Transcript 3.9: Issues in E

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3.4: Banking and Personal Finance Online
• electronic banking (e-banking):
– Various banking activities conducted from home or the
road using an Internet connection;
– Also known as cyberbanking, virtual banking, online
banking, and home banking.
• Virtual Banks
– Have no physical location, but only conduct online
transactions
• NetBank (netbank.com)
• First Internet Bank (firstib.com).
– Make sure that the bank is legitimate before sending money to
a virtual bank
Module: Competing in the Network Economy
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3.4: Banking and Personal Finance Online
• Online Banking Capabilities
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View current account balances and history at anytime
Access to statements
Pay bills online
Download account transactions
Transfer money between accounts
Balance accounts
Communicate with the bank
Access information anytime
Access information anywhere
Use additional services
Module: Competing in the Network Economy
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3.4: Banking and Personal Finance Online
• Implementation Issues in Online Financial
Transactions:
– Securing financial transactions
– Access to banks’ Intranets by outsiders
– Using imaging systems
– Differential pricing of online versus off-line services
– Potential Risks
Module: Competing in the Network Economy
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3.4: Banking and Personal Finance Online
• Personal Finance Services Online
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Bill paying and electronic check writing
Tracking of bank accounts, expenditures, and credit cards
Portfolio management
Investment tracking and monitoring
Stock quotes and past and current prices of stocks
Personal budget organisation
Record keeping of cash flow and profit and loss analysis
Tax services
Retirement goals, planning, and budgeting
Module: Competing in the Network Economy
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3.4: Banking and Personal Finance Online
• In online bill paying, funds are taken from the user's
accounts by an intermediary who then arranges payments
with the user's debtor.
• Online Billing and Bill Paying
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Automatic transfer of mortgage payments
Automatic transfer of funds to pay monthly utility bills
Paying bills from online banking accounts
Merchant-to-customer direct billing
Using an intermediary for bill consolidation
Person-to-person direct payment
Pay bills at bank kiosks
Taxes
Module: Competing in the Network Economy
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3.5: On-Demand Delivery Services and E-Grocers
• E-grocer:
– A grocer that will take orders
online and provide deliveries on a
daily or other regular schedule or
will deliver items within a very
short period of time
• On-demand delivery service:
– Express delivery made fairly
quickly after an online order is
received
Module: Competing in the Network Economy
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3.5: On-Demand Delivery Services and E-Grocers
• Who are the e-grocery shoppers?
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Shopping avoiders (dislike going to physical stores)
Necessity users (e.g., disabled and elderly)
New technologists (young and technology savvy)
Extremely busy consumers (time-starved)
Consumers who gain a sense of self-worth from online
shopping (leading edgers)
Module: Competing in the Network Economy
3-8
3.6: Online Delivery: Digital Products, Entertainment & Media
• Digital Products
– Certain goods, (software and music) may be
digitised completely and delivered over the Internet.
Module: Competing in the Network Economy
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3.6: Online Delivery: Digital Products, Entertainment & Media
• Napster: Its Rise, Collapse and Revival
– Consumers-to-consumers (peer-to-peer) digital distribution
– Napster only shares “libraries” or lists of songs, and then
enables a peer-to-peer file-sharing environment
– Sued for copyright infringement in 2002
– Free file sharing is no longer allowed
– Napster forced to charge customers for use of its file-sharing
service
– Entered into an agreement with Bertelsmann AG (large global
music label that participated in the lawsuit against Napster)
– Went into bankruptcy in 2002
– Roxio purchased and reopened in late 2003 as “for fee filesharing service”.
Module: Competing in the Network Economy
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3.6: Online Delivery: Digital Products, Entertainment & Media
• Benefits and Limitations of Digital Delivery
– There are several advantages to the use of digital
delivery including increased speed of delivery, low
product cost and low distribution costs.
– The major disadvantage is that not all goods can be
digitised.
Module: Competing in the Network Economy
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3.6: Online Delivery: Digital Products, Entertainment & Media
• Online Entertainment
– Interactive Entertainment
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Web browsing
Internet gaming
Single and multiplayer games
Adult entertainment
Participatory Web sites
Reading
Module: Competing in the Network Economy
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3.6: Online Delivery: Digital Products, Entertainment & Media
• Noninteractive Entertainment
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Event ticketing
Restaurants
Information retrieval
Retrieval of audio and video entertainment
Live events
Module: Competing in the Network Economy
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3.7: Online Purchase Basics
• Shopping Portals:
– Gateways to storefronts and malls; may be
comprehensive or niche-oriented. Examples:
• gomez.com and shopping.yahoo.com
• Shopping Robots (Shopping Agents or Shopbots)
– Tools that scout the Web looking for goods and
services that meet consumer’s specified search criteria
• Wireless Shopping Comparisons
– Enable shoppers to compare prices any time from
anywhere, including from any physical store.
Module: Competing in the Network Economy
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3.7: Online Purchase Decision Aids
• Business Ratings Sites
– Rating of e-tailers and online products based on multiple criteria.
• Trust Verification Sites
– Evaluate and verify the trustworthiness of various e-tailers
• Other Shopper Tools
– Escrow services: 3rd party to assure quality
– Communities of consumers who offer advice and
opinions. Examples: Epinions.com, PriceGrabber.com.
– e-wallet: A program that contains a shopper’s information.
Note: Escrow services and electronic wallets are useful for online
purchases because they can decrease the amount of contract risk for
the customer during an online purchase.
Module: Competing in the Network Economy
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3.7: Online Purchase Decision Aids
• Business Rating Sites. Examples:
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Bizrate.com
Consumer Reports Online (consumerreports.org)
Forrester Research (forrester.com)
Gomez Advisors (gomez.com)
• Trust verifications sites. Examples:
– TRUSTe, VeriSign, BBBOnline, WebTrust.
• The above two tools add to customers’ feelings of security
in making an online purchase. They allow the customer to
evaluate the quality of the merchant, and not just the price
of the good, before making a purchasing decision.
Module: Competing in the Network Economy
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3.7: Online Purchase Decision Aids
• Role of search agents to support shopping
– Agents are able to aggregate information from several
sources as well as maintaining information about
personal preferences to enhance the shopping
experience.
– Amazon.com’s A9 Search Engine
• Remembers information
• A user can make notes about any Web page and search
them
• Offers a new way to store and organise bookmarks
• Recommends new sites and favorite old sites specifically
for the user to visit
Module: Competing in the Network Economy
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3.8: Successful Click-and-Mortar Strategies
• What motivates a brick-and-mortar company to sell
online?
– Traditional firms sell online to compete with new e-commerce
entrants and to preserve market share. Additionally, traditional firms
may see e-commerce as a way to expand their existing market share.
• Click-and-mortar hybrid strategies:
– Speak with one voice
• Link all backend systems to an integrated customer service
– Empower the customer
• A powerful 24/7 channel for service and information
– Leverage the channels
• Offers advantages of each channel to customers from all channels
Module: Competing in the Network Economy
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3.8: Click-and-Mortar Strategies
• Alliance of virtual and traditional retailers:
Amazon.com and ToysRUs
– The alliance between these two firms allowed Amazon.com to
concentrate on its core competence of effective online
logistics and customer relationship management, while
Toys’R’Us could concentrate in their area of core
competence–purchasing and marketing toys.
– During the 1999 Christmas season, before their alliance, both
companies failed to profitably deliver toys on time
– Pooled their expertise to form a single online toy store
– The alliance allows them to leverage each other core strengths
– Revenues are split between the two companies; the risks are
also equally shared.
Module: Competing in the Network Economy
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3.8: Click-and-Mortar Strategies
• Alliance of virtual and traditional retailers:
Amazon.com and ToysRUs (cont’d)
– After 4 years, the partners sued each other
– One reason for the difficulties was that the two companies had
to coordinate disparate systems (operational, technological,
and financial) as they merge their corporate cultures.
– For example, Toys’R’Us wanted Amazon to sell only
Toys’R’Us toys, and it paid $250 million a year for this
exclusivity. Amazon interpreted the contract to allow them to
sell toys from any company.
– The alliance failed due to systems issues, corporate cultures
and contract issues.
Module: Competing in the Network Economy
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3.8: Problems with E-Tailing and Lessons Learned
• Reasons retailers give for not going online
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Product is not appropriate for web sales
Lack of significant opportunity
Too expensive
Technology not ready
Online sales conflict with core business
Module: Competing in the Network Economy
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3.8: Problems with E-Tailing and Lessons Learned
• Failures in B2C dot-coms
– Kozmo.com
• A creative idea for on-demand deliveries of movie
rentals
• Difficulty in how to return the videos
– Furniture.com
• Difficulty in delivering products in a timely manner
– eRegister.com
• Registering for courses etc. online was not popular
with consumers
Module: Competing in the Network Economy
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3.8: Problems with E-Tailing and Lessons Learned
• Lessons learned:
– Don’t ignore profitability
• Online marginal sales don’t lead to marginal profits
– Manage new risk exposure
– Watch the cost of branding
• Drive to establish brand can lead to excessive spending
– Do not start with insufficient funds
– The web site must be effective and able to perform
– Keep it interesting
• Dynamic sites with rich databases of information appeal
most to customers
Module: Competing in the Network Economy
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3.9: Issues in E-Tailing
• Disintermediation:
– The removal of organisations or business process layers
responsible for certain intermediary steps in a given
supply chain
– Manufacturer sells directly to consumer.
• Reintermediation:
– The process whereby intermediaries (either new ones or
those that had been disintermediated) take on new
intermediary roles.
• Unbundling:
– Offering specialised services in small segments in order to
improve speed and efficiency.
Module: Competing in the Network Economy
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Module: Competing in the Network Economy
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3.9: Issues in E-Tailing
• Cybermediation (electronic intermediation):
– The use of software (intelligent) agents to facilitate
intermediation
• Hypermediation:
– Extensive use of both human and electronic intermediation to
provide assistance in all phases of an e-commerce venture.
• The use of EC and IT can create changes in a traditional supply
chain. These changes can remove existing players
(disintermediation) and can bring them back with different roles
and functions (reintermediation). Cybermediation uses
intelligent agents while hypermediation uses extensive human
and electronic intermediation at all stages of the value chain.
Module: Competing in the Network Economy
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3.9: Issues in E-Tailing
• Channel Conflict
– Occurs when an upstream member of the value chain
begins to sell directly to customers.
– Can also occur when the online division of an existing
company begins to compete with its off-line division or
existing third party distribution channels.
• Determining the right price
– Prices need to be competitive, while still providing an
adequate margin.
– EC can allow companies to segment users into different
price groups and test pricing more than was possible with
only brick-and-mortar operations.
Module: Competing in the Network Economy
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3.9: Issues in E-Tailing
• Personalisation
– Personalisation is the ability to use technology to create
goods that meet the exact specifications of the consumer.
• For example, an e-tailer can use cookie files and other technologies to
track the specific browsing and buying behavior of each consumer.
Next, produce a marketing plan tailored to that consumer’s pattern
– Mass customisation is the ability to create personalised goods
for a large number of customer goods based on their exact
specifications. Highly risky for pure-play e-tailing.
• Fraud and illegal activities
– A major problem in B2C is the increasing rate of online fraud
• How to make customers happy
– Merchants can find out what customers want through market, the
topic of of our next lesson.
Module: Competing in the Network Economy
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Managerial Issues
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What should our strategic position be?
List the B2C distribution channel models.
How will intermediaries act in cyberspace?
Should we set up alliances?
Describe channel and other conflicts that may
appear in e-tailing.
6. Why are virtual e-tailers usually not profitable?
Module: Competing in the Network Economy