no slide title chapter 2 retailing in electronic commerce learning objectives define the factors that determine the business models of electronic marketing identify the critical success factors of

Reactive Electronic Department Store (cont.).  Marks & Spencer in the UK, La Redoute in[r]

Chapter 2 Retailing in Electronic Commerce

Learning Objectives

Define the factors that determine the business

models of electronic marketing

Identify the critical success factors of direct marketing

Design the desirable relationship in a direct marketing

 Observe the reactive strategy of traditional

department stores

 Discuss whether electronic commerce should

always target global markets

 Identify the consumer’s shopping procedures on

the Internet

 Discuss the types of aiding-comparison-shopping

devices

 Describe the impact of EC on disintermediation

and re-intermediation in retailing

Learning Objectives (cont.)

Overview of Electronic Marketing Structure

 Business-oriented Electronic Marketing (B2B)

 needs more precise record keeping, trackability,

accountability, and formal contracts, usually with the high volume of transactions and large amount payments conversation

Consumer-oriented Electronic Marketing (B2C)

 mostly online Internet

 grows offline mainly by using smart cards, although it is still experimental

Advantages of Electronic Marketing

 Direct marketing

 Customization

 Online customer service

 Electronic shopping malls:

Broker (e.g Internet Mall)

Stores (e.g Amazon, J.C.Penney Online)

 electronic brokers

 Global marketing

 Customers can order from cyberstores 24

hours a day, 7 days a week from any place in the world

Forecast of the B2C Electronic Markets

 Forecast of Business-to-Consumer Electronic

Market Size

 Kinds of items was sold

Forecast of the B-to-C Electronic Markets (cont.)

(Unit: Millions of U.S Dollars)

[Source: OECD, Setp 1997]

Forecast of Business-to-Customer Electronic Market Segments

What’s sells on the Internet?

Forecast of the B-to-C Electronic Markets (cont.)

 Items with high brand recognition

 hard goods that can be transformed to digitized goods

like the books, music, and video

 items with security guarantee given by highly reliable or

known vendors

 relatively cheap items

 repetitively purchasing items such as grocery

 commodities with standard specification

 items whose operating procedures can be more

effectively demonstrated by a video

 packaged items which are well known to customers and

which cannot be open even when customers physically visit the store

Business Models of Electronic Marketing

Direct Marketing Manufacturers

Customer Services

Generalized Mall

v.s.

Specialized Mall/Store

 Proactive vs Reactive Strategic toward

Cybermarketing

 Proactive strategic posture toward cybermarketing

a company’s main distribution channel is the Internet, and

internal management such as inventory and operations management is focused to affect the benefit of

cybermarketing

 Reactive Strategic posture toward cybermarketing

the traditional physical distribution channel is left as the

company’s main distribution channel even though the company has opened an online distribution channel

 Global vs Regional Marketing

 Sales vs Customer Services

Business Models of Electronic Marketing (cont.)

 Active and Full direct Marketing

Direct Marketing

Dell Computer Corporation Case

 Founding Spirit of Dell : Telemarketing

 Astonishingly High Growth and Returns

 Revenue via Internet

 Dell’s Products on the Internet

 Dell’s Critical Success Factors

Direct Marketing (cont.)

 Price competitiveness owing to

mass-customization

 Database marketing and customer intimacy

 Global reach and value added services at a

single contact point

 High reliability and reputation

 Delivery support

 advanced web applications

 Reactive and Partial Direct Marketing

Direct Marketing (cont.)

 sell their products mainly through traditional channels

like department stores, discount stores, and

franchises

 Ford Case

including dealers as partners is optimal because orders that are received directly by the automakers may not be physically fulfilled without the cooperation of dealers

the received orders can then be assigned to the nearest dealer who owns the desired car in the inventory

the dealer’s inventory information should be shared by automakers through a common network

 Ford’s reactive direct marketing model (procedure)

Direct Marketing (cont.)

 Reactive and Partial Direct Marketing

Select the brand of car or truck

that interests you

Choose the body style you most desire

Select the option package(s)

that appeals to you

Add other individual options

to build your most comfortable, useful customized vehicle with a price and availability of the vehicle you configuredThen the Online Shopping Service System will provideYou can change options to accommodate the budget,Pick the interior upholstery that suits your tastewith the aid of Payment Calculator SystemSend the “Vehicle Summary” to the dealerPick your favorite exterior paint colorDecide whether to lease or buy,you with a “Vehicle Summary” and finalize the configurationThe dealer will contact youdealer name, city, or stateSearch a dealer online byApply for financing

 Ford supports a Pre-owned Showroom in the following way :

Enter your ZIP code Search the inventory Enter your personal information Secure your vehicle Select a dealership for test-drive and delivery Choose a Ford Extended Service Plan Explore leasing or financing options Test drive and accept delivery Confirm you delivery Confirm you order Print you order

Online Customer Service

 Provided in conjunction with online sales

 Provided to products which are sold offline

 Example: Service and Support homepage of

Hewlett Packard (HP)

 By using computer telephone integration (CTI)

technology, the same screen that a customer sees can be automatically displayed to the

human agent (and vice versa) who responds to the customer’s call watching the online data

about the customer.

Active Electronic Intermediaries

Pure electronic mall

 Company’s retailing business exists only on the

assist the search process of finding the appropriate

products and their vendors

Partial electronic mall

 Electronic mall as one of existing distribution channels

 Generalized Electronic Brokers

Active Electronic Intermediaries (cont.)

 Examples : Internet Mall, and iMall

 Provide a directory, keyword search engine, message

encryption, optional Web site hosting service and a

common platform of electronic payments

 Necessary factors to make shopping successful

Screening quality and reliability for Assurance

• customers need a reliable screening capability of quality and reliability of brands and companies

• e-brokers should create a trusted third party

Competing Electronic Channels

• several electronic channels help finding the items in need

• e-brokers should provide some differentiated attraction

 Specialized Electronic Distributors

Active Electronic Intermediaries (cont.)

 Digitized Products and Services Stores

Sold software, games, CDs, and videos together

 Cyber Flower Stores

1-800-FLOWERS

Reactive Electronic Department Store

 The J.C Penney Case

 An Internet-based

revenues amounts to only

1 to 2% of $30.5 billion total sales of 1997

Catalog 13%

Drug Stores

32%

Insurance 3%

based 1%

Internet-Department Stores 51%

 Updating prices and adding

new items to the electronic catalogs is convenient and inexpensive

 Overcoming the limitations of

paper catalogs without incurring extra distribution cost

 Electronic Department Stores Worldwide

 Marks & Spencer in the UK, La Redoute in

France, Jusco in Japan, Nordstrom in the USA, and Lotte and Hyundai in Korea

 Common strategy is finding significant benefits

from merchandising online

 Offering electronic service on the Internet is a

supplementary channel of advertisement

 By 1999, 3% of all US major retailers will sell

online

Regional Shopping Service

Peapod Case

 the leading Internet supermarket, providing

consumers with broad product choices and local

delivery services

 provide pictures, nutritional contents, past purchase

records

 users : middle and upper class people, some of who

are single parents, and all of that are very busy

$4.95/month membership fee, and $6.95 service free + 5% of the purchased amount

= cost of delivery service

Procedures for Internet Shopping :

The Consumer’s Perspective

to meet the needs

meet the requirements

multiple perspectives: specification,

conditions

4 Place an order

inspect; possible while using

support, or to return if disappointed

Procedures for Internet Shopping :

The Consumer’s Perspective ( cont.)

Aiding Comparison Shopping

Human and Agents within an e-Mall

Comparison

 Comparisons as a Multiple Criteria Decision

Making

The Impact of EC on Traditional Retailing System

 Disintermediation and Re-intermediation

 Disintermediation - the removal of organizations or

business process layers responsible for certain intermediary steps in a given value chain

eliminating the traditional intermediaries, such as

wholesalers, distributors, and retailers, to reduce the price

 Re-intermediation - the shifting or transfer of the

intermediary functions, rather than the complete elimination

intermediation such as electronic shopping malls,

directory and search engine service, and comparison aids using agents creates the role of re-intermediation

 Impact on Manufacture’s Distribution Strategy

The Impact of EC on Traditional Retailing System (cont.)

 Manufacturer’s monopolistic Internet-based

distribution: Levi’s do not allow any one else to sell the Levi’s product on the Internet.

 Coexistence with the dealers: This is the case in the

car distribution.

 Regionally mixed strategy: Nike sells on the Internet,

but only in the U.S.A.

 Mass Customization for Make-to-Order:

Manufacturers have to be adoptive to the customized orders of ultimate consumers This means the

manufacturer should be ready for mass customization

and distribution systems

Regard the electronic store as an additional channel of distribution OR

 From an intermediary’s point of view:

Commit to the

directory service

Retailing a specialized breed

of items OR

Managerial Issues (cont.)

 For existing retailer in the physical space:

 How to transform its business posture to get the

highest possible customer satisfaction at a