E-Commerce and Small Business - Finding the Right Products to Sell on the Internet Robert T. Chi Information Systems Department College of Business Administration California State University, Long Beach

Motivation The Internet has provided a rare opportunity especially for small to medium sized enterprises. The potential of the Internet as a commercial medium and market. Both successful and unsuccessful cases of Internet marketing have been reported. In this research, we focus on the use of the Internet as a virtual storefront. we identify the factors that impact the use of on-line marketing approach.

Introduction The Internet matches buyers and sellers in a more cost-effective manner, compared with traditional advertising and marketing. It breaks through the physical barriers and moves firms to a new commercial marketplace. The opportunity for buyers to examine or test the product or service and interact with the seller to receive additional information or support.

Pros and Cons of E-Marketing Approach Advantages of Internet Marketing: Communication Channel: Exchange information between sellers and buyers. (1) the ability to store vast amounts of information that can be searched and disseminated in a cost- effective manner which is accessible by virtually everyone on the Net, (2) interactivity and the ability to provide information on demand, and (3) provide perceptual experiences that are superior to a printed catalog.

Continued: Transaction Channel: Generate sales activities. small companies that play in niche markets (i.e., sell specialized or unique products or services) in which buyers and sellers are small and geographically dispersed, can use the Internet to reach a much bigger customer base The Internet can also ease transaction processing, especially for handling complex orders

Continued: Distribution Channel: Physical exchange of products/services. On-line marketing offers more choices and flexibility and, at the same time, eliminates huge inventories, storage costs, utilities, and space rental, etc. Using the Internet as the distribution channel can reduce the delivery cost substantially, and also ensures instant delivery of products/services.

Table 1. Advantages of the Internet marketing approach grouped by the three channel functions CommunicationImproved product information Improved price information Availability of service, 24 hours a day, 7 days a week Lower cost of communication Interactivity and the ability to provide information on demand Real-time inventory update On-line technical support Quick response of inquiries Customized orders Post-sale service TransactionVirtual storefront can be reached by all Internet users Lower cost of transaction Allow microtransactions Reduce human errors Reduce procurement cycle time Lower inventory level and other related overhead Possible to customize promotion and sales to individual customers Flexible pricing DistributionReduced waiting time to receive product for digital products/services Channel FunctionsAdvantages No personal contact Relatively low entry and establishment costs Lower cost of delivery for digital products/services

Table 2. Product and Service Classification Grid (Adapted from Peterson et al., [1997]) Dimension 1 Value Proposition Dimension 2 Degree of Differentiation Dimension 3 Frequency of Purchase Examples of Products and Services Category DigitalHighFrequentOn-line newspapers and MagazinesDHF InfrequentSoftware packagesDHI LowFrequentStock market quotesDLF InfrequentAutomobile financing, insuranceDLI TangibleHighFrequent Wines, soft drinks, cigarettesTHF Infrequent Stereo systems, AutomobilesTHI LowFrequentMilk, eggsTLF InfrequentPrecious metal ingot of Known weight and purity TLI

Table 3. Classification grid for analyzing the potential benefits of Internet markeing

Limitations and Future Research limited the scope to focus only on the product characteristics and their effects on the success of Internet marketing. Other factors that may impact the performance of Internet marketing include: 1) the firm’s current distribution structure and channel relationships, 2) the size of the company, 3) the promotion strategies, and 4) the pricing structure, etc. Study the cases of individual companies to evaluate and design channels that would help with the successful launch of new products.

Goal Pprovide a framework to identify factors that influence consumer buying behavior on different product/service categories over the Internet.

Table 1. Characteristics of Products sold on the Internet and Corresponding Key Factors * degree of importance: H – High, M – Medium, L - Low

Table 2 summary of survey results Product categor y Conv e- nienc e Enjo y Qu al. Info Com m Cost Comm Time Tran Cost Tran Time Securit y Deli Cost Deli Time Servic e 1 (HHT) (HLT) (LHT) (LLT) (HHI) (HLI) (LHI) (LLI) Average std

Figure 1 Charting of the survey results

Table 3 Rankings of relative importance within each product category Product categor y Conv e- nienc e Enjo y Qu al. Inf o Com m Cost Comm Time Tran Cost Tran Time Securi ty Deli Cost Deli Time Servic e 1 (HHT) (HLT) (LHT) (LLT) (HHI) (HLI) (LHI) (LLI) Averag e

Table 4 Product category 3 Low cost, High competition, Tangible vs. 6 High cost, Low competition, Intangible Product category Conve- nience* * Enj oy* * Qual. Info* * Com m Cost* * Comm Time** Tran Cost Tran Time Securit y* Deli Cos t Deli Time** Servic e** 3 (LHT) (HLI) * 1 standard deviation apart  ** 2 standard deviation apart

Figure 2 Comparison chart for product categories 3 (LHT) and 6 (HLI)

Table 5 High vs. Low Outlay goods Product category Conve- nience* Enjo yInfo* Com m Cost* Com m Time Tran Cost* Tran Time Securit y* Deli Cost* Deli Time* Servic e* H Outlay L Outlay * 1 standard deviation apart

Table 6 High vs. Low Competition goods Product category Conve- nience*EnjoyInfo Comm Cost Comm Time Tran Cost Tran Time Securit y Deli Cost Deli Tim e Servic e* H Comp L Comp * 1 standard deviation apart

Table 7 Tangible vs. Intangible goods Product category Conve- nience Enjoy * Inf o Com m Cost Com m Tim e* Tran CostTran Time Securit y Deli Cost * Deli Tim e Servic e Tangible Intangible * 1 standard deviation apart

Figure 3 Charting the importance of different factors between high and low outlay products

Figure 4 Charting the importance of different factors between high and low competitive products

Figure 5 Charting the importance of different factors between tangible and intangible products