Retailing In E Commerce


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Retailing In E Commerce

  1. 1. ELC 200 Day 6
  2. 2. Agenda <ul><li>Questions from last Class? </li></ul><ul><li>Assignment 2 posted to WebCT </li></ul><ul><ul><li>Due Feb 9 (next class) </li></ul></ul><ul><li>Assignment 3 will be posted on Feb 13 </li></ul><ul><li>Begin Discussion on </li></ul><ul><ul><li>Retailing in E-Commerce: Products and Services </li></ul></ul><ul><li>Quiz 1 on Feb 13 </li></ul><ul><ul><li>Computer based WebCT exam </li></ul></ul><ul><ul><li>Chap 1-3 </li></ul></ul><ul><ul><li>20 m/c (60 points) 5 short essays (40 points) </li></ul></ul><ul><ul><li>70 mins </li></ul></ul><ul><ul><li>open book, open notes, open computer </li></ul></ul>
  3. 3. Chapter 3 Retailing in E-Commerce: Products and Services
  4. 4. Learning Objectives <ul><li>Define and describe the primary business models of electronic retailing (“e-tailing”) </li></ul><ul><li>Discuss various e-tail markets, such as those for books, music, and cars </li></ul><ul><li>Identify the principles of “click-and-mortar” strategies for traditional retailers </li></ul><ul><li>Describe how online travel and tourism operate </li></ul>
  5. 5. Learning Objectives (cont.) <ul><li>Discuss the online employment market, including its drivers and benefits </li></ul><ul><li>Describe online real estate, insurance, and stock trading </li></ul><ul><li>Discuss cyberbanking and online personal finance </li></ul><ul><li>Describe on-demand delivery by e-grocers </li></ul>
  6. 6. Learning Objectives (cont.) <ul><li>Describe the delivery of digital products and online entertainment </li></ul><ul><li>Discuss various e-tail consumer aids, including comparison-shopping aids </li></ul><ul><li>Identify the critical success factors for direct marketing and e-tailing </li></ul><ul><li>Describe reintermediation, channel conflicts, and personalization in e-tailing </li></ul>
  7. 7. King of E-Tailing <ul><li>The Problem </li></ul><ul><ul><li> has recognized that it must continually enhance its electronic store by expanding product selection and improving the customer experience </li></ul></ul><ul><li>The Solution </li></ul><ul><ul><li> now offers specialty stores </li></ul></ul><ul><ul><ul><li>Professional and technical store </li></ul></ul></ul><ul><ul><ul><li>Expanded book editorial content </li></ul></ul></ul><ul><ul><ul><li>Increased product selection </li></ul></ul></ul>
  8. 8. (cont.) <ul><li>Some key features of the are: </li></ul><ul><ul><li>Easy browsing and searching </li></ul></ul><ul><ul><li>Useful product information </li></ul></ul><ul><ul><li>Low prices </li></ul></ul><ul><ul><li>One-Click order technology </li></ul></ul><ul><li>Features that make the online shopping experience more enjoyable </li></ul><ul><ul><li>Gift ideas </li></ul></ul><ul><ul><li>E-cards </li></ul></ul>
  9. 9. (cont.) <ul><li>Various marketplace services </li></ul><ul><ul><li>Amazon Auctions </li></ul></ul><ul><ul><li>zShops service hosts electronic storefronts for a monthly fee </li></ul></ul><ul><li>Customer relationship management </li></ul><ul><ul><li>Creates interesting and informative front-end </li></ul></ul><ul><ul><li>Highly automated and efficient back-end support </li></ul></ul><ul><ul><li>Personalized service </li></ul></ul><ul><li>Diversification through business alliances </li></ul>
  10. 10. (cont.) <ul><li>The Results </li></ul><ul><ul><li>Financial performance—annual sales for have trended upward, from $15.7 million in 1996 to $4 billion in 2002 </li></ul></ul><ul><ul><li>Offers several features for international customers </li></ul></ul><ul><ul><li>Declared its first profit for the 2001 first quarter </li></ul></ul><ul><ul><li>Yet the company’s financial success is by no means assured </li></ul></ul>
  11. 11. E-Tailing and B2C Market Growth <ul><li>A retailer is a sales intermediary , a seller that operates between manufacturers and customers </li></ul><ul><li>Electronic retailing (e-tailing)—retailing conducted online, over the Internet </li></ul><ul><ul><li>Catalog sales free a retailer from the need for a physical store </li></ul></ul><ul><ul><li>Manufacturer sells directly to the customer, cutting out the intermediary </li></ul></ul>
  12. 12. Size and Growth of the B2C Market <ul><li>Statistics for volume of B2C EC sales come from many sources: </li></ul><ul><ul><li> </li></ul></ul><ul><ul><li> </li></ul></ul><ul><li>Statistics on e-tailing can be found at: </li></ul><ul><ul><li> </li></ul></ul><ul><ul><li> </li></ul></ul><ul><li>Substantial deviations in the reported data due to how the numbers are derived </li></ul>
  13. 13. US figures <ul><li> </li></ul>
  14. 14. What Sells Well on the Internet? <ul><li>Computers and electronics </li></ul><ul><li>Sporting goods </li></ul><ul><li>Office supplies </li></ul><ul><li>Books and music </li></ul><ul><li>Toys </li></ul><ul><li>Health and beauty </li></ul><ul><li>Entertainment </li></ul><ul><li>Apparel </li></ul><ul><li>Cars </li></ul><ul><li>Services </li></ul><ul><li>Others </li></ul>
  15. 15. Characteristics of Successful E-Tailing <ul><li>Brand recognition and guarantees </li></ul><ul><ul><li>LL Bean </li></ul></ul><ul><li>Guarantee provided by highly reliable or well-known vendors </li></ul><ul><li>Digitized products </li></ul><ul><ul><li>itunes </li></ul></ul><ul><li>Inexpensive items </li></ul><ul><li>Frequently purchased </li></ul><ul><ul><li>Gevalia Coffee </li></ul></ul><ul><li>Commodities with standard specifications </li></ul><ul><ul><li>Office Depot </li></ul></ul><ul><li>Well-known packaged items that cannot be opened even in a traditional store </li></ul><ul><ul><li>Fredricks </li></ul></ul><ul><ul><li>Ammo </li></ul></ul>
  16. 16. E-Tailing Business Models <ul><li>E-tailing business models can be classified in several ways: </li></ul><ul><ul><li>By the scope of items handled </li></ul></ul><ul><ul><ul><li>General-purpose </li></ul></ul></ul><ul><ul><ul><li>Specialty e-tailing </li></ul></ul></ul><ul><ul><li>By scope of the sales region covered </li></ul></ul><ul><ul><ul><li>Global </li></ul></ul></ul><ul><ul><ul><li>Regional </li></ul></ul></ul><ul><ul><li>Two main models </li></ul></ul><ul><ul><ul><li>Direct selling model </li></ul></ul></ul><ul><ul><ul><li>Distribution channel </li></ul></ul></ul>
  17. 17. Classification by Revenue Model <ul><li>Product sales models </li></ul><ul><ul><li>Charge customers directly for products or services </li></ul></ul><ul><li>Subscription models </li></ul><ul><ul><li>Charge monthly or annual subscription fee for service </li></ul></ul><ul><li>Transaction-fee models </li></ul><ul><ul><li>Charge service fee based on the level of transaction offered </li></ul></ul><ul><li>Advertising-supported models </li></ul><ul><ul><li>Charge fee to advertisers instead of customers </li></ul></ul><ul><li>Sponsorship models </li></ul><ul><ul><li>Companies sponsor the business through donations (usually supplemental income) </li></ul></ul>
  18. 18. Classification by Distribution Channel <ul><li>Direct marketing—manufacturers sell directly from company sites to individual customers </li></ul><ul><li>Pure-play e-tailers—have no physical stores, only an online sales presence </li></ul><ul><li>Click-and-mortar retailers—traditional retailers with a supplementary Web site </li></ul>
  19. 19. Direct Marketing by Manufacturers or Mail-Order Companies <ul><li>Direct marketing—broadly, marketing that takes place without intermediaries between manufacturers and buyers; in the context of this book, marketing done online between the seller and the buyer </li></ul><ul><ul><li>Disintermediation—removal of organizations or business process layers responsible for certain intermediary steps in a given supply chain </li></ul></ul>
  20. 20. Exhibit 3.1: Disintermediation in the B2C Supply Chain
  21. 21. Direct Marketing by Manufacturers or Mail-Order Companies (cont.) <ul><li>Parties in direct marketing have a greater opportunity to influence each other </li></ul><ul><li>Make-to-order online—direct sales by manufacturers are gaining popularity due to the ability to customize products or services </li></ul>
  22. 22. Lands’ End: How a Mail-Order Company Moved Online <ul><li> </li></ul><ul><li>Successful B2C e-tailers are mail-order companies once based solely on paper catalogs </li></ul><ul><li>Logistics system were already in place </li></ul><ul><li>Lands’ End served over 6.2 million customers in 2000 </li></ul><ul><li>Internet sales: </li></ul><ul><ul><li>1999 were 5% of company’s total sales </li></ul></ul><ul><ul><li>2000 were 10% </li></ul></ul><ul><ul><li>2003 are 20% (projected) </li></ul></ul>
  23. 23. Lands’ End (cont.) <ul><li> offers all its catalog products online </li></ul><ul><li>Web site offers: </li></ul><ul><ul><li>Allows women customers to build and store a 3D model of their body </li></ul></ul><ul><ul><li>Male customers use a feature called “Oxford Express </li></ul></ul><ul><ul><li>Personal shopping accounts </li></ul></ul><ul><ul><li>Order status tracking </li></ul></ul>
  24. 24. Lands’ End (cont.) <ul><li>The company has: </li></ul><ul><ul><li>Affiliates network that pays 5% commission for every sale that comes from a referral </li></ul></ul><ul><ul><li>B2B “store” ( </li></ul></ul><ul><ul><li>Allows online customers to shop with the assistance of a “real” personal shopper </li></ul></ul><ul><ul><li>Global presence with localized sites </li></ul></ul>
  25. 26. Virtual (Pure-Play) E-Tailers <ul><li>Virtual e-tailers sell over the Internet without a physical sales channel </li></ul><ul><ul><li>General purpose e-tailers ( </li></ul></ul><ul><ul><ul><li>Broad range of products </li></ul></ul></ul><ul><ul><ul><li>Large number of consumers </li></ul></ul></ul><ul><ul><li>Specialty or niche e-tailers ( </li></ul></ul><ul><ul><ul><li>One specific product area </li></ul></ul></ul><ul><ul><ul><li>High demand items in the area </li></ul></ul></ul><ul><ul><ul><li>Effective practices for customer appeal </li></ul></ul></ul>
  26. 27. Buying Cars Online: Build to Order <ul><li>Traditional system—”build-to-stock”: </li></ul><ul><ul><li>Manufacturers conduct market research to estimate which features and options will sell well </li></ul></ul><ul><ul><li>Make the cars they wish to sell </li></ul></ul><ul><ul><li>Cars are sold from stock at a loss when there is insufficient demand for a particular vehicle </li></ul></ul><ul><li>Auto giants intend to transform themselves from build-to-stock to build-to-order companies </li></ul><ul><ul><li>Cutting inventory requirements in half </li></ul></ul><ul><ul><li>Giving customers exactly what they want </li></ul></ul>
  27. 28. Buying Cars Online: Build to Order (cont.) <ul><li>Using a virtual car at </li></ul><ul><ul><li>Consumers custom configure their car’s features and components, see it online, price it, have it delivered to a nearby dealer </li></ul></ul><ul><li>Web site helps with the research process </li></ul><ul><li>The configuration is transmitted to the production floor: </li></ul><ul><ul><li>Reducing delivery time </li></ul></ul><ul><ul><li>Contributing to increased customer satisfaction </li></ul></ul>
  28. 29. A Specialty E-Tailer <ul><li> is designed to appeal to cat enthusiasts </li></ul><ul><ul><li>No banner ads </li></ul></ul><ul><ul><li>Easy to navigate </li></ul></ul><ul><ul><li>Updated weekly </li></ul></ul><ul><ul><li>Displays products in clear categories </li></ul></ul><ul><ul><li>Retail prices comparable to pet stores </li></ul></ul><ul><ul><li>Prices kept low through aggressive cost control </li></ul></ul>
  29. 30. A Specialty E-Tailer (cont.) <ul><li> hosts its site on Yahoo! </li></ul><ul><ul><li>Allows it to use sophisticated technology </li></ul></ul><ul><ul><ul><li>Cookies for the shopping-cart process </li></ul></ul></ul><ul><ul><ul><li>Payment security </li></ul></ul></ul><ul><ul><ul><li>Access to a large audience. </li></ul></ul></ul><ul><li>Concentrate on its core competencies: </li></ul><ul><ul><li>Selecting the right cat toys </li></ul></ul><ul><ul><li>Marketing them effectively </li></ul></ul><ul><li>Example of a low-volume specialized store that attracts people with specific shopping needs </li></ul>
  30. 31. Click-and-Mortar Retailers <ul><li>Brick-and-mortar retailers—retailers who do business in the non-Internet, physical world in traditional brick-and-mortar stores </li></ul><ul><li>Click-and-mortar retailers—brick-and-mortar retailers with a transactional Web site from which to conduct business </li></ul><ul><li>Traditional retailing frequently involves a single distribution channel, the physical store—may also operate a mail-order business </li></ul><ul><li>Multichannel store— firm that operates both physical stores and an online e-tail site </li></ul>
  31. 32. Other Business Models <ul><li>Electronic mall </li></ul><ul><li>Transaction brokers </li></ul><ul><li>Information portals </li></ul><ul><li>Communities portal </li></ul><ul><li>Content creator or disseminators </li></ul><ul><li>Viral marketing </li></ul><ul><li>Market makers </li></ul><ul><li>Make-to-order </li></ul><ul><li>Service providers </li></ul>
  32. 33. Travel and Tourism Services Online <ul><li>The Internet is an ideal place to plan, explore, and arrange almost any trip and save money </li></ul><ul><li>Travel-related information available at many sites including: </li></ul><ul><ul><li> </li></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><li> </li></ul></ul>
  33. 34. Travel and Tourism Services (cont.) <ul><li>Information and bookings </li></ul><ul><li>Travel tips </li></ul><ul><li>Electronic Travel magazine </li></ul><ul><li>Fare comparisons </li></ul><ul><li>Currency conversion calculators </li></ul><ul><li>Fare tracker </li></ul><ul><li>Worldwide business and places locator </li></ul><ul><li>Outlet for travel accessories and books </li></ul><ul><li>Experts’ opinions </li></ul><ul><li>Major international and travel news </li></ul><ul><li>Driving maps and directions </li></ul><ul><li>Chat rooms </li></ul><ul><li>Frequent flier deals </li></ul><ul><li>Online travel auctions </li></ul>Services provided:
  34. 35. Travel and Tourism Services (cont.) <ul><li>Special services </li></ul><ul><ul><li>Very low airfares and discount accommodations </li></ul></ul><ul><ul><li>Last-minute trips can also be booked </li></ul></ul><ul><ul><li>Special vacation destinations </li></ul></ul><ul><li>Sites that offer medical advice and services for travelers: </li></ul><ul><ul><li>World Health Organization ( </li></ul></ul><ul><ul><li>Governments ( </li></ul></ul><ul><ul><li>Private organizations ( </li></ul></ul>
  35. 36. Travel and Tourism Services (cont.) <ul><li>Wireless services </li></ul><ul><ul><li>Customers with WAP cell phones can check their flight status, update frequent flyer miles, and book flights </li></ul></ul><ul><li>Direct marketing </li></ul><ul><ul><li>Build customer profiles and target specific customers with tailored offers </li></ul></ul><ul><li>Alliances and consortia </li></ul><ul><ul><li>Increase sales or reduce purchasing costs </li></ul></ul>
  36. 37. Travel and Tourism Services (cont.) <ul><li>Benefits </li></ul><ul><ul><li>Free information is tremendous </li></ul></ul><ul><ul><li>Free information is accessible anytime </li></ul></ul><ul><ul><li>Substantial discounts </li></ul></ul><ul><li>Limitations </li></ul><ul><ul><li>Not all people use the Internet </li></ul></ul><ul><ul><li>It may take a long time to find what you want </li></ul></ul><ul><ul><li>People are still reluctant to provide credit card numbers </li></ul></ul>
  37. 38. Impacts of EC on the Travel Industry <ul><li>Impacts of EC on the travel industry into 10 categories including: </li></ul><ul><ul><li>Product promotion, new products, new business models </li></ul></ul><ul><li>Only the value-added activities of travel agencies will not be automated </li></ul><ul><ul><li>Performed by a new type of organization </li></ul></ul><ul><ul><li>Will serve certain targeted markets and customers </li></ul></ul><ul><li>Entering the market will be: </li></ul><ul><ul><li>Travel superstores that will provide </li></ul></ul><ul><ul><li>Innovative individuals operating from their homes </li></ul></ul>
  38. 39. <ul><li>Many large corporations receive additional services from large travel agencies </li></ul><ul><ul><li>Online optimization tools provided by travel companies ( </li></ul></ul><ul><ul><li>Travel authorization software that checks availability of funds and compliance with corporate guidelines </li></ul></ul><ul><li>This is a huge and rapidly growing market </li></ul><ul><ul><li>Oracle’s e-Travel provides software to automate and manage online booking </li></ul></ul>Corporate Travel
  39. 40. Corporate Travel (cont.) <ul><ul><li>American Express,Microsoft and MCI have developed AXI system that displays: </li></ul></ul><ul><ul><ul><li>Airline seat charts </li></ul></ul></ul><ul><ul><ul><li>Maps showing hotels </li></ul></ul></ul><ul><ul><ul><li>Information on nearby health clubs </li></ul></ul></ul><ul><ul><ul><li>Weather information </li></ul></ul></ul><ul><ul><ul><li>Creates profiles for travelers and their preferences </li></ul></ul></ul><ul><ul><ul><li>Attempts to satisfy both travelers and corporate travel managers </li></ul></ul></ul>
  40. 41. Intelligent Agents in Travel Services <ul><li>Step 1: visit an online travel site and enter </li></ul><ul><ul><li>Desired destination </li></ul></ul><ul><ul><li>Dates </li></ul></ul><ul><ul><li>Available budget </li></ul></ul><ul><ul><li>Special requirements </li></ul></ul><ul><ul><li>Desired entertainment </li></ul></ul><ul><li>Step 2: computer dispatches an intelligent agent that “shops around” </li></ul>
  41. 42. Intelligent Agents in Travel Services (cont.) <ul><li>Step 3: agent attempts to match your requirements with what is available, negotiates with vendors </li></ul><ul><li>Step 4: agent returns within minutes with suitable alternatives, modifies as per your wishes, books the vacation </li></ul><ul><li>Voice communication with agent may be possible by 2005?? (not yet) </li></ul>
  42. 43. The Employment Placement and the Job Market <ul><li>Job markets </li></ul><ul><ul><li>Employers are looking for employees with specific skills, and individuals are looking for jobs </li></ul></ul><ul><ul><li>Very volatile market </li></ul></ul><ul><ul><li>Moved to the Internet </li></ul></ul><ul><ul><li>Millions of job seekers, hundreds of thousands of jobs </li></ul></ul>
  43. 44. The Internet Job Market <ul><li>The Internet offers a perfect environment; it is especially effective for technology-oriented jobs </li></ul><ul><ul><li>Job seekers </li></ul></ul><ul><ul><li>Job offerers </li></ul></ul><ul><ul><li>Recruiting firms </li></ul></ul><ul><ul><li>Government agencies and institutions </li></ul></ul>
  44. 45. Matching Workers with Jobs in the Philippines <ul><li>Philippine Department of Labor created a Web site that matches people with jobs as a free service </li></ul><ul><ul><li>For those who do not have computers or Internet access, the government makes computer terminals (kiosks) available </li></ul></ul><ul><ul><li>Government employees help those applicants who do not know how to use the system </li></ul></ul><ul><ul><li>Job seekers can find a job that best suits their qualifications </li></ul></ul>
  45. 46. Matching Workers with Jobs in the Philippines (cont.) <ul><li>At the heart of the system is its matchmaking capabilities </li></ul><ul><li>This job-matching feature differentiates this site from other online job sites </li></ul><ul><li>Everything is done electronically, so job seekers can see the match results in seconds </li></ul>
  46. 47. Benefits of the Electronic Job Market <ul><li>For job seekers </li></ul><ul><ul><li>Find very detailed and timely information on a large number of jobs world-wide </li></ul></ul><ul><ul><li>Quickly communicate with potential employers </li></ul></ul><ul><ul><li>Post resumes for large-volume distribution </li></ul></ul><ul><ul><li>Search for jobs quickly from any place at any time </li></ul></ul><ul><ul><li>Obtain several support services at no cost </li></ul></ul><ul><ul><li>Assess their market value </li></ul></ul><ul><ul><li>Find out how to use their voice in an interview </li></ul></ul><ul><ul><li>Can access newsgroups that are dedicated to finding jobs </li></ul></ul>
  47. 48. Benefits of the Electronic Job Market (cont.s) <ul><li>For employers </li></ul><ul><ul><li>Advertise to a large number of job seekers </li></ul></ul><ul><ul><li>Save on advertisement costs </li></ul></ul><ul><ul><li>Lower the cost of processing (using electronic application forms) </li></ul></ul><ul><ul><li>Provide greater (‘equal opportunity’) for job seekers </li></ul></ul><ul><ul><li>Find highly skilled employees </li></ul></ul>
  48. 49. Exhibit 3.5 Virtual Job Employment Agent
  49. 50. Limitations of the Electronic Job Market <ul><li>Many people do not use the Internet </li></ul><ul><ul><li>Companies may use both traditional advertising approaches and the Internet </li></ul></ul><ul><ul><li>Clear trend: more and more of the job market are going to the Internet </li></ul></ul><ul><li>Security and Privacy </li></ul><ul><ul><li>Resumes and other online communications are usually not encrypted </li></ul></ul><ul><ul><li>Possibility that someone at your current place of employment may find out that you are job hunting </li></ul></ul>
  50. 51. Limitations of the Electronic Job Market (cont.) <ul><li>Electronic job market may also create high turnover costs for employers by accelerating employees’ movement to better jobs </li></ul><ul><li>Finding candidates online is more complicated: </li></ul><ul><ul><li>There is a large number of resumes available online </li></ul></ul><ul><ul><li>Some sites offer prescreening of candidates to help alleviate this problem ( </li></ul></ul>
  51. 52. Intelligent Agents in the Electronic Job Market <ul><li>For Job Seekers </li></ul><ul><ul><li> offers a free service that uses intelligent agents </li></ul></ul><ul><ul><ul><li>To search the Internet’s top job sites and databases for job postings based on users’ profiles </li></ul></ul></ul><ul><ul><ul><li>Users can create as many as five different profiles based on </li></ul></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><ul><li>Users receive a daily e-mail containing job opportunities from over a dozen top job sites around the Internet interests. </li></ul></ul></ul><ul><ul><ul><li>Saves the users a tremendous amount of time </li></ul></ul></ul>
  52. 53. Intelligent Agents in the Electronic Job Market (cont.) <ul><li>For employers </li></ul><ul><ul><li> (now part of Yahoo!) has a special intelligent-agent powered search engine helps employers find resumes that match specific job descriptions </li></ul></ul><ul><ul><li>Its Knowledge Base interprets a candidate’s resume, determining skills based on context and matching those skills to the position criteria </li></ul></ul><ul><ul><li>The Knowledge Base would select only the candidates with relevant skills </li></ul></ul>
  53. 54. ELC 200 Day 7
  54. 55. Agenda <ul><li>Questions from last Class? </li></ul><ul><li>Assignment 2 Due </li></ul><ul><li>Assignment 3 will be posted on Feb 13 </li></ul><ul><li>Finish Discussion on </li></ul><ul><ul><li>Retailing in E-Commerce: Products and Services </li></ul></ul><ul><li>Quiz 1 on Feb 13 </li></ul><ul><ul><li>Computer based WebCT exam </li></ul></ul><ul><ul><li>Chap 1-3 </li></ul></ul><ul><ul><li>20 m/c (60 points) 5 short essays (40 points) </li></ul></ul><ul><ul><li>70 mins </li></ul></ul><ul><ul><li>open book, open notes, open computer </li></ul></ul>
  55. 56. Real Estate <ul><li>You can view many properties on the screen </li></ul><ul><li>You can sort and organize properties </li></ul><ul><li>You can find detailed information about the properties </li></ul><ul><li>You can search, compare and apply for loans </li></ul><ul><li> </li></ul>For Sale
  56. 57. <ul><li>In some locations, real estate databases are only available to realtors over private networks in their offices </li></ul><ul><li>Builders use virtual reality technology on their Web sites to demonstrate three-dimensional floor plans to home buyers </li></ul><ul><li>“ Virtual models” enable buyers to “walk through” three-dimensional mock-ups of homes </li></ul>Real Estate (cont.)
  57. 58. Real Estate Applications <ul><li>Advice to consumers on buying or selling a home </li></ul><ul><ul><li> </li></ul></ul><ul><li>International Real Estate Directory and News is a comprehensive real estate Web site </li></ul><ul><ul><li> </li></ul></ul><ul><li>National listing of properties for sale </li></ul><ul><ul><li> </li></ul></ul><ul><li>Commercial real estate listings </li></ul><ul><ul><li> </li></ul></ul>
  58. 59. Real Estate Applications (cont.) <ul><li>Searching residential real estate in multiple databases </li></ul><ul><ul><li> </li></ul></ul><ul><ul><li> </li></ul></ul><ul><li>National Association of Realtors, has links to property listings in all major US cities </li></ul><ul><ul><li> </li></ul></ul><ul><li>Real estate related maps </li></ul><ul><ul><li> </li></ul></ul>
  59. 60. <ul><li>Information on current mortgage rates </li></ul><ul><ul><li> </li></ul></ul><ul><ul><li> </li></ul></ul><ul><li>Mortgage comparisons, calculations, and other financing information; mortgage application </li></ul><ul><ul><li> </li></ul></ul><ul><ul><li> </li></ul></ul><ul><li>Online lenders can approve loans online </li></ul><ul><ul><li> </li></ul></ul>Real Estate Applications (cont.)
  60. 61. Real Estate Applications (cont.) <ul><li>Automated closing of real estate transactions </li></ul><ul><ul><li> </li></ul></ul><ul><li>Home seller sites provide a place for persons who want to sell their homes privately, without using a real estate agent </li></ul><ul><ul><li> </li></ul></ul><ul><li>Rental properties </li></ul><ul><ul><li> </li></ul></ul><ul><li>Several services are available, including a virtual walk-through of some listings </li></ul>
  61. 62. Real Estate Applications (cont.) <ul><li>Online real estate is supporting rather than replacing existing agents </li></ul><ul><li>Real estate agents are still charging high commissions </li></ul><ul><li>Several Web sites have started to offer services at lower commissions </li></ul><ul><ul><li> </li></ul></ul><ul><li>To find mortgage interest rates online use </li></ul><ul><ul><li> </li></ul></ul><ul><ul><li> </li></ul></ul>
  62. 63. Insurance Online <ul><li>Insurance—auto, home, life, and health at a substantial discount </li></ul><ul><ul><li> </li></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><li> </li></ul></ul>
  63. 64. Online Stock Trading <ul><li>Costs between $5 and $29 per transaction (vs. $10 - $35 in traditional discount brokerage ad ~$100 for full service broker ) </li></ul><ul><li>No waiting on busy telephone lines </li></ul><ul><li>No oral communication, less chance for errors </li></ul><ul><li>Place orders from anywhere, any time, day or night </li></ul><ul><li>No biased broker to push you </li></ul><ul><li>Considerable amount of free information </li></ul>
  64. 65. Exhibit 3.6 Online Electronic Stock Trading
  65. 67. <ul><li>For current financial news </li></ul><ul><li>,, </li></ul><ul><li>For municipal bond pricing </li></ul><ul><li> </li></ul><ul><li>For overall market information and many links </li></ul><ul><li> </li></ul><ul><li>For free Guru advice see </li></ul><ul><li> </li></ul>Investment Information
  66. 68. Investment Information (cont.) <ul><li>For stock screening and evaluation: </li></ul><ul><li> </li></ul><ul><li> </li></ul><ul><li>For articles from the Journal of the American Association of Individual Investors </li></ul><ul><ul><li> </li></ul></ul><ul><li>For reports the latest findings and pricing of IPOs </li></ul><ul><ul><li> </li></ul></ul><ul><li>For chart lovers </li></ul><ul><li> </li></ul>
  67. 69. <ul><li>For mutual funds evaluation and other interesting investment information </li></ul><ul><li> </li></ul><ul><li>For earning estimates and much more </li></ul><ul><li> </li></ul><ul><li>For almost anything you need </li></ul><ul><li> </li></ul><ul><li>Online trading is expanding to include </li></ul><ul><ul><li>Mutual funds, commodities, financial derivatives </li></ul></ul>Investment Information (cont.)
  68. 71. Banking & Personal Finance Online (cont.) <ul><li>Electronic banking (e-banking)—various banking activities conducted from home or the road using an Internet connection; also known as: </li></ul><ul><ul><li>Cyberbanking Virtual banking </li></ul></ul><ul><ul><li>Online banking Home banking </li></ul></ul><ul><li>Electronic banking </li></ul><ul><ul><li>Saves time and money for users </li></ul></ul><ul><ul><li>Offers an inexpensive alternative to branch banking </li></ul></ul><ul><li>Many traditional banks around the world offer diversified e-banking services </li></ul><ul><ul><li> </li></ul></ul><ul><li>Electronic banking (e-banking)—various banking activities conducted from home or the road using an Internet connection; also known as: </li></ul><ul><ul><li>Cyberbanking Virtual banking </li></ul></ul><ul><ul><li>Online banking Home banking </li></ul></ul><ul><li>Electronic banking </li></ul><ul><ul><li>Saves time and money for users </li></ul></ul><ul><ul><li>Offers an inexpensive alternative to branch banking </li></ul></ul><ul><li>Many traditional banks around the world offer diversified e-banking services </li></ul><ul><ul><li> </li></ul></ul><ul><li>Electronic banking (e-banking)—various banking activities conducted from home or the road using an Internet connection; also known as: </li></ul><ul><ul><li>Cyberbanking Virtual banking </li></ul></ul><ul><ul><li>Online banking Home banking </li></ul></ul><ul><li>Electronic banking </li></ul><ul><ul><li>Saves time and money for users </li></ul></ul><ul><ul><li>Offers an inexpensive alternative to branch banking </li></ul></ul><ul><li>Many traditional banks around the world offer diversified e-banking services </li></ul><ul><ul><li> </li></ul></ul>
  69. 72. Capabilities of Home Banking <ul><li>Get current account balances any time </li></ul><ul><li>Obtain charge and credit card statements </li></ul><ul><li>Pay bills </li></ul><ul><li>Download account transactions </li></ul><ul><li>Transfer money between accounts </li></ul><ul><li>Balance accounts </li></ul><ul><li>Send e-mail to the bank </li></ul><ul><li>Expand the meaning of “banker’s hours” </li></ul><ul><li>Handle finances when traveling </li></ul><ul><li>Additional services </li></ul><ul><ul><li>Free phone banking </li></ul></ul><ul><ul><li>Waive checking fees </li></ul></ul>
  70. 73. International and Multiple-Currency Banking <ul><li>Some international retail purchasing can be done by credit card </li></ul><ul><li>Other transactions may require international banking support </li></ul><ul><ul><li>Hong Kong Bank’s HEXAGON provides e-banking in Asia </li></ul></ul><ul><ul><li>Tradecard and MasterCard developed a multiple-currency system for global transactions ( </li></ul></ul><ul><ul><li>A multidealer foreign exchange service that enables faster and cheaper foreign exchange transactions ( </li></ul></ul>
  71. 74. <ul><li>Using bank intranets </li></ul><ul><ul><li>Banks provide large business customers with personalized service by allowing them access to the bank’s intranet to access accounts, historical transactions, intranet-based decision-support applications </li></ul></ul><ul><li>Imaging systems—allow customers to view images of all: </li></ul><ul><ul><li>Incoming checks </li></ul></ul><ul><ul><li>Invoices </li></ul></ul><ul><ul><li>Other related online correspondence </li></ul></ul>Implementation Issues in Online Financial Transactions
  72. 75. Online Security at Bank of America <ul><li>Safeguards provided by Bank of America: </li></ul><ul><ul><li>Encryption and digital certification verification—assures users that they are connected to the B of A </li></ul></ul><ul><ul><li>Information flows through a direct Web server, then goes through an internal firewall to the application server </li></ul></ul><ul><ul><li>The bank maintains accurate information and corrections are made quickly </li></ul></ul>
  73. 76. Online Security at Bank of America (cont.) <ul><ul><li>Information is shared among the company’s family of partners only for legitimate business purposes </li></ul></ul><ul><ul><li>The company uses “cookies” to learn about its customers; customers can control both the collection and use of the information </li></ul></ul><ul><ul><li>The bank provides suggestions on how users can increase security ( “Use a browser with 128-bit encryption”) </li></ul></ul>
  74. 77. Online Security at Bank of America (cont.)
  75. 78. Personal Finance Online <ul><li>Bill paying and </li></ul><ul><li>e-checks </li></ul><ul><li>Tracking bank accounts etc. </li></ul><ul><li>Portfolio management </li></ul><ul><li>Investment tracking </li></ul><ul><li>Stock quotes and prices (past and current) </li></ul><ul><li>Budget organization </li></ul><ul><li>Record keeping </li></ul><ul><li>Tax computations </li></ul><ul><li>Retirement goals, planning and budgeting </li></ul>
  76. 80. Online Billing and Bill Paying <ul><li>Automatic transfer of mortgages </li></ul><ul><ul><li>This method has existed for several years </li></ul></ul><ul><ul><li>The payer authorizes its bank to pay the mortgage, including tax escrow payments </li></ul></ul><ul><li>Automatic transfer of funds to pay monthly utility bills </li></ul><ul><li>Paying bills from online banking account </li></ul>
  77. 81. Online Billing and Bill Paying (cont.) <ul><li>A merchant-to-customer direct billing </li></ul><ul><ul><li>A merchant posts bills on its Web site </li></ul></ul><ul><ul><li>Customers can view and pay their bill </li></ul></ul><ul><li>Using an intermediary </li></ul><ul><ul><li>A third party consolidates all bills related to each customer in one site in a standard format </li></ul></ul><ul><ul><li>Collects a certain commission </li></ul></ul><ul><ul><li>Makes it convenient to complete transactions </li></ul></ul>
  78. 82. Online Billing and Bill Paying (cont.) <ul><li>Person-to-person direct payment </li></ul><ul><ul><li> (now an eBay company)—enables you to send funds to another individual over the Internet </li></ul></ul><ul><li>Online billing and bill-paying can be classified into B2C, B2B, or C2C. </li></ul><ul><li>Opportunities exist in B2B services—can save businesses about 50 percent of billing costs </li></ul><ul><ul><li>In Hong Kong, CitiCorp links suppliers, buyers, and banks on one platform, enabling automatic payments </li></ul></ul>
  79. 83. On-Demand Delivery Service (ODDS) <ul><li>On-demand delivery service (ODDS)—express delivery made fairly quickly after an online order is received </li></ul><ul><li>On-Demand Delivery Services (ODDS) </li></ul><ul><ul><li>May own a fleet of delivery vehicles for regular deliveries and delivery within short time period </li></ul></ul>
  80. 84. The Case of E-Grocers <ul><li>E-grocer—a grocer that will take orders online and provide regular deliveries on a daily or other regular schedule or will deliver items within a very short period of time </li></ul><ul><ul><li>All e-grocers offer consumers the ability to order items online and have them delivered to their house </li></ul></ul><ul><ul><li>Some e-grocers offer free regular “unattended” weekly delivery based on a monthly subscription model </li></ul></ul>
  81. 85. The Case of E-Grocers (cont.) <ul><ul><li>Others offer on-demand deliveries with a surcharge or additional delivery charge added </li></ul></ul><ul><ul><li>One e-tail grocer sells only nonperishable items shipped via common carrier </li></ul></ul><ul><ul><li>Many offer additional services </li></ul></ul><ul><ul><ul><li>Dry cleaning pickup and delivery </li></ul></ul></ul><ul><ul><ul><li>“Don’t run out” automatic reordering </li></ul></ul></ul><ul><ul><ul><li>Fresh flower delivery </li></ul></ul></ul><ul><ul><ul><li>Movie rentals </li></ul></ul></ul><ul><ul><ul><li>And more </li></ul></ul></ul>
  82. 86. Exhibit 3.7 On-Demand Delivery Services Model
  83. 87. Who Are the Online Grocery Shoppers? <ul><li>Shopping avoiders </li></ul><ul><li>Necessity users—limited by their ability to shop offiline </li></ul><ul><li>New technologists </li></ul><ul><li>Time-starved consumers </li></ul><ul><li>Consumers who gain a sense of self-worth from online shopping </li></ul><ul><li>Older individuals who enjoy shopping in any type of store </li></ul>
  84. 88. Who Are the Online Grocery Shoppers? (cont.) <ul><li>Repeat customers with an ongoing relationship with the grocer </li></ul><ul><ul><li> in Hong Kong offers a “personal shopping list” that helps customers easily order repetitive items </li></ul></ul><ul><ul><li> in the United Kingdom is another successful e-grocer </li></ul></ul>
  85. 89. Who Are the Online Grocery Shoppers? (cont.) <ul><li>Offers grocers an additional channel to increase their sales volume and serve customers </li></ul><ul><li>Increases their publicity by maintaining an Internet presence </li></ul><ul><li>Despite the promise that on-demand delivery seems to hold, virtual e-grocers have not been successful in this competitive market </li></ul>
  86. 90. Digital Delivery <ul><li>Digital (“soft”) goods </li></ul><ul><ul><li>Music, movies, videos, software, newspapers, magazines, graphics, etc. </li></ul></ul><ul><ul><li>Can be delivered in “hard” or “soft” form </li></ul></ul><ul><ul><ul><li>Computer program on CD-ROM with owner’s manual and warranty card </li></ul></ul></ul><ul><ul><ul><li>Download from Web site after payment </li></ul></ul></ul>
  87. 91. Napster Experience: Person-to-Person Sharing Tool <ul><li>Enabled individual users to download music files from each other’s computers </li></ul><ul><ul><li>Court ruled that as a manager of file exchanges, Napster must observe copyright laws </li></ul></ul><ul><ul><li>Napster began charging customers for use of its file-sharing service </li></ul></ul><ul><li>Napster entered into an agreement with Bertelsmann AG (now owns Napster) </li></ul><ul><ul><li>The latest version of Napster’s file-swapping software features a “buy button” that links to CDNow, a Bertelsmann-owned Web site that sells traditional, physical music CDs </li></ul></ul>
  88. 92. New Developments in Digital Delivery <ul><li>Custom-publishing music CD sites—collection of personal favorites </li></ul><ul><ul><li>Disintermediation of traditional print media </li></ul></ul><ul><ul><ul><li>Journals and magazines </li></ul></ul></ul><ul><ul><ul><li>Newspapers (e.g., Wall Street Journal) </li></ul></ul></ul><ul><li>Comprehensive portals </li></ul><ul><ul><li>Links to many different sellers </li></ul></ul><ul><ul><li>Shopping comparison sites </li></ul></ul><ul><ul><li>Comparison tools are available </li></ul></ul>
  89. 93. Shopping Portals (cont.) <ul><li>Shopping portals—niche oriented </li></ul><ul><ul><li>Specialize in a certain line of products </li></ul></ul><ul><ul><li>Some collect referral fee only </li></ul></ul><ul><ul><li>Others have formal relationships with affiliates </li></ul></ul><ul><li>Shopbots and agents—tools that scout the Web for specific search criteria requested by consumers </li></ul><ul><ul><li> - best prices on multiple items </li></ul></ul><ul><ul><li> – cars </li></ul></ul><ul><ul><li> – computers </li></ul></ul><ul><ul><li> – office supplies </li></ul></ul>
  90. 94. Business Rating Sites & Trust Verification Sites <ul><li>Sites that rate e-tailers </li></ul><ul><ul><li>—compiles results provided by a network of shoppers </li></ul></ul><ul><ul><li>—consumer identifies relative importance of different criteria </li></ul></ul><ul><li>Sites that evaluate and verify trustworthiness and integrity of e-tailers </li></ul><ul><ul><li>TRUSTe seal of assurance </li></ul></ul><ul><ul><li>BBBOnLine </li></ul></ul>
  91. 95. Other Shopping Tools <ul><li>Escrow services—3 rd party to assure quality </li></ul><ul><li>Communities of consumers—offer advice and opinions on products </li></ul><ul><li>Other software agents and comparison sites are presented in Exhibit 3.9 </li></ul>
  92. 96. Successful Click-and-Mortar Strategies <ul><li>Click-and-mortar hybrid strategies </li></ul><ul><ul><li>Speak with one voice </li></ul></ul><ul><ul><li>Empower the customer </li></ul></ul><ul><ul><li>Leverage the channels </li></ul></ul><ul><ul><ul><li>Return item purchased online at physical store </li></ul></ul></ul><ul><ul><ul><li>Order via the Web at the physical store items not available there </li></ul></ul></ul><ul><li>Large, efficient established retailers are able to create the optimum value proposition for their customers by providing a complete offering of services </li></ul>
  93. 97. Transformation to Click-and-Mortar at CircuitCity <ul><li>Educates customers about features and capabilities of products </li></ul><ul><li>Customers can perform powerful searches to find most appropriate products </li></ul><ul><li>Offers extensive amount of information on electronics etc., organized very flexibly </li></ul><ul><li>Online purchases are smooth, secure and seamless </li></ul>
  94. 98. Alliance of Virtual with Traditional Retailers: Amazon and Toys R Us <ul><li>Toys R Us had limited logistics capabilities including distribution centers </li></ul><ul><li>Amazon failed in the toy market lacking supplier relationships with toy manufacturers </li></ul><ul><li>Alliance allows each partner to leverage each others core strengths </li></ul><ul><li>Innovative model still working out problems </li></ul>
  95. 99. Problems with E-Tailing & Lessons Learned <ul><li>Profitability </li></ul><ul><ul><li>Lose money on every sale as they try to grow to a profitable size and scale </li></ul></ul><ul><ul><ul><li>Get Big Fast! </li></ul></ul></ul><ul><ul><li>Underlying cost and revenue models were not sound </li></ul></ul><ul><ul><li>Long-run success requires financial viability </li></ul></ul><ul><li>Manage new risk exposure </li></ul><ul><ul><li>Local companies contend with local customers and local regulations </li></ul></ul><ul><ul><li>National firms have more constituents </li></ul></ul><ul><ul><li>Global firms deal with numerous cultural perspectives </li></ul></ul>
  96. 100. Problems with E-Tailing & Lessons Learned (cont.) <ul><li>Branding—drive to establish brand can lead to excessive spending </li></ul><ul><li>Starting with insufficient funds </li></ul><ul><li>Keep it interesting </li></ul><ul><ul><li>Static design is a “turn-off” </li></ul></ul><ul><ul><li>Dynamic sites with rich databases of information appeal most to customers </li></ul></ul>
  97. 101. A Blooming Success <ul><li> sells attractively packaged c ustomized designer flower baskets, cakes, gourmet gift baskets </li></ul><ul><li>Expanded the business by adding functions such as online payments </li></ul><ul><li>Success factors that helped Ambassador’s online business blossom: </li></ul><ul><ul><li>Extensive experience in the business </li></ul></ul><ul><ul><li>Analysis that floral gift products are suitable for Internet sales </li></ul></ul>
  98. 102. A Blooming Success (cont.) <ul><ul><li>Back-end operations for the online floral gift shop were already in place </li></ul></ul><ul><ul><li>Multichannel retailing strategy </li></ul></ul><ul><ul><li>Initial pilot implementation that resulted in orders </li></ul></ul><ul><ul><li>Plans and budgets prepared for experimentation </li></ul></ul><ul><ul><li>Decision to outsource the implementation from scratch </li></ul></ul><ul><ul><li>Integration of online store functions with other business models and IT systems </li></ul></ul>
  99. 103. Disintermediation & Reintermediaries <ul><li>Disintermediation—manufacturer sells directly to consumer </li></ul><ul><li>Reintermediearies—new intermediary roles in the digital environment offer new ways to: </li></ul><ul><ul><li>Reach new customers </li></ul></ul><ul><ul><li>Bring value to customers </li></ul></ul><ul><ul><li>Generate revenues </li></ul></ul>
  100. 104. Intermediary’s New Role <ul><li>Role will shift to one that emphasizes value-added services such as: </li></ul><ul><ul><li>Assisting customers in comparison shopping from multiple sources </li></ul></ul><ul><ul><li>Providing total solutions by combining services from several vendors </li></ul></ul><ul><ul><li>Providing certifications and trusted third-party control and evaluation systems </li></ul></ul>
  101. 105. Reintermediaries <ul><li>Reintermediaries—intermediaries that have restructured their roles in the purchase process </li></ul><ul><ul><li>—pricing information for consumers </li></ul></ul><ul><ul><li>—information about the dealer’s true costs </li></ul></ul><ul><li>“ Lead services” that </li></ul><ul><ul><li>Direct buyers to member dealers </li></ul></ul><ul><ul><li>Offer direct sales of new cars </li></ul></ul><ul><ul><ul><li> </li></ul></ul></ul><ul><ul><ul><li> (’s partner) </li></ul></ul></ul>
  102. 106. Cybermediation and Hypermediation <ul><li>Cybermediation (electronic intermediation)—use of software (intelligent) agents to facilitate intermediation </li></ul><ul><li>Hypermediation—extensive use of both human and electronic intermediation to provide assistance in all phases of an </li></ul><ul><li>e-commerce venture </li></ul>
  103. 107. Conflict and Personalization <ul><li>Channel conflict—situation in which an online marketing channel upsets the traditional channels due to real or perceived damage from competition </li></ul><ul><li>Personalization—custom designed marketing plan </li></ul><ul><ul><li>Tailored to buying patterns </li></ul></ul><ul><ul><li>Appeal to sense of value </li></ul></ul><ul><ul><li>Excellent customer service </li></ul></ul><ul><ul><li>Mass customization </li></ul></ul>
  104. 108. Managerial Issues <ul><li>Should we grab a first-mover advantage or wait and learn? </li></ul><ul><ul><li>Get big fast or get it right first? </li></ul></ul><ul><li>What should our strategic position be? </li></ul><ul><li>Are we financially viable? </li></ul><ul><li>Should we recruit out of town? </li></ul><ul><li>Are there international legal issues regarding online recruiting? </li></ul><ul><li>Do we have ethics and privacy guidelines? </li></ul><ul><li>How will intermediaries act in cyberspace? </li></ul><ul><li>Should we set up alliances? </li></ul>
  105. 109. Summary <ul><li>E-tailing business models </li></ul><ul><li>The major e-tail markets </li></ul><ul><li>Click-and-mortar strategy </li></ul><ul><li>How online travel/tourism services operate </li></ul><ul><li>The online job market,its drivers,and benefits </li></ul><ul><li>The electronic real estate market </li></ul>
  106. 110. Summary (cont.) <ul><li>Online stocks and bonds </li></ul><ul><li>Cyberbanking and personal finance </li></ul><ul><li>On-demand delivery service </li></ul><ul><li>Delivery of digital products </li></ul><ul><li>Aiding consumer purchase decisions </li></ul><ul><li>Critical success factors </li></ul><ul><li>Disintermediation and reintermediation </li></ul>