electronic commerce: introduction, business strategies, and business models minder chen, ph.d....
TRANSCRIPT
Electronic Commerce: Introduction, Business Strategies, and Business Models
Minder Chen, Ph.D.Associate Professor of Management Information Systems and Decision Sciences
School of Management, George Mason [email protected]
EC - 2 © Minder Chen, 1996-2000
Reference1. Net Ready, by Amir Hartman and John Sifonis, McGRaw-Hill, 2000. 2. Now or Never, by Mary Modahl, Harper Business, 20003. Designing Systems for Internet Commerce by G. Winfield Treese, Lawrence C. Stewart
(May 1998) Addison-Wesley Pub Co; ISBN: 0201571676 4. Net Results: Web Marketing that Works by Rick E. Bruner (Editor), Cybernautics, Usweb
Corporation Hayden Books; ISBN: 1568304145 5. E-Business : Roadmap for Success by Ravi Kalakota, Marcia Robinson, Don Tapscott
(June 1999) Addison-Wesley Pub Co (C); ISBN: 0201604809 6. Customers.Com: How to Create a Profitable Business Strategy for the Internet and Beyon
d by Patricia B. Seybold (Contributor), R. T. Marshak, Ronni Marshak 1 Ed edition (November 1998) Times Books; ISBN: 0812930371
7. Net Success : 24 Leaders in Web Commerce Show You How to Put the Web to Work for Your Business by Christina Ford Haylock, Len Muscarella, Ron Schultz, Steve Case (May 1999) Adams Media Corporation; ISBN: 1580621147
8. Creating the Virtual Store: Taking Your Web Site from Browsing to Buying, by Magdalena Yesil, Published by John Wiley & Sons, November 1, 1996
9. Understanding Electronic Commerce (Strategic Technology Series), by David R. Kosiur, Published by Microsoft Press, May 1, 1997.
EC - 3 © Minder Chen, 1996-2000
Cyber-Seminar OutlineEC Introduction
Introduction
The cycle of electronic commerce
EC and Business Process
EC statistics
EC Strategies 4Cs strategy: Customer, Content, Community, Commerce
Revenue streams
EC development process
EC Business ModelsB2C Virtual stores: physical and digital goods and services
Infomediaries: Seller-side
Informediaries: Buyer-side
Infomediaries: B2B marketspace
EC - 4 © Minder Chen, 1996-2000
EC Introduction
• Introduction• The cycle of electronic commerce• EC and business process• EC statistics
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Electronic Commerce: Introduction
E-Business
E-Commerce
Internet Commerce
Commerce
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Electronic Commerce
• Electronic commerce is broadly as the ability to execute business activities (transactions, contracts, and partnership) over a computer network. The execution of these activities lead to the exchange of goods, services, and money.
• Online business activities are changing market dynamics and structures of various industries.
• Electronic commerce adds a new dimension "information" to business activities involving information goods, information services, and electronic money.
EC - 7 © Minder Chen, 1996-2000
The Low-Friction Market
"[The Internet] will carry us into a new world of low friction, low-overhead capitalism, in which market information will be plentiful and transaction costs low."
-- Bill Gates, The Road Ahead
"Where there is a friction, there is opportunity!"
-- Net Ready.
EC - 8 © Minder Chen, 1996-2000
The Cycle of Electronic Commerce
Customers Online Ads Online Orders
Standard Orders
Access
SearchesQueriesSurfing
Distribution
Online: soft goodsDelivery: hard goods
Electronic Customer Support
Follow-on Sales
Source: Understanding Electronic Commerce (Strategic Technology Series), by David R. Kosiur, Published by Microsoft Press, May 1, 1997.
EC - 9 © Minder Chen, 1996-2000
Components of Electronic Commerce
Institution
• Government• Merchants• Manufacturers• Suppliers• Consumers
Processes
• Marketing• Sales• Payment• Fulfillment• Support
Networks• Intranet• Extranet• Internet
Source: adapted from David Kosiur, Understanding Electronic Commerce, Microsoft Press, 1997.
ElectronicCommerce
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EC and Business Processes Seller Customer
Co
rpo
rate
Dat
abas
es
Provide Info
Get customer
Provide info
Fulfill order
Support
Identify need
Find source
Evaluate offerings
Purchase
Maintain, Repair,Operate
Phone, fax, e-mail
Web site
Newsgroups
Net communities
Web site
EDI
Web site, phone, fax, e-mail, e-mailing list
Credit cards, e-cashP.O.s
Demos, reviews
Send info
Data sheets, catalogs, demos
Request info
Web surfing
Web searches, web ads
Deliver soft goods electronically
Source: adapted from David Kosiur, Understanding Electronic Commerce, Microsoft Press, 1997.
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World Wide Internet Commerce
Forester Research, Inc. June 1999
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Business Internet Commerce Trends
B2C: Business to ConsumerB2B: Business to Business
Reference: http://cyberatlas.internet.com/
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Business-to-Business E-Commerce• International Data Corporation forecasts that business-to-business e-
commerce revenue will jump from $80 billion worldwide in 1998 to $1.1 trillion in 2003. Forrester Research believes that number will go even higher to $1.3 trillion by 2003.
• Business-to-Business -- Vertical Industries – Computing and Electronics: For this year, businesses will invest $50
billion in computers and other electronic equipment online. Increase to $319 billion by 2002.
– Motor vehicles: Companies will spend $9 billion online to purchase fleets of cars and trucks this year. 2002—grow to $114 billion—more than a 1000% increase.
– Online utilities: Online trades of $15 billion in 1999 will grow to $110 billion by 2002.
– Food and agriculture: Expected to be about $3 billion in 1999--$20 billion by 2002.
– Pharmaceutical and medical: Forecasted $1 billion this year. Increase 20-fold by 2002.
Source: Business 2.0, March, 1999 re: Forrester Research
EC - 14 © Minder Chen, 1996-2000
Statistics• Holiday Season 1998
– 2.1 million households shopped online for the first time
– Generated $2.3 billion
– Virtually all (98%) of AOL shoppers said they would shop online again in the next 6 months (Source: Jupiter Communications)
• By 2003 . . . – Consumers on the Web will spend more than $177 billion
worldwide.
– There will be an eight-fold increase in Web buyers worldwide to 143 million (International Data Corporation, March 1999)
– In Europe, 43 million households will be online. (Source: Nua Internet Surveys 12/98 re: DataMonitor)
– In Japan, buyers will spend one trillion Yen online. (Source: Nikkei Multimedia, 12/98)
• 1% of 5 million US merchants are able to collect payments via the Internet in 1999.
• 10% E-merchants by year 2003.
EC - 15 © Minder Chen, 1996-2000
Retailing Trends
1950s 1960s-1970s 1980s 1990s
Main street
Main street
Malls
Malls
Superstores
Superstores
Web
Web
• Home Depot• CompUSA• Barnes and Nobles• Border
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AOL Findings
• Buy brands
• Seek convenience
• Are increasingly time-starving
• Are not solely motivated by price
• Require simplicity
Source: America Online, 1999
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Net Economy• 1940s - 1980s
– Manufacturing to information economy
– Local - regional - national - multinational
– Tangible brick-and-mortar assets: offices, shops, service centers, and warehouse
• 1990s - 21st Century– Net economy:
» Information & Knowledge
» Communication and interactions
– Global and virtual
– Business Focus: Information, channel, flow, customer loyalty, reliable service, relationship
– Intangible assets: Knowledge, experiences, relationships
EC - 18 © Minder Chen, 1996-2000
Internet Economy Driving Forces
• Changing customer demands
• Globalization
• Internet ubiquity
• New technology
• New marketplace and intermediacies
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Selling Points of Virtual Stores
• "The Internet is going to become a channel of distribution." -- The president of a major U.S. advertising agency
• Another firm advertise its virtual store as "The parking is easy, there are no checkout lines, we are open 24 hours a day, and we deliver right to your door."
• The trend toward point-of-sale moving into the home is accelerating.
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Benefits to the Merchants
• Increased sales of existing products to generate additional revenues
• Use the web to target their offers to a niche market
• "The store is always open!"
• Establish better relationships with customers.
• Low cost information distribution
• Increased speed to market
• Expanded delivery channels
• Global exposure and reach
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Benefits to the Consumers
• Convenience
• Informative
• Value presented upfront: Demo and free download
• No long wait times
• Easy flow and navigation
• Search capabilities
• Engaging presentation
• Constant updates
• Easy to buy
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All 3 Steps in One Medium
• Web and EC allows you to integrate three major steps of markting and sales in one medium.
Get Attention Give More Information/Answer Questions
Informing Selling
• TV Ads
• Magazines
• Brochures• Sales People• Print/editorial
• Store• Telephone• Catalogue
Transact/Service
Branding
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Internet Industry
Internet Economy
Consulting
Contentand
Activity
ElectronicCommerce
Infrastructure
Client/ServerSoftware
ISPNetworkServices
InternetEquipment
Commerce InstrumentsPortalsCommerce Servers
SportsMallsEntertainmentNewsfeedPublications
System Integrationand Design Browsers
Web ServerApplication ServersSecurityTools
Internet ServiceConsumer ServicesCarriers
Backbone RouterAccess EquipmentServer Computers
EC - 24 © Minder Chen, 1996-2000
EC Strategies
• 4Cs Strategy: – Customer– Content– Community– Commerce
• Revenue Streams• EC Development Process
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• Most Visited Retailers:1. Bluemountainarts.com
2. Amazon.com
3. AOL.com
4. Ebay.com
5. Etoys.com
6. Barnesandnoble.com
7. CNet.com (software)
8. Egghead.com
9. CDNow.com
10. Musicblvd.com
11. ColumbiaHouse.com
12. Classifieds2000.com
13. Beyond.com
14. Coolsavings.com
15. Valupage.com
Not in Top 25:• Towerrecords.com• Borders.com• Toysrus.com• Target.com• Gap.com• Macys.com• Sears.com• WalMart.com• “BigCompany.com”• • • YourCompany.com??
New Competition From Surprising Places
EC - 26 © Minder Chen, 1996-2000
Moving Your Business Online
• Companies are motivated by either fear or greed to move to their businesses to the net.
• To .com your company is becoming an imperative.
• They have to obsolete their current business models and work very hard to search a new business model.
Your competitor is just one-click away
EC - 27 © Minder Chen, 1996-2000
Electronic Commerce Applications and the Cycle of Commerce
Marketing
Sales
Production/Logistics
Billing/C
ollections
ServiceSeller's Cycle of Commerce
Time
EC - 28 © Minder Chen, 1996-2000
Electronic Commerce Applications and the Cycle of Commerce
Shopping/Testing
Procurem
entR
eceiving/Logistics
Paym
ent
Operation
Buyer's Cycle of Commerce
Time
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EC Strategies: 4 Cs
CommerceCommerce
ContentContentCommunityCommunity
CustomersCustomers
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Customers
• Obsess over your customers
• Remember that the Web is an infant– What do you have to offer that the physical world
cannot in order to attract customers?
• If you make one customer unhappy, he won't tell five friends -- he'll tell 5,000 on newsgroups, list servers, and so on.
– "Word of mouth" factor gets amplified on the Net
• The shifts of balance of power away from business and toward customer.
- Jeff Bezos
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Self Assessment: Customer Caring
What do your customers need? What requests do they make of you?
How do you respond to customer’s requests?
What kind of information can they get from you?
What process do they go through? How do you produce and distribute it to them?
What are the steps that your customers have to take
to complete a purchase transactions?
How do they get shipment status?
How are exceptions handled?
What do you need from customer? What do you know about customer preferences?
What information could you use to better target your
product and service offerings?
What can you do to build relationships? How can you engage customers in an ongoing dialog?
How can you continue to provide information, products,
and services to reinforce your ongoing relationships?
EC - 32 © Minder Chen, 1996-2000
5 Steps to Success in EC• Set strategy
– Make it easy for customers to do business with you!
• Focus on the end-customer– Identify end-customers and their needs– Distinguish from channel partners– Identify other internal and external stakeholders
• Redesign customer-facing business processes• Wire your company for profit and success• Foster customer loyalty
– Determine and prioritize objectives– Decide what to measure and how to measure– Measure profitability and other critical success
indicators
Source: Adapted from Customer.com by Patricia Seybold, 1998
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Foster Customer Loyalty • The key to profitability in EC• Achieving higher revenues via customer
acquisition and customer retention– Acquisition costs– Base profit– Revenue growth– Cost savings– Referrals– Price premium
• Benefits: – No-cost acquisition – Experienced customer
• Strategies– Increase customer "inventory" – Increase customer "tenure"
EC - 34 © Minder Chen, 1996-2000
8 Critical Success Factors
• Target the right customers
• Own customer's total experience
• Streamline business processes that impact the customer
• Provide a 360-degree view of relationships with your customers
• Let customers help themselves
• Help customers do their jobs
• Deliver personalized services
• Foster community
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Target the Right Customers
• Know who your customers and prospects are
• Find out which customers are profitable
• Decide which customers you want to attract (or keep from losing)
• Decide which customers influence key purchases
• Find out which customers generate referrals
• Don't confuse customers, partners, and stakeholders
EC - 36 © Minder Chen, 1996-2000
Own the Customer's Total Experience
• Deliver a consist and branded experience
• Focus on saving customer time and irritation
• Offer a peace of mind
• Work with partner to deliver consistent service and quality
• Respect the customer individuality
• Give customers control over their experience
EC - 37 © Minder Chen, 1996-2000
Creating Sustainable Value in EC
• Develop a brand based on consumer experiences– The brand emerges as the two-way communication on
the net and off the net.
• Develop superior physical distribution– Physical distribution is a choke point in EC
• Leverage customer information – Use personal information to more convenience
shopping and customized services» Privacy issue
» Ask customer explicitly for such data
» Require a more subtle approach
– Use collective data » Use it to adjust pricing, product offering, and target market
EC - 38 © Minder Chen, 1996-2000
Virtual Communities
Virtual Community
Users
• Money
• Content• Demographics
Providers
• Content• Hard goods• Games• Services
Other Websites
Advertisers
• Advertising
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Consumers' Needs for Community• Communities of transaction: Facilitate the buying and selling of
products and services and deliver information related to those transactions.
– Bring in a critical mass of sellers and buyers to facilitate certain types of transactions.
– Virtual Vineyards (wine.com)
• Communities of Interest: Bring together participants who interact extensively with one another on specific topics.
– Higher degree of interpersonal communication.
– GardenWeb: www.gardenweb.com
– Motley Fool created by David and Tom Gardners on AOL (fool.com)
– Parents Place: www.parentsplace.com
• Communities of Fantasy – Chat rooms: Red Dragon Inn
– Virtual Team competition at ESPNet: espnet.sportszone.com
• Communities of Relationship: People come together around certain life experiences that are very intense and can lead to the formation of deep personal connections.
– Cancer Forum on CompuServe
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www.parentsoup.com
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www.iVillage.com
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Geocities: www.geocities.com• This collection of themes cyberhoods is populated by a half-million
"homesteaders" who get free home pages.
http://geocities.yahoo.com/home/
EC - 43 © Minder Chen, 1996-2000
Quick Test for Technographics
More Men More Women
More Educated Less Educated
High Income Low Income
Have Children No Children
Younger Age Older
LaggardsEarly Adopter
Mainstreams
Time
Nu
mb
er o
f n
ew u
sers
Source: Now or Never, 2000
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Technology-Fit: Customer and Product
Cu
sto
me
r N
ee
d fo
r P
rod
uct I
nfo
rmat
ion
High
Low
Customer Demographics MatchPoor High
Earlier AdopterSecond Wave
Second WaveWeb Laggards
TideDenny's
AAFedExpMicrosoft
NikePepsi
Jenny CraigChrysler
Source: Forrester Research
EC - 45 © Minder Chen, 1996-2000
Challenge• Consumers: Everything on the Internet should to be free.
• Merchant: How can I make a profit if everything is free.
• Examples: – Free web browsers: Netscape Communicator and Internet Explorer
– Free email: Juno, mail.yahoo.com and hotmail.com
– Free Internet Access: Freeserve in Britain
– Free PC: eMachine and CompuServe; Free-PC
– Free web hosting: Geocities, Angelfire, Zoom
– Free ...
Pri
ce
Year
$250
$0
1930 1999
Cost of a 3-minute Long Distance Call
Gilder's Law All tangible and intangible items that can be copied adhere to the law of inverted pricing and become cheaper as they improve.
Anticipate this cheapness in your pricing strategy and product/service development strategy
All tangible and intangible items that can be copied adhere to the law of inverted pricing and become cheaper as they improve.
Anticipate this cheapness in your pricing strategy and product/service development strategy
EC - 46 © Minder Chen, 1996-2000
Revenue Streams
• Advertising / Sponsorship
• Transaction
• Subscription / Listing Fee
• Value-added services
EC - 47 © Minder Chen, 1996-2000
Multifaceted Model for Web-Based EC Design• ATTRACT: Hits
– Communities of interest
– Changing topics for repeat customers
– Features that encourage customers to explore
• ENGAGE: Leads– Special areas encourage customer to register (i.e. selection of articles customized for
visitors interests)
• PARTICIPATE: Sales revenue– Free download (video, audio, & software)
– Shopping– Chat and News
– Subscription
• JUMP: Advertising revenue
– Other products of interest to customer– Other sites of interest to customer
Adapted from Netscape Communications Inc., 1996.
Attract
Engage
Participate
Jump
EC - 48 © Minder Chen, 1996-2000
EC Companies Transform the Revenue Mix
Pricing
Value
Customers
NewCustomers
NewValues
NewPricing
The mix: Who pays for what and how much.
Highly interrelated!
Source: Now or Never, 2000
EC - 49 © Minder Chen, 1996-2000
What To Do Now
1. Define your eBusiness strategy FAST
2. Assess readiness: – customers
– products/services
– organization
– technology
– infrastructure
Rap
id in
novati
on
Rap
id in
novati
on
EC - 50 © Minder Chen, 1996-2000
What To Do Now3. Identify the target:
– Business objectives– Customer segment– Application area
4. Build it in less than 6 months -- Flexibility -- Scalability -- Extendibility
5. Keep extending the function -- new products and services, new customer interfaces, enhance performance, security and capability
6. START NOW !
You are never done!You are never done!
EC - 51 © Minder Chen, 1996-2000
Four Strategies to Start Online Business
• Integration
• Subsidiary
• Partnership
• Buyout
Co
st
Low
High
Tim
e to
Mar
ket
Slow
Fast
Ris
k
Low
High
EC - 52 © Minder Chen, 1996-2000
Top Three Concerns
• Retailers– Conflict with investment in physical stores; – Technology issues; and – Lack of distribution and fulfillment network.
• Manufacturers– Products not appropriate for online sales; – Potential risk to channel relationships; and – Consumers won’t buy online– Many manufacturers simply weren't capable
of shipping a single box of Tide or a bottle of Advil. They had no experience in dealing directly with consumers.
EC - 53 © Minder Chen, 1996-2000
Becoming Virtual
• Egghead to Egghead.com
• Computer Literacy to Fatbrain.com
• Romac International to KForce.com
Kinder Toys is Moving to www.toydomain.com
(Find us on the web after June 1st)
Kinder Toys is Moving to www.toydomain.com
(Find us on the web after June 1st)
EC - 54 © Minder Chen, 1996-2000
Your 3 Biggest Problems/Opportunities
• What should our strategy be?
• How do we build it in 3 to 6 months?
• How do we stay on the edge of innovation for life?
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Web Experiences for Consumers
• A many-to-many rather a one-to-many experience
• Fresh content
• Access to detail information
• Communities unbounded by space and time
• The multimedia appeal of TV
• A redefinition of privacy and identity
• Hyper-impulsivity: The web permits a closer conjunction of desire, transaction, and payment than any other environment.
EC - 56 © Minder Chen, 1996-2000
E-Business Creation Process
E-Vision
BusinessDrivers
TechnologyDrivers
E-BusinessStrategy
RapidImplementation
• Customer feedback• Benchmark data• Competitive analysis• Market forces• Usage statistics• Customer needs• Current capabilities
• Personalization• ROI• Profiling• Segmentation• Experience
modeling• Expanded
business opportunities
• Systems and networks
• Web architecture• Business
infrastructure• Technology
components• Web technology
strategy
Source: Adapted from Digital Transformation, 2000
EC - 57 © Minder Chen, 1996-2000
EC Development Process
• Knowledge building and market evaluation to identify a need and a niche
• Competitive and capability analysis
• EC Business model design and feature identification
• Determine what you have to offer (merchandizing)
• Set your e-business goals and priorities
• Design your EC architecture
• Assemble your EC teams
• Build your web site
• Set up a system to handle sales
• Provide customer services
• Advertise your online business (online and offline)
• Evaluate your performance and moving on
EC - 58 © Minder Chen, 1996-2000
Popularity Adds Value in a Network
Val
ue
to U
ser
Number of Compatible User
Vicio
us c
ycle
Vir
tuou
s cy
cle
Networks• Real: LAN, Internet, Fax • Virtual: Virtual community, Chat
room, Instant messenger
Positive Network
Externality
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Keys to Long Term Success
• Fast deployment
• Evolutionary implementation
• First mover advantages
• Promotion, promotion, promotion
• Customer focus and services
• Interaction with customers
• Integrating emerging technologies
• Redefining and redesigning business models
• Comprehensive database and data warehouse design
• Integrating back office operations with the virtual store fronts
•
EC - 60 © Minder Chen, 1996-2000
EC Business Models
• Virtual stores: physical and digital goods and services
• Infomediaries: Seller-side
• Informediaries: Buyer-side • Infomediaries: B2B marketspace
EC - 61 © Minder Chen, 1996-2000
Types of Virtual Stores• Hard goods:
– Food – Clothes– Computer hardware and Electronics– Packaged software
• Soft goods (Bits delivered on-line) – Information
» Database» Publishing » Research
– Software» Computer games» Java applets» Application software
• Services– Selling time:
» Computer game play» Consulting » Legal and medical services
– Selling information (subscriptions) » Dating services» Legal and medical advice
– Reservations and tickets» Airline tickets» Event tickets» Hotel and restaurant
EC - 62 © Minder Chen, 1996-2000
Is EC Appropriate for You?
Industries who set up virtual storefronts
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What Consumers Are Buying Online• Computer-related products 49%
• Books 35%
• Consumer electronics 34%
• Travel Reservations 28%
• Cars, boats 19%
• Clothing and apparel 18%
• Recorded music, CDs 18%
• Larger household goods (furniture, major appliances) 15%
• Filmed entertainment, videos 13%
• Gifts delivered by mail (flowers, candy) 12%
• Publication subscriptions 8%
• Investment or financial services 8%
• Food and drink 8%
• Artwork, poster, etc 4%
• Other 13%
» Source: Ernst & Young Internet Shopping Study 1998
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EC Business Models
• Payment direction: – Buy-side– Sell-side– Marketspace: Business is being transacted with both
suppliers and customers.
• Trading parties: Most analysts predict the B2B model will have a more rapid adoption rate, but that the volume of transactions in the B2C model will, in the long run, greatly surpass that of B2B.
– Business to Business– Business to Consumer
• Type of product or service that is being provided. – Physical goods and services– Digital goods (contents) – Digital services
EC - 65 © Minder Chen, 1996-2000
Sell-Side E-Commerce Model
Selling Merchant
Buyer A
Buyer C
Buyer B
EDI
HTML & FormsHTML & XML
OBIOnline Selling
Co
ns
um
er o
r Bu
sin
es
s
EC - 66 © Minder Chen, 1996-2000
Sell-Side Storefront
• Primary model used in current business-to-consumer scenarios
• Single seller, typically a distributor, constructs a Web storefront to sell to many consumers (i.e. Amazon.com)
• Unless a single distributor can aggregate all the suppliers in a given industry, the buyer remains responsible for comparison shopping between stores
• Expensive for buyer; does not meet the needs of corporate procurement organizations.
EC - 67 © Minder Chen, 1996-2000
Buy-Side E-Commerce Model
Buyer
Seller A
Seller C
Seller B
EDI
HTML & FormsHTML & XML
OBIOnline Procurement
Bu
sin
es
s
EC - 68 © Minder Chen, 1996-2000
Buy-Side eProcurement• Buy-side applications generally consisting of a
browser-based self-service front end to ERP and legacy purchasing systems
• Corporate procurement aggregates many supplier catalogs into a single “universal” catalog and allows end-user requisitioning from the desktop, facilitating standard procurement for the organization and cutting down on “maverick” purchasing
• Purchases made through this system are linked to the back-office ERP or accounting system, cutting time and expense from the transaction and avoiding potential bookkeeping errors
• Model yields reduced transaction costs but not lower purchase costs; no impact on size of supplier base, no enablement of dynamic trade; buying organizations must set-up and maintain catalogs for each of their suppliers; too costly and technically demanding for most medium and small-sized businesses.
EC - 69 © Minder Chen, 1996-2000
Marketplace E-Commerce Model
VirtualMarketspace
Seller A
Seller C
Seller B
EDI
HTML & Forms
HTML & XML
OBI
Buyer A
Buyer C
Buyer B
EDI
HTML & Forms
HTML & XML
OBI
• eBay.com• Pricelines.com• Egghead.com• Amazom.com Auction• www.chemdex.com
Infomediacy (Content Aggregator)
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• No vendor loyally• No switching costs• Time-insensitive• Short-term• Casual• Many vendors• Products differentiated
on price, image
• Relationship-based• Very high switching costs• Extremely time-sensitive• Long-term• Mission-critical• Few partners• Partners differentiated on
reliability, flexibility
Business-to-ConsumerBusiness-to-Consumer Business-to-BusinessBusiness-to-Business
Business-to-Business vs. Business-to-Consumer
EC - 71 © Minder Chen, 1996-2000
B2B Marketspace
• Latest evolution of B2B eCommerce, enabling a many-to-many relationship between buyers and suppliers
• Buyers and suppliers leverage economies of scale in their trading relationships and access a more “liquid” marketplace
• Sellers find buyers for their goods, buyers find suppliers with goods to sell
• Many-to-many liquidity allows the use of dynamic pricing models such as auctions and exchanges, further improving the economic efficiency of the market.
• Examples: – E-Steel.com– verticalnet.com
EC - 72 © Minder Chen, 1996-2000
Channel Conflict: How About the Distributors
• The concept of complete dis-intermediation - the elimination of the middleman - remains a theory. New intermediaries are emerging.
• Cisco System has 2 billion dollars annual sales on the Web.
• 70% of Cisco online business comes from VARs and distributors.
• Fruit of Loom Inc. has 31 of its 55 distributors up on its extranet called Activewear Online. Distributors have to do lot of value-add and customer support to survive.
EC - 73 © Minder Chen, 1996-2000
Retailers and Manufacturers Co-exist on the Web
• US retail sales revenues 1998:– Brick-and-mortar stores 93%
– Catalog sales: 6%
– E-commerce 1%
• Cases: – Levi Strauss sells jeans at www.levis.com but won't allow retailers
to sell them online.
– Estee Lauder sells Clinique cosmetics at www.clinque.com but doesn't offer retail promotion.
– Waterford sells a limited selection at www.waterford.com like chandeliers and corporate gifts.
• Strategies: – Manufacturers want to maintain channels while stay in direct touch
with their customers.
– Provide online dealer locators.
– Share customers information back and forth.
EC - 74 © Minder Chen, 1996-2000
Clicks-and-Mortar
• Clicks-and-mortar has become the new buzzword in retailing circles.
• It means having an integrated, multi-touchpoint strategy that takes advantage of your physical retail outlets and integrates them seamlessly into your Web strategy.
• A good clicks-and-mortar strategy uses the Web to drive traffic to your stores and uses your stores to drive traffic to the Web.
YourSherpa.com
Brick-and-Click
EC - 75 © Minder Chen, 1996-2000
Business Channel: Multi-Channel Presence
Buyer Seller
• Brick-and-mortar – Face-to-Face
• Mail order– Mail – Printed catalog
• Phone order – Telex– Phone– Fax
• Electronic commerce • EDI• Email• Web
Multi-channel plays will have extraordinary power if companies elegantly blend and synchronize those channels.
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Pure Play