Transcript E-COMMERCE Learning Unit 2: RETAILING IN ELECTRONIC …

E-COMMERCE
Learning Unit 2: RETAILING IN
ELECTRONIC COMMERCE
OUTCOMES:
• Define the factors that determine the business
models of electronic marketing
• Identify the critical success factors of direct
marketing
• Identify the typical products that sell well in
the electronic market
• Identify the consumer’s shopping procedure
on the Internet
• Understand the types of comparison-shopping
aids
WHAT IS A BUSINESS MODEL? (Manual p. 19)
• A method of doing business by which a business can generate revenue to
sustain itself
• A method of spelling out where the business is positioned in the value
chain
• A component of a business plan
Business models and factors that determine business models:
BUSINESS MODEL OVERVIEW: (Textbook p. 43)
• Business models describe the plan used by an e-commerce firm to
generate revenue
• PAST: The reason why e-commerce grew very fast : low entry barriers,
availability of venture capital, high value in the stock market, investors
were convinced that e-commerce would replace traditional commerce
• The year 2000 marked a shift in investor perceptions: failure of ecommerce business modules, insecurities, devaluation of e-commerce
stock
• PRESENT: E-commerce business models are now viewed more realistically
with more reasonable expectations of their ability to yield profit
TYPES OF E-COMMERCE (Textbook p. 44)
1. Business-to-business (B2B)
• The Internet offers businesses several advantages
in terms of speed, coverage and digital
communication which will streamline operations,
improve efficiency and reduce costs
EXAMPLE: Retailers and delivery agents
2. Business-to-consumer (B2C)
• Websites are designed to accommodate
customers, to facilitate trade and payment with
the added convenience and efficiency of the
Internet
EXAMPLE: Online banking services
3. Consumer-to-Business (C2B)
• Consumers can use their collective buying
power to purchase in bulk or to negotiate
prices
• The Internet provides a convenient meeting
point and forum for consumers to unite
EXAMPLE: internet forums
4. Consumer-to-Consumer (C2C)
• Consumers can use the Internet as a point of
contact to exchange between each other
EXAMPLE: eBay, bidorbuy
E-COMMERCE BUSINESS MODELS (Textbook p. 46)
Def: a business model stipulate the manner in which an
e-commerce firm plans to generate revenue (the firm
should have a competitive advantage and offer value to
consumers)
Four (4) Elements/components of a business model
1. Value offering
• The firm must be able to define the value that it
intends to provide to customers
• It must also determine the manner in which this value
will be created and transferred to customers
• The value should refer to the competitive advantage of
the firm (unique/superior value or low cost)
• Attributes of e-commerce:
-speed and convenience (24h, 7 days a week)
-trust (if a company builds a reputation of
trust, consumers will stay loyal
-intellectual property rights
-network effects
-customisation and personalisation
2. Target market(s)
Organisations should understand the needs of their target
market (niche) or target markets
3. Scope
The geographic coverage of the organisation and the
extent of products/services offered
4. Resources
The organisation should have access to the resources
required to produce value offerings. Examples of
resources are: supplier networks, intermediaries, human
capital, internet and software infrastructure,
organisational systems also intangible resources for
example: information, communication or relationships
REFER TO YOUR TEXTBOOK P. 50 FOR THE AMAZON AND
20/TWENTY EXAMPLES
TYPOLOGIES OF BUSINESS MODELS
Organisations should be willing to experiment with new
business models to find new sources of competitive or
first move advantage
The following typologies can be treated as broad guidelines for e-commerce
business:
1. Advertising model/content providers
(websites offer services or content to attract web users. The website
becomes a meeting point for web users. Revenue is generated by selling
space on the website to companies who place banner ads or links on the site
– used by popular ISPs, search engines, portals and e-tailors)
2. E-tailing
(Organisations are using the web to trade goods or services)
EXAMPLES: amazon, kalahari.net, kulula
3. Infomediary
(similar to content providers. Offer free content to lure users to their site, but
revenue is not generated from hosting advertising, but from the sale of
personal behavioural data about their users)
4. Brokers
(A person hired to act as an agent or intermediary in making contracts or
sales. Online brokers match the needs of buyers and sellers
Unique brokerage models available on the Internet:
-auctions and reverse auctions e.g eBay
-search engines e.g Google
-virtual malls e.g Standard Bank
5. Market makers
(provide 3 core functions namely: online space to trade, rules that govern
trade, online and physical infrastructure to process trade)
6. Community
(formed to build relationships. Mainly C2C, also B2B)
Categories of community sites:
-Open source model (free of charge for members)
-Public broadcaster model (digital content is supplied
by
community members e.g music file sharing)
-Knowledge network (expert/specialised sites)
7. Payment models (subscription models)
8. Networked utility providers
(specialised software providers that permit users to make better use of the
Internet e.g Adobe Acrobat)
REFER TO YOUR TEXTBOOK P. 61 FOR THE COMPARISON OF THE
VARIOUS BUSINESS MODELS
CRITICAL SUCCESS FACTORS OF DIRECT MARKETING AND E-TAILING
(Manual p. 20)
Let us compare the different views:
1. Turban and King
• Profitability (e-tailors lose money when cutting prices to attract
customers, they also have underlying cost)
• Manage new risk exposure (organisations are facing new
competitors due to global reach of technology)
• Branding (branding is expensive and respect and a positive
reputation takes time to establish)
• Starting with insufficient funds (start-up cost as well as costs to
maintain the online business)
• Keep it interesting (dynamic)
• Web 2.0 (aims to facilitate creativity , collaboration and sharing
between user e.g social networking sites like Facebook and Twitter)
2. Martin Lindstrom
• The full story (e-tailoring = intangible, therefore
e-tailors must compensate by providing adequate
info, pictures, colour, photos)
• Keep it simple (help customers by narrow down
options, only manage a few products)
• Clean up (quick turnaround of inventory)
• Be upfront, even about bad news ( do not hide
information such as shipping costs from
customers)
• Learn about your consumer (do research about
customer needs and monitor customer
behaviour)
3. Eid, Trueman and Ahmed
Category A: Marketing strategy related factors
• Top management support
• Clear goals
• Integrate internet and offline marketing
• Partners
• Potential target markets
Category B: Website related factors
• Design
• Online and offline promotion of the site
Category C: Global related factors
• Foreign marketing environment
• Global resources
• Language
• Culture
• Delivering
Category D: Internal related factors
• Technological infrastructure
• Internal culture
• Sales force
• Online support training
Category E: External related factors
• Trust
• Online security
• Relationships with suppliers
• Affordable Internet access
• Customer acceptance
TYPICAL PRODUCTS THAT SELL WELL ON THE ELECTRONIC
MARKET
Computers, sporting goods, office supplies, books, music, toys, health
and beauty, entertainment, clothing, cars, services
Characteristics of products that are suitable for web sales:
• High value (rare/special products e.g diamonds)
• Suitable for shipping by mail (shipping cost should not be
too high)
• Information based products (non-perishable, info-intensive
e.g books, software, electronics)
• Services (hotel reservations, investments, air travel
E-TAILING
Def: Organisations that use the web to trade goods or
services
Examples:
Amazon, kulula, kalahari.net
Restrictions of e-tailing in SA:
• Limited internet access
• Limited electronic payment options (only credit cards
may be used)
Key drawback of e-tailing:
• Consumers must wait for delivery
Advantages:
• Download (bypass time lag and cost of delivery)
• Large product selections (options) – low cost structure,
customised products, liberation from time-consuming
and unrewarding retail environments
• Permits trading across time and space
• Many manufacturers are able to deal directly with endusers (manufacturing model)
Critical success factors:
• E-tailing rely on WOM
• Well-known e-tailers e.g Amazon have benefited greatly
from their popularity
• Positive purchase experience will produce repeat business
and new business
Types of e-tailers:
• Aggregators: e.g amazon which offers a broad product
assortment
• Category killers: e.g Toys R Us, which specialises in one
category
CONSUMERS’ SHOPPING PROCEDURE ON THE
INTERNET
CONSUMER DECISION-MAKING
Consumer decision making can be regarded in terms of the
decision-making process (from need arousal to disposal) and
types of consumer decision making (from routine to limited to
extensive problem solving)
Consumers can use the Internet to help them with their
decision-making, namely:
• Communication
• Surfing
• Collect information and compare
• Purchase
• Make use of decision aids/shopping agents/shopping bots
(software or programmes that help consumers in the
consumer decision-making process e.g infoseek, google
PLEASE NOTE: IT IS REQUIRED OF YOU TO STUDY THE INFLUENCE OF
SHOPPING AGENTS ON EACH STAGE OF THE DECISION-MAKING
PROCESS (Textbook p.75-84)
DECISION-MAKING PROCESS
STEP 1: Need identification/need arousal
• Need identification occurs when the consumer recognises a need
for a particular product/service. Consumers will surf the net and
get exposure
• Agents should track consumer needs and notify consumers when a
desired product enters the market place (notification agents)
STEP 2: Search and the consideration set
• Online consumers tend to rely on one or two websites for their
basic needs. They choose a few favourite sites that they add to
their list of ‘favourites’ or ‘bookmarks’ and repeatedly visit these
sites
• The role of shopping agents and other decision aids focuses on
search and recommendation agents (e.g ananzi, google)
STEP 3: Evaluation of alternatives
• Evaluation of alternatives is based on the
nature of information provided and the
perceived reliability of that information.
• Vast amount of information and options
available on the Internet
• Consumers normally make use of well-known
short cuts
• Decision aids/ shopping agents could consider
the consumer’s criteria based on: price,
delivery date, quality, brand, expert opinion,
etc. and then suggest a product
STEP 4: Product purchase
• Once the decision has been made, the consumer
can then purchase either online or offline.
• Considerations would be: characteristics of the
product/service, delivery options, consumer
preferences, access to credit, trust, security
concerns and country of residence
STEP 5: Consumption
• Individual differences such as consumer
resources, motivation, lifestyle and personality
generally influence the consumption process as
well as the characteristics of the product/service.
• Some products can be consumed online e.g music
STEP 6: Post-consumption evaluation
• Consumers can log compliments and
complaints directly with the companies
concerned
• Orders can be tracked online
• Follow-up e-mails
• Keeping track of consumer behaviour
• Communication strategy can be adapted
based on consumer interest
• Electronic database management
• Consumer word of mouth e.g hellopeter
COMPARISON SHOPPING AIDS
Shopping bots and agents are tools that scrutinise the Web for specific
search criteria requested by consumers e.g
• Mysimom.com
• AutoBytel.com
• Zdnet.com
• Office.com
NON-HUMAN CUSTOMERS: DEALING WITH
SHOPBOTS(Textbook p. 265)
• With the advent of agents and bots, many companies will be
dealing with the non-human agents of customers rather than with
the customers themselves e.g. search engines, shopping bots,
chatter bots, gossip bots, datasheet bots
• Marketers not only have to understand human behaviour in
cyberspace, but the behaviour of their agent
Ice activity
You received an invitation to your best friends
wedding in Port Elizabeth. Your mother said she
would pay for your flight, but that it shouldn’t
be more than R1500. Apply the consumer
decision making process this scenario by
discussing what you would do in the 6 steps.
Step 1: Need identification: _______________
Step 2: Information search: _______________
Step 3: Evaluate information:______________
Step 4: Product purchase: _________________
Step 5: Product Consumption: _____________
Step 6: Post Purchase evaluation: ___________