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Chap 02
1.
Chapter 2
Retailing in Electronic Commerce © Prentice Hall, 2000 1
2.
Learning Objectives Define the
factors that determine the business models of electronic marketing Identify the critical success factors of direct marketing Design the desirable relationship in a direct marketing setting Analyze the critical success factors of electronic intermediaries Identify the typical products that sold well in the electronic market © Prentice Hall, 2000 2
3.
Learning Objectives (cont.) Observe
the reactive strategy of traditional department stores Discuss whether electronic commerce should always target global markets Describe the consumerâs shopping procedures on the Internet Discuss the types of aiding-comparison- shopping devices Describe the impact of EC on disintermediation and re-intermediation in retailing © Prentice Hall, 2000 3
4.
Overview of Electronic
Marketing Structure Consumer-oriented Electronic Marketing (B2C) Mostly online; on the Internet Growing offline too, mainly by using smart cards, although it is still experimental Business-oriented Electronic Marketing (B2B) Needs more precise record keeping, trackability, accountability, and formal contracts, usually with high volume of transactions and large amount payments © Prentice Hall, 2000 4
5.
Advantages of Electronic
Marketing Customers can order from cyberstores 24 hours a day, 7 days a week from any place in the world Direct marketing Customization Online customer service Electronic shopping malls: Intermediaries (e.g. Internet Mall) Stores (e.g. Amazon, J.C.Penney Online) Electronic intermediaries Global marketing © Prentice Hall, 2000 5
6.
Forecast of the
B2C Electronic Markets Forecasting Institutions 1997 2000 IDC 1,000 117,000 VSAComm 48 3,500 VeriFone 350 65,000 Actif Media 436 46,000 Killen & Assoc. 775,000 Yankee 850 144,000 Jupiter 45 580 E-land 450 10,000 EU 228,000 USA 200 EITO 363 200,000 AEA/AU 200 45,000 Hambrecht & Quest 1,170 23,200 Forrester 518 6,579 [Source: OECD, 1997] Initial Forecast of B2C Electronic Market Size © Prentice Hall, 2000 6
7.
Forecast of the
B2C Electronic Markets (cont.) Kinds of items sold (Unit: Millions of U.S. Dollars) Items 1997 2000 Apparel 46 322 Gifts/flowers 45 658 Books 16 Not available Food/drink 39 336 Clothing 89 322 Entertainment 85 1,250 Subscription services 120 966 Pornography 52 Not available Music 9 186 Online games 127 1,013 Consumer finance 68 Not available Consumer insurance 30 1,110 [Source: OECD, Sept. 1997] Initial Forecast of B2C Electronic Market Segments © Prentice Hall, 2000 7
8.
Forecast of the
B2C Electronic Markets (cont.) What sells on the Internet? Items with high brand recognition Goods that can be transformed to digitized goods like books, music, and video Items with security guarantee given by highly reliable or known vendors Relatively cheap items Repetitively purchased items such as groceries Commodities with standard specification Items whose operating procedures can be more effectively demonstrated by a video Packaged items which are well known to customers and which cannot be opened even when customers physically visit the store © Prentice Hall, 2000 8
9.
Business Models of
Electronic Marketing Direct Marketing Manufacturers Electronic Mall Vs. Vs. Indirect Marketing Manufacturers Electronic Store Active Strategic Posture Sales Vs. Vs. Reactive Strategic Posture Customer Services Global Marketing Full Cybermarketing Vs. Vs. Regional Marketing Partial Cybermarketing Electronic Store Generalized Mall Vs. Vs. Electronic Broker Specialized Mall/Store © Prentice Hall, 2000 9
10.
Business Models of
Electronic Marketing (cont.) Proactive Vs. reactive strategic posture toward cybermarketing Proactive strategic posture toward cybermarketing a companyâs main distribution channel is the Internet, and internal management such as inventory and operations management is focused to affect the benefit of cybermarketing Reactive strategic posture toward cybermarketing the traditional physical distribution channel is left as the companyâs main distribution channel even though the company has opened an online distribution channel Global Vs. regional marketing © Prentice Hall, 2000 © Prentice Hall, 2000 10
11.
Direct Marketing Active and
full direct Marketing Dell Computer Corporation Case Founding spirit of dell: telemarketing Astonishingly high growth and returns Revenue via the Internet Dellâs products on the Internet © Prentice Hall, 2000 11
12.
Direct Marketing (cont.) Dellâs
Critical Success Factors Price competitiveness owing to mass- customization and direct marketing Database marketing and customer intimacy Global reach and value added services at a single contact point High reliability and reputation Delivery support Advanced web applications © Prentice Hall, 2000 12
13.
Direct Marketing (cont.) Reactive
and Partial Direct Marketing Sell their products mainly through traditional channels like department stores, discount stores, and franchises Ford Case including dealers as partners is optimal because orders that are received directly by the automakers may not be physically fulfilled without the cooperation of dealers the received orders can then be assigned to the nearest dealer who owns the desired car in the inventory the dealerâs inventory information should be shared by automakers through a common network © Prentice Hall, 2000 13
14.
Direct Marketing (cont.) Reactive
and Partial Direct Marketing Fordâs reactive direct marketing model (procedure) Then the Online Chooseoption leaseor you the budget, You can changeShopping Service options will provide Decidedealerdealer online by Selectoptionswillofpackage(s) Add other individualstyle buy, Selectwhether tocontact truck The the a the body System Search brand accommodate the to car or Pick Pickinterior upholstery that paint color taste Send the âVehicle forexterior suits your the your favorite financing the dealer Apply Summaryâ to to buildwith and dealer Paymentdesire state you configured with a price the aidcomfortable,theSummaryâ your youavailability ofconfiguration most finalizemost Calculator System vehicle andwith a appeals to or customized thatname, city,you of âVehicle you that interests vehicle you the useful Ford supports a pre-owned showroom in the following way : Select EnterConfirmyour deliveryoptions Choose aEnterpersonal information ExploreSearchExtendedcodeand Plan aTest drive andyour order dealershipyourtest-drive your for accept Service delivery Secure the inventory Confirmyou vehicle leasing or financing Ford Print ZIP delivery order © Prentice Hall, 2000 14
15.
Online Customer Service Provided
in conjunction with online sales Provided to products which are sold offline Example: service and support homepage of Hewlett Packard (HP) By using computer telephone integration (CTI) technology, the same screen that a customer sees can be automatically displayed to the human agent (and vice versa) who responds to the customerâs call watching the online data about the customer © Prentice Hall, 2000 15
16.
Active Electronic Intermediaries
Pure electronic mall Companyâs retailing business exists only on the Internet Electronic distributors take full responsibility of fulfilling orders and collecting payments Electronic brokers assist the search process of finding the appropriate products and their vendors Partial electronic mall Electronic mall as one of existing distribution channels © Prentice Hall, 2000 16
17.
Active Electronic Intermediaries
(cont.) Generalized Electronic Intermediaries Examples : Choice Mall, and iMall Provide a directory, keyword search engine, message encryption, optional Web site hosting service and a common platform of electronic payments Necessary factors to make shopping successful Screening quality and reliability for assurance ⹠customers need a reliable screening capability of quality and reliability of brands and companies ⹠e-brokers should create a trusted third party Competing electronic channels ⹠several electronic channels help in finding the items needed ⹠e-brokers should provide some differentiated attraction © Prentice Hall, 2000 17
18.
Active Electronic Intermediaries
(cont.) Specialized Electronic Distributors Cyber Bookstores Amazon, Barnes and Noble Cyber CD Stores Columbia House, Music Boulevard, CD Universe, and CDNow Digitized Products and Services Stores Software, games, CDs, and videos Cyber Flower Stores 1-800-FLOWERS © Prentice Hall, 2000 18
19.
Reactive Electronic Department
Store The J.C. Penney Case The Internet-based revenue amounts to only 1 to 2% of $30.5 Internet- billion total sales of 1997 (3.5% in Insurance based 1999) 3% 1% Drug Stores Updating prices and adding 32% new items to the electronic catalogs is convenient and Catalog Department inexpensive 13% Stores Overcoming the limitations of 51% paper catalogs without incurring extra distribution cost © Prentice Hall, 2000 19
20.
Reactive Electronic Department
Store (cont.) Electronic Department Stores Worldwide Marks & Spencer in the U.K., La Redoute in France, Jusco in Japan, Nordstrom in the U.S.A., and Lotte and Hyundai in Korea Common strategy is finding significant benefits from merchandising online Offering electronic service on the Internet is a supplementary channel of advertisement By 2000, 3.5% of all U.S. major retailing will be done online © Prentice Hall, 2000 20
21.
Regional Shopping Service Peapod
Case The leading Internet supermarket, providing consumers with broad product choices and local delivery services Provide pictures of items, nutritional contents, past purchase records Users: middle and upper class people, some of whom are single parents, and all of whom are very busy. Also sick and elderly people or those without transportation. $4.95/month membership fee, and $6.95 service free + 5% of the purchased amount = cost of delivery service © Prentice Hall, 2000 21
22.
Procedures for Internet
Shopping : The Consumerâs Perspective Preliminary requirement determination to meet the needs Search for the available items that can meet the requirements Compare the candidate items with multiple perspectives: specification, price, delivery date, and other terms and conditions © Prentice Hall, 2000 22
23.
Procedures for Internet
Shopping : The Consumerâs Perspective (cont.) Place an order Pay the bill Receive the delivered items and inspect; possibly while using Contact the vendor to get service and support, or to return if disappointed © Prentice Hall, 2000 23
24.
Aiding Comparison Shopping Search
hypertext files by agents Search in a web-based database both by human and software agents within an e-mall Comparable item retrieval and tabular comparison Comparisons over multiple malls Comparisons as a multiple criteria decision making © Prentice Hall, 2000 24
25.
The Impact of
EC on Traditional Retailing System Disintermediation and Re-intermediation Disintermediation â the removal of organizations or business process layers responsible for certain intermediary steps in a given value chain eliminating the traditional intermediaries, such as wholesalers, distributors, and retailers, to reduce the cost Re-intermediation â the shifting or transfer of the intermediary functions, rather than the complete elimination intermediation such as electronic shopping malls, directory and search engine service, and comparison aids using agents creates the role of re-intermediation © Prentice Hall, 2000 25
26.
The Impact of
EC on Traditional Retailing System (cont.) Impact on Manufacturerâs Distribution Strategy Manufacturerâs monopolistic Internet-based distribution: Leviâs does not allow any one else to sell the Leviâs product on the Internet (policy changed in 1999). Coexistence with the dealers: This is the case in car distribution. Regionally mixed strategy: Nike sells on the Internet, but only in the U.S.A. Mass Customization for Make-to-Order: Manufacturers have to be adaptive to the customized orders of ultimate consumers. This means the manufacturer should be ready for mass customization. © Prentice Hall, 2000 26
27.
Managerial Issues From
a manufacturerâs point of view: Fully committed to direct marketing, Regard the electronic restructuring the OR store as an additional current manufacturing channel of distribution and distribution systems © Prentice Hall, 2000 27
28.
Managerial Issues (cont.) From
an intermediaryâs point of view: Retailing a Commit to the OR specialized breed directory service of items For existing retailer in the physical space: How to transform its business posture to get the highest possible customer satisfaction at a minimum operating cost? © Prentice Hall, 2000 28
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