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

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 75% 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” in and around households, business firms, and institutions The major service industry groups include: Finance, insurance, real estate Travel Legal and accounting Business services – consulting, advertising and marketing, and information processing Health services Educational services

Question Within these service industry groups, companies can be further categorized into two groups that provide services with very different characteristics What are these two types of services?

Categorizing Service Industries Services either involve transaction brokering or “hands-on” service 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 these categories has been most impacted by e- commerce?

Online Service Industries In this chapter we will focus on characteristics and trends in the three of the largest, and most successful, online transaction brokering industries These industries include: Online financial services Online travel services Online career services

Online Financial Services Contributes over $3 trillion to the US GDP or about 20% of the total GDP Financial services include: Banking Brokerage Mortgage and lending Insurance Real estate

Online Financial Service Industry Trends Two important global trends in the financial services industry have direct consequences for online financial services firms and overall industry structure These trends include: Industry consolidation Movement toward integrated financial services

Online Financial Consumer Behavior Consumers are attracted to financial sites because of their desire to save time and access information rather than save money Around 72.5 million households use online banking compared to just 46.7 million in 2005 Most online consumers use financial services sites for mundane financial management, such as checking balances of existing accounts and paying bills Once accustomed to performing these simple tasks, consumers move on to more sophisticated capabilities such as using personal financial management tools and making loan payments The number of people using mobile devices for financial service needs is also surging

Online Travel Services Travel and tourism in the US contributes over $400 billion to the GDP Online travel is one of the most successful B2C e-commerce segments Travel is an information intensive product requiring significant consumer research Travel market segments include airline tickets, hotel reservations, car rentals, and cruises/tours

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 intense because shoppers 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: Industry consolidation Use of meta-search engines that scour the Web for the best deals and then collect finder or affiliate fees from travel site Increased use of mobile devices and apps

Online Career Services Next to travel services, one of the Internet’s most successful online services has been job services The top sites generate more than $1 billion annually in revenue from employers’ fees and consumer fees Recruitment market segments (Table 9.9) General recruitment sites Executive search sites Niche job sites The professional social networking site LinkedIn is also becoming an increasingly important player in the market In 2011, it added a plug-in, Apply with LinkedIn, that allows job seekers to easily submit their LinkedIn profile to an employer’s Web site

Online Career Services Trends Trends for 2011-2012 in the online recruitment services industry include the following: Consolidation – industry dominated by two sites Diversification – explosion of small niche sites Localization Job search engines/aggregators Social networking Mobile