Online Services Chapter 9

Learning Objectives Describe the major features of the online service sector Discuss current trends in the following online industries: financial services travel services career services Understand the business models of on-demand service companies

The Service Sector Largest and most rapidly expanding part of the economies in advanced industrial nations In the US, the service sector (broadly defined) employs about four out of every five workers and accounts for about 80% of all economic activity E-commerce in the service sector offers extraordinary opportunities to deliver information, knowledge, and transaction efficiencies

What are Services? Service occupations are “concerned with performing tasks” Two service categories include: Transaction brokers “hands-on” services Transaction brokering involves acting as an intermediary to facilitate a transaction In hands-on services the service provider and client need to interact directly Which of the categories has been most impacted by e-commerce?

Service Industry Groups The major service industry groups are: Finance, insurance, real estate Travel Legal, accounting, and other business services Health services Educational services In this chapter we will focus on characteristics and trends in three of the largest, and most successful, online transaction brokering industries Online financial services Online travel services Online career services

Online Financial Services The online financial services sector is a shining example of an e-commerce success story, but one with many twists and turns Innovative, pure-online firms such as E*Trade have transformed the brokerage industry Impacts on large, powerful banking, insurance, and real estate firms have been delayed by consumer resistance and lack of industry innovation For instance, online-only banks have not displaced or transformed traditional banks

Online Financial Consumer Behavior Surveys show that consumers are attracted to financial sites because of their desire to save time and access information rather than save money Most online consumers use financial services sites for mundane financial management, such as checking balances on existing accounts Once accustomed, consumers move on to more sophisticated capabilities such as using personal financial management tools, making loan payments, and considering offers from online institutions The number of people using mobile devices for financial service needs is also surging

Financial Portals and Account Aggregators Online financial services also enable some new services that would be more difficult to perform offline Financial portals provide consumers with comparison shopping services, independent financial advice, and financial planning Account aggregators pull together all of a customer’s financial (and even nonfinancial) data at a single personalized Web site

Online Travel Services Online travel is one of the most successful B2C e-commerce segments Accounts for almost one-third of all US B2C e-commerce revenues in 2015 Online travel services revenues are expected to grow to almost $200 billion in 2019 Travel services appear to be an ideal service for the Internet It is information intensive and requires significant consumer research Travel requirements can be accomplished online Travel service sites do not require any “inventory” Suppliers are highly fragmented and often have excess capacity The four major sectors include airline tickets, hotel reservations, car rentals, and travel packages

Online Travel Industry Dynamics Because much of what travel agency sites offer is a commodity, and thus they face the same costs, competition among online providers is intense Price competition is difficult because shoppers, as well as online site managers, can comparison shop easily Therefore, competition among sites tends to focus on scope of offerings, ease of use, payment options, and personalization Some industry trends include: Intense consolidation to build stronger multi-channel sites Impacted by meta-search engines that scour the Web for the best prices on travel and lodging Use of mobile devices and apps is increasing Social media also impacts the industry through user-generated content and online reviews

Online Career Services Next to travel services, one of the Internet’s most successful online services has been job services Online job market is dominated by two large players – Monster and CareerBuilder LinkedIn is also becoming an increasingly important player in this market Recruitment market segments (Table 9.8) General recruitment sites Executive search sites Niche job sites

Online Career Services Trends Current trends in the online recruitment services industry include: Consolidation – industry dominated by two sites Diversification – explosion of specialty niche sites (reduces information overload for users) Social recruiting – 92% of HR professionals surveyed recently said they use sites like LinkedIn for recruiting Mobile Job search engines/aggregators – provide free, searchable, index of thousands of job listings and use an advertising revenue model rather than a transaction fee Data analytics and hiring by algorithm – increasingly used to match job seekers with job openings, and sift online job applications focusing on key words

On-demand service companies Provide a platform that enables on-demand service delivery by connecting providers (with spare resources) to consumers Unlike traditional sharing, these firms collect a fee from both sellers and buyers Funded by over $26 billion in venture capital Examples of on-demand service firms are listed in Table 9.9 Two common examples include Airbnb and Uber They incorporate several unique characteristics into their service provision: Use of mobile and Internet technology to enables transactions on their platforms Supported by the use of online reputation systems Successful firms lower the cost of services like urban transportation, lodging, office space, and personal errand services