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E-Commerce and Small Business - Finding the Right Products to Sell on the Internet

E-Commerce and Small Business - Finding the Right Products to Sell on the Internet. Robert T. Chi Information Systems Department College of Business Administration California State University, Long Beach. Motivation.

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E-Commerce and Small Business - Finding the Right Products to Sell on the Internet

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  1. E-Commerce and Small Business - Finding the Right Products to Sell on the Internet Robert T. Chi Information Systems Department College of Business Administration California State University, Long Beach

  2. Motivation • The Internet has provided a rare opportunity especially for small to medium sized enterprises. • The potential of the Internet as a commercial medium and market. • Both successful and unsuccessful cases of Internet marketing have been reported. • In this research, we focus on the use of the Internet as a virtual storefront. • we identify the factors that impact the use of on-line marketing approach.

  3. Introduction • The Internet matches buyers and sellers in a more cost-effective manner, compared with traditional advertising and marketing. • It breaks through the physical barriers and moves firms to a new commercial marketplace. • The opportunity for buyers to examine or test the product or service and interact with the seller to receive additional information or support.

  4. Pros and Cons of E-Marketing ApproachAdvantages of Internet Marketing: • Communication Channel: Exchange information between sellers and buyers. • (1) the ability to store vast amounts of information that can be searched and disseminated in a cost-effective manner which is accessible by virtually everyone on the Net, • (2) interactivity and the ability to provide information on demand, and • (3) provide perceptual experiences that are superior to a printed catalog.

  5. Continued: • Transaction Channel: Generate sales activities. • small companies that play in niche markets (i.e., sell specialized or unique products or services) in which buyers and sellers are small and geographically dispersed, can use the Internet to reach a much bigger customer base • The Internet can also ease transaction processing, especially for handling complex orders

  6. Continued: • Distribution Channel: Physical exchange of products/services. • On-line marketing offers more choices and flexibility and, at the same time, eliminates huge inventories, storage costs, utilities, and space rental, etc. • Using the Internet as the distribution channel can reduce the delivery cost substantially, and also ensures instant delivery of products/services.

  7. Table 1. Advantages of the Internet marketing approach grouped by the three channel functions Channel Functions Advantages Communication Improved product information Improved price information Availability of service, 24 hours a day, 7 days a week Lower cost of communication Interactivity and the ability to provide information on demand Real-time inventory update On-line technical support Quick response of inquiries Customized orders Post-sale service No personal contact Transaction Virtual storefront can be reached by all Internet users Lower cost of transaction Allow microtransactions Reduce human errors Reduce procurement cycle time Lower inventory level and other related overhead Possible to customize promotion and sales to individual customers Flexible pricing Relatively low entry and establishment costs Distribution Reduced waiting time to receive product for digital products/services Lower cost of delivery for digital products/services

  8. Table 2. Product and Service Classification Grid (Adapted from Peterson et al., [1997]) Dimension 1 Value Proposition Dimension 2 Degree of Differentiation Dimension 3 Frequency of Purchase Examples of Products and Services Category Digital High Frequent On-line newspapers and Magazines DHF Infrequent Software packages DHI Low Frequent Stock market quotes DLF Infrequent Automobile financing, insurance DLI Tangible High Frequent Wines, soft drinks, cigarettes THF Infrequent Stereo systems, Automobiles THI Low Frequent Milk, eggs TLF Infrequent Precious metal ingot of Known weight and purity TLI

  9. Table 3. Classification grid for analyzing the potential benefits of Internet markeing Channel Functions Advantages DHF DHI DLF DLI THF THI TLF TLI Communication Improved product information X X X X Improved price information x x X X x x X Availability of service X X X X X X X X Lower cost of communication X X X X X X X X Interactivity X X X X Real-time inventory update X X X X On-line technical support X X X X X X Quick response of inquiries X X X X X X X X Customized orders X X X X Post-sale service X X X X No personal contact ? ? ? ? ? ? ? ? Transaction Virtual storefront x X x X Lower cost of transaction X X X X X X X X Allow microtransactions X X X X Reduce human errors X X X X x X x X Reduce procurement cycle time X X X X Lower inventory level x x x x x x x X Customize promotion and sales x x x x Flexible pricing x x X X x x X X Low entry costs X X X X X X X X Distribution Reduced waiting X X X X Lower cost of delivery X X X X

  10. Limitations and Future Research • limited the scope to focus only on the product characteristics and their effects on the success of Internet marketing. • Other factors that may impact the performance of Internet marketing include: 1) the firm’s current distribution structure and channel relationships, 2) the size of the company, 3) the promotion strategies, and 4) the pricing structure, etc. • Study the cases of individual companies to evaluate and design channels that would help with the successful launch of new products.

  11. Goal Pprovide a framework to identify factors that influence consumer buying behavior on different product/service categories over the Internet.

  12. Tangibility Price Competition Convenience Shopping Enjoyment Quality Info. Comm. Cost Comm. Time Transaction Cost Trans. Time Distribution Cost and Time, Post-Sales Services Tangible or physical goods High outlay Highly competitive M M M H H H L M H Less competitive H H H L M L L M M Low outlay Highly competitive L L L H H H H H H Less competitive M M M L L L H H M Intangible or informa-tional goods High outlay Highly competitive M M M H H H L L M Less competitive H H H L M L L L L Low outlay Highly competitive L L L H H H H L M Less competitive M M M L L L H L L Table 1. Characteristics of Products sold on the Internet and Corresponding Key Factors * degree of importance: H – High, M – Medium, L - Low

  13. Table 2 summary of survey results Product category Conve-nience Enjoy Qual. Info Comm Cost Comm Time Tran Cost Tran Time Security Deli Cost Deli Time Service 1 (HHT) 8.41 6.95 8.94 8.16 7.97 8.62 8.21 9.36 8.62 8.42 8.50 2 (HLT) 8.81 7.36 8.97 8.32 8.02 8.68 8.27 9.23 8.71 8.29 8.57 3 (LHT) 6.64 6.65 7.11 7.59 7.75 8.39 8.16 8.59 8.55 8.21 6.82 4 (LLT) 8.41 7.32 8.33 8.06 8.02 8.43 8.26 9.05 8.55 8.27 8.07 5 (HHI) 8.75 7.38 8.81 8.53 8.36 8.75 8.65 9.15 8.72 8.70 8.25 6 (HLI) 9.04 7.39 9.14 8.42 8.24 8.30 8.24 9.08 8.31 8.70 8.68 7 (LHI) 7.43 7.65 7.88 7.76 7.95 8.25 8.30 8.50 8.11 8.04 7.49 8 (LLI) 8.89 7.25 8.59 8.28 8.19 8.13 8.07 8.84 8.02 8.21 8.31 Average 8.30 7.24 8.47 8.14 8.06 8.44 8.27 8.98 8.45 8.36 8.09 std 0.84 0.31 0.68 0.32 0.19 0.22 0.17 0.31 0.27 0.24 0.63

  14. Figure 1 Charting of the survey results

  15. Table 3 Rankings of relative importance within each product category Product category Conve-nience Enjoy Qual. Info Comm Cost Comm Time Tran Cost Tran Time Security Deli Cost Deli Time Service 1 (HHT) 7 11 2 9 10 3 8 1 3 6 5 2 (HLT) 3 11 2 7 10 5 9 1 4 8 6 3 (LHT) 11 10 8 7 6 3 5 1 2 4 9 4 (LLT) 4 11 5 9 10 3 7 1 2 6 8 5 (HHI) 3 11 2 8 9 3 7 1 5 6 10 6 (HLI) 3 11 1 6 9 8 9 2 7 4 5 7 (LHI) 11 9 7 8 6 3 2 1 4 5 10 8 (LLI) 5 11 2 8 10 4 7 1 3 6 9 Average 5 11 2 8 10 4 7 1 3 6 9

  16. Product category Conve-nience** Enjoy** Qual. Info** Comm Cost** Comm Time** Tran Cost Tran Time Security* Deli Cost Deli Time** Service** 3 (LHT) 6.64 6.65 7.11 7.59 7.75 8.39 8.16 8.59 8.55 8.21 6.82 6 (HLI) 9.04 7.39 9.14 8.42 8.24 8.30 8.24 9.08 8.31 8.70 8.68 Table 4 Product category 3 Low cost, High competition, Tangible vs. 6 High cost, Low competition, Intangible • * 1 standard deviation apart • ·   ** 2 standard deviation apart

  17. Figure 2 Comparison chart for product categories 3 (LHT) and 6 (HLI)

  18. Product category Conve-nience* Enjoy Info* Comm Cost* Comm Time Tran Cost* Tran Time Security* Deli Cost* Deli Time* Service* H Outlay 8.75 7.27 8.97 8.36 8.15 8.59 8.34 9.21 8.59 8.53 8.50 L Outlay 7.84 7.22 7.98 7.92 7.98 8.30 8.20 8.75 8.31 8.18 7.67 Table 5 High vs. Low Outlay goods • * 1 standard deviation apart

  19. Product category Conve-nience* Enjoy Info Comm Cost Comm Time Tran Cost Tran Time Security Deli Cost Deli Time Service* H Comp 7.81 7.16 8.19 8.01 8.01 8.50 8.33 8.90 8.50 8.34 7.77 L Comp 8.79 7.33 8.76 8.27 8.12 8.39 8.21 9.05 8.40 8.37 8.41 Table 6 High vs. Low Competition goods • * 1 standard deviation apart

  20. Product category Conve-nience Enjoy* Info Comm Cost Comm Time* Tran Cost Tran Time Security Deli Cost* Deli Time Service Tangible 8.07 7.07 8.34 8.03 7.94 8.53 8.23 9.06 8.61 8.30 7.99 Intangible 8.53 7.42 8.61 8.25 8.19 8.36 8.32 8.89 8.29 8.41 8.18 Table 7 Tangible vs. Intangible goods • * 1 standard deviation apart

  21. Figure 3 Charting the importance of different factors between high and low outlay products

  22. Figure 4 Charting the importance of different factors between high and low competitive products

  23. Figure 5 Charting the importance of different factors between tangible and intangible products

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