Class 2: Class 2 E-Marketplaces:
Structures, Mechanisms,
Economics, and Impacts
Agenda: Agenda E-marketplaces and their components.
The role of intermediaries.
The major types of e-marketplaces.
Electronic catalogs, search engines, and shopping carts.
Types of auctions and their characteristics.
Agenda: Agenda The benefits and limitations of auctions.
Bartering and negotiating.
The role of m-commerce.
Competition in the digital economy.
The impact of e-markets on organizations.
E-Marketplaces: E-Marketplaces Markets (electronic or otherwise) have three main functions:
Matching buyers and sellers;
Facilitating the exchange of information, goods, services, and payments associated with market transactions; and
Providing an institutional infrastructure, such as a legal and regulatory framework, which enables the efficient functioning of the market.
E-Marketplaces: E-Marketplaces Electronic marketplaces (e-marketplaces or marketspaces), changed several of the processes used in trading and supply chains
Greater information richness
Lower information search costs for buyers
Diminished information asymmetry between sellers and buyers
Ability of buyers and sellers to be in different locations
E-Marketplaces: E-Marketplaces e-marketspace
A marketplace in which sellers and buyers exchange goods and services for money (or for other goods and services), but do so electronically
infomediaries
Electronic intermediaries that control information flow in cyberspace, often aggregating information and selling it to others
E.g., http://www.abebooks.com
E-Marketplaces: E-Marketplaces Marketspace components
Customers
Sellers
Products and services
digital products
Goods that can be transformed into digital format and delivered over the Internet
Infrastructure
E-Marketplaces: E-Marketplaces Marketspace components
front end
The portion of an e-seller’s business processes through which customers interact, including the seller’s portal, electronic catalogs, a shopping cart, a search engine, and a payment gateway
back end
The activities that support online order-taking. It includes fulfillment, inventory management, purchasing from suppliers, payment processing, packaging, and delivery
Types of E-Marketplaces: Types of E-Marketplaces Electronic Storefronts
storefront
A single company’s Web site where products or services are sold
Most common mechanisms are a(n):
electronic catalog
search engine
electronic cart
e-auction facilities
payment gateway
Types of E-Marketplaces: Types of E-Marketplaces e-mall (online mall)
An online shopping center where many online stores are located
Types of Stores and Malls
General stores/malls
Specialized stores/malls
Regional versus global stores
Pure online organizations versus click-and-mortar stores
Intermediation in EC: Intermediation in EC infomediaries
Electronic intermediaries that control information flow in cyberspace, often aggregating information and selling it to others
Five limitations of direct interaction
Search costs
Lack of privacy
Incomplete information – too time consuming to collect all info on each seller directly
Pricing inefficiencies – the sellers do not sell in large quantities by serving each customer individually
Infomediaries and the Information Flow Model: Infomediaries and the Information Flow Model
Intermediation in EC: Intermediation in EC disintermediation
Elimination of intermediaries between sellers and buyers
reintermediation
Establishment of new intermediary roles for traditional intermediaries that have been disintermediated
Intermediation in EC: Intermediation in EC
Market Mechanisms: Market Mechanisms Electronic catalogs
Search engines
Software (intelligent) agents
Electronic shopping cart
Auctions
Forward
Backward
Dynamic pricing
E-Bartering
Mobile computing/commerce
Electronic Catalogs and Other Market Mechanisms: Electronic Catalogs and Other Market Mechanisms electronic catalogs
The presentation of product information in an electronic form; the backbone of most e-selling sites
Issues to consider:
Interactivity
The degree of customization
Integration with business processes
Search capabilities
Ease of updating
Electronic Catalogs and Other Market Mechanisms: Electronic Catalogs and Other Market Mechanisms Two approaches to creating customized catalogs
Let the customers identify the parts of interest to them from the total catalog
Let the system automatically identify customer characteristics based on the customer’s transaction records
Electronic Catalogs and Other Market Mechanisms: Electronic Catalogs and Other Market Mechanisms search engine
A computer program that can access a database of Internet resources, search for specific information or keywords, and report the results
software (intelligent) agent
Software that can perform routine tasks that require intelligence
Electronic Catalogs and Auctions as EC Market Mechanisms: Electronic Catalogs and Auctions as EC Market Mechanisms electronic shopping cart
An order-processing technology that allows customers to accumulate items they wish to buy while they continue to shop
auction
A competitive process in which a seller solicits consecutive bids from buyers (forward auctions) or a buyer solicits bids from sellers (backward auctions). Prices are determined dynamically by the bids
Auctions As EC Market Mechanisms: Auctions As EC Market Mechanisms Limitations of Traditional Off-line Auctions
The rapid process may give potential buyers little time to make a decision
Bidders do not have much time to examine the goods
Bidders must usually be physically present at auctions
Difficult for sellers to move goods to an auction site
Commissions are fairly high
Auctions As EC Market Mechanisms: Auctions As EC Market Mechanisms electronic auction (e-auction)
Auctions conducted online
dynamic pricing
Prices that change based on supply and demand relationships at any given time
Auctions As EC Market Mechanisms: Auctions As EC Market Mechanisms forward auction
An auction in which a seller entertains bids from buyers
reverse auction (bidding or tendering system)
Auction in which the buyer places an item for bid (tender) on a request for quote (RFQ) system, potential suppliers bid on the job, with the price reducing sequentially, and the lowest bid wins; primarily a B2B or G2B mechanism
The Reverse Auction Process: The Reverse Auction Process
Auctions As EC Market Mechanisms: Auctions As EC Market Mechanisms “name-your-own-price” model
Auction model in which a would-be buyer specifies the price (and other terms) he or she is willing to pay to any willing and able seller. It is a C2B model that was pioneered by Priceline.com
Auctions As EC Market Mechanisms: Auctions As EC Market Mechanisms Limitations of E-Auctions
Minimal security
Possibility of fraud
Limited participation
Bartering and Negotiating Online: Bartering and Negotiating Online bartering
The exchange of goods or services
e-bartering (electronic bartering)
Bartering conducted online, usually by a bartering exchange
bartering exchange
A marketplace in which an intermediary arranges barter transactions
EC in the Wireless Environment: M-Commerce: EC in the Wireless Environment: M-Commerce
mobile commerce (m-commerce)
E-commerce conducted via wireless devices
m-business
The broadest definition of m-commerce, in which
e-business is conducted in a wireless environment
Competition in the Digital Economy: Competition in the Digital Economy Porter’s Competitive Analysis in an Industry
competitive forces model
Model, devised by Porter, that says that five major forces of competition determine industry structure and how economic value is divided among the industry players in an industry; analysis of these forces helps companies develop their competitive strategy
Porter’s Competitive Forces Model : Porter’s Competitive Forces Model
Changes in the Supply Chain: Changes in the Supply Chain
Impacts of EC on Business Processes and Organizations: Impacts of EC on Business Processes and Organizations Transforming Organizations by using the Intranet, Extranet, and Internet
Technology and organizational learning:
Corporate change must be planned and managed
Organizations may have to struggle with different experiments and learn from their mistakes
The changing nature of work
Firms are reducing the number of employees down to a core of essential staff and outsourcing whatever work they can to countries where wages are significantly lower
Impacts of EC on Business Processes and Organizations: Impacts of EC on Business Processes and Organizations Redefining Organizations
New and improved product capabilities
New business models
Improving the supply chain
Impacts on Manufacturing
build-to-order (pull system)
A manufacturing process that starts with an order (usually customized). Once the order is paid for, the vendor starts to fulfill it
Real-time demand-driven manufacturing
Assembly lines
ERP systems
Impacts of EC on Business Processes and Organizations: Impacts of EC on Business Processes and Organizations Redefining Organizations
Impacts on Finance and Accounting
E-markets require special finance and accounting systems. Most notable of these are electronic payment systems
Impacts on Human Resource Management and Training
GE example
EC is changing how people are recruited, evaluated, promoted, and developed, e.g., eHR
EC also is changing the way training and education are offered to employees
Companies are cutting training costs by 50% or more, and virtual courses and programs are mushrooming
Managerial Issues: Managerial Issues What about intermediaries?
Managerial Issues: Managerial Issues What about intermediaries?
Their role will be changed
Some old ones will disappear and new ones emerge
In most cases, distributors will have to change their roles
Market and industry trends analysis is required
Managerial Issues: Managerial Issues 2. Should my company auction?
Managerial Issues: Managerial Issues 2. Should my company auction?
Pros
an extra channel
Cons
Fraud
New pricing models
New technologies
New procedures
Other support services
Managerial Issues: Managerial Issues 3. How do we compete in the digital economy?
Managerial Issues: Managerial Issues 3. How do we compete in the digital economy?
The basic principles of competition theories are the same
The competition rules are different
Compete with both old- and new-economy companies
Fast pace of changes and the impact of new business models developed by competitors may be devastating
The competition of business models not businesses
Managerial Issues: Managerial Issues 4. What organizational changes will be needed?
Managerial Issues: Managerial Issues 4. What organizational changes will be needed?
System integration
ERP systems even for SMEs
The role of networking
Organizational change – e-culture
Class 2: Class 2 Retailing in Electronic Commerce:
Products and Services
Agenda: Agenda The scope of e-tailing.
E-tailing business models.
How online travel/tourism services operate.
The online job market and its benefits.
The electronic real estate market.
Online trading of stocks and bonds.
Cyberbanking and personal finance.
Critical success factors.
Disintermediation and reintermediation.
Amazon.com: The King of E-Tailing: Amazon.com: The King of E-Tailing The opportunity
July 1995, e-tailing pioneer Amazon.com, offered books via an electronic catalog from its Web site (amazon.com)
The company has continually enhanced its business models and electronic store by:
expanding product selection
improving the customer’s experience
adding services and alliances
recognizing the importance of order fulfillment and warehousing
Amazon.com: The King of E-Tailing (cont.): Amazon.com: The King of E-Tailing (cont.) Amazon.com has expanded in a variety of directions:
expands its editorial content through partnerships with experts in certain fields
increases product selection with the used and out-of-print titles
expands its offerings beyond books (June 2002 became an authorized dealer of Sony Corp. selling Sony products online)
today: a diversified e-retailer
Amazon.com: The King of E-Tailing (cont.): Amazon.com: The King of E-Tailing (cont.) Key features of the Amazon.com superstore are:
easy browsing, searching, and ordering
useful product information, reviews, recommendations, and personalization
broad selection
low prices
secure payment systems
efficient order fulfillment
personalization
Amazon.com: The King of E-Tailing (cont.): Amazon.com: The King of E-Tailing (cont.) Amazon.com is recognized as an online leader in CRM
“Welcome back, Alexander Serenko” with recommendations of new books from the customers preferred genre based on previous purchases
Amazon.com: The King of E-Tailing (cont.): Amazon.com: The King of E-Tailing (cont.) Sends purchase recommendations via
e-mail to cultivate repeat buyers
Efficient search engine and other shopping aids
Customers can personalize their accounts and manage orders online with the patented “One-Click” order feature including an electronic wallet
Amazon.com: The King of E-Tailing (cont.): Amazon.com: The King of E-Tailing (cont.) ‘One-click’ order feature
Electronic Wallet – you don’t have to enter shipping info and credit card #
Received US Patent No. 5,960,411 on Sept 28, 1999
In October 1999, Barnes & Nobel.com infringed the patent
Amazon.com: The King of E-Tailing (cont.): Amazon.com: The King of E-Tailing (cont.) Amazon filed a lawsuit
In December, Amazon obtained a preliminary injunction granted by a lower court judge in Seattle
Losses for Barnes and Nobel
Barnes and Nobel appealed and the injunction was removed
Amazon continued the case
Amazon.com: The King of E-Tailing (cont.): Amazon.com: The King of E-Tailing (cont.) In 2002, Amazon settled its patent-infringement suit
No comments from both companies
Lawyers assume that Barnes and Noble paid a license fee or covered some costs
Amazon and the U.S. Patent and Trade Office were often criticized by independent software designers for issuing this patent
Internet Marketing and Electronic Retailing (E-Tailing): Internet Marketing and Electronic Retailing (E-Tailing) Amazon is an example of e-tailing
Overview of e-tailing
Electronic retailing (e-tailing): Retailing conducted online, over the Internet
E-tailers: Those who conduct retail business over the Internet
Internet Marketing and Electronic Retailing: Internet Marketing and Electronic Retailing Size and Growth of the B2C Market
Reported amounts of online sales deviate substantially based on how the numbers are derived
Annual online 2004 sales were estimated to be over $70 billion
The average online shopper spent over $350 per quarter
Forrester Research estimates that e-tailing will reach $316 billion by 2010
Internet Marketing and Electronic Retailing: Internet Marketing and Electronic Retailing Computer hardware and software
Consumer electronics
Office supplies
Sporting goods
Books and music Toys
Health and beauty
Apparel and clothing
Jewelry
Cars
Services
Others
What Sells Well on the Internet?
Internet Marketing and Electronic Retailing: Internet Marketing and Electronic Retailing Characteristics of Successful E-Tailing
High brand recognition
A guarantee provided by highly reliable or well-known vendors
Digitized format
Relatively inexpensive items
Frequently purchased items
Commodities with standard specifications
Well-known packaged items that cannot be opened even in a traditional store
Internet Marketing and Electronic Retailing: Internet Marketing and Electronic Retailing Online Marketing Team Exercise
4 teams, 3 students each
One product per team
5 mins to review each characteristic of the product and make a recommendation on whether it may be successfully sold online (use the slide above (#55) for this)
What’s in it for me?
Internet Marketing and Electronic Retailing: Internet Marketing and Electronic Retailing Online Marketing Team Exercise
Team1: McAfee McAfee Internet Security Suite (antivirus software), sold by McAfee
Team 2: Snowblower sold by Walmart.com (MTD Electric Snow Buster, product ID 5156105)
Team 3: Various Bridal Shoes from http://www.qualitybridalshoes.com
Team 4: Residential Heating Oil in Canada, no specific seller, the viability of a business model is investigated
Problems with E-tailing and Lessons Learned: Problems with E-tailing and Lessons Learned Don’t ignore profitability
Manage new risk exposure
Watch the cost of branding
Do not start with insufficient funds
The Web site must be effective
Keep it interesting
E-Retailing Business Models: E-Retailing Business Models direct marketing
Broadly, marketing that takes place without intermediaries between manufacturers and buyers; in the context of this book, marketing done online between any seller and buyer
E-Retailing Business Models: E-Retailing Business Models Direct Sales by Manufacturers
Sellers can understand their markets better because of the direct connection to consumers
Consumers gain greater information about the products through their direct connection to the manufacturers
E-Retailing Business Models: E-Retailing Business Models virtual (pure-play) e-tailers
Firms that sell directly to consumers over the Internet without maintaining a physical sales channel
click-and-mortar retailers
Brick-and-mortar retailers that offer a transactional Web site from which to conduct business
E-Retailing Business Models: E-Retailing Business Models brick-and-mortar retailers
Retailers who do business in the non-Internet, physical world in traditional brick-and-mortar stores
multichannel business model
A business model where a company sells in multiple marketing channels simultaneously (e.g., both physical and online stores)
E-Retailing Business Models: E-Retailing Business Models Retailing in Online Malls
Referring Directories
Malls with Shared Services
Representative B2C Services
Postal Services
Services and Products for Adults
Wedding Channels
Gift Registries
Travel and Tourism Services Online: Travel and Tourism Services Online Online travel is probably the most successful
e-commerce implementation
Services provided include:
General information
Reserving and purchasing tickets, accommodations, and entertainment
Travel tips
Electronic travel magazines
Fare comparisons
Travel and Tourism Services Online: Travel and Tourism Services Online Benefits of Online Travel Services
Benefits to consumers
Large amount of free information available 24/7
Substantial discounts can be found
Benefits to providers
Airlines, hotels, and cruise lines are selling otherwise-empty spaces
Direct selling saves the provider’s commission and its processing
Travel and Tourism Services Online: Travel and Tourism Services Online Limitations of Online Travel Services
Many people do not use the Internet
Complex trips or those that require stopovers may not be available online because they require specialized knowledge and arrangements
Travel and Tourism Services Online: Travel and Tourism Services Online Corporate Travel
To reduce corporate travel costs, companies can make arrangements that enable employees to plan and book their own trips using online optimization tools provided by travel companies, e.g., American Express
Travel authorization software that checks availability of funds and compliance with corporate guidelines is usually provided by travel companies
Travel and Tourism Services Online: Travel and Tourism Services Online Intelligent Agents in Travel Services
Software agents emulate the work and behavior of human agents in executing organizational processes like travel authorization, planning or decision making
Each agent is capable of acting autonomously, cooperatively, or collectively to achieve the stated goal
Employment Placement and the Job Market Online: Employment Placement and the Job Market Online The Internet Job Market
Job seekers
Employers seeking employees
Job agencies
Government agencies and institutions
The Internet is a global online portal for job seekers
Employment Placement and the Job Market Online: Employment Placement and the Job Market Online Limitations of the Electronic Job Market
Many people do not use the Internet. This limitation is even more serious with non-technology-oriented jobs
Security and privacy: resumes and other online communications are usually not encrypted, so one’s job-seeking activities may not be secure
Intelligent Agents Match Resumes with Available Jobs: Intelligent Agents Match Resumes with Available Jobs
Real Estate, Insurance, and Stock Trading Online: Real Estate, Insurance, and Stock Trading Online Real Estate Applications
Advice to consumers on buying or selling a home
Commercial real estate listings
Listings of residential real estate in multiple databases
The National Association of Realtors (realtor.com) has links to house listings in all major cities
mls.ca
condoflip.com
Real Estate, Insurance, and Stock Trading Online: Real Estate, Insurance, and Stock Trading Online Real Estate Applications
Maps are available
Information on current mortgage rates
Mortgage brokers can pass loan applications over the Internet and receive bids from lenders who want to issue mortgages
Online lenders can tentatively approve loans online
Automated closing of real estate transactions
Real Estate, Insurance, and Stock Trading Online: Real Estate, Insurance, and Stock Trading Online Insurance Online
An increasing number of companies use the Internet to offer standard insurance policies (auto, home, life, or health) at a substantial discount
Third-party aggregators offer free comparisons of available policies
Several large insurance and risk-management companies offer comprehensive insurance contracts online
Online Electronic Stock Trading: Online Electronic Stock Trading
Real Estate, Insurance, and Stock Trading Online: Real Estate, Insurance, and Stock Trading Online Investment Information Online
Current financial news
Municipal bond prices
Many tools are available to help investors in the bond market
Free “guru” (expert) advice
Stock screening and evaluation tools
Banking and Personal Finance Online: 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
Banking and Personal Finance Online: Banking and Personal Finance Online Virtual Banks
Virtual banks have no physical location, but only conduct online transactions
virtualbank.com
Banking and Personal Finance Online: Banking and Personal Finance Online Implementation Issues in Online Financial Transactions
Securing financial transactions
Access to banks’ intranets by outsiders
Pricing online versus off-line services
Risks
Banking and Personal Finance Online: Banking and Personal Finance Online Online Billing and Bill Paying
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
On-Demand Delivery Services and E-grocers: On-Demand Delivery Services and E-grocers e-grocer
A grocer that takes orders online and provides deliveries on a daily or other regular schedule or within a very short period of time
grocerygateway.com
Managerial Issues: Managerial Issues What should our e-tailing strategic position be?
Managerial Issues: Managerial Issues What should our e-tailing strategic position be?
Overall strategic position
What niche are we in?
What business functions can we execute internally and what should we outsource?
Partners?
Fixed and marginal costs?
Channel cannibalization
Managerial Issues: Managerial Issues 2. How will intermediaries act in cyberspace?
Managerial Issues: Managerial Issues 2. How will infomediaries act in cyberspace?
Still hard to say
The role of the Internet and eBusiness will stabilize over time
Look at researchers’ predictions