Chapter 3

1. Chapter 3 Retailing in Electronic Commerce: Products and Services

2. Learning Objectives • Describe electronic retailing (e-tailing) and its characteristics. • Define and describe the primary e-tailing business models. • Describe how online travel and tourism services operate and their impact on the industry. • Discuss the online employment market, including its participants, benefits, and limitations. • Describe online real estate services. Prentice Hall

3. Learning Objectives • Discuss online stock-trading services. • Discuss cyberbanking and online personal finance. • Describe on-demand delivery of groceries and similar products/services. • Describe the delivery of digital products and online entertainment. • Discuss various e-tail consumer aids, including comparison-shopping aids. • Describe disintermediation and other B2C strategic issues. Prentice Hall

4. Internet Marketing and Electronic Retailing • OVERVIEW OF ELECTRONIC RETAILING • electronic retailing (e-tailing) Retailing conducted online, over the Internet. • e-tailers Retailers who sell over the Internet. • Manufacturer sells directly to the customer, cutting out the intermediary • Catalog sales free a retailer from the need for a physical store Prentice Hall

5. Internet Marketing and Electronic Retailing • SIZE AND GROWTH OF THE B2C MARKET • ($70,$90 billion for 2004, 2005) = 2-4 of total retails in US. • A growth of about 20% per annum. Prentice Hall

6. Computers and electronics Sporting goods Office supplies Books and music Toys Health and beauty Entertainment Apparel Cars Services Others What Sells Well on the Internet? Prentice Hall

7. Basic Principles for E-TAILING Success • Sound business thinking, visionary leadership, thorough competitive analysis and financial analysis, and the articulation of a well-thought-out EC strategy are essential. • Ensure appropriate infrastructure, particularly a stable and scalable technology infrastructure to support the online and physical aspects of EC business operations. Prentice Hall

8. Brand recognition and guarantees Guarantee provided by highly reliable or well-known vendors Digitized products Inexpensive items Frequently purchased Commodities with standard specifications Well-known packaged items that cannot be opened even in a traditional store Characteristics of Successful E-Tailing Prentice Hall

9. E-Tailing Business Models • CLASSIFICATION BY DISTRIBUTION CHANNEL • Direct marketing by mail-order retailers that go online • Direct marketing by manufacturers • Pure-play e-tailers • Click-and-mortar retailers • Internet (online) malls Prentice Hall

10. E-Tailing Business Models Prentice Hall

11. E-Tailing Business Models • direct marketing Broadly, marketing that takes place without intermediaries between manufacturers and buyers; in the context of this book, marketing done online between any seller and buyer. • Direct Sales by Manufacturers • Pure-Play E-Tailers • virtual (pure-play) e-tailers Firms that sell directly to consumers over the Internet without maintaining a physical sales channel. Prentice Hall

12. E-Tailing Business Models • click-and-mortar retailers Brick-and-mortar retailers that offer a transactional Web site from which to conduct business. • brick-and-mortar retailers Retailers who do business in the non-Internet, physical world in traditional brick-and-mortar stores. • multichannel business model A business model where a company sells in multiple marketing channels simultaneously (e.g., both physical and online stores). Prentice Hall

13. E-Tailing Business Models • Retailing in Online Malls • Referring directories • Malls with shared services • OTHER B2C MODELS AND SPECIAL RETAILING • Online Group Buying • B2C IN SOCIAL NETWORKS • Virtual Shopping Prentice Hall

14. Travel and Tourism Services Online • The Internet is an ideal place to plan, explore, and arrange almost any trip and save money • Travel-related information available at many sites including: • Expedia.com Orbitz.com • Travelocity.com Asiatravel.com • Travelweb.com Trip.com • Eurovacations.com Priceline.com • Lonelyplanet.com Prentice Hall

15. Information and bookings Travel tips Electronic Travel magazine Fare comparisons Currency conversion calculators Fare tracker Worldwide business and places locator Outlet for travel accessories and books Experts’ opinions Major international and travel news Driving maps and directions Chat rooms Frequent flier deals Online travel auctions Travel and Tourism Services Services provided: Prentice Hall

16. Travel and Tourism Services • Special services • Very low airfares and discount accommodations • Last-minute trips can also be booked • Special vacation destinations • Sites that offer medical advice and services for travelers: • World Health Organization (who.int) • Governments (cdc.gov/travel) • Private organizations (Healthcenter.com) Prentice Hall

17. Travel and Tourism Services • Wireless services Customers with WAP cell phones can check their flight status, update frequent flyer miles, and book flights • Direct marketing Build customer profiles and target specific customers with tailored offers • Alliances and consortia Increase sales or reduce purchasing costs Prentice Hall

18. Travel and Tourism Services • Benefits • Free information is tremendous • Free information is accessible anytime • Substantial discounts • Limitations • Not all people use the Internet • It may take a long time to find what you want • People are still reluctant to provide credit card numbers Prentice Hall

19. Impacts of EC on the Travel Industry • Impacts of EC on the travel industry into 10 categories including: Product promotion, new products, new business models • Only the value-added activities of travel agencies will not be automated • Performed by a new type of organization • Will serve certain targeted markets and customers • Entering the market will be: • Travel superstores that will provide • Innovative individuals operating from their homes Prentice Hall

20. Corporate Travel • Many large corporations receive additional services from large travel agencies • Online optimization tools provided by travel companies (rosenbluth.com) • Travel authorization software that checks availability of funds and compliance with corporate guidelines • This is a huge and rapidly growing market Oracle’s e-Travel provides software to automate and manage online booking Prentice Hall

21. Corporate Travel • American Express,Microsoft and MCI have developed AXI system that displays: • Airline seat charts • Maps showing hotels • Information on nearby health clubs • Weather information • Creates profiles for travelers and their preferences • Attempts to satisfy both travelers and corporate travel managers Prentice Hall

22. Intelligent Agents in Travel Services • Step 1: visit an online travel site and enter • Desired destination • Dates • Available budget • Special requirements • Desired entertainment • Step 2: computer dispatches an intelligent agent that “shops around” Prentice Hall

23. Intelligent Agents in Travel Services • Step 3: agent attempts to match your requirements with what is available, negotiates with vendors • Step 4: agent returns within minutes with suitable alternatives, modifies as per your wishes, books the vacation • Voice communication with agent may be possible by 2005 Prentice Hall

24. The Employment Placement and the Job Market • Job markets • Employers are looking for employees with specific skills, and individuals are looking for jobs • Very volatile market • Moved to the Internet • Millions of job seekers, hundreds of thousands of jobs Prentice Hall

25. The Internet Job Market • The Internet offers a perfect environment; it is especially effective for technology-oriented jobs • Job seekers • Job offerers • Recruiting firms • Government agencies and institutions Prentice Hall

26. Benefits of the Electronic Job Market • For job seekers • Find very detailed and timely information on a large number of jobs world-wide • Quickly communicate with potential employers • Post resumes for large-volume distribution • Search for jobs quickly from any place at any time • Obtain several support services at no cost • Assess their market value • Find out how to use their voice in an interview • Can access newsgroups that are dedicated to finding jobs Prentice Hall

27. Benefits of the Electronic Job Market • For employers • Advertise to a large number of job seekers • Save on advertisement costs • Lower the cost of processing (using electronic application forms) • Provide greater (‘equal opportunity’) for job seekers • Find highly skilled employees Prentice Hall

28. Limitations of the Electronic Job Market • Many people do not use the Internet • Companies may use both traditional advertising approaches and the Internet • Clear trend: more and more of the job market are going to the Internet • Security and Privacy • Resumes and other online communications are usually not encrypted • Possibility that someone at your current place of employment may find out that you are job hunting Prentice Hall

29. Limitations of the Electronic Job Market • Electronic job market may also create high turnover costs for employers by accelerating employees’ movement to better jobs • Finding candidates online is more complicated: • There is a large number of resumes available online • Some sites offer prescreening of candidates to help alleviate this problem (jobtrak.com) Prentice Hall

30. Virtual Job Employment Agent Prentice Hall

31. Real Estate Online • You can view many properties on the screen • You can sort and organize properties • You can find detailed information about the properties • You can search, compare and apply for loans For Sale Prentice Hall

32. Real Estate Applications • Advice to consumers on buying or selling a home assist2sell.com • International Real Estate Directory and News is a comprehensive real estate Web site ired.com • National listing of properties for sale homesinamerica.com • Commercial real estate listings commercialproperty.com • Rental properties homestore.net • Real estate related maps mapquest.com Prentice Hall

33. Insurance Online • Insurance—auto, home, life, and health at a substantial discount • Insureate.com • Order.com • Quotesmith.com Prentice Hall

34. Online Stock Trading • Costs between $5 and $29 per transaction (vs. $10 - $35 in traditional brokerage) • No waiting on busy telephone lines • No oral communication, less chance for errors • Place orders from anywhere, any time, day or night • No biased broker to push you • Considerable amount of free information Prentice Hall

35. Online Stock Trading Prentice Hall

36. Banking Online • Electronic banking (e-banking)—various banking activities conducted from home or the road using an Internet connection; also known as: • Cyberbanking Virtual banking • Online banking Home banking • Electronic banking • Saves time and money for users • Offers an inexpensive alternative to branch banking • Many traditional banks around the world offer diversified e-banking services • main.hangseng.com Prentice Hall

37. Get current account balances any time Obtain charge and credit card statements Pay bills Download account transactions Transfer money between accounts Balance accounts Send e-mail to the bank Expand the meaning of “banker’s hours” Handle finances when traveling Additional services Free phone banking Waive checking fees Capabilities of Home Banking Prentice Hall

38. International and Multiple-Currency Banking • Some international retail purchasing can be done by credit card • Other transactions may require international banking support • Hong Kong Bank’s HEXAGON provides e-banking in Asia • Tradecard and MasterCard developed a multiple-currency system for global transactions (tradecard.com) • A multidealer foreign exchange service that enables faster and cheaper foreign exchange transactions (fxall.com) Prentice Hall

39. Implementation Issues in Online Financial Transactions • Using bank intranets Banks provide large business customers with personalized service by allowing them access to the bank’s intranet to access accounts, historical transactions, intranet-based decision-support applications • Imaging systems—allow customers to view images of all: • Incoming checks • Invoices • Other related online correspondence Prentice Hall

40. Bill paying and e-checks Tracking bank accounts etc. Portfolio management Investment tracking Stock quotes and prices (past and current) Budget organization Record keeping Tax computations Retirement goals, planning and budgeting Personal Finance Online Prentice Hall

41. Online Billing and Bill Paying • Automatic transfer of mortgages • This method has existed for several years • The payer authorizes its bank to pay the mortgage, including tax escrow payments • Automatic transfer of funds to pay monthly utility bills • Paying bills from online banking account Prentice Hall

42. Online Billing and Bill Paying • A merchant-to-customer direct billing • A merchant posts bills on its Web site • Customers can view and pay their bill • Using an intermediary • A third party consolidates all bills related to each customer in one site in a standard format • Collects a certain commission • Makes it convenient to complete transactions Prentice Hall

43. Online Billing and Bill Paying • Person-to-person direct payment Paypal.com (now an eBay company)—enables you to send funds to another individual over the Internet • Online billing and bill-paying can be classified into B2C, B2B, or C2C. • Opportunities exist in B2B services—can save businesses about 50 percent of billing costs In Hong Kong, CitiCorp links suppliers, buyers, and banks on one platform, enabling automatic payments Prentice Hall

44. On-Demand Delivery Service (ODDS) • On-demand delivery service (ODDS)—express delivery made fairly quickly after an online order is received • On-Demand Delivery Services (ODDS) • May own a fleet of delivery vehicles for regular deliveries and delivery within short time period Prentice Hall

45. On-Demand Delivery Services Model Prentice Hall

46. The Case of E-Grocers • E-grocer—a grocer that will take orders online and provide regular deliveries on a daily or other regular schedule or will deliver items within a very short period of time • All e-grocers offer consumers the ability to order items online and have them delivered to their house • Some e-grocers offer free regular “unattended” weekly delivery based on a monthly subscription model Prentice Hall

47. The Case of E-Grocers • Others offer on-demand deliveries with a surcharge or additional delivery charge added • One e-tail grocer sells only nonperishable items shipped via common carrier • Many offer additional services • Dry cleaning pickup and delivery • “Don’t run out” automatic reordering • Fresh flower delivery • Movie rentals • And more Prentice Hall

48. Problems with E-Tailing & Lessons Learned • Profitability • Lose money on every sale as they try to grow to a profitable size and scale • Underlying cost and revenue models were not sound • Long-run success requires financial viability • Manage new risk exposure • Local companies contend with local customers and local regulations • National firms have more constituents • Global firms deal with numerous cultural perspectives Prentice Hall

49. Problems with E-Tailing & Lessons Learned (cont.) • Branding—drive to establish brand can lead to excessive spending • Starting with insufficient funds • Keep it interesting • Static design is a “turn-off” • Dynamic sites with rich databases of information appeal most to customers Prentice Hall

50. Disintermediation & Reintermediaries • Disintermediation—manufacturer sells directly to consumer • Reintermediearies—new intermediary roles in the digital environment offer new ways to: • Reach new customers • Bring value to customers • Generate revenues Prentice Hall