e-commerce and small business - finding the right products to sell on the internet

E-Commerce and Small Business - Finding the Right Products to Sell on the Internet

Robert T. Chi

Information Systems Department

College of Business Administration

California State University, Long Beach

Motivation

The Internet has provided a rare opportunity especially for small to medium sized enterprises.

The potential of the Internet as a commercial medium and market.

Both successful and unsuccessful cases of Internet marketing have been reported.

In this research, we focus on the use of the Internet as a virtual storefront.

we identify the factors that impact the use of on-line marketing approach.

Introduction

The Internet matches buyers and sellers in a more cost-effective manner, compared with traditional advertising and marketing.

It breaks through the physical barriers and moves firms to a new commercial marketplace.

The opportunity for buyers to examine or test the product or service and interact with the seller to receive additional information or support.

Pros and Cons of E-Marketing ApproachAdvantages of Internet Marketing: Communication Channel: Exchange

information between sellers and buyers. (1) the ability to store vast amounts of information

that can be searched and disseminated in a cost-effective manner which is accessible by virtually everyone on the Net,

(2) interactivity and the ability to provide information on demand, and

(3) provide perceptual experiences that are superior to a printed catalog.

Continued:

Transaction Channel: Generate sales activities.

small companies that play in niche markets (i.e., sell specialized or unique products or services) in which buyers and sellers are small and geographically dispersed, can use the Internet to reach a much bigger customer base

The Internet can also ease transaction processing, especially for handling complex orders

Continued:

Distribution Channel: Physical exchange of products/services.

On-line marketing offers more choices and flexibility and, at the same time, eliminates huge inventories, storage costs, utilities, and space rental, etc.

Using the Internet as the distribution channel can reduce the delivery cost substantially, and also ensures instant delivery of products/services.

Communication Improved product information

  Improved price information

  Availability of service, 24 hours a day, 7 days a week

  Lower cost of communication

  Interactivity and the ability to provide information on demand

  Real-time inventory update

  On-line technical support

  Quick response of inquiries

  Customized orders

  Post-sale service

Transaction Virtual storefront can be reached by all Internet users

  Lower cost of transaction

  Allow microtransactions

  Reduce human errors

  Reduce procurement cycle time

  Lower inventory level and other related overhead

  Possible to customize promotion and sales to individual customers

  Flexible pricing

Distribution Reduced waiting time to receive product for digital products/services

Channel Functions Advantages

  No personal contact

  Relatively low entry and establishment costs

  Lower cost of delivery for digital products/services

Dimension 1Value Proposition

Dimension 2Degree of Differentiation

Dimension 3Frequency of Purchase

Examples of Products and Services

Category

Digital High Frequent On-line newspapers and Magazines DHF

    Infrequent Software packages DHI

  Low Frequent Stock market quotes DLF

    Infrequent Automobile financing, insurance DLI

Tangible High Frequent 

Wines, soft drinks, cigarettes THF

    Infrequent 

Stereo systems, Automobiles THI

  Low Frequent Milk, eggs TLF

    Infrequent Precious metal ingot of Known weight and purity

TLI

Channel Functions

Advantages DHF DHI DLF DLI THF THI TLF TLI

Communication Improved product information X X     X X    

  Improved price information x x X X x x   X

  Availability of service X X X X X X X X

  Lower cost of communication X X X X X X X X

  Interactivity X X     X X    

  Real-time inventory update X X     X X    

  On-line technical support X X X X   X   X

  Quick response of inquiries X X X X X X X X

  Customized orders X X     X X    

  Post-sale service X X X X        

Transaction Virtual storefront x X     x X    

  Lower cost of transaction X X X X X X X X

  Allow microtransactions X X X X        

  Reduce human errors X X X X x X x X

  Reduce procurement cycle time X X X X        

  Lower inventory level x x x x x x x X

  Customize promotion and sales x x     x x    

  Flexible pricing x x X X x x X X

Distribution Reduced waiting X X X X        

  No personal contact ? ? ? ? ? ? ? ?

  Low entry costs X X X X X X X X

  Lower cost of delivery X X X X        

Limitations and Future Research limited the scope to focus only on the product

characteristics and their effects on the success of Internet marketing.

Other factors that may impact the performance of Internet marketing include: 1) the firm’s current distribution structure and channel relationships, 2) the size of the company, 3) the promotion strategies, and 4) the pricing structure, etc.

Study the cases of individual companies to evaluate and design channels that would help with the successful launch of new products.

Goal

Pprovide a framework to identify factors that influence consumer buying behavior on different product/service categories over the Internet.

Table 1. Characteristics of Products sold on the Internet and Corresponding Key Factors

Tangibility

Price

Competition

Convenience

Shopping

Enjoyment

Quality

Info.

Comm. Cost

Comm.

Time

Transaction Cost

Trans. Ti

me

Distribution Cost and

Time,

Post-Sales

Services

Tangible or physical goods   

High outlay

Highly competitive

M M M H H H L M H

  Less competitive

H H H L M L L M M

Low outlay

Highly competitive

L L L H H H H H H

  Less competitive

M M M L L L H H M

Intangible or informa-tional goods   

High outlay

Highly competitive

M M M H H H L L M

  Less competitive

H H H L M L L L L

Low outlay

Highly competitive

L L L H H H H L M

  Less competitive

M M M L L L H L L

Product category

Conve-

nience

Enjoy

Qual.

Info

Comm

CostComm Time

Tran Cost

Tran Time

Security

Deli Cost

Deli Time

Service

1 (HHT) 8.41 6.958.94 8.16 7.97 8.62 8.21 9.36 8.62 8.42 8.50

2 (HLT) 8.81 7.368.97 8.32 8.02 8.68 8.27 9.23 8.71 8.29 8.57

3 (LHT) 6.64 6.657.11 7.59 7.75 8.39 8.16 8.59 8.55 8.21 6.82

4 (LLT) 8.41 7.328.33 8.06 8.02 8.43 8.26 9.05 8.55 8.27 8.07

5 (HHI) 8.75 7.388.81 8.53 8.36 8.75 8.65 9.15 8.72 8.70 8.25

6 (HLI) 9.04 7.399.14 8.42 8.24 8.30 8.24 9.08 8.31 8.70 8.68

7 (LHI) 7.43 7.657.88 7.76 7.95 8.25 8.30 8.50 8.11 8.04 7.49

8 (LLI) 8.89 7.258.59 8.28 8.19 8.13 8.07 8.84 8.02 8.21 8.31

Average 8.30 7.248.47 8.14 8.06 8.44 8.27 8.98 8.45 8.36 8.09

std 0.84 0.310.68 0.32 0.19 0.22 0.17 0.31 0.27 0.24 0.63

Figure 1 Charting of the survey results

6

6.5

7

7.5

8

8.5

9

9.5

10

1 (HHT)

2 (HLT)

3 (LHT)

4 (LLT)

5 (HHI)

6 (HLI)

7 (LHI)

8 (LLI)

Product category

Conve-

nience

Enjoy

Qual.

Info

Comm

CostComm Time

Tran Cost

Tran Time

Security

Deli Cost

Deli Time

Service

1 (HHT) 7 11 2 9 10 3 8 1 3 6 5

2 (HLT) 3 11 2 7 10 5 9 1 4 8 6

3 (LHT) 11 10 8 7 6 3 5 1 2 4 9

4 (LLT) 4 11 5 9 10 3 7 1 2 6 8

5 (HHI) 3 11 2 8 9 3 7 1 5 6 10

6 (HLI) 3 11 1 6 9 8 9 2 7 4 5

7 (LHI) 11 9 7 8 6 3 2 1 4 5 10

8 (LLI) 5 11 2 8 10 4 7 1 3 6 9

Average 5 11 2 8 10 4 7 1 3 6 9

Table 4 Product category 3 Low cost, High competition, Tangible vs. 6 High cost, Low competition, Intangible

Product category

Conve-nience*

*

Enjoy*

*

Qual.

Info**

Comm

Cost**

Comm Time**

Tran Cost

Tran Time

Security*

Deli Cos

tDeli

Time**Servic

e**

3 (LHT) 6.646.65 7.11 7.59 7.75 8.39 8.16 8.59 8.55 8.21 6.82

6 (HLI) 9.047.39 9.14 8.42 8.24 8.30 8.24 9.08 8.31 8.70 8.68

•* 1 standard deviation apart   ** 2 standard deviation apart

Figure 2 Comparison chart for product categories 3 (LHT) and 6 (HLI)

6.00

7.00

8.00

9.00

10.00

3 (LHT)

6 (HLI)

Table 5 High vs. Low Outlay goods

Product category

Conve-nience* Enjoy Info*

Comm

Cost*

Comm

TimeTran Cost*

Tran Time

Security*

Deli Cost*

Deli Time*

Service*

H Outlay 8.75 7.27 8.97 8.36 8.15 8.59 8.34 9.21 8.59 8.53 8.50

L Outlay 7.84 7.22 7.98 7.92 7.98 8.30 8.20 8.75 8.31 8.18 7.67

•* 1 standard deviation apart

Table 6 High vs. Low Competition goods

Product category

Conve-nience* Enjoy Info

Comm Cost

Comm Time

Tran Cost

Tran Time

Security

Deli Cost

Deli Tim

eServic

e*

H Comp 7.81 7.16 8.19 8.01 8.01 8.50 8.33 8.90 8.50 8.34 7.77

L Comp 8.79 7.33 8.76 8.27 8.12 8.39 8.21 9.05 8.40 8.37 8.41

•* 1 standard deviation apart

Table 7 Tangible vs. Intangible goods

Product category

Conve-nience

Enjoy*

Info

Comm

Cost

Comm

Time*

Tran Cost

Tran Time

Security

Deli Cost

*

Deli Tim

eServic

e

Tangible 8.07 7.078.34 8.03 7.94 8.53 8.23 9.06 8.61 8.30 7.99

Intangible 8.53 7.428.61 8.25 8.19 8.36 8.32 8.89 8.29 8.41 8.18

•* 1 standard deviation apart

Figure 3 Charting the importance of different factors between high and low outlay products

6.00

7.00

8.00

9.00

10.00

H Outlet

L Outlet

Figure 4 Charting the importance of different factors between high and low competitive products

6.00

7.00

8.00

9.00

10.00

Conve

nien

ce

Enjoy

Info

Comm

Cos

t

Comm

Tim

e

Tran

Cost

Tran

Time

Secur

ity

Deli C

ost

Deli T

ime

Servic

e

H Comp

L Comp

Figure 5 Charting the importance of different factors between tangible and intangible products

6.00

7.00

8.00

9.00

10.00

Tangible

Intangible