Business strategies for ecommerce I. What to consider when developing an ecommerce site • Challenges and obstacle

1. Business strategies for ecommerce • I. What to consider when developing an ecommerce site • • Challenges and obstacles • • What matters • II. Portals • III. Auctions • IV. Customer service

2. An e-commerce site that's going to make money must be inviting, well-organized, secure and intuitive. Vaughan-Nichols,. S.J. (1998). E-Commerce Step-by-Step ZDNet http://www.zdnet.co.il/devhead/stories/articles/0,4413,2185923,00.html

3. Major challenges for ecommerce retailers • Brand development and promotion • Generating online sales • Attracting new customers • Boosting customer loyalty and retention • Improving after-sale customer service • Cutting costs in after-sales customer service

4. And Boosting customer traffic to offline stores Cutting costs of sales transactions Accelerating inventory turns Cutting general advertising and promotion costs

5. Major obstacles Understanding the technical requirements for an ecommerce site Lack of a clear business model to guide development Insufficient corporate resources Consumer fears about security and privacy The difficulty of integrating ecommerce web sites into the company’s other business processes

6. What matters: Having a well-designed, easy-to-use site is the most important factor in for online success Having a strong company brand and well-known branded products Using an effective site promotion strategy Linking with the right search engines Having a presence on the right portals or web communities Offline promotion Successfully marketing the web business

7. What matters in a web site • Information organization and architecture: is it easy to navigate? Search? • Currency: how frequently is content updated? • Knowledge: do the pages educate visitors about products and their uses? • Interactivity: does it offer the ability to provide feedback, ask questions, etc? • Customization: does it allow visitors to tailor content and information presentation? • Community: Does it allow visitors to share information with other visitors? • Speed: how quickly do pages download

8. What else? • Having contact information on every page • Having a site that works under minimal conditions (text-only...) • Making it easy for people to inquire about your services, while they are still online (mailto: links, short forms) • Having a way to ask your web site visitors for their e-mail addresses • This is an opportunity to resell them later, by sending them quality, informative helpful e-mail as a follow- up

9. The important question to ask is, "Can I deliver what I make or do anywhere in the world?" 1. Decide if the product or service you sell is deliverable to a Net audience Can it be sent via the Net or delivered by physical means, including FedEx or getting on an airplane yourself? 2. Determine the added costs of delivery If the cost of delivering is too high, stop here 3. Find an e-commerce host and get a bid Check carefully to make sure that the services and protections you want are offered

10. Then: 4. Determine whether the extra revenue - minus the added cost of delivery and the e-commerce site cost - produces an adequate return 5. If it does, it’s time to go into business You may find that these steps do not produce a clear case for starting your e-commerce project right now If they don’t, repeat the calculation quarterly until you find it’s time to start.

11. What must be managed? Ecommerce sites need a reliable technical and social infrastructure to support the: Practice of sales skills via the Internet Orchestration and management of customer relationships and support Creation of new relationships with customers, suppliers, partners, and even competitors.

12. Strategy for marketing to consumers Awareness Attraction Visit-engagement Purchase Repurchase

13. Awareness Announcements: through letterheads, business cards, brochures, packages, newspapers, magazines and TV Carefully chosen address: it should be similar to the company name and easy to remember Attraction Links from other sites Search engines and indexes leading to the site Site can be easily and quickly accessed

14. Visit/engagement Information about products and company Facilities: careful use of scripting, search engines, sound, video and animation Purchase Multiple methods: ordering form, mail, fax, phone ordering and e-mail Payment facilities: cash, check, credit card and direct account Delivery/booking facilities: mail, fax, call phone and e-mail, package tracking Interactivity: offers, interaction with others

15. Revisit and re-purchase (stickiness) Freshness: “What’s New” Changing content and features Extended interactivity: communities/clubs/user-to- user communication Extensive help: “FAQs” Link to other sites Customisation: collecting user information, meeting customer needs Personalization:, optional menu and content requiring user input Customer loyalty and service programs

16. Once the business is off the ground, the next strategic decision is to grow vertically or horizontally “Syndication is...the next-generation business architecture of the Internet” Neil Weintraub http://www.herring.com/mag/issue46/neil.html These are horizontally specialized web sites that form partnerships They are “syndicated” into collective business systems that provide both superior economics for business and superior benefits to customers Each participant of a syndicated business specializes in either physical production, virtual experiences, or infrastructure. Producers, channels, and syndicators

17. Syndication divides the web-labor For producers, the reality is that it doesn't matter so much where customers see the product as how many of them see it Those who run channels want to attract as many customers as possible Who produced the message is of secondary concern As producers and channels focus on their core businesses, they are done by clerks, clearinghouses, and call centers to syndicators This leads to aggregation and the pooling of resources The difference between a showroom and a showroom of showrooms

18. Business strategies for ecommerce I. What to consider when developing an ecommerce site • Challenges and obstacles • What matters II. Portals III. Auctions IV. Customer service

19. Portals “Portal” is a new term seen to be synonymous with gateway It is a web site that is (or wants to be) a major starting site for users when they go online It is also a site that users tend to visit as an “anchor site” Most portals have adopted the Yahoo style of content categories This involves a text-intensive, faster loading page that visitors will find easy to use and to return to Deeper in the site are many different types of resources and services

20. Portal sites have attracted stock market interest because they are viewed as able to draw traffic This means large numbers of numbers of advertising viewers and higher rates Typical services offered by portal sites include: Services: shopping, chat, free email, webhosting Resources: directories of web sites, news, weather information, stock quotes, phone and map information, a facility to search for other sites Portals are moving towards personalization to make themselves sticky Excite is among the first portals to offer users the ability to create a site that is personalized for them

21. Portals are becoming large, all-purpose ecommunities with high ecommerce potential, including advertising revenue They do have some disadvantages They dictate the content that you are able to find They're a good aid for new users, but they only serve up a slice of the Internet They often point to sites that live under the same corporate umbrella as they do, rather than to the most relevant or informative site on a given topic

22. The term “portal space” means the total number of major sites competing to be one of the portals Leading portals include Yahoo, Excite, Netscape NetCenter, Lycos, Go.com, MSN.com, Snap.com With its own private array of sites when you dial in, AOL is also a portal to its own Web A number of large ISPs also offer portals to the Web for their own users Now, M&A AOL --> Netscape ABC --> Go.com Disney --> Infoseek NBC --> Snap.com USA Networks --> Lycos

23. What is the future of portals? One possibility is that they become the new desktop: the “webtop” Sites begin to offer the types of web-based services that replace those provided by desktop software Email, schedule and calendaring address databases, productivity applications Then word processing, spreadsheets This personalized desktop can be accessed from anywhere on the net with any device The network is the computer (assuming lots of bandwidth)

24. Why you might like it Ease of use Accessibility Privacy (no corporate surveillance) Everything you need in one place Lots of functionality with a cheap, small, fast PC

25. This would create a shift in the business model of portals They were doorways, now they are “data guardians” and “full service providers” They take on the responsibility for maintaining and upgrading shared software They have to guarantee privacy, security, universal access, and reliability They begin to compete with software companies who would rather sell individual packages to users than one server version

26. Another future is the enterprise portal Large companies are developing their own customized web gateways on their intranets These local portals give employees access to important corporate information as well as the latest news, sports scores and stock quotes The value is in the retrieval and reporting of internal company data through a well-organized and secure web portal For example a user can pull corporate data from IT (ERP, data warehouses, legacy programs) and view the information and its relationships on the desktop This is individualized data-mining

27. One company that builds enterprise portals is Epicentric <www.epicentric.com> Epicentric enables companies to build custom portals for their intranet and extranets by providing content and commerce aggregation and syndication technology and solutions This requires an enterprise server, a hosted service, or a combination of the two, depending on customer needs and requirements The Portal Server is a Java application server that supports NT and Unix Web servers The company also licenses aggregation technology to vertical portal sites on the Web

28. Business strategies for ecommerce I. What to consider when developing an ecommerce site • Challenges and obstacles • What matters II. Portals III. Auctions IV. Customer service

29. Web auctions are based on the ability to negotiate in near real-time They allow best price bargaining, guaranteed sales, minimal collusion It is a one to many negotiation based solely around price Some auction forms allow rounds of negotiation, others do not The rules of the negotiation are clearly spelled out for all participants

30. What makes auctions work? A successful auction must have repeat business This requires building a loyal community The community is based on the development and maintenance of mutual trust Social practices create and maintain trust Posting comments about buyers and sellers and link these comments to specific auctions Target the advertising for auctions (appropriate newsgroups and lists) Have clear statements about privacy and security

31. A standard online auction of an item will often contain a: Registration procedure Picture of the item List of features Suggested comparison price Instructions on how to bid for the item Forms to fill out to place your bid Description of the rules of the auction

32. Item # of sites selling this item (n=100) “Other” 49 Computer 47 Information 30 Consumer products 28 Collectibles 22 Auto equipment 17 Recreation/Travel 16 Arts and crafts 16 Financial products 9 Antiques 9 Food and beverages 5 Real estate 7 Sports equipment or 7 memorabilia The most popular category is “other,” which highlights the broad range of goods and services sold over the net Beam, C. and Segev, A. (1998) Auctions on the Internet: A Field Study Working Paper 98-WP-1032 November 1998 (Revised)

33. Requirements Support for a variety of auction formats Integration of auctions with business’ back-end applications to allow automated trading processes Security, based on cryptography and audit trails Preventing hackers from sabotaging and buyers and sellers from cheating or disrupting the auction Efficient notification to inform bidders of the latest bids

34. Different auction methods: The commonly used auction types are Open-cry (English) auction Buyers gather at a physical or virtual location at a pre- specified time Each buyer can hear or see the bid submitted by other buyers and has a limited time to offer a higher counter- bid In physical auctions the responses must be received within seconds In web auctions, several minutes or hours will be allowed for the response From Kumar and Feldman (1998) Internet Auctions http://www.ibm.com/iac/

35. Single and multiple round sealed bid auctions Buyers must submit bids by a specified deadline The bid information secret is until the deadline Then bids are evaluated and the winners are declared Single round auctions lack the bidding frenzy of open cry auctions where bidders try outbid their rivals In a multiround sealed bid auction there is a deadline for each round of bids At the deadline the auction is closed or the bids from the current round are publicized and a new round of bidding begins

36. Dutch auctions These are good for perishable items (food, airplane seats) It starts with a very high asking price The price is decreased until buyers bid and specify the number of items they will purchase at the current asking price The bid can then be lowered to sell more while the inventory lasts The auctioneer controls how fast the inventory sells by controlling the lowering of the bid It closes at a pre-specified time, when the items are sold, or the price has fallen to a pre-specified level (or some combination)

37. The reverse auction (priceline.com) The buyer sets a price she is willing to pay The auction house bids the price out to sellers Sellers compete to meet the bid If the bid is matched, the buyer must purchase the item The auction house takes a cut of the transaction The Vickery auction Each submits one sealed bid Bids are opened simultaneously and the winner has the highest bid But: the winner pays the price of the second highest bidder

38. The auction process Initial buyer and seller registration Authentication of parties, exchange of public keys Creation of a profile for each trader reflecting interests in products and spending limits Setting up a particular auction event: Describing the items being sold or acquired and setting up the rules of the auction The auction rules explain the: Type and procedures (open cry, sealed bid, Dutch) Parameters (price, delivery dates, terms of payment) Starting and closing dates and times

39. Scheduling and advertising Items to be auctioned in upcoming auctions are advertised, and potential buyers are notified Popular auctions can be mixed with less popular ones to force people to be present in the less popular auctions Bidding This involves the collection of bids from buyers and implements the bid control rules of the auction Minimum bid, bid increment, deposits required with bids... For open cry auctions there is notification of the participants when new high bids are submitted

40. Evaluation of bids and closing the auction The auction closing rules are applied and the winners and losers of the auction are notified Trade settlement This final step handles Payment to the seller Transfer of goods to the buyer If the seller is not the auctioneer, payment of fees to the auctioneer and other agents (appraisers, consignment agents, etc.)

41. Auction security Auction house policy and seller instructions dictate whether the auction is accessible to the: Public at large Buyers/sellers registered with the auction services Buyers registered to participate in the current auction Access control mechanisms enforce these rules Security mechanisms ensure that the site is not sabotaged by an outsider This means preventing unauthorized bids and alterations and denial of service attacks

42. Cryptography is important to auctions Trusted third parties can enforce access rules and digital signing of contracts to ensure non-repudiation Encryption can prove that an auction notice was posted and accessible during a certain time period During bidding, encryption is needed to ensure that a bid is not tampered with, or disclosed to others In open cry auctions, spurious bids must be prevented These occur when the seller or auctioneer bid to prompt the highest bidder to increase the bid This means establishing a verifiable link from each bid to a bidder

43. Auction houses One-to-many auction The house provides access to goods and services auctions them to many buyers Consumer-to-consumer auction The house brings together many buyers and sellers at the same time and they negotiate with each other Reverse auction The house allows the buyer to set the price that sellers compete to match Business to business auction One company auctions off projects to contractors who submit bids (procurement) or unwanted inventory

44. Best practices Offer frequent auctions Email an English auction bidder if the bid is topped Offer secure payment processing Send out regular email to subscribers Provide a search engine Divide the site into categories Offer “phantom” bidding services for English auctions Update the front page frequently (every 24 hours) Run special programs to encourage customer loyalty Offer additional services Beam, C. and Segev, A. (1998) Auctions on the Internet: A Field Study Working Paper 98-WP-1032November 1998 (Revised)

45. Business strategies for ecommerce I. What to consider when developing an ecommerce site • Challenges and obstacles • What matters II. Portals III. Auctions IV. Customer service

46. Customer service: the next-to-last frontier Comparison shopping has made branding and differentiation difficult If all your competitors’ products can be arrayed along side yours, competition based on price differences becomes a problem What’s left? Managing customer relationships "If you would like to press one, press one. If you would like to press two, press two. If you would like to press the pound key, press the pound key... "

47. “The golden egg in marketing is to retain happy customers, who not only keep buying from you, but also tell their friends and associates that you are the greatest company in the world” Kuegler, T. (1999). How can we help you online today? http://www.searchz.com/Articles/0318991.shtml “The ideal scenario ‘is to have an easy-to-use site that meets a need users can’t get in the real world’ says Meg Whitman…CEO of Ebay” Perez, J.C. (1999). Online Stores Must Simplify, Says Panel. http://www.thestandard.net/articles/display/0,1449,2548,00.html

48. Goal of customer service is “fulfillment” The web allows interactive customer services: Instant gratification Direct responses to immediate needs Total and immediate responsiveness One-to-one communication Personal interaction through digital means (email, chat) Successful fulfillment is a basis of the long-term relationship with the customer

49. Principles of customer service are well established offline Browsing During the sale After the sale Managing the environment Q&A Demos Pre-sale Creating the relationship Selling add-ons Closing the sale Maintaining the relationship Q&A Services Updates Promotions Returns

50. Jupiter Communications surveyed 125 major web sites (content, consumer brands, travel, retail, financial services) 42% never responded to customer inquiries or took >5 days to respond Retailers were the best 54% responded within a day Financial services and travel agencies were next: 35% responded with one day Among travel agencies, 19% took >3 days