Transcript toy store chain

Chapter 6:
E-Commerce
For use with Strategic Electronic Marketing:
Managing E-Business 2e
Copyright 2003 South-Western College Publishing
Chapter 6 Slide: 1
LEARNING OBJECTIVES(1):
1. Gain an understanding of the e-commerce
process.
2. Outline why a multichannel approach is
beneficial for a retailer.
3. Explain why newly formed pure-play
Internet businesses may have a hard time
gaining competitive advantages in the retail
market.
4. Compare and contrast how e-commerce is
being used as a strategic tool by e-retailers
and traditional retailers.
For use with Strategic Electronic Marketing:
Managing E-Business 2e
Copyright 2003 South-Western College Publishing
Chapter 6 Slide: 2
LEARNING OBJECTIVES(2):
5. Outline the major types of fraud committed
online and what is being done to limit fraud.
6. Perform a benefit analysis of alternative
sales channels.
7. List the limitations to international ecommerce.
8. Explain the role of an ASP in a business’s
e-commerce strategy.
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Chapter 6 Slide: 3
Vignette: Where Are My Groceries?
• Thinking Strategically
– Evaluate your grocery shopping habits. How often do
you purchase the same products?
– Consider if you would trust a grocer to pick out your
meats, fruits, and vegetables.
– On your next visit to a brick-and-mortar grocery,
determine which aspects of grocery shopping could be
automated.
– Evaluate the business model for a traditional grocery
and determine where its competitive advantage lies.
– Estimate the expenses a business could save by moving
grocery shopping online.
– What is the future of online grocery sales?
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Chapter 6 Slide: 4
E-Commerce
• E-commerce is the process of allowing
Web based technologies to facilitate
commerce or trade.
– E-commerce can be retail, between an ebusiness and an end user, or it can be
used for business-to-business
transactions.
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Chapter 6 Slide: 5
E-Retailing
• Retail sales are likely to shift between various
alternative sales channels.
– Sales channels are the models that businesses use to
sell to their customers. These could include brick and
mortar outlets, catalogs, direct marketing, or ecommerce.
– A destination site is a Web site that is designed to have
the visitor return over and over. This requires including
extras such as games, chats, contents, new information,
or any other content that the targeted audience may
desire.
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Chapter 6 Slide: 6
E-Retailing
• E-retailing will not necessarily result in an
increase in overall retail sales; instead, consumers
are shifting purchases by adopting a multichannel
approach and using alternative sales channels.
– Sales channels are the models that businesses use to
sell to their customers. These include brick-and-mortar
outlets, catalogs, direct marketing, or e-commerce.
• Multichannel retailers support the commerce
process in a number of ways, including:
– In-store or in-catalog marketing of the online channel,
gift certificates purchased online, in-store return of
online orders, catalog orders online, and others.
For use with Strategic Electronic Marketing:
Managing E-Business 2e
Copyright 2003 South-Western College Publishing
Chapter 6 Slide: 7
Figure 6.1: U.S.
E-Commerce Sales
12
10.04
10
8.88
7.59
8
6
6.90
5.27
5.53
7.46
7.47
E-commerce
(billions)
5.98
Pecent of
total Retail
Sales
4
2
0.7
0.8
0.8
0.9
1.1
1
0.9
1
1.2
0
1999 Q 2000 Q 2000 Q 2000 Q 2000 Q 2001 Q 2001 Q 2001 Q 2001 Q
4
1
2
3
4
1
2
3
4
Data source: U.S. Census Bureau, “United States Department of Commerce News,”
February 20, 2002, <http://www.census.gov/mrts/www/current.html>.
For use with Strategic Electronic Marketing:
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Copyright 2003 South-Western College Publishing
Chapter 6 Slide: 8
Figure 6.2: Relative
E-Commerce Sales by Industry
October 2001 (000)
Furniture
October
2001 (000)
Food/Beverages
Softw are
Music
Books
Toys/Videogames
Consumer Electronics
Hotel Reservations
Computer hardw are
Apparel
$7
00
,0
00
$6
00
,0
00
$5
00
,0
00
$4
00
,0
00
$3
00
,0
00
$2
00
,0
00
$1
00
,0
00
$0
Airline Tickets
Data Source: CyberAtlas staff, “November Brings Increase in E-Commerce Activity,” December 17, 2001,
<http://cyberatlas.internet.com/markets/retailing/article/0,,6061_941661,00.html#table>.
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Chapter 6 Slide: 9
Figure 6.3: E-Business Model
Supply
Chain
Extranet
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Chapter 6 Slide: 10
Figure 6.4: E-Commerce
Value Chain
E-Commerce Value Chain can give insight into the
problems encountered by newly formed online-only ecommerce companies.
Supply
Chain:
Develop and
deploy
inventory
systems,
warehousing,
extranets,
etc.
Product
and Pricing
Strategies:
Develop
positioning
strategy,
image with
market, etc.
Promotion:
Distribution
Knowledge
Need to develop
Channels:
Management:
customer base, Need locations, Need database on
experience in shipping
customer and links
targeting
facilitators,
to inventory and
audience.
payment systems, other business
and return policies processes.
and procedures.
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Management:
Needs experience in
field, knowledge of
process and industry, Delivered
Value to
strong relationships
with employees,
Customer
suppliers, and other
constituencies.
Chapter 6 Slide: 11
Table 6.1: Retailer
Value Chain Analysis
Retailer
Value Chain Analysis
New onlineonly
New online only businesses must develop this entire value chain system from scratch.
Established
onlineonly
Established online-only businesses such as Amazon.com may have these components
developed. They may have advantages in supply chains, image as online-only firm,
targeting audiences, shipping systems for distribution, data collection and
knowledge management, and managerial expertise in e-business.
Catalog
Business
es
Existing catalog businesses have these components developed. They may have
advantages in supply chains, image as non brick-and-mortar, targeting audiences,
shipping systems for distribution, knowledge management, and managerial
expertise in direct marketing.
Retail Chains
Existing traditional national retail chain businesses may these components developed.
National chains may have advantages in supply chains, image, targeted audiences,
prime locations for distribution, information capture and knowledge management
systems, and managerial expertise in retailing.
SME Retailer
Existing small to medium sized retailer may have none of these components developed
for conducting business outside of the targeted market area.
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Chapter 6 Slide: 12
Figure 6.5: E-Commerce
Personalization
Personalization
Customer Profiling
and Suggestion Selling
One-Click Automated
Ordering
Knowledge
Database
E-Mail Marketing
Order Tracking
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Chapter 6 Slide: 13
Online Growth
• Amazon.com
– End of 2001: largest unique audience with more
than 31 million visitors.
– From the year 2000 to 2001, increased its
unique audience by 34 percent.
• Brick and Click from 2000-2001
– Wal-Mart: Increased its unique audience by 133
percent.
– JCPenney: Increased by 34 percent.
– Target: Increased by 142 percent
– Sears increased by 23 percent
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Copyright 2003 South-Western College Publishing
Chapter 6 Slide: 14
Table 6.2: Benefit Analysis for Amazon.com (1)
Benefits
Amazon.com
Number of
Books
Discounts on
books.
Millions
Percent off on all titles
(customer pays
shipping)
Online databases allow
links to topic areas.
Ability to
browse by
topics
Consumer's
Average 2-3 days
access to books
Access to
Immediate - online
information
about the book.
Mall
Superstores:
Bookstore:
70,000
175.000 +
Discounts on selected
titles.
Books placed in topic
sections.
Immediate
Consumer must browse or
ask for help.
For use with Strategic Electronic Marketing:
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Copyright 2003 South-Western College Publishing
Chapter 6 Slide: 15
Table 6.2: Benefit Analysis for Amazon.com (2)
Benefits
Ability to
converse with
the author.
Shipping of
gift books.
Other
relationship
development
tools
Interaction
with
customers
Amazon.com
Mall Bookstore: Superstores:
Online through
Rarely except for signing.
discussion groups or
email.
Handled online.
Customer must ship.
Personalization
Database
recommendations
based on past
purchases.
Email comments
Email links to
service personnel.
Chat rooms with
other customers.
Other stores
for customers
to visit.
Coffee shops
Face-to-face
Face-to-face
sales
sales
representatives. representatives.
For use with Strategic Electronic Marketing:
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Copyright 2003 South-Western College Publishing
Chapter 6 Slide: 16
Niche E-Retailers
• Niche e-retailers typically target narrow market
segments with clearly differentiated offerings.
• Successful niche e-retailers can offer a deep
product line and add expertise and advice that
cannot be found in traditional stores.
• They do need to develop brand names and
establish credibility with their customers if they
are to succeed
For use with Strategic Electronic Marketing:
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Copyright 2003 South-Western College Publishing
Chapter 6 Slide: 17
Case 6.1: A
Prescription for Success?
Thinking Strategically
• Consider the types of products that individuals usually purchase
at a pharmacy. Determine the importance of receiving that
product immediately versus waiting until the next day.
• How important is it to talk to a pharmacist about products
purchased at a pharmacy?
• Visit an online pharmacy. Compare the services it offers to what
can be found at a brick-and-mortar store.
• Decide whether consumers’ purchasing patterns would differ if
they were buying products on a continuing basis.
– For example, if an individual were permanently on a heart
medicine, would he or she want to order the medicine online and
have it delivered to his or her home?
• Speculate on the future of online pharmacies.
For use with Strategic Electronic Marketing:
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Chapter 6 Slide: 18
Table 6.3: Niche E-Retailers
Business
Target Market
dELiA*s
Teenage girls and
www.dELiAs.com young women
Wine.com
www.wine.com
Individuals
interested in high
quality wines and
gourmet foods
Product Offering
This Multichannel (catalog,
Web site, and stores) retailer
offers apparel and accessories.
Wine.com, the largest online
wine retailer in the United
States, offers wine and advice
on purchasing wine.
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Chapter 6 Slide: 19
Table 6.3: Niche E-Retailers
Business
JustBalls
www.justballs.com
Another
Universe
www.anotheruniver
se.com
Target Market
Individuals and
institutions needing
unique or specialty
balls and related items.
Males, average age 28
with higher than
average income.
Product Offering
An assortment of balls and
ball related products and
offer expertise and
information on balls.
The site emphasizes content
about television, movies,
comic books, and
collectibles to hold viewers
interest.
For use with Strategic Electronic Marketing:
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Copyright 2003 South-Western College Publishing
Chapter 6 Slide: 20
Case 6.2: Dell Computer Company.
• Thinking Strategically
– Determine if Dell has an advantage over
traditional computer sales businesses.
– Does Dell have an advantage over other online
sellers?
– Consider what you would want if you were to
purchase a computer. Would you feel it is
necessary to talk to a person directly?
For use with Strategic Electronic Marketing:
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Chapter 6 Slide: 21
Case 6.2: Dell Computer Company.
• Thinking Strategically
– Evaluate the Dell Web site (http://www.dell.com).
Does this site provide all the information
necessary for you to buy?
– Determine the importance of the Dell brand
name.
– Explain if the business system that Dell has
developed will work for other types of
businesses.
– How does Dell develop and maintain
relationships with its customers?
For use with Strategic Electronic Marketing:
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Chapter 6 Slide: 22
Figure 6.6: Dell’s Business Model
Suppliers linked
through Extranet
deliver just-in-time.
Lowers inventory
costs.
Dell
manufactures
customized PC
and sell at low
price.
Product delivered through
independent shippers such as UPS.
Contract low shipping rates, no
fixed costs in assets.
Web page provides
information and ordering.
Lowers ordering costs.
Payments are made online through
Web page credit card or invoice.
Lowers bad debt expense and credit
risks.
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Customer gathers
information and
purchases through
Web page.
Lowers
communication
costs.
Chapter 6 Slide: 23
Business-to-Business E-Commerce
• Considered from three perspectives:
– First, there is the supply chain system and process
described in Chapter 4. This system links suppliers,
distributors, and other channel members into an
integrated process.
– Second, businesses are engaging in marketplaces where
goods are bought and sold. This process will be covered
in more depth in Chapter 11.
– Third, e-retail has had an impact on the business-tobusiness market. The largest category for sales in the Bto-B e-commerce arena is in the PC hardware and
software industry.
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Chapter 6 Slide: 24
International E-Commerce
• To develop e-commerce, four factors must be in place.
– First, the technical infrastructure must allow the flow of
information.
– Second, flexibility of channel relationships is required.
• In countries such as Japan, where long distribution channels are
maintained through personal relationships, disintermediation and
restructuring will be much more difficult.
– Third, the political and legal structure must allow for the use of ecommerce.
• The ability to ship products without tariff restrictions and the free
flow of capital are requirements.
– Fourth, although the Internet is the facilitator for this change, it is
the willingness of businesses and customers to change their
business and purchasing habits that allows the change to move
forward.
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Chapter 6 Slide: 25
International E-Commerce (1)
• Implementing new business models:
– First, the technical infrastructure must allow for
the flow of information.
– Second, flexibility of channel relationships is
required.
• In countries like Japan where long distribution
channels are maintained through personal
relationships, disintermediation and restructuring
will be much more difficult.
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Chapter 6 Slide: 26
International E-Commerce (2)
• Implementing new business models:
– Third, the political and legal structure must
allow E-commerce to be undertaken.
• The ability to ship products without tariff
restrictions and the free flow of capital is a
requirement.
– Fourth, Businesses and customers must be
willing to change their business and purchasing
habits.
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Chapter 6 Slide: 27
Table 6.5: Political
and Legal Problems
Problem
Examples
Advertising
and
Competition
France: By law all Web sites aimed at French customers must be in French.
Germany: Some promotions, such as two-for-one or promotional tie-ins may be
illegal. Lands’ End was forced to drop its “Money Back Guarantee, No Matter
What,” promise in Germany because it was seen as anti-competitive. Lands’ End
German Web site will link to other Land’s End Web sites that show the guarantee.[i]
Sweden: Toy advertising may not be directed at children.
Payments
Credit card payments can be used, but because of differing currencies customers
may not know the exact price until the currency exchange is made. The development
of the Euro should allow for smoother payments.
Delivery
The cost of shipping a product 30 miles across a border can be more expensive than
300 miles within the borders of a country.
Legal
Return policies may not be the same for all countries.
Setting liability for faulty products may be unclear.
It may be difficult to determine how value added taxes are assessed.
Privacy laws in Europe are more stringent than in the U.S.[ii]
[i] Ann Therese Palmer, “Lands’ End’s End Run,” Business Week, October 18, 1999, p. 8.
[ii] Martha Bennett, “The Worldwide Sell,” CIO - Section 1, July 15, 1998, pp. 60-63; and Henry Heilbrunn, “Interactive
Marketing in Europe,” Direct Marketing, March 98, pp. 56-59.
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Chapter 6 Slide: 28
Figure 6.7: Distribution of Worldwide
E-Commerce Sales and Growth
100
90
80
70
60
50
40
30
20
10
0
Market
Share
Growth
Percent
North America
Europe
Asia-Pacific
Japan
Rest of World
Data Source: Michael Pastore, “New Records Predicted For Holiday E-Commerce,” CyberAtlas, October 22, 2001,
<http://cyberatlas.internet.com/markets/retailing/article/0,,6061_908021,00.html#table2>.
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Chapter 6 Slide: 29
Figure 6.8: Relative Number of Browsers
versus Shoppers in Selected Countries
80%
70%
60%
50%
40%
30%
20%
10%
0%
Browsing for
Products
Spain
Italy
France
Taiwan
Hong
Kong
Germany
Austria
Sweden
United
States
Purchasing
Products
Data Source: Michael Pastore, “Net Users Worldwide Taking Commerce Online,” CyberAtlas, June 13,
2001, <http://cyberatlas.internet.com/big_picture/geographics/article/0,,5911_783851,00.html#table>.
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Chapter 6 Slide: 30
Hosting The Technology
• Commerce service providers (CSPs) are
companies that facilitate commerce for other
businesses.
– Businesses can form an alliance with hosting sites such
as ISPs, banks, distributors, or online malls.
• The low cost entry of using a CPS is very
attractive to merchants.
– The merchant must still market their site as they would
any other business, but they do not have the brick and
mortar costs and can reach the entire world with the ecommerce site.
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Chapter 6 Slide: 31
Table 6.6: Advantages of Selling
With Standalone Vs CSP Sites
Issue
Costs
Control
Pulling
Customers
Quality of
Traffic
Standalone System
No fees paid to the CSP.
Higher costs in personnel,
hardware, software, and
development.
Business can control all of its
policies related to selling.
If mall closes, business may lose
past customers.
Business must get customers to
their site by themselves through
promotion.
A standalone site may have higher
quality traffic that is more likely to
buy.
Using a CSP
Lower cost for maintaining
technology to support the site.
Seller may need to comply
with mall's sales, credit, and
return polices.
Retail trade concentration can
pull in a larger number of
shoppers.
Individuals who browse one
day may turn into shoppers at
another time.
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Chapter 6 Slide: 32
Exercise 6.1 E-Retailer Shopping
• Visit a number of pure-play e-commerce sites.
Include sites that you have purchased from.
• Why did you purchase something from those
sites?
• Indicate how your online shopping behavior
related to your offline behavior.
• What were the most important criteria you used in
shopping at the site?
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Chapter 6 Slide: 33
Exercise 6.2: Multichannel Shopping
• Visit a number of multichannel e-commerce
sites. Include stores that you have purchased
from.
• How does a multichannel retailer use the
Internet to support its sales?
• Describe why you have purchased from the
channel you use most often.
• Specify the most important criteria you use in
shopping at the Web site.
• How is your online shopping behavior likely to
change in a multichannel retail environment?
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Chapter 6 Slide: 34
Exercise 6.3: Multichannel
Shopping Analysis
• Choose one of the businesses you visited in
Exercise 6.1 or 6.2.
• Outline its e-commerce model and e-commerce
value chain.
• Where in the value chain does the business gain
competitive advantages?
• Undertake a benefit analysis as indicated in Table
• 6.2.
• Determine the benefit categories and compare the
e-commerce site to its channel counterparts.
• Indicate where competitive advantages lie.
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Chapter 6 Slide: 35
ALE 5.3: Niche Retailers
• Use the Web to find narrowly targeted niche
retailers.
• Determine the target market for the e-retailer.
• Describe how these e-retailers target their market.
• Explain how they are differentiated from other
competitors.
Business Site
Target Market
Product Offering
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Chapter 6 Slide: 36
Competitive Exercise 6.5: Developing
Competitive E-Commerce Models
• Management has asked you to outline an ecommerce model and e-commerce value chain that
will give your business a competitive advantage.
• Choose an industry and identify the target market.
Indicate the components that need to be included
in the Web site to allow the business model to
operate and the value chain to deliver value.
• Evaluate a number of ASPs. Should your Web site
be hosted by the business or outsourced?
• Compare your recommendations to those of
others.
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Chapter 6 Slide: 37