannels Mature transactional systems include features for payment processing, order fulfillment, logistics, inventory management, and a host of other services. The real gains for traditional retailers will come from leveraging the benefits of their physical presence and the benefits of their online presence. Speak with one voice – link all of its back-end systems to create an integrated customer experience.(consistent information distributed and received) Empower the customer – the seller creates a powerful 24/7 channel for service and information. Sellers empower the customers opportunity to perform various functions interactively, at any time (e.g., find store locations, product information, inventory availability online) Leverage the multichannels – the innovative retailer will offer the advantages of each marketing channel to customers from all channels. Whether the purchase is made online or at the store, the customer should benefit from the presence of both channels.

Example: Circuit City Transformation to click-and-mortar: Circuit City
1999, Circuit City’s Web site largely a brochureware site capable only of selling gift certificates EC system credit card authorization and inventory-management systems were in place

Circuit City (cont.) Features of the circuitcity.com site:
educates customers about the various features and capabilities of different products customers gain valuable knowledge to assist them in the purchase decision extensive amount of information about electronics and other products, organized in a very flexible way

Circuit City (cont.) Online purchase to be smooth, secure, and seamless Order fulfillment method is flexible receive the purchase via common carrier pay a larger shipping charge for overnight delivery pick up the item at the nearby brick-and-mortar store

Managerial Issues What should our strategic position be?
Are we financially viable? How should we introduce wireless shopping? Are there international legal issues regarding online recruiting? Do we have ethics and privacy guidelines? How will intermediaries act in cyberspace? Should we set up alliances?

BREAK-2 Application Case 3.4: Online Security at a Bank (p.123)

Learning Objectives Describe electronic retailing (e-tailing) and its characteristics. Define and describe the primary e-tailing business models. Describe.

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Learning Objectives Describe electronic retailing (e-tailing) and its characteristics. Define and describe the primary e-tailing business models. Describe.

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