Transcript E-commerce fundamentals

OHT 2.1
Chapter 2
E-commerce fundamentals
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OHT 2.2
Learning objectives
• Evaluate changes in business relationships
between organizations and their customers
enabled by e-commerce
• Identify the main business and marketplace
models for electronic trading
• Describe different revenue models and
transaction mechanisms available through
hosting an e-commerce site.
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OHT 2.3
Issues for managers
• What are the implications of changes in
marketplace structures for how we trade with
customers and other partners?
• Which business models and revenue models
should we consider to exploit the Internet?
• What will be the importance of online
marketplace hubs or exchanges to our
business?
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The e-business environment
Figure 2.1 The environment in which e-business services are provided
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Activity – the e-business environment
• For each of the environment influences shown
previously, give examples of why it is
important to monitor and respond in an
e-business context. For example, the
personalization mentioned in the text is part of
why it is important to respond to technological
innovation.
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OHT 2.6
Environment constraints and opportunities
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Customers – which services are they offering via their web site that your
organization could support them in?
Competitors – need to be benchmarked in order to review the online services
they are offering – do they have a competitive advantage?
Intermediaries – are new or existing intermediaries offering products or services
from your competitors while you are not represented?
Suppliers – are suppliers offering different methods of procurement to
competitors that give them a competitive advantage?
Macro-environment
Society – what is the ethical and moral consensus on holding personal
information?
Country specific, international legal – what are the local and global legal
constraints for example on holding personal information, or taxation rules on sale
of goods?
Country specific, international economic – what are the economic constraints
of operating within a country or global constraints?
Technology – what new technologies are emerging by which to deliver online
services such as interactive digital TV and mobile phone-based access?
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B2B and B2C models
Figure 2.2 B2B and B2C interactions between an organization, its suppliers and
its customers
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Transaction alternatives between
businesses and consumers
Figure 2.3 Summary of transaction alternatives between businesses and
consumers
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B2B and B2C characteristics
Characteristic
B2C
B2B
Proportion of adopters with
access
Low to medium
High to very high
Complexity of buying
decisions
Relatively simple –
individual and influencers
More complex – buying
process involves users,
specifiers, buyers, etc.
Channel
Relatively simple – direct or
from retailer
More complex, direct or via
wholesaler, agent or
distributor
Purchasing characteristics
Low value, high volume or
high value, low volume.
May be high involvement
Similar volume/value. May
be high involvement.
Repeat orders (rebuys)
more common
Product characteristic
Often standardized items
Standardized items or
bespoke for sale
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Disintermediation
Figure 2.4 Disintermediation of a consumer distribution channel showing
(a) the original situation, (b) disintermediation omitting the wholesaler, and
(c) disintermediation omitting both wholesaler and retailer
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Example – Vauxhall
www.vauxhall.com
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Reintermediation
Figure 2.7 Reintermediation process: (a) original situation, (b) reintermediation
contacts
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Example - Kelkoo
www.kelkoo.com
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Countermediation
• Creation of a new intermediary
• Example:
– B&Q www.diy.com
Opodo www.opodo.com
Boots www.wellbeing.com
www.handbag.com
Ford, DaimlerChrysler (www.covisint.com)
• Partnering with existing intermediary –
Mortgage broker Charcol and Freeserve
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Portals
Q1. Define portal
Q2. Is a search engine the same as a
portal? Yes, No
Q3. Is a search engine the same as a
directory? Yes, No
Q4. List search engines / portals you use
and explain why
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Meta services
Search engines
Portal
Directories
‘A gateway to
information
resources and
services’
News aggregators
MR aggregators
Comparers
Exchanges
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Types of portal
Type of portal
Characteristics
Example
Access portal
Associated with ISP
Freeserve
(www.freeserve.net)
Horizontal or functional
portal
Range of services: search
engines, directories, news
recruitment, personal
information management,
shopping, etc.
Yahoo! (www.yahoo.com)
Excite (www.excite.com)
Lycos (www.lycos.com)
Vertical
May cover a single function
e.g.:
–news
– and industry sector
Moreover
(www.moreover.com)
SciQuest
(www.sciquest.com)
Geographical (region,
country, local area)
May be:
– horizontal
– vertical
Yahoo! country versions
Countyweb
(www.countyweb.com)
Marketplace
May be:
– horizontal
– vertical
– geographical
CommerceOne
(www.commerceone.net)
PlasticsNet
(www.plastics.net)
Media type
Voice portal
Verizon VoiceGear
(www.voicegear.net)
Vodafone Vizzavi
(www.vizzavi.com)
Silicon
(www.silicon.com)
Wireless portal
Streaming media portal
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Importance of portals
OHT 2.18
Rank
Property
Unique
visitors
Reach in
%
Ave time
1
MSN
7,924,421
47.0
00:39:24
2
Microsoft
6,910,303
40.9
00:09:48
3
Yahoo!
6,196,878
36.7
00:32:27
4
Google
5,935,960
35.17
00:15:47
5
AOL Time Warner
5,083,892
30.1
00:18:55
6
Wanadoo
(Freeserve)
4,853,630
28.8
00:13:09
7
British Telecom
4,145,338
24.6
00:20:22
8
Amazon
3,757,606
22.3
00:12:58
9
BBC
3,399,175
20.14
00:17:28
10
Ask Jeeves
3,270,176
19.4
00:11:09
Nielsen//NetRatings – top 10 domains web properties in the UK (June 2000 measurement period, at home panel),
September 2002 (http://epm.netratings.com/uk/web/NRpublicreports.toppropertiesmonthly). Data for other countries
available at: www.mediametrix.com http://www.nielsen-netratings.com/hot_off_the_net_i.jsp)
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All the web - 51 billion pages
OHT 2.19
Methods for finding web pages
Unregistered
sites,
inaccessible sites
and databases
Search
engine
registered
sites
Directories
Invisible web
Not indexed by search
engines
Search Engine
Search against
every word on
every page
indexed
Google
Directory
Yahoo!
Searches against
company name
and 25 word
description
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Location of trading
Place of purchase
Example of sites
A. Seller controlled
v
Vendor sites, i.e. home site of organization selling products, e.g.
www.del.com.
B. Seller oriented
v
Intermediaries controlled by third-parties to the seller such as distributers
and agents, e.g. Opodo (www.opodo.net) represents the main air carriers.
C. Neutral
v
Intermediaries not controlled by buyer’s industry (e.g. industry net
www.commerceone.com).
v
Product specific search engines (e.g. CNET (www.computer.com)).
v
Comparison sites, e.g. Barclay Square/Shopsmart
(www.barclaysquare.com).
v
Auction space, e.g. uBid (www.ubid.com).
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Trading arrangements
Commercial (trading) mechanism
Online transaction mechanism of Nunes et al.
(2000)
1. Negotiated deal
Example: Can use similar mechanism to auction as
on Commerce One(www.commerceone.net)
Negotiation – bargaining between single seller
and buyer. Continuous replenishment – ongoing
fulfilment of orders under pre-set terms
2. Brokered deal
Example: Intermediaries such as Screentrade
(www.screentrade.co.uk)
Achieved through online intermediaries offering
auction and pure markets online
3. Auction
Examples: C2C: E-bay (www.ebay.com)
B2B: Industry to Industry
(www.assetauctions.freemarkets.com)
Seller auction – buyers’ bids determine final price
of sellers’ offerings. Buyer auction – buyers
request prices from multiple sellers. Reverse –
buyers post desired price for seller acceptance
4. Fixed price sale
Example: All e-tailers
Static call – online catalogue with fixed prices
Dynamic call – online catalogue with continuously
updated prices and features
5. Pure markets
Example: Electronic share dealing
Spot – buyers’ and sellers’ bids clear instantly
6. Barter
Example: www.intagio.com and
www.bartercard.co.uk
Barter – buyers and sellers exchange goods.
According to the International Reciprocal Trade
Association (www.irta.com) barter trade was over
$9 billion in 2002.
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Business model
Timmers (1999) defines a ‘business model’ as:
An architecture for product, service and
information flows, including a description of
the various business actors and their roles;
and a description of the potential benefits for
the various business actors; and a description
of the sources of revenue.
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Business models
Figure 2.11 Alternative perspectives on business models
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Reverse auction example
• Through 2001 there were over 512 online auction
bidding events processed for DaimlerChrysler on
vendor supported portal Covisint (www.covisint.com)
amounting to approximately €10 billion. That is a third
of their total procurement volume. In May 2001,
DaimlerChrysler staged the largest online bidding
event ever, with an order volume of €3.5 billion in just
four days. As well as savings in material purchasing
prices, DaimlerChrysler also reduced throughput
times in purchasing by 80 percent
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Revenue models
• Visit the Global Composites site and explore the
different opportunities for revenue generation (see
the Business Directory for company listings). You
should include current and future possiblities for
revenue generation.
• Global Composites (www.globalcomposites.com) is a
business-to-business intermediary providing
resources for over 10,000 professionals in the
composites industry.More than 2000 companies are
listed
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Revenue model answers
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Simple listings are free, but more sophisticated company profiles with web links
are charged for
Banner advertising in different categories can be used to generate revenue
Sponsorship of e-newsletters
Commission on affiliate referrals to company sites
Fees for hosting an e-commerce shop-front (future possibility)
Commission on sales occurring at the site (future possibility)
Commission on auctions (future possibility)
Note that there is a careful balance for this business type of generating revenue
and not discouraging potential suppliers or buyers. For this reason the service is
free to buyers and sellers can list minimum services.
Revenue models will use a combination of techniques as follows:
Online commerce – sale of products (direct or indirect)
Online commerce – sale of digital services (can be on subscription basis or pay
per view)
Ad revenue through banner advertising or sponsorship of content/services
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Learning from the dot coms
Explain these financials!
Thomson Travel
lastminute.com
Formed
1965
1998
FY 2000
2002
FY 2002
Turnover
£3 billion
£2.6 million
18.4 m
(on Total
Transaction
Value of
124.2m)
Profit/loss
£77 million
– £6 million
– £53 million
Market capitalization
£980 million
£700 million
£ 200 million
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Dot com lessons – can you add to these?
1. Explore new business and revenue models.
2. Perform continuous scanning of the marketplace
and respond rapidly.
3. Set up partner networks to leverage the expertise
and reputation of specialists.
4. The real world is still important for product
promotion and fulfilment.
5. Examine the payback and return on investment of
new approaches carefully.
See also chapter 5 examining reasons for failure
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