Professional Documents
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Electronic Commerce: Business Models and Strategies
Electronic Commerce: Business Models and Strategies
Electronic Commerce: Business Models and Strategies
• Introduction
• The cycle of electronic commerce
• EC and business process
• EC statistics
Electronic Commerce: Introduction
E-Business
E-Commerce
Commerce
Internet
Commerce
Electronic Commerce
• Electronic commerce is broadly as the ability to
execute business activities (transactions,
contracts, and partnership) over a computer
network. The execution of these activities lead
to the exchange of goods, services, and money.
• Online business activities are changing market
dynamics and structures of various industries.
• Electronic commerce adds a new dimension
"information" to business activities involving
information goods, information services, and
electronic money.
The Low-Friction Market
"[The Internet] will carry us into a
new world of low friction, low-
overhead capitalism, in which market
information will be plentiful and
transaction costs low."
-- Bill Gates, The Road Ahead
Access
Searches
Queries Follow-on Sales
Surfing 冲浪
Standard Orders
Distribution
Online: soft goods
Delivery: hard goods
Institution Processes
• Government 政府 • Marketing 市场
• Merchants 商家 • Sales 销售
• Manufacturers 制造商 • Payment 支付
• Suppliers 供应商 • Fulfillment 履行
• Consumers 消费者 Electronic • Support 支援
Commerce
Networks
• Intranet
• Extranet
• Internet
Source: adapted from David Kosiur, Understanding Electronic Commerce, Microsoft Press, 1997.
EC and Business Processes
Seller Phone,
Customer
Send info Request info
fax, e-mail
Provide Identify
Info need
Data sheets,
catalogs, demos Web surfing
Web searches,
Get web ads Find
Web site
customer source
Corporate Databases
Newsgroups
Evaluate
Provide Net offerings
info communities
Demos,
reviews
Web site Purchase
Credit cards, e-cash
P.O.s
Fulfill
order EDI
Maintain,
Deliver soft goods electronically Repair,
Support Web site, phone, Operate
fax, e-mail, e-mailing list
Ma
Ma
Su
W
lls
in
pe
eb
st r
rs
to
ee
re
t
s
• Home Depot
• CompUSA
• Barnes and Nobles
• Border
AOL Findings
• Buy brands
• Seek convenience
• Are increasingly time-starving
• Are not solely motivated by price
• Require simplicity
Client/Server
Consulting
Internet Software
Economy
System Integration
and Design Browsers
Web Server
Application Servers
Security
Backbone Router Tools
Internet ISP
Access Equipment Network
Equipment Internet Service
Server Computers Services Consumer Services
Carriers
EC Strategies
• 4Cs Strategy:
– Customer
– Content
– Community
– Commerce
• Revenue Streams
• EC Development Process
New Competition From Surprising Places
• Most Visited Retailers: Not in Top 25:
1. Bluemountainarts.com
• Towerrecords.com
2. Amazon.com
3. AOL.com • Borders.com
4. Ebay.com • Toysrus.com
5. Etoys.com • Target.com
6. Barnesandnoble.com • Gap.com
7. CNet.com (software)
8. Egghead.com
• Macys.com
9. CDNow.com • Sears.com
10. Musicblvd.com • WalMart.com
11. ColumbiaHouse.com • “BigCompany.com”
12. Classifieds2000.com
•
13. Beyond.com
14. Coolsavings.com
•
15. Valupage.com • YourCompany.com??
Moving Your Business Online
• Companies are motivated by either fear or
greed (既有所畏惧又翘首相望) to move to
their businesses to the net.
• To .com your company is becoming an
imperative.
• They have to obsolete (作废) their current
business models and work very hard to search
a new business model.
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Electronic Commerce Applications and the Cycle of Commerce
Re
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EC Strategies: 4 Cs
Customers
Commerce
Content Community
Customers
• Obsess over your customers
• Remember that the Web is an infant
– What do you have to offer that the physical world
cannot in order to attract customers?
• If you make one customer unhappy, he won't tell
five friends -- he'll tell 5,000 on newsgroups, list
servers, and so on.
– "Word of mouth" factor gets
amplified on the Net
• The shifts of balance of power away from
business and toward customer.
- Jeff Bezos
Self Assessment: Customer Caring
What process do they go through? How do you produce and distribute it to them?
What are the steps that your customers have to take
to complete a purchase transactions?
How do they get shipment status?
How are exceptions handled?
What do you need from customer? What do you know about customer preferences?
What information could you use to better target your
product and service offerings?
What can you do to build relationships? How can you engage customers in an ongoing dialog?
How can you continue to provide information, products,
and services to reinforce your ongoing relationships?
5 Steps to Success in EC
• Set strategy
– Make it easy for customers to do business with you!
• Focus on the end-customer
– Identify end-customers and their needs
– Distinguish from channel partners
– Identify other internal and external stakeholders
• Redesign customer-facing business processes
• Wire your company for profit and success
• Foster customer loyalty
– Determine and prioritize objectives
– Decide what to measure and how to measure
– Measure profitability and other critical success
indicators
Source: Adapted from Customer.com by Patricia Seybold, 1998
Foster Customer Loyalty
• The key to profitability in EC
• Achieving higher revenues via customer
acquisition 获得 and customer retention 保持
– Acquisition costs
– Base profit
– Revenue growth
– Cost savings
– Referrals
– Price premium
• Benefits:
– No-cost acquisition
– Experienced customer
• Strategies
– Increase customer “inventory” (保有量)
– Increase customer “tenure” (保有期)
8 Critical Success Factors
• Target the right customers
• Own customer's total experience
• Streamline business processes that impact the
customer
• Provide a 360-degree view of relationships with
your customers
• Let customers help themselves
• Help customers do their jobs
• Deliver personalized services
• Foster community
Target the Right Customers
• Know who your customers and prospects are
• Find out which customers are profitable
• Decide which customers you want to attract (or
keep from losing)
• Decide which customers influence key
purchases
• Find out which customers generate referrals
• Don't confuse customers, partners, and
stakeholders
Own the Customer's Total Experience
• Deliver a consist and branded experience
• Focus on saving customer time
• Offer a peace of mind
• Work with partner to deliver consistent service
and quality
• Respect the customer individuality
• Give customers control over their experience
Creating Sustainable Value in EC
• Develop a brand based on consumer experiences
– The brand emerges as the two-way communication on
the net and off the net.
• Develop superior physical distribution
– Physical distribution is a choke point in EC
• Leverage customer information
– Use personal information to more convenience
shopping and customized services
» Privacy issue
» Ask customer explicitly for such data
» Require a more subtle approach
– Use collective data
» Use it to adjust pricing, product offering, and target market
Virtual Communities
• Content
• Money • Hard goods
• Content
Virtual • Games
• Demographics Community • Services
Users Providers
• Advertising
Advertisers Other
Websites
Consumers' Needs for Community
• Communities of transaction: Facilitate the buying and selling of products
and services and deliver information related to those transactions.
– Bring in a critical mass of sellers and buyers to facilitate certain types of
transactions.
– Virtual Vineyards (wine.com)
• Communities of Interest: Bring together participants who interact
extensively with one another on specific topics.
– Higher degree of interpersonal communication.
– GardenWeb: www.gardenweb.com
– Motley Fool created by David and Tom Gardners on AOL (fool.com)
– Parents Place: www.parentsplace.com
• Communities of Fantasy 虚拟社区
– Chat rooms: Red Dragon Inn
– Virtual Team competition at ESPNet: espnet.sportszone.com
• Communities of Relationship: People come together around certain life
experiences that are very intense and can lead to the formation of deep
personal connections.
– Cancer Forum on CompuServe
www.parentsoup.com
www.iVillage.com
Geocities: www.geocities.com
• This collection of themes cyberhoods is populated by a half-million
"homesteaders" who get free home pages.
http://geocities.yahoo.com/home/
Quick Test for Technographics
More Men More Women
Mainstreams
Early Adopter
Laggards
Time
Source: Now or Never, 2000
Technology-Fit: Customer and Product
Tide Nike
Low Denny's Pepsi
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Long Distance Call
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Revenue Streams
• Advertising / Sponsorship
• Transaction
• Subscription / Listing Fee
• Value-added services
Multifaceted Model for Web-Based EC Design
• ATTRACT: Hits
– Communities of interest
– Changing topics for repeat customers
– Features that encourage customers to explore
• ENGAGE: Leads
– Special areas encourage customer to register (i.e. selection of articles customized for visitors
interests)
• PARTICIPATE: Sales revenue
– Free download (video, audio, & software)
– Shopping
– Chat and News
– Subscription
• JUMP: Advertising revenue Attract
– Other products of interest to customer Jump
– Other sites of interest to customer
Engage
Participate
New New
Values Pricing
New
Customers
Highly interrelated!
Rapid innovation
– products/services
– organization
– technology
– infrastructure
What To Do Now
3. Identify the target:
– Business objectives
– Customer segment
– Application area
4. Build it in less than 6 months
-- Flexibility
-- Scalability
-- Extendibility
5. Keep extending the function -- new products and services, new
customer interfaces, enhance performance, security and capability
6. START NOW !
You are never done!
Four Strategies to Start Online Business
• Integration
Time to Market
• Subsidiary
Cost
Risk
• Partnership
• Buyout
High Fast High
Top Three Concerns
• Retailers
– Conflict with investment in physical stores;
– Technology issues; and
– Lack of distribution and fulfillment network.
• Manufacturers
– Products not appropriate for online sales;
– Potential risk to channel relationships; and
– Consumers won’t buy online
– Many manufacturers simply weren't capable
of shipping a single box of Tide or a bottle
of Advil. They had no experience in dealing
directly with consumers.
Becoming Virtual
• Egghead to Egghead.com
• Computer Literacy to Fatbrain.com
• Romac International to KForce.com
Kinder
Kinder Toys
Toys is
is Moving
Moving toto
www.toydomain.com
www.toydomain.com
(Find
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Your 3 Biggest Problems/Opportunities
Business Technology
Drivers Drivers
E-Business Rapid
Strategy Implementation
Source: Adapted from
Digital Transformation, 2000
EC Development Process
• Knowledge building and market evaluation to identify a need
and a niche
• Competitive and capability analysis
• EC Business model design and feature identification
• Determine what you have to offer (merchandizing)
• Set your e-business goals and priorities
• Design your EC architecture
• Assemble your EC teams
• Build your web site
• Set up a system to handle sales
• Provide customer services
• Advertise your online business (online and offline)
• Evaluate your performance and moving on
Popularity Adds Value in a Network
le
yc
c
us
uo
Value to User
t
e
Vir
cl
cy Positive
Network
us
Externality
o
ci
Vi
Networks
• Real: LAN, Internet, Fax
• Virtual: Virtual community, Chat
room, Instant messenger
Buyer A
Consumer or Business
EDI
Online
Selling OBI
Buyer C
Sell-Side Storefront
• Primary model used in current business-
to-consumer scenarios
• Single seller, typically a distributor,
constructs a Web storefront to sell to
many consumers (i.e. Amazon.com)
• Unless a single distributor can
aggregate all the suppliers in a given
industry, the buyer remains responsible
for comparison shopping between
stores
• Expensive for buyer; does not meet the
needs of corporate procurement
organizations.
Buy-Side E-Commerce Model
Seller A
EDI
Business
Buyer HTML & Forms Seller B
HTML & XML
Online
Procurement OBI
Seller C
Buy-Side eProcurement
• Buy-side applications generally consisting of a
browser-based self-service front end to ERP and
legacy purchasing systems
• Corporate procurement aggregates many supplier
catalogs into a single “universal” catalog and allows
end-user requisitioning from the desktop, facilitating
standard procurement for the organization and
cutting down on “maverick” purchasing
• Purchases made through this system are linked to
the back-office ERP or accounting system, cutting
time and expense from the transaction and avoiding
potential bookkeeping errors
• Model yields reduced transaction costs but not lower
purchase costs; no impact on size of supplier base, no
enablement of dynamic trade; buying organizations
must set-up and maintain catalogs for each of their
suppliers; too costly and technically demanding for
most medium and small-sized businesses.
Marketplace E-Commerce Model
Buyer A Seller A
EDI
EDI
OBI
Buyer C OBI Seller C
Infomediacy (Content Aggregator)
• eBay.com
• Pricelines.com
• Egghead.com
• Amazom.com Auction
• www.chemdex.com
Business-to-Business vs. Business-to-Consumer
Business-to-Consumer Business-to-Business
• No vendor loyally • Relationship-based
• No switching costs • Very high switching costs
• Time-insensitive • Extremely time-sensitive
• Short-term • Long-term
• Casual • Mission-critical
• Many vendors • Few partners
• Products differentiated • Partners differentiated on
on price, image reliability, flexibility
B2B Marketspace
• Latest evolution of B2B eCommerce, enabling
a many-to-many relationship between buyers and
suppliers
• Buyers and suppliers leverage economies of
scale in their trading relationships and access
a more “liquid” marketplace
• Sellers find buyers for their goods, buyers find
suppliers with goods to sell
• Many-to-many liquidity allows the use of
dynamic pricing models such as auctions and
exchanges, further improving the economic
efficiency of the market.
• Examples:
– E-Steel.com
– verticalnet.com
Channel Conflict: How About the Distributors
• The concept of complete dis-intermediation -
the elimination of the middleman - remains a
theory. New intermediaries are emerging.
• Cisco System has 2 billion dollars annual sales
on the Web.
• 70% of Cisco online business comes from VARs
and distributors.
• Fruit of Loom Inc. has 31 of its 55 distributors
up on its extranet called Activewear Online.
Distributors have to do lot of value-add and
customer support to survive.
Retailers and Manufacturers Co-exist on the Web
• US retail sales revenues 1998:
– Brick-and-mortar stores 93%
– Catalog sales: 6%
– E-commerce 1%
• Cases:
– Levi Strauss sells jeans at www.levis.com but won't allow retailers to
sell them online.
– Estee Lauder sells Clinique cosmetics at www.clinque.com but doesn't
offer retail promotion.
– Waterford sells a limited selection at www.waterford.com like
chandeliers and corporate gifts.
• Strategies:
– Manufacturers want to maintain channels while stay in direct touch
with their customers.
– Provide online dealer locators.
– Share customers information back and forth.
Clicks-and-Mortar
• Clicks-and-mortar has become the new buzzword in
retailing circles.
• It means having an integrated, multi-touchpoint
strategy that takes advantage of your physical retail
outlets and integrates them seamlessly into your Web
strategy.
• A good clicks-and-mortar strategy uses the Web to
drive traffic to your stores and uses your stores to drive
traffic to the Web.
Brick-and-Click
YourSherpa.com
Business Channel: Multi-Channel Presence
• Brick-and-mortar
– Face-to-Face
Raw
material
producer Exchange
Manufacturer
C2B
Distributor
Buyer
Buyer
Net Small Suppliers
Small Suppliers
Small Buyers
Small Buyers
Number of Sellers and Buyers
The
Goldman
Sachs B2B
Windmill in
the Age of
Consortia