E-Commerce BBA ( Hons )

1. E-CommerceBBA (Hons) (Electronic Marketplace Essentials) Lectures 4,5,6 By: Farhan Mir

2. Administration • Introduction to E-Marketplaces • The online buying process • Key EC activities and mechanism • E-Market Mechanism • Models of E-Markets • Online Auctions & Bartering • Case Studies (Dell, Ford & Peapod)

3. Electronic Marketplaces • Markets play a central role in the economy facilitating the exchange of: • information • goods • services • payments • Markets create economic value for: • buyers • sellers • market intermediaries • society at large

4. Electronic Marketplaces (cont.) • Three main functions of markets • matching buyers and sellers • facilitating the exchange of information, goods, services, and payments associated with market transactions • providing an institutional infrastructure, such as a legal and regulatory framework, that enables the efficient functioning of the market

5. Electronic Marketplaces (cont.) • In recent years markets have seen a dramatic increase in the use of IT—EC has: • increased market efficiencies by expediting or improving functions • been able to significantly decrease the cost of executing these functions

6. E-Marketplaces • Electronic marketplaces (e-marketplaces or marketspaces), changed several of the processes used in trading and supply chains • Greater information richness • Lower information search costs for buyers • Diminished information asymmetry between sellers and buyers • Greater temporal separation between time of purchase and time of possession • Greater temporal proximity between time of purchase and time of possession • Ability of buyers and sellers to be in different locations

7. Marketspace Components (cont.) • Digital products: Goods that can be transformed to digital format and delivered over the Internet • Front end: The portion of an e-seller’s business processes through which customers interact, including the seller’s portal, electronic catalogs, a shopping cart, a search engine, and a payment gateway

8. Marketspace Components(cont.) • Back end: The activities that support online order-taking. It includes fulfillment, inventory management, purchasing from suppliers, payment processing, packaging, and delivery • Intermediary: A third party that operates between sellers and buyers

9. Types of Electronic Markets • Electronic storefront: A single or company Web site where products and services are sold • Mechanisms necessary for conducting the sale: • electronic catalogs • search engine • e-auction facilities • payment gateway • shipment court • customer services

12. Types of Electronic Markets (cont.) • e-mall (online mall): An online shopping center where many stores are located • some are merely directories • some provide shared services (e.g., choicemall.com). • some are actually large click-and-mortar retailers • some are virtual retailers (e.g., buy.com)

15. Types of Electronic Markets (cont.) • Types of stores and malls • General stores/malls • Specialized stores/malls • Regional versus global stores • Online Distributor Vs Online Broker • Pure online organizations versus click-and-mortar stores

16. Types of E-Marketplaces: From Storefronts to Portals • Types of E-Marketplaces e-marketplace An online market, usually B2B, in which buyers and sellers exchange goods or services; the three types of e-marketplaces are private, public, and consortia private e-marketplaces Online markets owned by a single company; may be either sell-side or buy-side e-marketplaces.

17. Types of E-Marketplaces: From Storefronts to Portals • Types of E-Marketplaces sell-side e-marketplace A private e-marketplace in which a company sells either standard or customized products to qualified companies buy-side e-marketplace A private e-marketplace in which a company makes purchases from invited suppliers

18. Models of E-Markets • Pure Vs. Partial Marketing • Electronic Distributor Vs. Electronic Broker • Electronic Store Vs. E-Malls • Reactive Vs. Proactive Strategy • Generalized Vs. Specific Stores/Malls • Global Vs. Regional

19. E-Market Essentials Catalogs, Auctions, Bartering & Issues of E-Markets

20. Electronic Catalogs • Electronic catalogs—the presentation of product information in an electronic form; the backbone of most e-selling sites • Evolution of electronic catalogs • Merchants—advertise and promote • Customers—source of information and price comparisons • Consist of product database, directory and search capability and presentation function • Replication of text that appears in paper catalogs • Moredynamic, customized, and integrated

21. Exhibit 2.4 Comparison of Online Catalogs with Paper Catalogs

23. Customized Catalogs • Assembled specifically for: • A company • An individual shopper • Customization systems can: • Create branded, value-added capabilities • Allows user to compose order • May include individualized prices, products, and display formats • Automatically identify the characteristics of customers based on the transaction records

24. Auctions as EC Market Mechanisms • Auction: A market mechanism by which a seller places an offer to sell a product and buyers make bids sequentially and competitively until a final price is reached • Auctions can be done: • online • off-line • at public sites (eBay) • at private sites (by invitation)

25. Auctions as EC Market Mechanisms (cont.) • Electronic auctions (e-auctions): Auctions conducted online • Host sites on the Internet serve as brokers, offering services for sellers to post their goods for sale and allowing buyers to bid on those items • Conventional business practices that traditionally have relied on contracts and fixed prices are increasingly being converted into auctions with bidding for online procurements

26. Auctions as EC Market Mechanisms (cont.) • Dynamic pricing: Prices that change based on supply and demand relationships at any given time At what price would you buy/sell today?

27. Auctions as EC Market Mechanisms (cont.) • Four major categories of dynamic pricing • One buyer, one seller • One seller, many potential buyers • One buyer, many potential sellers • Many sellers, many buyers

28. Types of Dynamic Pricing

29. Benefits of E-Auctions

30. Bartering Online • Bartering: An exchange of goods and services • e-bartering: Bartering conducted online, usually by a bartering exchange • Bartering exchange: A marketplace in which an intermediary arranges barter transactions

31. Issues in E-Markets: Liquidity, Quality, and Success Factors • Early liquidity: Achieving a critical mass of buyers and sellers as fast as possible, before a start-up company’s cash disappears • Quality uncertainty: The uncertainty of online buyers about the quality of non-commodity type products that they have never seen, especially from an unknown vendor • Microproduct: A small digital product costing a few cents

32. What is Web 2.0? • The Social Web . Social networking and community- oriented sites ex. myspace.com, friendster.com, facebook.com, multiply.com, tagged.com, twitter,com, etc.

33. What is Web 2.0? • The User-focused Web . The user needs are catered: participate, organize, read, write & play online

34. Why is it important? Why use Web 2.0? • Value Content Creation . Custom search engines . Collaboration . Communication . Communication . Web-based journals/blogs . Outreach . Wikis . Instruction . Podcasts . Training . Videos and photos . Resource . Library marketing development

35. Web 2.0, Social Networks, and E-Commerce • Why Is There an Interest? • Web 2.0 applications and especially social networks attract a huge number of visitors • Social networks are spreading rapidly and many of them cater to a specific segment of the population • Young visitors today will grow up and spend money • Retailers stand to benefit from online communities in several important ways

36. Managerial Issues • How do we compete in the digital economy? • What about intermediaries? • What organizational changes will be needed?

37. E-CommerceBBA (Hons) Cases on E-Markets and Models Lectures 4,5,6 Course Lecturer: Farhan Mir

38. Proactive & Direct Marketing Dell Computers

39. Dell’s Direct Marketing • Michelle Dell a fresh graduate from University of Texas started the company in 1983 • Rather maintaining old PCs or upgrading them (What he started earlier at his company) he realized he could purchase new components from supplier and built is own one • He thought he could sell these PCs direct to customer at lower (discount) prices • Dell advertised in Magazines and the number of orders increased significantly

40. Dell’s Direct Marketing • Within two years it grew from nothing to a $70 Million business • Initially consumers ordered PC and them the business climbed to highs when small and large business started to place orders • In 1990s Dell started new venture in Europe to extend it’s market and increased its product line and establish a name as far as quality is concerned

41. Dell’s Direct Marketing… • In early 1990s Dell establish links with retailers for selling their PCs where customers could have latest brands and after sales service from partner retailers like BestBuy, PC World and Business Depot • Although there was growth in companies overall posture but lot of investment was done and indirect channels acquired profit share of Dell therefore there was decrease in stock price of Dell and need for an alternative solution • Returning back to its old direct marketing model Dell again saw a boom in it’s business in the mid and late 1990s • It became the US No. 1 computer manufacturer and worlds No. 2 in 2000, establishing new unit in Malaysia and new plants in Europe

42. Dell’s Model • Dell developed and exercised a model that was not only very unique but it also focused on speed and few inventory • This eliminated the reseller’s margins and cost associated with Inventories • Dell’s model was based on Information Technologies throughout it’s network, especially among it’s partners • The Direct Model also strongly serve Customer Service and Support (one of the focused themes of Michelle Dell)

43. Dell’s Direct Marketing: Here comes the Web • Michelle Dell was always fascinated by the growing phenomenon of Internet and World Wide Web • An idea stuck at his mind that “why not a customer could order a computer online?” • They were selling on phone and those customers were the first willing to place orders online • Internet proved to be a more comprehensive yet very efficient extension of Dell’s Direct Model • Dell enhanced it’s offerings by providing personalized pages for each customer online

50. Reactive Direct Marketing(& Customized E-Catalogs) Ford Motors