ITB6227 Programming for E-COMMERCE Lecture E-Tailing Revenue Models ITB6227 - Web programming for E-Commerce

ITB6227 - Web programming for E-Commerce Objectives Describe the role of e-commerce Business models and how they relate to e-commerce Difference between business models and revenue models Types of B2C Revenue models Describe Traditional Retailing and transference to E-Retailing Benefits of E-Retailing Differentiate between core components and additional components of an E-Retailing system Overview of an E-Commerce development methodology ITB6227 - Web programming for E-Commerce

ITB6227 - Web programming for E-Commerce E-commerce Basics The basic process for e-commerce from a customer viewpoint (applicable to B2B, B2C) Identify the Need Search for potential products or services that meet requirements Select a vendor Make payment arrangements Make payment Maintenance and Warranty issues Identifying a need May be automatically done via ERP system. Automatic detection of low stock levels etc. ITB6227 - Web programming for E-Commerce

ITB6227 - Web programming for E-Commerce Consumer Goods Intangible goods (services) Tangible goods Digital products Physical products Perishable Non-perishable Some “products” involve tangible and intangible goods You contract someone to create a design and that design is delivered via internet Intangible goods – here we mean a service performed for a customer Some “products” involve tangible and intangible goods The creation of the design is the service, The actual digital design is the good Digital products versus Physical products. Physical products have disadvantages compared to digital products. Physical products – storage, perishability, Digital products – can be copied, modified etc Other advantages/disadvantages? ITB6227 - Web programming for E-Commerce

The Role of Electronic Commerce Reduce transaction costs Some typical costs Search costs – customers can easily locate and analyze product or service information Transaction processing costs – (management of invoices, purchase orders, payment schemes) The Process can be automated Improve information flow To customers, business partners etc ITB6227 - Web programming for E-Commerce

The Role of Electronic Commerce Increase coordination of actions for an organization Between departments, or other external organizations Improve existing markets Enhance current markets Focused marketing campaigns based on hard data Additional technology based services to “encourage” purchase Create entirely new markets Development of new online markets, tapping in to the global internet market, overseas markets ITB6227 - Web programming for E-Commerce

ITB6227 - Web programming for E-Commerce Source: http://www.trademe.co.nz/motors ITB6227 - Web programming for E-Commerce

ITB6227 - Web programming for E-Commerce Source: http://www.autotrader.co.nz/ ITB6227 - Web programming for E-Commerce

ITB6227 - Web programming for E-Commerce Source: http://www.liveplasma.com ITB6227 - Web programming for E-Commerce

ITB6227 - Web programming for E-Commerce Business Models What is a Business Model A working description that includes details about the operation of a business. Expenses Revenues Operating strategies Sales and marketing procedures Can describe all activities related to the day to day function of the business Collection and description of all business processes (typical processes: dispatching goods, processing orders etc) ITB6227 - Web programming for E-Commerce

ITB6227 - Web programming for E-Commerce Revenue Models What is a Revenue Model? The way in which a business’ processes are arranged to generate income Used as a method to group a companies business processes Will also typically involve Identifying customers Marketing to those customers Generating sales to those customers ITB6227 - Web programming for E-Commerce

Business Models vs Revenue Models The architectural configuration of components of transactions designed to exploit business opportunities The description and setup of the “environment” a business creates to create business opportunities Revenue Model The specific ways in which a business model enables revenue generation It is about the different methods used to get the money! Revenue Models at Wintec Delivery of specific courses online Delivering face to face courses Information Technology Services – has contracts to provide the IT support function to external organisations, sport waikato etc. Revenue Models for Universities Delivery of courses plus generating income through research activities (government has several research grants available that universities can contest for) ITB6227 - Web programming for E-Commerce

ITB6227 - Web programming for E-Commerce Use of Business Models Early days of E-commerce One approach for many companies was to simply copy the business model of a successful existing online company This practice led to many E-commerce failures A Better way: businesses analyze their own business model and look for opportunities to apply Internet technologies to enhance or replace business processes Although two businesses may work in the same industry, they can still have unqiue ways of doing things Not all business models easily or successfully translate to the web ITB6227 - Web programming for E-Commerce

ITB6227 - Web programming for E-Commerce Use of Business Models Some business models are quite simple A company produces a good or service and sells it to customers And others quite complex Other models can be more intricately woven, and there are several issues involved in translating it to the web. Consider Radio and Television programming Radio and later television programming has been broadcasted over the airwaves free to anyone with a receiver for much of the past century. The broadcaster is part of a complex network of distributors, content creators, advertisers (and their agencies), and listeners or viewers. Who makes money and how much is not always clear at the outset. The bottom line depends on many competing factors. ITB6227 - Web programming for E-Commerce

ITB6227 - Web programming for E-Commerce Revenue Models in B2C Publicity Company establishes a website for publicity purposes Advertising Effective for sites with significant number of site visitors Sale of goods/services Sales transactions on the web Subscription Certain sections of a website only available via subscription “Knowledge based” websites for instance In other e-commerce categories Transaction fee Fee charged for C2C by intermediary business Facebook ITB6227 - Web programming for E-Commerce

ITB6227 - Web programming for E-Commerce Source: https://www.mturk.com/mturk/welcome ITB6227 - Web programming for E-Commerce

ITB6227 - Web programming for E-Commerce

Traditional Retailing Sales to a customer using either a physical location or direct communication Types include Malls Collection of individual stores, individually managed with Mall management providing the physical location for the retailer to sell from Generalized store Unified management but will carry different product lines ITB6227 - Web programming for E-Commerce

Traditional Retailing Specialized Stores Sell a specific product line Franchise Store Stores that come under a single marketing and branding effort, each store may be under different management, with a fee paid back to the franchisee Direct Mailing Catalogue sent to customers who purchase using mail order Others Telemarketing, door-to-door sales ITB6227 - Web programming for E-Commerce

ITB6227 - Web programming for E-Commerce E-Retailing E-Retailing (Or E-tailing) is a result of mapping traditional retailing models to the Internet and internet associated technologies Specialized stores  specialized e-stores Generalized stores  generalized e-stores Malls  E malls Franchise Stores  ??? ITB6227 - Web programming for E-Commerce

New E-Retailing Models The Internet and Natural evolution of e-commerce has led to the development of new e-retailing models E-Brokers Do not sell directly Match a customers request to e-retailers Search is based on attributes supplied by the consumer e.g. price, brand, location etc Example: PriceSpy (www.pricespy.co.nz) Direct Selling by Manufacturer Example: Dell Computers (www.dell.co.nz) ITB6227 - Web programming for E-Commerce

Benefits of E-Retailing For Customers: Convenience Delivered goods, multiple payment methods Better information Competitive pricing Ability to easily perform price comparisons, leads to price transparency. You can determine the fair price for an item Can shop anywhere, anytime(equipment needed) More value added services Simple Example: A customer can define product a search by specifying product attributes in order of importance Personalization/Customisation What other benefits might there be? ITB6227 - Web programming for E-Commerce

ITB6227 - Web programming for E-Commerce Personalization – Amazon.com Source: https://www.mturk.com/mturk/welcome ITB6227 - Web programming for E-Commerce

Benefits of E-Retailing For E-Retailer: Global reach, new markets Targeted marketing Low setup costs (compared to physical store etc) More value added services Besides being able to provide value added services to customers to better fulfill their needs, another example can be the ability to market and sell a large number of products in an online store, more than would be physically possible in a physical store Personalization/Customisation What other benefits might there be? ITB6227 - Web programming for E-Commerce

ITB6227 - Web programming for E-Commerce Traditional Customization - Showrooms ITB6227 - Web programming for E-Commerce

ITB6227 - Web programming for E-Commerce Traditional Customization – Shop Layout ITB6227 - Web programming for E-Commerce

ITB6227 - Web programming for E-Commerce Shop Layout Customisation ITB6227 - Web programming for E-Commerce

E-Retailing System (e-shop) Components Core Components (must haves) for this are:- Online catalog for goods tied to the order process Search facility for product evaluation and selection Ordering subsystem shopping cart Order status checking facility “Checkout” facility for capture of delivery and payment details, connection to a payment gateway ITB6227 - Web programming for E-Commerce

E-Retailing System Components Additional Components A customer handling system Customer authentication, capturing of customer details, marketing, managing customer complaints Online delivery system (for digital products) Delivery by direct download, streaming etc Mechanisms for “protecting” digital products (good luck… ) Forums and other systems for developing online communities What are they for? Further software systems as are necessary: - Often customised to the specific types of product or service being marketed ITB6227 - Web programming for E-Commerce

ITB6227 - Web programming for E-Commerce

E-Retailing System Components Another aspect indirectly related to system components Personalization of system layouts (interface) By the e-retailer For marketing and promotion purposes Offline retail involves a lot of planning in physical store design and layout as well as how and what products are placed where on shelves, displays that are placed around checkouts etc. Customers may not be consciously aware of this… By the customer To suite customer preferences for interaction within an e-commerce system ITB6227 - Web programming for E-Commerce

E-Commerce Development Methodology Basic summary of steps Develop detailed description of existing business model (and revenue models) Develop an e-business model A Model of the system in an online e-commerce environment. This may reflect all or parts of an organization's current business model. A critical step because not all aspects of a business may easily translate to this environment Development system requirements Choose system architecture and implementation platforms Design and develop software structure and model Detailed design – web UI, databases, integration with legacy systems (back end systems we may need to work with) Implementation Testing and piloting the e-commerce system ITB6227 - Web programming for E-Commerce