By: Zeeshan A. Bhatti

Intro to E-Commerce E-Commerce is connecting producers, sellers, and customers via

technology – most probably Internet

Companies that ignore the impact of Internet on their market run the risk of becoming as relevant to customers as rotary-dial telephone The Dot –Com Bubble (1997-2000)

New innovative ways of connecting with suppliers, buyers, and serving the customers E.g., FreshDirect, SimonDelivers allow online grocery shopping Not only time saving, but customers say groceries online are fresher and of

higher quality

Business basics still apply – taking care of customers and earning profit

What are digital goods? Digital goods are goods that can be

delivered over a digital network. Music tracks, video, Hollywood movies,

software, newspapers, magazines, and books can all be expressed, stored, delivered, and sold as purely digital products

The marginal cost of producing another unit is about zero (it costs nothing to make a copy of a music file)

Digital Markets and Digital Goods Internet reduces Information

Asymmetry An information asymmetry exists when

one party in a transaction has more information that is important for the transaction than the other party

Reduced Search and Transaction Costs Disintermediation

E-Commerce functions Most visible changes – World of retailing

Although E-commerce wont replace traditional retailing – still no retailer not even Wal-Mart, can ignore impact of Internet on its business model

Take orders anywhere, anytime Collect information on customers easily – easy marketing Link: TESCO Virtual Subway Store

Entrepreneurs on the web will most likely never meet their customers face to face Yet, those customers, living anywhere in the world, will visit

their shops online, and expect to receive individual attention

New business models – Pricing, for example, is no longer as simple as it was Global reach – customers comparing prices across

the globe – global competition

Digital economy – Customer Powered Web More informed customers

85% of Internet users research products & services online before buying them in stores or by telephone

E-Commerce Infographics

Benefits of Selling on the Web First E-Commerce transaction: Aug 11, 1994

Daniel Kohn: Sting CD “First Summoner’s Tales” to a student of Swarthmore College for $12.48 + Shipping

The opportunity to increase revenues and profits New sales channel – generate additional sales

Survey by IPSOS & PayPal: 72% of small businesses say they have increased their sales 65% says it has increases their profits as well

Ability to expand reach into global markets Tapping into global markets could be very expensive traditionally Time difference

Remain open 24/7 More than half of the retail sales occur after 6 p.m. Extending the hours of brick-and-mortar stores Increase in dual career couples – amount of available leisure time shrinks –

New opportunities

Capacity of Web’s interactive nature for customer service Selling on web can be highly impersonal – lack of human interaction Properly designed websites – create exciting, interactive experience for online

visitors Customers can contact the company anytime “Personalize” to suit specific tastes and preferences E.g., Lillion Vernon’s Website customize itself based on individual customer’s

past buying behavior by tracking the purchase patterns

Power to educate and inform Most informative marketing media – specially to Women and Gen Y since

they crave for info. E.g., a travel company advertising a European tour

A newspaper ad could include brief description of tour, a photo or two, price and telephone number

A web ad can include all this + dozens of photos, accommodation information, itinerary, seating configurations, info on optional side trips and links to other informative websites

Lower cost of doing business Lower administrative costs by reducing sales cycle Savings on Customer support, distributing marketing materials E.g., Brady Corporation – makers of signs, identification tags etc., faced

problems from its outdated order processing and quality control system Used Web-to-Workbench system that sends customer order directly to factory

floor and customers can design the signs themselves and preview the final order

Reduced processing cost upt o 88% from $16 to $2

Power to track Web Results Track activities on your website

No. of visitors – click through rates on their banner ads

E.g., BuyTelco Inc., a company that helps individuals to select best high-speed internet plans realized the conversion rate was 0.7% -- Not even 1 out of 100 people would buy

Used Web Analytics S/W to see how customers were navigating and where they were abandoning it – the Checkout Process required info on 5 pages

Conversion rate increased to 3% by reducing the no. of pages

Web Analytics tools that measure a Website’s ability to attract customers, generate sales – helps entrepreneurs to know what works and what doesn’t You can collect data and analyze them Make adjustments to website accordingly Video Google Analytics

Commerce Metrics: Basic Analytics such as sales revenue generated, no. of items sold, which

products are selling best etc.

Visitor Segmentation Measurements: Return customers or new customers? How customers have reached the website (via search engine or pay-per-

click-ad) Which search terms they’ve used? – Google Adwords (Pay per Click)

Content Reports: Which products customers are looking for and

which are the most viewed web pages Where do the customers exit your website?

Process measurements: How do websites attract visitors and convert

them into customers? Does the check out process run smoothly? How often do shoppers abandon their carts? At

what point?

In early days of E-Commerce, entrepreneurs strived to create sticky and viral sites Sticky Site:

Acts like electronic flypaper – capturing visitors’ attention and offering them interesting info. to make them stay online

The premise of stickiness – the longer the stay, more likely is the purchase or revisit

Viral Site: A website that visitors are willing to share with their friends Word of mouse advertising is the most effective way of

attracting traffic – recommendations

Other common measures of the Web site performance are:

1. Click-through Rate The proportion of people who see a company’s online ad and

actually click on it to reach its website CTR = Number of Sales / Number of Impressions E.g., If company’s ad is displayed 500 times in one day and 12 people

clicked on it, thenCTR = 12 /500 = 2.4%

2. Cost per acquisition (CPA) The cost a company incurs to generate each new customer CPA = Total cost of acquiring new customer / No. of new customers E.g., A company purchases an ad in an e-magazine for $200 and it yields

15 new customers, thenCPA = 200/15 = $13.33

3. The conversion ratio (Browse-to-buy)

Proportion of visitors to site who actually make a purchase

CR = No. of customers who made a purchase/ No. of

visitors to the site E.g., If 1000 people visits the website and

23 people actually purchase, thenCR = 23 /1000 = 2.3%

Factors to be considered before launching into E-Commerce In U.S 77% of the small businesses say that their products are not

suitable for sale on the Web Another 37% say they do not see the advantage of selling online

The key barriers: Not knowing where and how to start an e-commerce effort Cost and Time

However, business owners should consider Developing a plan for integrating the Web into the overall firm’s strategy

Developing deep lasting relationships with customers Attracting customers costs money and they should be retained Customer’s tastes are always changing – analyze the trends

What exactly do you expect a Website to do for your company? Info only? Reach new customers? Increase sales to existing

customers? Improve communication? Will customers be able to place orders on your website, or should they call you?

How much can you afford to invest in e-commerce? How long can you wait for the ROI? How well suited are your products and services for selling on

the Web? Will you be tied into your company’s inventory system? How will handle order fulfillment? Can you handle increased

sales? Payment Methods? Is there a privacy policy for your website?

The Myths of E-Commerce Setting up a shop on Web is no guarantee of success

Successful models are very famous e.g., Amazon but those who fail are not talked abt.

Make sure you do not fall into following myths:

Setting up a business on the Web is easy and Inexpensive Although, anyone with the right s/w can post a static website – creating an effective,

professional website can be expensive and time consuming

Most small businesses owners set up simple “electronic flyers” – not truly commerce oriented but provides a new way to connect to new and existing customers

Small businesses outsource e-commerce activities – focus on core competencies and hire other companies with competencies in e-commerce (pick, pack and ship)

Setting up site is the first step – follow up investments (Updating, Revising, Buying H/W)

If I launch a website, customers will flock to it Once the site is setup, the expenses don’t end up there

More than 8.32 billion pages – getting a site noticed in the crowd is very difficult Even listing with search engines does not guarantee that

Setting up a website and then failing to drive customers is like setting up a physical store in the back alley Promote your website offline (print URL on everything) Buying ads in traditional media (banner ads, banner exchange etc.)

Convincing other sites to establish links to your website can boost ranking e.g., Selling products on Ebay

SEO – Search Engine Optimization: the process of improving the visibility of a website on search engines Blogs, SNS, FAQs etc.

Natural or Organic Listings: result of “spiders” – programs search engines use to crawl the

web

Paid Listings: short text advertisements on search engines with links to the sponsoring

company’s website

Paid inclusion: Search engine company charges fees related to inclusion of websites in their search index

No need to wait for search engine to find the site

Privacy is not an important issue on the Web Access to unbelievable amounts of info abt customers

Offering “freebies” in exchange of info.

Companies are responsible for securing this info. E.g., EU laws and regulations abt. unauthorized use – the right of customers to exclude info.

Most important part of E-Commerce is Technology Although understanding technology of e-commerce is important part of the formula

– not the most crucial part

Most successful entrepreneurs in e-commerce are those that understand their industry and business model

They can hire webmasters and technologists but there is no substitute of their industry based skills

Internet Customer Service is not as important as it is in Traditional Retail Store Sites that are difficult to navigate, slow to load or confusing are turn offs

Higher expectations with sites where people shop frequently E.g., 80% of online shopper said they are unwilling to accept lower levels of online customer

service

The most common reasons for leaving websites are: Shipping & handling charges were too high Delivery times were too long The checkout process required too much info and took time Insufficient product information

Types of Customer Services that can be offered: Responding customer emails (avg time 29 hours) Virtual chat with CSRs Order confirmation emails can enhance satisfaction levels Keeping track of customer database for customized services

Flash makes a website better Trap: Designing a flashy website with “bells

and whistles”

“more” is not necessarily “better” – adequate info

Keep a simple design – easy to load Fancy graphics, bright colors, playful music can

attract attention but can be distracting Perception varies across regions – visual aid

required!

It’s what’s up from front that counts Website is imp – but back office design is of much more

importance

If behind-the-scene support is not in place, company’s e-commerce effort will come crashing down

Web-based entrepreneurs discover that greatest challenge is not to attract customer but workable order fulfilling Specially in rush days e.g., Eid, Christmas etc.

Contracts with shipping companies E.g., FedEx, UPS etc. (builds trust as well)

It’s too late to get on the Web A common myth, especially in small

businesses

E-Commerce is still developing: new innovative ways E.g., www.threadless.com

A major mistake: waiting to build a perfect website Evolves with time – very few get it “right” the

1st time “try it, learn from it, fix it”… Delay is your

biggest enemy – if you delay, someone else will do it

Strategies for E-Success

Develop a community Need to offer more than just quality products – develop community of

customers with similar interests

Give them the chance of interacting with other like-minded customers The virtual community Email lists, chat rooms, customer polls, blogs etc.

Attract visitors by giving away freebies One of the most attractive word on internet is “free”

A freebie is something that customers value but it doesn’t have to be attractive Most common giveaway on web is “Information”

E.g., Newsletter

Make creative use of Email Don’t spam – Well constructed permission

email E.g., deals, offers, new stuff etc.

According to Symantec, 67% of email is spam

Catalogs are very expensive – email costs nothing – but it can cost a lot if you don’t send it wisely

Make sure your Web Site says “Credibility” Online shoppers are wary – due to prevalence of online fraud

They wont shop unless a company builds trust in its web site

Visitors began evaluating as soon as they arrive on your site Does the site look professional? Are there misspelled words and typographical errors? Source of info should be legitimate!! Are there any dead links on your website? Are your privacy and merchandise policy posted in prominent place?

Ways to establish credibility Simplest way is to establish credibility is to use brand names Online seal programs e.g., TRUSTe or BBBOnLine Payment Methods e.g., PayPal, VeriSign Mention CSR activities , if any

Make the most out of Web’s Global Reach When designing: Keep the foreign

customers in mind Include language buttons: local language

increases sales Link: Beware of translation errors Color Schemes are important

E.g., Africans prefer bold colors but flag colors must be alternatively preferred or disallowed

Overseas price considerations, taxes Embargos and sanctions (Strategically imp

products)

Select an intuitive domain name A domain name that is consistent with your image

E.g., www.toys.com

Short: easy to remember

Memorable: short might not always be memorable E.g., don’t use initials (e.g., www.sbfo.com for Stanley Brothers

Furniture Outlet)

Be specially careful with domain names – blunders might occur E.g., Worst domain names ever

Make it easy-to-navigate Conduct pilot test with users

Watch them cruise on the website – Observe where they get stuck Are they stuck? Are they confused?

Make product search easy

Build Loyalty Give customers a reason to return on your website (e.g.,

Frequent Buyer Programs/Offers etc.)

Include an email option and telephone number Customers appreciate the opportunity to communicate

with your company Be sure to respond quickly Preferably add a toll free number

Option to track orders Send confirmation emails to keep them happy Keep them informed about delivery Online Tracking Mechanisms Don’t hide shipping charges

E-Commerce 2.0 What is Web 2.0 and E-Commerce 2.0?

A new way of Payment: Google Wallet

Customer Reviews Reviews attract customers to your site

9% higher customer satisfaction levels, were 9% more likely to make a purchase and 8% more likely to purchase on the next visit

Reviews educate customers, positive reviews can motivate people to buy

Consumers are willing to pay between 20 to 99% more for a 5-star rated product than for a 4-star rated product

Customer reviews can be photos, videos, blogs or 140 character Twitter updates

Shopping Widgets Shopping widgets refer to portable content that can

be displayed (almost) anywhere on the Web

Zazzle Myspace Widgets

The Alvenda shopping widget allows retailers like 1-800-Flowers to “open up shop” on any other website. Shoppers don’t have to leave the publisher’s site (great for the publisher and customer), and the order is processed through the retailer’s regular order system.

Questions & Answers (FAQs) You’re likely to get a better answer from

someone who owns the product than from a customer service rep who hasn’t seen or used the product

Twitter Users can get nearly instant answers to

questions (provided they’re under 140 characters) directed at a retailer or the general Twitter universe

Word of Mouth – alternative to email marketing

User Generated Cross Sells and Photos E.g., www.threadless.com User created lists like Amazon’s Listmania

and the iTunes Store’s iMixes User created lists on IMDB Wetseal customers can also browse by

outfits that other visitors have created, or build their own.

Facebook Pages The best Facebook Pages have taken

advantage of the platform to create a social network for their most raving fans that live where they play, not on the retailer’s website

Some retailer offer promotions to get people sign up on their page

Co Browsing Products like ShopTogether and PurchLive

 add a social component to a retail site by offering the ability to invite a friend to co-browse an online store in real-time

For example, Charlotte Russe gives the option to invite friends through Twitter and Facebook. It updates your status with a shortlink for anyone who wants to join you on your visit

Social Login Social login, also known as social sign-

in, is a form of single sign-on using existing login information from a social networking service such as Facebook or Twitter to sign into a third party website in lieu of creating a new login account specifically for that website

Easy check out