chapter 7: e-commerce 1 copyright 2005 prentice hall inc. a pearson education company e-commerce and...

Chapter 7: E-CommerceChapter 7: E-Commerce 11Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company

E-Commerce and the Entrepreneur

E-Commerce and the Entrepreneur


The Internet: Changing the Face The Internet: Changing the Face of Business of Business

The most successful companies embrace the The most successful companies embrace the Internet as a mechanism for transforming their Internet as a mechanism for transforming their companies and for changing companies and for changing everythingeverything about about the way they do business.the way they do business.

In the world of e-commerce, size matters less In the world of e-commerce, size matters less than speed and flexibility.than speed and flexibility.

High-volume, low-margin, commodity products High-volume, low-margin, commodity products are best suited for selling on the Web. are best suited for selling on the Web.

14%

16%

46%

56%

56%

62%

67%

0% 10% 20% 30% 40% 50% 60% 70%

Percent of Small Businesses

Increased sales outside the U.S.

Reduced unit costs

Increased profits

Increased total sales

New types of customers

Improved competitive condition

Brought new customers

Benefits to Small Businesses of a Web Site


Benefits of Selling on the WebBenefits of Selling on the Web

Only 33% of small companies have Web Only 33% of small companies have Web sites, and of those, only 24% generate sites, and of those, only 24% generate revenues from online sales. Benefits revenues from online sales. Benefits include:include:

Opportunity to increase revenuesOpportunity to increase revenues Ability to expand into global marketsAbility to expand into global markets Ability to remain open 24 hours a day, Ability to remain open 24 hours a day,

seven days a weekseven days a week


Benefits of Selling on the WebBenefits of Selling on the Web(continued)(continued)

Capacity to use the Web’s interactive Capacity to use the Web’s interactive nature to enhance customer servicenature to enhance customer service

Power to educate and informPower to educate and inform Ability to lower the cost of doing businessAbility to lower the cost of doing business Ability to spot new business opportunities Ability to spot new business opportunities

and capitalize on themand capitalize on them Ability to grow fasterAbility to grow faster Power to track sales resultsPower to track sales results


E-CommerceE-Commerce

Of those small business owners who do Of those small business owners who do not have Web sites:not have Web sites: 77% say their products and services are not 77% say their products and services are not

suitable for selling online.suitable for selling online. 37% say they do not see any benefits of 37% say they do not see any benefits of

selling online.selling online. Barriers:Barriers:

Not knowing how or where to startNot knowing how or where to start Cost and time concernsCost and time concerns


Factors to Consider Before Factors to Consider Before Launching into E-CommerceLaunching into E-Commerce

How a company exploits the Web’s How a company exploits the Web’s interconnectivity and the opportunities it interconnectivity and the opportunities it creates to transform relationships with creates to transform relationships with suppliers, customers, and others is crucial to its suppliers, customers, and others is crucial to its success.success.

Web success requires a company to develop a Web success requires a company to develop a plan for integrating the Web into its overall plan for integrating the Web into its overall strategy.strategy.


Factors to Consider Before Factors to Consider Before Launching into E-CommerceLaunching into E-Commerce

(continued)(continued)

Developing a deep, lasting relationship with Developing a deep, lasting relationship with customers takes on even greater importance on customers takes on even greater importance on the Web.the Web.

Creating a meaningful presence on the Web Creating a meaningful presence on the Web requires an ongoing investment of resources – requires an ongoing investment of resources – time, money, energy, and talent.time, money, energy, and talent.

Measuring the success of a Web-based sales Measuring the success of a Web-based sales effort is essential to remaining relevant to effort is essential to remaining relevant to customers whose tastes, needs, and preferences customers whose tastes, needs, and preferences constantly change. constantly change.


Assessing You Company’s Online Assessing You Company’s Online PotentialPotential

1.1. Does your product have broad appeal to Does your product have broad appeal to customers everywhere?customers everywhere?

2.2. Do you want to sell your product to customers Do you want to sell your product to customers outside of your immediate geographic area?outside of your immediate geographic area?

3.3. Can the product you sell be delivered Can the product you sell be delivered conveniently and economically?conveniently and economically?

4.4. Can your company realize significant cost Can your company realize significant cost advantages by going online?advantages by going online?

5.5. Can you draw customers to your company’s Web Can you draw customers to your company’s Web site with a reasonable investment?site with a reasonable investment?


12 Myths of E-Commerce12 Myths of E-Commerce

Myth 1: Setting up a business on the Web is Myth 1: Setting up a business on the Web is easy and inexpensive.easy and inexpensive.

0%

5%

10%

15%

20%

25%

30%

35%

4 to 8 9 to 12 13 to 24 25 to 52 More than 52

Number of Weeks

Time Required to Develop an E-Commerce Site


Follow-up InvestmentsFollow-up Investments

Setting up a Web site is only the first Setting up a Web site is only the first investment.investment.

Redesign Web siteRedesign Web site Buy more computer hardwareBuy more computer hardware Automate or expand warehouse to meet Automate or expand warehouse to meet

customer demandcustomer demand Integrate Web site into inventory control Integrate Web site into inventory control

systemsystem Increase customer call-center capacityIncrease customer call-center capacity



Myth 1: Setting up a business on the Web is Myth 1: Setting up a business on the Web is easy and inexpensive.easy and inexpensive.

Myth 2: If I launch a site, customers will Myth 2: If I launch a site, customers will flock to it.flock to it.

Myth 3: Making money on the Web is easy.Myth 3: Making money on the Web is easy.

Myth 4: Privacy is not an important issue Myth 4: Privacy is not an important issue on the Web. on the Web.


Privacy OnlinePrivacy Online

Jupiter Media Matrix survey: 70% of Jupiter Media Matrix survey: 70% of consumers expressed concern about online consumers expressed concern about online privacy.privacy.

Estimate: If online companies were able to Estimate: If online companies were able to alleviate customers’ online privacy and alleviate customers’ online privacy and security issues, online retail sales would be security issues, online retail sales would be 24% higher! 24% higher!

64% of Web customers distrust Web sites.64% of Web customers distrust Web sites.



Myth 5: The most important part of any Myth 5: The most important part of any e-commerce effort is technology. e-commerce effort is technology. Myth 6: Strategy? I don’t need a strategy Myth 6: Strategy? I don’t need a strategy to sell on the Web! Just give me a Web to sell on the Web! Just give me a Web site and the rest will take care of itself. site and the rest will take care of itself. Myth 7: On the Web, customer service is Myth 7: On the Web, customer service is not as important as it is in a traditional not as important as it is in a traditional retail store. retail store.


The Importance of ServiceThe Importance of Serviceon the Webon the Web

Study: 75% of Web shoppers who fill their on-Study: 75% of Web shoppers who fill their on-line shopping carts become frustrated and leave line shopping carts become frustrated and leave the site before checking out.the site before checking out.

Reasons:Reasons: Could not find items they were looking forCould not find items they were looking for Shopping cart too hard to findShopping cart too hard to find Checking out took too longChecking out took too long Site did not look trustworthySite did not look trustworthy Shipping charges too highShipping charges too high

What Web Shoppers WantWhat Web Shoppers Want

Retail Customers Business Customers

1. Competitive prices1. Competitive prices 1. On-time delivery1. On-time delivery

2. Well-designed presentation2. Well-designed presentation 2. Competitive prices2. Competitive prices

3. Good selection3. Good selection 3. Well-designed presentation3. Well-designed presentation

4. Reliable shipping4. Reliable shipping 4. Good selection4. Good selection

5. On-time delivery5. On-time delivery 5. Easy ordering5. Easy ordering

6. Easy ordering6. Easy ordering 6. Valuable product info6. Valuable product info

7. Customer support7. Customer support 7. Customer support7. Customer support

8. Valuable product info8. Valuable product info 8. Reliable shipping8. Reliable shipping

9. Posted privacy policy9. Posted privacy policy 9. Posted privacy policy9. Posted privacy policy

10. User-friendly navigation10. User-friendly navigation 10. User-friendly navigation10. User-friendly navigation



Myth 8: Flash makes a Web site better.Myth 8: Flash makes a Web site better.

Myth 9: It’s what’s up front that counts. Myth 9: It’s what’s up front that counts.

Myth 10: E-commerce will cause brick-Myth 10: E-commerce will cause brick-and-mortar retail stores to disappear. and-mortar retail stores to disappear.

Myth 11: The greatest opportunity for e-Myth 11: The greatest opportunity for e-commerce lies in the retail sector. commerce lies in the retail sector.

$80

$1,140

$31

$178

$-

$200

$400

$600

$800

$1,000

$1,200

Bill

ions

of $

Business-to Business Business-to-Consumer

Worldwide E-Commerce Revenues

1999

2003



Myth 8: Flash makes a Web site better.Myth 8: Flash makes a Web site better.

Myth 9: It’s what’s up front that counts. Myth 9: It’s what’s up front that counts.

Myth 10: E-commerce will cause brick-Myth 10: E-commerce will cause brick-and-mortar retail stores to disappear. and-mortar retail stores to disappear.

Myth 11: The greatest opportunity for e-Myth 11: The greatest opportunity for e-commerce lies in the retail sector. commerce lies in the retail sector.

Myth 12: It’s too late to get on the Web. Myth 12: It’s too late to get on the Web.


Approaches to E-CommerceApproaches to E-Commerce

On-line shopping mallsOn-line shopping malls Storefront building servicesStorefront building services Internet service providers (ISPs) and Internet service providers (ISPs) and

Application service providers (ASPs)Application service providers (ASPs) Hiring professionals to design a custom Hiring professionals to design a custom

sitesite Building a site in-houseBuilding a site in-house


Online Shopping MallsOnline Shopping Malls

Advantages:Advantages: SimplicitySimplicity Low costLow cost

Disadvantages:Disadvantages: Lack of prominenceLack of prominence Lack of control over siteLack of control over site


Storefront-Building ServicesStorefront-Building Services

Advantages:Advantages: SimplicitySimplicity Low cost – as little as $100 to $500 per Low cost – as little as $100 to $500 per

monthmonth DisadvantagesDisadvantages

Cookie-cutter approachCookie-cutter approach Handle only a limited number of productsHandle only a limited number of products


Internet Service ProvidersInternet Service Providersand Application Service Providersand Application Service Providers

Provide many of the same features as store-Provide many of the same features as store-front design services but offer more flexibility front design services but offer more flexibility and customized designs. and customized designs.

Can grow with a company as its online sales Can grow with a company as its online sales volume grows. volume grows.

What to consider when choosing:What to consider when choosing: CostCost DowntimeDowntime Quality of backup systemsQuality of backup systems Capacity for hosting sitesCapacity for hosting sites


Hiring ProfessionalsHiring Professionals

Key advantage: Ability to customize a Key advantage: Ability to customize a site, making it anything an entrepreneur site, making it anything an entrepreneur wants. wants.

Major disadvantage: CostMajor disadvantage: Cost A custom-designed site can cost between A custom-designed site can cost between

$10,000 and $30,000$10,000 and $30,000 A site with complete front-office and back-A site with complete front-office and back-

office integration can cost more than office integration can cost more than $500,000!$500,000!


Building a Site in-HouseBuilding a Site in-House

Key advantage: Complete control over Key advantage: Complete control over the site and its design, operation, and the site and its design, operation, and maintenance.maintenance.

Major disadvantage: Cost of hiring staff.Major disadvantage: Cost of hiring staff. Cost can reach $250,000 to $500,000.Cost can reach $250,000 to $500,000.


Strategies for E-SuccessStrategies for E-Success

Consider focusing on a market niche.Consider focusing on a market niche. Develop a community.Develop a community. Attract visitors by giving away Attract visitors by giving away

“freebies.” “freebies.” Make creative use of e-mail, but avoid Make creative use of e-mail, but avoid

becoming a “spammer.” becoming a “spammer.”


Strategies for E-SuccessStrategies for E-Success(continued)(continued)

Make sure your Web site says Make sure your Web site says “credibility.”“credibility.”

Consider forming strategic alliances.Consider forming strategic alliances. Make the most of the Web’s global reach.Make the most of the Web’s global reach. Promote your site online and offline. Promote your site online and offline.


Designing a Killer Web SiteDesigning a Killer Web Site

Understand your target customer.Understand your target customer. Select a domain name that is consistent Select a domain name that is consistent

with the image you want to create for with the image you want to create for your company and register it.your company and register it. ShortShort MemorableMemorable Indicative of a company’s businessIndicative of a company’s business Easy to spellEasy to spell


Designing a Killer Web SiteDesigning a Killer Web Site(continued)(continued)

Be easy to find.Be easy to find. Give customers what they want.Give customers what they want. Build loyalty by giving online Build loyalty by giving online

customers a reason to return to customers a reason to return to your site.your site.

Establish hyperlinks with other Establish hyperlinks with other businesses, preferably those businesses, preferably those selling complementary selling complementary products.products.



Include an e-mail option and a Include an e-mail option and a telephone number in your site.telephone number in your site.

Give shoppers the ability to Give shoppers the ability to track their orders online.track their orders online.

Offer Web shoppers a special all Offer Web shoppers a special all their own.their own.

Follow a simple design.Follow a simple design.



Assure customers that their Assure customers that their online transactions are secure. online transactions are secure.

Post shipping and handling Post shipping and handling charges up front.charges up front.

Keep your site updated.Keep your site updated. Consider hiring a professional Consider hiring a professional

to design your site. to design your site.


Tracking Web ResultsTracking Web Results

CounterCounter Log-analysis Log-analysis

softwaresoftware Click-stream Click-stream

analysisanalysis

ClusteringClustering Collaborative Collaborative

filteringfiltering Profiling systemsProfiling systems Artificial intelligenceArtificial intelligence

Web analyticsWeb analytics – tools that measure a Web site’s – tools that measure a Web site’s ability to attract customers, generate sales, and ability to attract customers, generate sales, and keep customers coming back. keep customers coming back.


Measuring Online PerformanceMeasuring Online Performance

RecencyRecency – the length of time between – the length of time between customers’ visits to a Web site.customers’ visits to a Web site.

Conversion (browse-to-buy) ratioConversion (browse-to-buy) ratio – the – the proportion of visitors to a site who actually proportion of visitors to a site who actually make a purchase.make a purchase.

Cost per action (CPA)Cost per action (CPA) – the amount it costs to – the amount it costs to produce a particular customer action.produce a particular customer action.

Cost per order (CPO)Cost per order (CPO) – the amount it costs to – the amount it costs to generate a customer order.generate a customer order.


Ensuring Web PrivacyEnsuring Web Privacy

Take an inventory of the customer data Take an inventory of the customer data collected.collected.

Develop a company policy for the Develop a company policy for the information you collect.information you collect.

Post your company’s privacy policy Post your company’s privacy policy prominently on your Web site and follow prominently on your Web site and follow it. it.


Ensuring Web SecurityEnsuring Web Security

Virus detection softwareVirus detection software Intrusion detection softwareIntrusion detection software FirewallFirewall

chapter 7: e-commerce 1 copyright 2005 prentice hall inc. a pearson education company e-commerce and...

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