AGENDA FOR TODAY 8:30 - 9:20 E-business models 9:20 - 9:30 Break 9:30 -10:00 Group discussion 10:00- 11:00 Case WEBVAN 11:00 - 11:10 Break 11:10 - 12:00 The customer interface for e-business

For Tomorrow Please prepare: STAPLES.COM

E-business Models CEDIR Program Summer 2001 Professor Ramiro Montealegre E-business Models

Until now: Framing Market Opportunity (i.e. where will the business compete) Today: Business Models (i.e. how will the business win)

Components of a Business Model Value Cluster Marketspace Offering Resource System Financial Model

Consumer Decision Process Disposal Loyalty Satisfaction Purchase Decision Evaluation of Alternatives Information Search Problem - Recognition Pre-Purchase Purchase Post-Purchase

Egg Diagram for 1-800-flowers.com Gift reminder service Holiday specials Everyday celebrations suggestions Special occasion suggestions Ideas and Information “Care and handling” “Do it yourself” Special events and educational workshops held at stores Floral ideas Garden ideas Home ideas Gift ideas Gourmet ideas Store locator Recommendations by budget Bestsellers Flower / Gift Decision Process Need Recognition Product Offering Gift Recommendations Education on Flowers and Decoration Search for Ideas and Offerings Gift guru Favorite gifts Gift frequency Gift impossible Gift baskets Corporate gift services Post-Sale Support Order receipt e-mail eQ&A online customer service FAQ Customer service inquiry form Post-Sale Support and Perks Evaluation of Alternatives Product price Product picture Product description Delivery information Delivery availability Perks Miles earned with flower purchases Free gifts Discounts at AOL & BN.com with flower purchases Member specials Message Selection Purchase Decision Shopping basket E-commerce transaction Special shopping features Delivery outside US 1-800-lasfloras.com Gizmo fully-animated greeting cards Physical cards in gifts

1-800-flowers.com Resource System Address Book BloomNet Network Third-Party Contractors Strong Distribution Network Gift Recommend- ations Fulfillment Center Stores Online Gift Center Gift Reminder Broad Assortment of Gifts High Quality of Flowers Rich Content Personalization Capabilities Popular Website Garden Works Integrated Partner Offers Telephone 3,000 Affiliates Plow & Hearth Online Customer Service Widespread, Easy Access Great Foods Multiple Contact Points Franchise Stores Catalog Technology Strong Brand Name Wide Reach to Customers Customer Service Centers = Core Benefits Snap Starmedia = Activities & assets Integrated online offline Systems MSN AOL = Capabilities

Sawhney and Kaplan — B2B Models Vertical Hubs Paper Chemicals Plastics Steel Logistics Management Media Buying Advertising Energy Management Functional Hubs Source: Adopted from Business 2.0, September 1999, page 88

Sources of Content Origination RJS Model Summary Sources of Content Origination Single Brand Multiple Brands Supply Side Demand Side Hybrid Integrator (Cisco.com) Hybrid Aggregator (Amazon.com) Forward-Integrated Producer (Walmart.com) Supply-Side Aggregator (Surplusdirect.com) Demand-Side Aggregator (Accompany.com) Backward Integrated User (Dellonline.com) - B2B Focus of Strategy

Alternative Shareholder Value Model

For Further Reading B2B, INTRANET,AND B2C TRENDS Microsoft http://msdn.microsoft.com/library/techart/collabdotnet.htm IBM http://www-106.ibm.com/developerworks/webservices/ HP http://www.e-speak.hp.com/ http://www.brint.com/Elecomm.htm

Case Discussion -- Webvan: Groceries on the Internet CEDIR Program Summer 2001 Professor Ramiro Montealegre Case Discussion -- Webvan: Groceries on the Internet

Targeted Families for Online Grocery Retailing 1. Both parents working 100% - If working 70%, similar behavior as a non-working parent 2. With Children - larger shopping baskets - More likely to be home from 16:00 to 19:00 Research by: Le Shop, 2000

Customers: Acquisition Cost Vs. Lifetime Value Grocery Industry 3 year lifetime * 40 orders/year * $100 average order = $12,000 Book Industry 3 year lifetime * 3 orders/year * $ 40 average order = $ 360 Acquisition Costs: Net Catalog Bricks-&-Mortar Books $8 $79 $59 Groceries $2,918 $2,989 $2,969

Online Grocery Shopping ADVANTAGES: - Fewer opportunities for impulse buying - Help in planning meals - Can buy in their own terms and shop any time - Time saving - Avoid crowded stores and parking lots - Access to larger selection and product information DISADVANTAGES: - Cannot inspect food before purchase - Miss spontaneity of discovering new/seasonal products - Miss the social opportunity to interact - Concern about fraud and privacy

Traditional Retail Store Value Chain 1. Case of cereal arrives at distribution center 2. Case of cereal is taken off the truck 3. The case of cereal is stored in distribution center 4. When the store needs cereal, a case is loaded on truck 5. Case of cereal arrives at the store 6. Store clerks store cereal case in the backroom 7. When needed, cereal case unpacked and stored in shelf 8. Old/outdated stock is removed 9. Customer put cereal in shopping cart 10. Cashier rings up the cereal 11. Clerk puts cereal in the bag 12. Customer transport cereal home

FOLLOW-UP “A fight for survival” Due to run out of cash at the end of Fall’2001 A revamped business plan provided cash to Dec. 01 It will need between $40-60 M to fund 2002. Stock has plummeted 95% Feb 2000: Closed operations in Dallas

Big Picture Demand Chain Management

Dell Model – Fulfillment Logistics

THE PRIMARY OBJECTIVES OF WEBVAN CASE STUDY WERE: 1) Discuss how to create value for the customers and how e-businesses should tackle fulfillment issues. 2) Explore the issue of fulfillment: how to overcome the physical distance from distribution center to the customer’s doorstep. 3) Given that no model has yet become profitable, speculate on when and if these models will turn a profit.

interface for e-business CEDIR Program Summer 2001 Professor Ramiro Montealegre The customer interface for e-business

The 7Cs of the Customer Interface Context Site’s layout and design Content Text, pictures, sound and video that web pages contain Commerce Site’s capabilities to enable commercial transactions Community The ways sites enable user-to-user communication Connection Degree site is linked to other sites Customization Site’s ability to self-tailor to different users or to allow users to personalize the site Communication The ways sites enable site-to-user communication or two-way communication

Fit and Reinforcement of Cs Business Model Individually Supporting Fit Context Content Community Customization Communication Connection Commerce Consistent Reinforcement

Performance of Lands’ End Site

Form vs. Function: The Design Context Frontier Integrated High Aesthetically Dominant AESTHETIC/ FORM Frontier is gradually moving outward as technology advances Low Functionally- Dominant Low High FUNCTION

Aesthetic Example — KMGI.com

Functional Dominant — Brint.com

Integrated Approach Example — Patagonia.com

A Framework to Understand Offering-Dominating Archetypes Multiple Superstore NUMBER OF PRODUCT CATEGORIES Specialty Store Category Killer Single Narrow Broad DEPTH OF PRODUCT LINE

Superstore Example — Amazon.com

Category Killer Example — Petsmart.com

Specialty Store Example — Frontgate.com

Information Dominant — Business 2.0 (www.business2.com)

Market Dominant Example — PlasticsNet.com