1. TOPIC 3: ELECTRONIC RETAILING (E-TAILING) BUSINESS MODELS
3.1 E-tailing, its characteristics and business models
3.2 Online travel & tourism services and industry impact
3.3 Online real estate, insurance and stock trading
3.4 Cyberbanking and online personal finance.
3.5 On-demand delivery services and e-grocers.
3.6 Online delivery of digital products and entertainment.
3.7 Online purchase aids & comparison-shopping aids
3.8 Critical success factors and problems with e-tailing and lessons learned
3.9 Reintermediation, channel conflict, and personalisation in e-tailing.

2. Case Study: : The King of E-Tailing
The Opportunity
July 1995, e-tailing pioneer Amazon.com, offered books via an electronic catalog from its Web site (amazon.com)
The company has continually enhanced its business models and electronic store by:
expanding product selection
improving the customer’s experience
adding services and alliances
recognising the importance of order fulfillment and warehousing

3. Case Study: : The King of E-Tailing
Technology used
Amazon.com has expanded in a variety of directions:
Offers specialty stores (professional and technical store)
Expands its editorial content through partnerships with experts in certain fields
Increases product selection with the (used and out-of-print titles)
Expands its offerings beyond books (June 2002 became an authorised dealer of Sony Corporation selling Sony products online)
Today: a diversified retailer of products and services

4. Case Study: : The King of E-Tailing
Key features of Amazon.com:
Easy browsing, searching, and ordering
Useful product information, reviews, recommendations, and personalisation
Broad selection
Low prices
Secure payment systems
Efficient order fulfillment
Personalisation
Enjoyable features:
“Gift Ideas” section features seasonally appropriate gift ideas and services
“Community” section provides product information and recommendations shared by customers
“E-Cards” section, free animated electronic greeting

5. Case Study: : The King of E-Tailing
Marketplace services:
Hosts and operates auctions
zShops service hosts electronic storefronts for a monthly fee
Allowing small businesses the opportunity to have customised storefronts supported by the richness of Amazon.com’s order-fulfillment processing

6. Case Study: : The King of E-Tailing
Amazon.com is an online leader in CRM
Informative marketing front ends
One-to-one advertisements
Free posting of menus from thousands of restaurants
“Welcome back, Sarah Shopper” with recommendations of new books from the customers preferred genre based on previous purchases.
Sends buy recommendations via to cultivate repeat buyers
Efficient search engine and other shopping aids
Customers can personalise their accounts and manage orders online with the patented “One-Click” order feature including an electronic wallet

7. Case Study: : The King of E-Tailing
In 1997, Amazon.com started an extensive affiliates program
By 2002, the company had more than 500,000 partners that refer customers to Amazon.com
Amazon pays a 3 to 5% commission on any resulting sale
Alliances with major “trusted partners” provide knowledgeable entry into new markets
Carsdirect.com allows it to sell cars online
Drugstore.com connects to health and beauty aids
AT&T, Nextel and others suggest service plans for wireless phones

8. Case Study: : The King of E-Tailing
The Results
Number one e-tailer since 2001 generated $3.12B
Very successful in reducing its costs and increasing its profitability
Annual sales have trended upward (over $5B in 2003)
$15.7 million in 1996 to $600 million in 1998 to about $4 billion by 2002
In 2003 the site offers over 17 million book, music, and DVD/video titles to some 20 million customers
Offers several features for international customers
In January 2002, Amazon.com declared its first ever profit—for the 2001 fourth quarter

9. Case Study: : The King of E-Tailing
What can we learn…
demonstrates the evolution of e-tailing
some of the problems encountered by e-tailers
solutions employed by Amazon.com to expand its business
the opportunities for e-tailing

10. 3.1: Internet Marketing and E-Tailing
Overview of e-tailing
Electronic retailing (e-tailing):
Retailing conducted online, over the Internet
E-tailers:
Those who conduct retail business over the Internet
The concept of retailing and e-tailing implies sales of products/services to customers, that is B2C EC.

11. 3.1: Internet Marketing and E-Tailing
Size and Growth of the B2C Market
Reported amounts of online sales deviate substantially based on how the numbers are derived
Annual online 2004 sales were estimated to be over $70 billion
The average online shopper spent over $350 per quarter
Forrester Research estimates that e-tailing will reach $316 billion by 2010

12. 3.1: Internet Marketing and E-Tailing
What Sells Well on the Internet?
Toys
Health and beauty products
Apparel and clothing
Jewelry
Cars
Services
Others
Computer hardware and software
Consumer electronics
Sporting goods
Office supplies
Books and music
Entertainment

13. 3.1: Internet Marketing and E-Tailing
Characteristics of successful e-tailing
High brand recognition (eg., Lands’ end, Dell)
Guarantee provided by highly reliable or well-known vendors (eg., Dell)
Digitised format (eg., software, music, videos)
Relatively inexpensive items (eg., office supplies)
Frequently purchased items (eg., groceries)
Commodities with standard specifications (eg., books, airline tickets), physical inspection unimportant.
Well-known packaged items that cannot be opened even in a traditional store (eg., vitamins, chocolates)

14. 3.1: Primary E-Tailing Business Models
Classification by Distribution Channel
1. Mail-order retailers that go online
Retailers leveraging on existing infrastructures by using direct online marketing as their main distribution channel
2. Direct marketing from manufacturers
Manufacturers market directly online to customers
3. Pure-play e-tailers
No physical stores, only online presence
4. Click-and-mortar retailers
Traditional retailers with supplementary Web sites
5. Internet (online) malls
Many independent online merchants in one location.

16. 3.1: Classification by Distribution Channel
Direct marketing by mail order companies
Broadly, marketing that takes place without intermediaries between manufacturers and buyers;
In our context, marketing done online between any seller and buyer
For a successful Mail-Order company to have a distinct advantage in online sales, it must have good payment processing, inventory management and order-fulfillment operations as shown in the following Lands’ End case study.

17. Case Study: Lands’ End
Lands’ End: How a mail-order company moved online
Successful because of the logistics system already in place
A subsidiary of Sears, Roebuck and Company
Internet sales in 2000—10% of the company’s $1.3B total
Projected Internet sales are 20 percent in 2003
In 1995 it offered only 100 products online; as of 2002, all of its products are online
Global presence in Japan, Germany, and the United Kingdom
Orders generated online are shipped from these distribution outlets—U.S. customers usually receive their orders in 2 days

18. Case Study: Lands’ End
Women customers can build and store a three-dimensional model of their body (Personal Model) that recommends outfits that flatter certain body profiles and suggests sizes based upon customer’s measurements
Male customers can use a feature called “Oxford Express” to sort through hundreds of fabrics, styles, collar and cuff options, and sizes within minutes
Customers can track their order status online and request catalogs using the Internet
Maintains a B2B “store” where companies can customise clothing such as polo shirts with their logo for use as company uniforms, incentives, or gifts.

19. 3.1: Classification by Distribution Channel
Direct sales by manufacturers
Sellers understand their markets better because of the direct connection to consumers
Consumers gain greater information about the products through direct connection to the manufacturers
Example: Dell Computers: build-to-order customisation
Virtual (pure-play) e-tailers
Firms that sell directly to customers over the Internet without maintaining a physical sales channel. Example: cattoys.com.

20. 3.1: Classification by Distribution Channel
Click-and-mortar retailers
Brick-and-mortar retailers with a transactional Web site from which to conduct business.
Multichannel business model
A business model where a company sells in multiple marketing channels simultaneously
Example: A company conducting its business using both physical stores and online stores.

21. 3.1: Classification by Distribution Channel
Retailing in online malls or e-mall
Referring directories
Directory organised by product type
Catalog listings or banner ads at the mall site advertise the products or stores
Malls with shared services
Consumer can find the product, order and pay for it, and arrange for shipment
Hosting mall provides these services, but they are executed by each store independently.
Ideally, the customer would like to go to different stores in the e-mall, use one shopping cart, and pay only once. This integrated services (with a single checkout for many merchants) is possible in Yahoo!store (smallbusiness.yahoo.com/merchant).

22. 3.1: Representative B2C Services
Of the many other B2C services, four of interest are those that deliver physical products, digital products and services:
Postal Services
Services and Products for Adults
Wedding Channels
Gift Registries

24. 3.2: Travel and Tourism Services Online
Online travel is probably the most successful e-commerce implementation
Online services provided include:
General information
Reserving and purchasing tickets, accommodations, and entertainment
Travel tips
Electronic travel magazines
Fare comparisons
Travel products store
Expert opinion
Frequent-flyer deals

25. 3.2: Travel and Tourism Services Online
Benefits of Online Travel Services
Benefits to consumers
Large amount of free information available 24/7
Potential for for substantial discounts in price
Benefits to providers
Airlines, hotels, and cruise lines are selling otherwise-empty spaces
Direct selling saves the provider’s commission and its processing. (Otherwise it has to sell via a transaction broker which charges fees for its services)

26. 3.2: Travel and Tourism Services Online
Role of software (intelligent) agents in travel services
Intelligent agents could provide a service to travel customers by providing buyer-seller negotiations.
Future applications would allow greater information flow for better pricing and decision making.

27. 3.3: Real Estate, Insurance & Stock Trading Online
Real Estate Applications
Advice to consumers on buying or selling a home
Directory and new sites
Property listings (commercial and residential)
Links to realtors
Maps are available
Information on current mortgage rates
Mortgage comparisons
Mortgage brokers
Online lenders
Sites for persons who want to sell their homes privately, without using a real estate agent
Rental properties are listed.

28. 3.3: Real Estate, Insurance & Stock Trading Online
Insurance Online
An increasing number of companies use the Internet to offer standard insurance policies (automobile, home, life, or health) at a substantial discount
Third-party aggregators offer free comparisons of available policies
Many large insurance companies are using a dual distribution strategy, by adding online distribution of standard insurance policies to their traditional agency distribution system.

29. 3.3: Real Estate, Insurance & Stock Trading Online

30. 3.3: Real Estate, Insurance & Stock Trading Online
Investment Information Online
Current financial news (money.cnn.com)
Bond prices (bloomberg.com)
Free (expert) advice (thestreet.com)
Stock screening and evaluation tools (MultexInvestor)
Trading strategies (Schwab Trader)
The latest on funding and pricing of IPOs
Financial information (earnings estimates)

31. 3.3: Real Estate, Insurance & Stock Trading Online
Advantages of Trading Stocks Online
Ease-of-use
Access to large amounts of information
Convenience
Reduced costs.
Risk of Trading Stocks Online
The major risk of online trading is security
The risks of delayed information as well as the relative ease of trading (increasing the amount of trading overall).

32. Case Study: Dangers of Online Stocks Trading
Almost 55% of stock trading in Korea is done online
Fraudulent online stock trading—August 2002
A criminal used a PC in an Internet cafe to place a buy order at a high price for 5 millions shares of “Delta Information & Communication”. He used the trust company’s stolen account number and password
In 90 seconds, over 100 people sold more than 10,000 shares each for a total of 2.7 million shares pushing the price of the shares way up
Hacker stopped buying and disappeared
Without buyers the price of Delta’s shares started to decline
In 2 days, Daewoo Securities (manager of the Hyundai account) suffered U.S. $5 million paper losses