E-Commerce

Jason C.H. Chen, Ph.D.School of Business Administration

Gonzaga University, Washington, U.S.A.Senior Consultant, Taskco.com

chen@gonzaga.eduNov. 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.com

chen@gonzaga.eduNov. 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

364434

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

B2CB2B

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 CEOIBM 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

Businesses

Businesses &

C

onsumers

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 issues

N

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 model

N

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 ROIBuyersBuyers

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: