1. E-Commerce 1 Lecture 6 Retailing in Electronic Commerce (E-Tailing)

2. E-Commerce 2 E-Tailing and B2C Market Growth Business-to-business (B2B) Requires precise record keeping, trackability, accountability, and formal contracts, usually with high volume of transactions and large amount payments Also online retailing Business-to-consumer (B2C) Ability to create direct relationships with consumer without intermediaries like distributors, wholesalers, or dealers

3. E-Commerce 3 E-Tailing and B2C Market Growth (cont.) The B2C Market success is derived from: Offering quality merchandise at good prices Excellent customer service Convenience

4. E-Commerce 4 Characteristics of goods leading to high online sales volumes Brand recognition and guarantees Digitized products Frequently purchased, inexpensive items Well-known items with standard specifications E-Tailing and B2C Market Growth (cont.)

5. E-Commerce 5 Consumer Purchase Process and Marketing Plan Purchase decision process Prepurchase steps Awareness of need for purchase Identify basic need or want Actual purchase Establish decision criteria Seek recommendations and information Make purchase Postpurchase steps Assistance with installation or setup Online help desks and instruction manuals

6. E-Commerce 6 Figure 3-1 The Consumer Purchase Decision Process

7. E-Commerce 7 Consumer Purchase Process and Marketing Plan (cont.) Time-starved consumers Shopping avoiders New technologists Time-sensitive materialists or click-and- mortar consumers Traditionalists Hunter-gatherers Brand loyalists Single shoppers Types of online shoppers

8. E-Commerce 8 Decision Criteria Value proposition—customer service, better prices, higher quality Personal service—treat the customer as a unique individual Convenience—self-contained site that serves all the customer’s needs Other criteria—service after the sale

9. E-Commerce 9 A Marketing Plan Influence the consumer’s decision process through the “marketing mix” Product—portfolio of items available Price of the products Promotion of products (advertisements and giveaways) Packaging and delivery

10. E-Commerce 10 Online Purchasing Aids Shopping portals Comprehensive portals Links to many different sellers Shopping comparison sites Comparison tools are available Niche oriented Specialize in a certain line of products (dogtoys.com) Some collect referral fee only Others have formal relationships with affiliates

11. E-Commerce 11 Online Purchasing Aids (cont.) Shopbots and agents—tools that scout the Web for specific search criteria requested by consumers Mysimon.com - best prices on multiple items AutoBytel.com – cars Zdnet.com/computershopper – computers Office.com – office supplies

12. E-Commerce 12 Online Purchasing Aids (cont.) Business ratings sites—sites that rate e-tailers Bizrate.com—compiles results provided by a network of shoppers Gomez.com—consumer identifies relative importance of different criteria

13. E-Commerce 13 Online Purchasing Aids (cont.) TRUSTe seal of assurance E-tailers pay TRUSTe for use of seal Hope consumers use seal as proxy for actual research about their site BBBOnLine Yearly license fees based on company’s annual revenue Secure Assure Yearly license fees based on company’s annual revenue Ernst and Young Created its own service for auditing e-tailers Offers some guarantee of integrity of business practices Trust verification sites — evaluate and verify trustworthiness and integrity of e-tailers

14. E-Commerce 14 Online Purchasing Aids (cont.) Other shopping tools Escrow services—3 rd party to assure quality Proper exchange of money and goods Research information Payment-processing support Communities of consumers Epinions.com—searchable recommendations on products PriceGrabber.com—comparison shopping

15. E-Commerce 15 E-Tailing Business Models Subscription models: charge monthly or annual subscription fee for service Transaction fee models: charge service fee based on the level of transaction offered Advertising-supported models: charge fee to advertisers instead of customers Sponsorship models: companies sponsor the business through donations (usually supplemental income)

16. E-Commerce 16 Figure 3-2 Disintermediation in the B2C Supply Chain Source: M. Warkentin, et al. (2000). Used with permission of Dr. Merrill Warkentin.

17. E-Commerce 17 E-Tailing Business Models (cont.) Direct marketing—sell directly to consumers Manufactures can sell directly to customers Disintermediation—removal of business process layers in the value chain Shortens the distribution chain Eliminates inefficiencies Shortens delivery time Builds closer relationships with consumers Click-and-mortar Additional marketing channel to the conventional one Effectively supports build-to-order requests

18. E-Commerce 18 E-Tailing Business Models (cont.) Pure-play e-tailers—sell over the Internet without a physical sales channel General purpose e-tailers (Amazon.com) Broad range of products Large number of consumers Specialty or niche e-tailers (CatToys.com) One specific product area High demand items in the area Effective practices for customer appeal

19. E-Commerce 19 E-Tailing Business Models (cont.) Traditional retailers with Web sites Physical store May include mail-order or catalog sales Multichannel store operates both Physical store E-tail site

20. E-Commerce 20 ODDS: Grocery Market Case On-Demand Delivery Services (ODDS) Own fleet of delivery vehicles Regular deliveries (weekly bases) Delivery within short time period (1 hour or same day)

21. E-Commerce 21 ODDS: Grocery Market Case (cont.) Potential online grocery shoppers Shopping avoiders Necessity users—limited by their ability to shop New technologists Time-starved consumers Responsible consumers Traditionals Repeat customers Example: Parknshop in Hong Kong

22. E-Commerce 22 Digital Delivery Digital (“soft”) goods Music, movies, videos, software, newspapers, magazines, graphics, etc. Can be delivered in “hard” or “soft” form Computer program on CD-ROM with owner’s manual and warranty card Download from Web site after payment

23. E-Commerce 23 Table 3-2 Digital Goods

24. E-Commerce 24 Digital Delivery (cont.) Napster experience—person-to-person sharing tool Enables individual users to download music files from each other’s computers Phenomenal growth of Napster community New version of its file-swapping software includes a “buy button” linked to CDNow May be beneficial to overall music sales as individuals easily sample a broader range of music

25. E-Commerce 25 Digital Delivery (cont.) New developments Custom-publishing music CD sites—collection of personal favorites Disintermediation of traditional print media Journals and magazines Newspapers (e.g., Wall Street Journal)

26. E-Commerce 26 Successful Click-and-Mortar Strategies Click-and-mortar hybrid strategies Speak with one voice—link all back-end systems to create an integrated customer experience Empower the customer—powerful channel for service and information Leverage the channels—offs advantages of each channel to customers from all channels Return item purchased online at physical store Order via the Web at the physical store items not available there

27. E-Commerce 27 Successful Click-and-Mortar Strategies (cont.) Circuit City Case: transform to click-and- mortar (CircuitCity.com) Educates customers about features and capabilities of products Customers can perform powerful searches to find most appropriate products Offers extensive amount of information on electronics etc., organized very flexibly Online purchases are smooth, secure and seamless

28. E-Commerce 28 Amazon and Toys R Us: alliance of pure- play with traditional retailer Toys R Us had limited logistics capabilities including distribution centers Amazon failed in the toy market lacking supplier relationships with toy manufacturers Alliance allows each partner to leverage each others core strengths Innovative model still working out problems Successful Click-and-Mortar Strategies (cont.)

29. E-Commerce 29 Disintermediation & Reintermediaries Disintermediation—manufacturer sells directly to consumer Reintermediaries—new intermediary roles in the digital environment offer new ways to: Reach new customers Bring value to customers Generate revenues

30. E-Commerce 30 Channel Conflict & Personalization Channel conflict— members antagonistic over: Incentives Rewards Policies Support Personalization— custom designed marketing plan Tailored to buying patterns Appeal to sense of value Excellent customer service Mass customization

31. E-Commerce 31 E-Tailing : Lessons Learned Profitability—online marginal sales don’t lead to marginal profits Branding—drive to establish brand can lead to excessive spending Performance—Web sites need to function in a fast, user-friendly manner Static design—dynamic sites with rich databases of information appeal most to customers

32. E-Commerce 32 Managerial Issues First-mover advantage or wait and learn Strategic positioning Trust New risk exposure Financial viability Successes