Oz – Foundations of Electronic Commerce © 2002 Prentice Hall Business-to-Consumer E-Commerce

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall2 Learning Objectives Summarize the principles of the main types of online business-to-consumer (B2C) activities List the major players in the B2C arena Explain the challenges of B2C firms Articulate the difficulties of e-retailing in general and delivery in particular

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall3 Learning Objectives Explain the concept of channel conflict Contrast failure and success factors in online B2C ventures List the major future developments that are anticipated in online B2C commerce

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall4 Business-to-consumer (B2C) hoopla Why consumers shop on the Internet: Convenience Saving time Comparative shopping

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall The business of e-retailing Characteristics, issues, and challenges

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall6 Retailing waves Intimacy Special services Small variety Shopper picks, packs, delivers Greater variety Lower prices No intimacy Shopper picks, packs, delivers Huge variety Lower prices Retailer picks, packs, delivers No intimacy No immediacy Grocery market example Corner grocerSupermarketOnline grocer

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall7 Elements of e-retailing E-tailing site must: Promote the items offered for sale Provide a search mechanism Comparison software Provide the means to process purchases and payments

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall8 Diminishing importance of brand names A brand name is a short cut when there is no convenient access to information about a product The plentiful and easily accessible information available on the Internet reduces the need to rely on brand names

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall9 Repeat business challenge Attract web surfers to spend more time at the e-tailing site Convert visitors into buyers A major challenge Conversion rate - the rate at which visitors are converted into buyers

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall10 Delivery challenge Prompt delivery is the greatest challenge for B2C businesses

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall11 Channel conflict A direct manufacturer-to-consumer channel may compete with the traditional distribution channels How to circumvent channel conflicts? Sell online items that are not distributed through retailers Use a different brand name for items sold online

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall Challenging warehouse-to- retail transition

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall13 Great difference in logistics between traditional and e-retail Labor & transportation costs shift from the customer to the retailer

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall14 “Last mile” problem Approach How it works PortalAggregate demand across categories; economies of scale BuildoverMaintain your own warehouse CachingAggregate orders for delivery at a single destination SpeedCharge more for fast delivery or convenience store items NicheCharge more for specialty items

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall15 Portal strategy A firm offers many different, but related services to consumers By aggregating service requests, economies of scale are achieved

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall16 Buildover strategy The firm builds its own infrastructure by building fulfillment centers Significant investment

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall17 Caching strategy cached Filled orders are aggregated, or cached, in one delivery location Collection centers More convenient than home delivery for both the firm and its customers

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall18 Speed strategy Quick delivery of products Customers willing to pay more than if they purchase items the traditional way

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall19 Niche strategy A niche market on which the firm specializes Does not require a new infrastructure Relatively narrow selection of products

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall20 Successful B2C business models Reservation systems Consumer auctions Reverse auctions Stock trading Gambling Content

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall21 Software sales Perishables online Bill presentment and payment “Do well by doing good” Online customer service

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall22 Failures: not all that glitters is gold Reason for failure What happens Poor business model There is no demand for the products/services Insufficient logistical means The firm runs out of funds before it has established adequate logistics infrastructure CompetitionCannot compete against stronger players

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall23 Reason for failure What happens Over reliance on advertising Traffic at the site is too small to generate enough advertising revenue Critical massFailure to reach within a reasonable period of time a large enough audience

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall24 Boo.com Foofoo.com Cookexpress.com Toysmart.com

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall25 Ingredients for success Meet a consumer need Consumers buy only what they need Total service Offer a host of related services as one package Aggregate online products and services offered in a traditionally fragmented industry

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall26 Interaction and personalization Enable customers to conduct live human- to-human interaction with the firm Create customer profiles Use of technology Use the latest technology to update your site

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall27 Trends in B2C commerce Mergers of B2C firms Clicks-and-mortar gravitation Sounder business models Mobile commerce M-commerce

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall Business-to-Consumer E-Commerce