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

2. 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
ITB Web programming for E-Commerce

3. 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.
ITB Web programming for E-Commerce

4. 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?
ITB Web programming for E-Commerce

5. 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
ITB Web programming for E-Commerce

6. 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
ITB Web programming for E-Commerce

7. ITB6227 - Web programming for E-Commerce
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ITB Web programming for E-Commerce

8. ITB6227 - Web programming for E-Commerce
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ITB Web programming for E-Commerce

9. ITB6227 - Web programming for E-Commerce
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ITB Web programming for E-Commerce

10. 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)
ITB Web programming for E-Commerce

11. 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
ITB Web programming for E-Commerce

12. 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)
ITB Web programming for E-Commerce

13. 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
ITB Web programming for E-Commerce

14. 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.
ITB Web programming for E-Commerce

15. 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
ITB Web programming for E-Commerce

16. ITB6227 - Web programming for E-Commerce
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ITB Web programming for E-Commerce

17. ITB6227 - Web programming for E-Commerce

18. 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
ITB Web programming for E-Commerce

19. 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
ITB Web programming for E-Commerce

20. 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  ???
ITB Web programming for E-Commerce

21. 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 (
Direct Selling by Manufacturer
Example: Dell Computers (
ITB Web programming for E-Commerce

22. 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?
ITB Web programming for E-Commerce

23. ITB6227 - Web programming for E-Commerce
Personalization – Amazon.com
Source:
ITB Web programming for E-Commerce

24. 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?
ITB Web programming for E-Commerce

25. ITB6227 - Web programming for E-Commerce
Traditional Customization - Showrooms
ITB Web programming for E-Commerce

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

27. ITB6227 - Web programming for E-Commerce
Shop Layout Customisation
ITB Web programming for E-Commerce

28. 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
ITB Web programming for E-Commerce

29. 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
ITB Web programming for E-Commerce

30. ITB6227 - Web programming for E-Commerce

31. 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
ITB Web programming for E-Commerce

32. 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
ITB Web programming for E-Commerce