1 © Prentice Hall, 2000 Chapter 2 Retailing in Electronic Commerce 2 © Prentice Hall, 2000 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 3 © Prentice Hall, 2000 ❚ Observe the reactive strategy of traditional department stores ❚ Discuss whether electronic commerce should always target global markets ❚ Describe the consumer’s 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 Learning Objectives (cont.) 4 © Prentice Hall, 2000 Overview of Electronic Marketing Structure ❚ 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 ❚ Consumer-oriented Electronic Marketing (B2C) ❙ Mostly online; on the Internet ❙ Growing offline too, mainly by using smart cards, although it is still experimental 5 © Prentice Hall, 2000 Advantages of Electronic Marketing ❙ 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 ❚ Customers can order from cyberstores 24 hours a day, 7 days a week from any place in the world 6 © Prentice Hall, 2000 Forecast of the B2C Electronic Markets Initial Forecast of B2C Electronic Market Size 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] 7 © Prentice Hall, 2000 ❚ Kinds of items sold Forecast of the B2C Electronic Markets (cont.) (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 8 © Prentice Hall, 2000 ❚ What sells on the Internet? Forecast of the B2C Electronic Markets (cont.) ❙ 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 9 © Prentice Hall, 2000 Business Models of Electronic Marketing Direct Marketing Manufacturers Vs. Indirect Marketing Manufacturers Full Cybermarketing Vs. Partial Cybermarketing Electronic Store Vs. Electronic Broker Electronic Mall Vs. Electronic Store Active Strategic Posture Vs. Reactive Strategic Posture Global Marketing Vs. Regional Marketing Sales Vs. Customer Services Generalized Mall Vs. Specialized Mall/Store 10 © Prentice Hall, 2000 ❚ Proactive Vs . reactive strategic posture toward cybermarketing ❙ Proactive strategic posture toward cybermarketing ❘ a company’s 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 company’s main distribution channel even though the company has opened an online distribution channel ❚ Global Vs. regional marketing ❚ Sales Vs. customer services Business Models of Electronic Marketing (cont.) © Prentice Hall, 2000 10 [...]... Hall, 20 00 23 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, 20 00 24 The Impact of EC on Traditional Retailing System Disintermediation and Re-intermediation... Stores Software, games, CDs, and videos Cyber Flower Stores 1-8 00-FLOWERS © Prentice Hall, 20 00 18 Reactive Electronic Department Store The J.C Penney Case The Internet-based revenue amounts to only 1 to 2% of $30.5 billion total sales of 1997 (3.5% in 1999) Insurance 3% Internetbased 1% Drug Stores Updating prices and adding 32% new items to the electronic catalogs is convenient and Catalog... delivery service © Prentice Hall, 20 00 21 Procedures for Internet Shopping : The Consumer’s 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, 20 00 22 Procedures for Internet Shopping... wholesalers, distributors, and retailers, to reduce the cost Re-intermediation — 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, 20 00 25 The Impact of EC on Traditional Retailing System (cont.)... the manufacturer should be ready for mass customization © Prentice Hall, 20 00 26 Managerial Issues From a manufacturer’s point of view: Fully committed to direct marketing, restructuring the current manufacturing and distribution systems OR © Prentice Hall, 20 00 Regard the electronic store as an additional channel of distribution 27 Managerial Issues (cont.) From an intermediary’s point of view: Commit... most useful Ford supports a pre-owned showroom in the following way : Select EnterConfirmyour deliveryoptions Choose aEnterpersonal information ExploreSearchExtendedcode and Plan aTest drive and your order dealershipyourtest-drive your for accept Service delivery Secure the financing Confirmyou vehicle leasing or inventory Ford Print ZIP delivery order © Prentice Hall, 20 00 14 Online Customer Service... 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, 20 00 17 Active Electronic Intermediaries (cont.) Specialized Electronic Distributors Cyber... Internet © Prentice Hall, 20 00 11 Direct Marketing (cont.) Dell’s Critical Success Factors Price competitiveness owing to masscustomization 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, 20 00 12 Direct Marketing (cont.)... Distribution Strategy Manufacturer’s monopolistic Internet-based distribution: Levi’s does not allow any one else to sell the Levi’s 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... strategy is finding significant benefits from merchandising online Offering electronic service on the Internet is a supplementary channel of advertisement By 20 00, 3.5% of all U.S major retailing will be done online © Prentice Hall, 20 00 20 Regional Shopping Service Peapod Case The leading Internet supermarket, providing consumers with broad product choices and local delivery services Provide . Dollars) Items 1997 20 00 Apparel 46 322 Gifts/flowers 45 658 Books 16 Not available Food/drink 39 336 Clothing 89 322 Entertainment 85 1 ,25 0 Subscription services 120 966 Pornography 52 Not available Music. 20 0 EITO 363 20 0,000 AEA/AU 20 0 45,000 Hambrecht & Quest 1,170 23 ,20 0 Forrester 518 6,579 [Source: OECD, 1997] 7 © Prentice Hall, 20 00 ❚ Kinds of items sold Forecast of the B2C Electronic. Institutions 1997 20 00 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 22 8,000 USA 20 0 EITO