E-Commerce

Jason C.H. Chen, Ph.D.

School of Business Administration

Gonzaga University, Washington, U.S.A.

Senior Consultant, Taskco.comchen@gonzaga.edu

Nov. 20, 2000

Topics

• E-Commerce:From B2C to B2B and Beyond

• e-Bid Process

• Features of a B2B application.

• Business plan for an e-Marketplace (next year)

• e-CRM and 1-1 Marketing (next year)

E-Commerce:From B2C to B2B and Beyond

Jason C.H. Chen, Ph.D.

School of Business Administration

Gonzaga University, Washington, U.S.A.

Senior Consultant, Taskco.comchen@gonzaga.edu

Nov. 22, 2000

Outline of Topics

• EC, B2C and B2B and their models.

• How big is B2B?

• Where is the Evidence?

• What are the revenue models in B2B?

• What is driving adoption of B2B?

• Why now?

• TASKCo.com

eBusiness Key Concepts

• eBusiness– The strategy of how to automate old business models

with the aid of technology to maximize customer value

• eCommerce– The process of buying and selling over digital media

• eCRM (eCustomer Relationship Management)– The process of building, sustaining, and improving

eBusiness relationships with existing and potential customers through digital media

What is E-Commerce ?

• Electronic commerce (EC) is an emerging concept that describes the buying and selling of products, services and information via computer networks, including the Internet.

9%6%6%

22%

15%

8%

26%24%

21%

In pilot stage Starting toimplement

In use

1997 1998 1999

Figure: E-commerce on the rise.Source: 1999 SG Cowen/Datamation Networked Computing Survey

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775

623

E-commerce status at sitesFigure:E-commerce apps are a big driver for storage. Average installed online storage in gigabytes.Source: 1999 SG Cowen/Datamation Networked Computing Survey No plans Start in 99/00 Expand in 99/00 Largely done

BenefitNewchannel forexistingbusiness

Improvedcustomerservice

Enabledentire newline ofbusiness

Reducedoperatingcosts

Improvedcycle time

% ofRespondents

25% 23% 18% 7% 5%

BenefitKeep pacewithtechnology

Reduced costof sales

Other Notavailable

None

% ofRespondents

5% 4% 6% 4% 3%

Table: E-commerce’s most promising potential benefits

eBusiness Processes

WHY Customer Relationship

Redesign Business Processes (Outside-In)

Applying Technology

WHAT

HOW

eBusiness Processes

WHY Customer Relationship

Redesign Business Processes (Outside-In)

Applying Technology

WHAT

HOW

C

B

C

B

Traditional versus E-Business Models?

C: Individual ConsumerB: Business

What is B2C?

• B2C (or Extranets) is just web-enabled relationships between existing partners; they tend to be run by a single company seeking to lower the cost of doing business with its current suppliers or individual customers.

• Examples?– Amazon.com– Egghead.com

Enterprise

User ProfilesWorkflow

Business rulesPaymentAnalytics

Internet

Intranet

Figure: A B2C e-business Model

B2C Applications

• Electronic storefront• Electronic malls• Advertising online• Service online

– selling books, toys, computers– e-banking (cyberbanking)– online stock trading– online job market, travel, real estate

Figure : B2C and B2B Internet Commerce in the U.S. (Source: Forrester Research)

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

1998 1999 2000 2001 2002 2003

B2C

B2B

Billion

What is B2B?

• “B2B” is business-to- business commerce conducted over the Internet (called B2B e-commerce space, or e-marketplaces)

N

B2B e-Markepplaces:A CEO’s Perspective

“The next chapter in the e-business revolution involves the transformation of entire markets and the redefinition of industries. We will see the rise of a new class of entities -- e-Marketplaces -- that will help online buyers and sellers find each other, attack the inefficiencies of traditional markets, and carve out for themselves important roles in the e-business economy.”

Louis V. Gerstner Jr.

Chairman of the Board and CEO

IBM Corporation

E-Market is …Web-based marketplace

• e-market is Web sites where buyers and sellers come together to communicate, exchange ideas, advertise, bid in auctions, conduct transactions, and coordinate inventory and fulfillment

BuyersBuyers

SellersSellers

MarketSiteMarketSite

Figure : A B2B Model(Source: Goldman Sachs Investment Research Report)

Banks,Financial Institutions

eCredit.com

Suppliers

Production materialsOperating goods, services

Enterprise Customers

LogisticsCelarix, NTE

E-ChannelManagement

ProcurementNetwork

TradingNetwork

E-Customer Relationship

E-Commerce

E-Portal ManagementE-Services

SCM/ERP/Legacy Appls

Bu

sinesses

Bu

sinesses &

C

onsu

mers

1:NM:1 M:N

Knowledge Management/Business Intelligence

Focus on e-Business Applications

B2B Applications

• Advertising

• Auctioning

• Procurement

• Channel management

• E-commerce

$39 $114$294

$522

$782

$1,500

$1,113

0

300

600

900

1200

1500

1800

1998 1999 2000 2001 2002 2003 2004

($ B

illio

ns)

B2B

Figure: The Goldman Sachs B2B Sizing in USA

How Big is B2B?

Where is the Evidence

• Three highlights from the Goldman Sachs B2B survey 1.0:– E-Commerce spending on proprietary Web site, e-

market, and procurement (75% say, in 2000)

– Business are increasingly likely to develop B2B e-markets and to favor online auctions (74% say, in 2000)

– Outsourcing e-commerce spending is commonplace among businesses (25% say, up to 75% of e-C spending)

B2B Revenue Model

• B2B companies exhibit varying business models, depending on the key products and services they offer. The models include:– transaction fees,– auction-driving commissions,– advertising,– content subscriptions,– software licensing

B2C vs. B2B

B2C B2B

Switching Costs Low with multiple suppliers High when integrated with e-frastructure;few qualified suppliers

RelationshipType

Transactional Long term, mission critical

Transaction Type Smaller average selling price Larger average selling priceRevenue Model Traffic volume is critical;

Large customer base is keyDon’t need every customer, only need theright customers

Source: Goldman Sachs Investmenet Research

The Magnificent Seven B2B Drivers

• Increasing competition and globalization

• Growing interactivity

• Financial opportunity

• Efficiencies and cost savings

• Enhanced market and customer reach

• Real-time needs

• Regulatory and taxation issuesN

Small Business Likely to Fuel B2B

• Small businesses will fuel the B2B market– the use of and dependence on the Internet by

small businesses as a medium for marketing, distribution, and commerce will likely fuel the B2B market.

– as more small business access the Internet and set up corporate Web pages, the more they will employ the Internet to execute their business strategy.

Benefits of B2B

• B2B solutions create competitive dynamics through:– cost savings

• the composition of cost (product versus process costs)

• the number of intermediaries in the supply chain.

– new financial (revenue) opportunities• the rate of industry-wide B2B adoption

• business modelN

Why Now?

• B2B catalysts are now arising to stimulate adoption (mentioned earlier).

• Interactive networks have recently become ubiquitous and inexpensive, accelerating the use of B2B applications.

• A viral effect will spur copycat behavior throughout the market as more companies continue to implement B2B applications.

Which Industries are Likely to Embrace B2B Solutions

• Industries that are B2B inclined exhibit certain key characteristics:– the supply chain is highly diffuse,– techno-innovators dominate the culture,– process represents more than 20% of total

costs,– products exhibit complex configurations,– expense pressure is intense.

• Research show that leading industries

migrating online and adopting B2B solutions include the following:– Aerospace/Defense: 35%– Electronics: 25%– Chemicals: 20%– Motor vehicles and parts: 18%– Medical equipment and transport: 17%

What Makes a B2B e-market Company Succeed?

• Five Critical Success Factors for e-markets:– Business model,– market size,– industry expertise,– branding and distribution,– management execution hustle (not just the

formulation of strategy)

N

Solutions for e-Enterprise Organizations

• Streamlines buying and selling between trading partners

• Maximizes trade efficiency across the entire supply chain

• Strategic e-commerce capabilities in Internet time

• Delivers compelling ROI

BuyersBuyers

SellersSellers

MarketSiteMarketSite

Solutions for Internet Market Makers

• Turn your supply chain into a revenue generation opportunity

• Leverage your industry domain expertise into strategic e-commerce solutions

• Brings e-commerce to businesses of any size, across all industries

Your Your PortalPortal

Global Solution for Businesses:The Global Trading Web

Global Trading

Web

Connect once to trade with anyone,anytime, anywhere in the world.

European e-markets

• B2C e-commerce in Europe is likely to remain approximately two to three years behind the U.S. .

• B2B in Europe currently lags the U.S. by two years.

• How about in Asia?

TASKCo Mission

ExpandMarkets

Improve Efficiencies

RetainCustomers

FundamentalBusiness

Drivers HaveNot Changed

Leveraging Internet to Help Customers to: