Chapter 9 - Online retail and services. The following will be discussed in this chapter: Major trends in online retail, 2010-2011; the retail sector, the retail industry, E-commerce retail: the vision, analyzing the viability of online firms, strategic analysis factors,...
Ecommerce: Business. Technology. Society Ecommerce business. technology. society seventh edition Kenneth C Laudon Carol Guercio Traver Copyright © 2011 Pearson Education, Inc Copyright © 2011 Pearson Education, Inc Chapter 9: Online Retail and Services Chapter 9 Online Retail and Services Copyright © 2011 Pearson Education, Inc Copyright © 2010 Pearson Education, Inc Copyright © 2011 Pearson Education, Inc Slide 92 Blue Nile Sparkles For Your Cleopatra Class Discussion Why is selling (or buying) diamonds over the Internet difficult? How has Blue Nile built its supply chain to keep costs low? How has Blue Nile reduced consumer anxiety over online diamond purchases? What are some vulnerabilities facing Blue Nile? Would you buy a $5,000 engagement ring at Copyright © 2011 Blue Nile? Pearson Education, Inc Slide 93 Major Trends in Online Retail, 20102011 Growth in social shopping Online retail remained profitable during recession Online retail still fastest growing retail channel Buying online a normal, mainstream experience Selection of goods increases, includes luxury goods Copyright © 2011 Informational shopping for big-ticket items Pearson Education, Inc Slide 94 The Retail Sector Most important theme in online retailing is effort to integrate online and offline operations U.S retail market accounts for $10 trillion (70%) of total GDP Personal consumption: Services: 61 % Nondurable Durable goods: 29 % goods: 10 % “Goods” vs “services” ambiguity Copyright © 2011 Pearson Education, Inc Slide 95 The Retail Industry 8 segments (clothing, durable goods, etc.) For each, uses of Internet may differ Information General vs direct purchasing merchandisers vs specialty retailers Mail order/telephone order (MOTO) sector most similar to online retail sector Sophisticated order entry, delivery, inventory Copyright © 2011 control systems Pearson Education, Inc Slide 96 Composition of the U.S. Retail Industry Copyright © 2011 Pearson Education, Inc Figure 9.1, p 579 SOURCE: Based on data from U.S Census Bureau, 2010 Slide 97 Ecommerce Retail: The Vision Reduced search and transaction costs; customers able to find lowest prices Lowered market entry costs, lower operating costs, higher efficiency Traditional physical store merchants forced out of business Some industries would be disintermediated Few of these assumptions were correct—structure of retail marketplace has not been revolutionized Internet has created new venues for multichannel firms and supported a few pure-play merchants Copyright © 2011 Pearson Education, Inc Slide 98 The Online Retail Sector Today Smallest segment of retail industry (6%) Growing at faster rate than offline segments Revenues expected to resume 10-15% growth between 2010 – 2014 72% of Internet users bought online in 2010 Primary beneficiaries: Established offline retailers with online Copyright © 2011 presence (e.g Staples) Pearson Education, Inc Slide 99 Online Retail and B2C Ecommerce is Alive and Well SOURCES: Copyright © 2011 Figure 9.2, p.582 Pearson Education, Inc Based on data from eMarketer, Inc., 2010a; authors’ estimates Slide 910 Online Mortgage and Lending Services Early entrants hoped to simplify and speed up mortgage value chain Difficulties in branding and simplifying mortgage generation process Three kinds of online mortgage vendor today Established online banks, brokerages, and lending organizations Pure online mortgage bankers Mortgage brokers Online mortgage industry has not transformed process of obtaining mortgage Copyright © 2011 Complexity of process Pearson Education, Inc Slide 931 Online Insurance Services Online term life insurance: One of few online insurance with lowered search costs, increased price comparison, and lower prices Commodity Most insurance not purchased online Online industry geared more toward Product information, search Price discovery Online quotes Influencing the offline purchasing decision Copyright © 2011 Pearson Education, Inc Slide 932 Online Real Estate Services Early vision: Local, complex, and agent-driven real estate industry would transform into disintermediated marketplace However, major impact is influencing of purchases offline Impossible to complete property transaction online Main services are online property listings, loan calculators, research and reference material Despite revolution in available information, there has not been a revolution in the industry value Copyright © 2011 chain Pearson Education, Inc Slide 933 Insight on Society Hotel Tax Battle: The Online Travel Industry vs. Local Government Class Discussion Who you think is right in this tax battle – the online travel industry or local governments? What you think will happen if local governments are successful in this fight? What is the Internet Travel Tax Fairness Act? Copyright © 2011 Pearson Education, Inc Slide 934 Online Travel Services One of the most successful B2C e-commerce segments 2007: First year online bookings greater than offline 2009: Online travel bookings declined slightly due to recession but expected to grow to $118 billion by 2013 For consumers: More convenience than traditional travel agents Copyright © 2011 For suppliers: A singular, focused customer pool Pearson Education, Inc Slide 935 Online Travel Services (cont.) Travel an ideal service/product for Internet Information-intensive product Electronic product—travel arrangements can be accomplished for the most part online Does not require inventory Does not require physical offices with multiple employees Suppliers are always looking for customers to fill excess capacity Does not require an expensive multi-channel Copyright © 2011 presence Pearson Education, Inc Slide 936 Online Travel Services Revenues Copyright © 2011 Pearson Education, Inc Figure 9.5, Page 617 SOURCE: Based on data from eMarketer, 2010c Slide 937 The Online Travel Market Four major sectors: Airline tickets Hotel reservations Car rentals Cruises/tours Two major segments: Leisure/unmanaged business travel Managed business travel – expected to offer greater growth opportunities Corporate online-booking solutions (COBS) Copyright © 2011 Pearson Education, Inc Slide 938 Projected Growth of Online Travel Market Segments Copyright © 2011 Pearson Education, Inc Figure 9.6, Page 623 SOURCES: Based on data from eMarketer, Inc., 2010c Slide 939 Insight on Business Zipcars Class Discussion What is the Zipcar business model? How does it make money? How does Zipcar use the Internet? Does Zipcar compete with traditional car rental firms? Will Zipcar work only in urban markets? Can it expand to the suburbs? Copyright © 2011 Pearson Education, Inc Slide 940 Online Travel Industry Dynamics Intense competition among online providers Price competition difficult Industry consolidation Stronger, offline established firms purchasing weaker online firms to create multi-channel travel sites Industry impacted by meta-search engines Commoditize online travel Copyright © 2011 Pearson Education, Inc Slide 941 Online Career Services Top sites generate over $1 billion annually Two main players: CareerBuilder, Monster Traditional recruitment: Classified, print ads, career expos, on-campus recruitment, staffing firms, internal referral programs Online recruiting More efficient, cost-effective, reduces total time-to- hire Enables job hunters to more easily distribute resumes while conducting job searches Ideally suited for Web due to information-intense Copyright © 2011 Pearson Education, Inc Slide 942 nature of process It’s Just Information: The Ideal Web Business? Recruitment ideally suited for Web Information-intense process Initial match-up doesn’t require much personalization Saves time and money for both job hunters and employers One of most important functions: Ability to establish market prices and terms Copyright © 2011 (online national marketplace) Pearson Education, Inc Slide 943 Online Recruitment Industry Trends Consolidation Diversification: Niche employment sites Localization Local Job vs national, Craigslist search engines/aggregators: “Scraping” Social listings: Indeed.com, JobCentral networking: LinkedIn; Facebook apps Copyright © 2011 Pearson Education, Inc Slide 944 All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher Printed in the United States of America Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Copyright © 2011 Pearson Education, Inc ... Pearson Education, Inc Slide 9 21 Service Industries Two categories Transaction brokers Hands-on service providers Features: Knowledge- and information-intense Makes them uniquely suited to e-commerce. .. liabilities and long-term debt Copyright © 2011 Working capital Pearson Education, Inc Slide 9 14 Etailing Business Models Virtual merchant Bricks-and-clicks Wal-Mart, J.C Penney, Sears... Pearson Education, Inc Slide 9 9 Online Retail and B2C Ecommerce is Alive and Well SOURCES: Copyright © 2011 Figure 9. 2, p.582 Pearson Education, Inc Based on data from eMarketer, Inc., 2010a; authors’