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

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1

<b>Chapter 2</b>

<b>Retailing in</b>

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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}

setting

 _{Analyze the critical success factors of electronic}

brokers

 _{Identify the typical products that are sold well in the}

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

_{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

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<b>Overview of Electronic Marketing Structure</b>



_{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}

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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}

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Forecast of the B2C Electronic Markets

 <b>_{Forecast of Business-to-Consumer Electronic}</b>

<b>Market Size</b>

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

_{Kinds of items was sold}

<b>Forecast of the B-to-C Electronic Markets</b>

<i>(cont.)</i>

<b>(Unit: Millions of U.S. Dollars)</b>

<b>Items</b> <b>1997</b> <b>2000</b>

<b>Apparel</b> <b> 46</b> <b> 322</b>

<b>Gifts/flowers</b> <b> 45</b> <b> 658</b>

<b>Books</b> <b> 16</b> <b> Not available</b>

<b>Food/drink</b> <b> 39</b> <b> 336</b>

<b>Clothing</b> <b> 89</b> <b> 322</b>

<b>Entertainment</b> <b> 85</b> <b> 1,250</b>

<b>Subscription services</b> <b> 120</b> <b> 966</b>

<b>Pornography</b> <b> 52</b> <b> Not available</b>

<b>Music</b> <b> 9</b> <b> 186</b>

<b>Online games</b> <b> 127</b> <b> 1,013</b>

<b>Consumer finance</b> <b> 68</b> <b> Not available</b>

<b>Consumer insurance</b> <b> 30</b> <b> 1,110</b>

<b>[Source: OECD, Setp. 1997]</b>

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_{What’s sells on the Internet?}

<b>Forecast of the B-to-C Electronic Markets</b>

<i>(cont.)</i>

 <b>_{Items with high brand recognition}</b>

 <b>_{hard goods that can be transformed to digitized goods}</b>

<b>like the books, music, and video</b>

 <b>_{items with security guarantee given by highly reliable or}</b>

<b>known vendors</b>

 <b>_{relatively cheap items}</b>

 <b>_{repetitively purchasing items such as grocery}</b>
 <b>_{commodities with standard specification}</b>

 <b>_{items whose operating procedures can be more}</b>

<b>effectively demonstrated by a video</b>

 <b>_{packaged items which are well known to customers and}</b>

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Business Models of Electronic Marketing

Direct Marketing Manufacturers

v.s.

Indirect Marketing Manufacturers

Full Cybermarketing
v.s.
Partial Cybermarketing
Electronic Store
v.s.
Electronic Broker
Electronic Mall

v.s.
Electronic Store

Active Strategic Posture
v.s.

Reactive Strategic Posture

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

_Proactive

<i>_vs.</i>

_{Reactive Strategic toward}

Cybermarketing

 _{Proactive strategic posture toward cybermarketing}

<b>_{a company’s main distribution channel is the Internet, and}</b>

<b>internal management such as inventory and operations </b>
<b>management is focused to affect the benefit of </b>

<b>cybermarketing</b>

 _{Reactive Strategic posture toward cybermarketing}

 <b>_{the traditional physical distribution channel is left as the}</b>

<b>company’s main distribution channel even though the </b>
<b>company has opened an online distribution channel</b>



_Global

<i>_vs.</i>

_{Regional Marketing}



_Sales

<i>_vs.</i>

_{Customer Services}

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

_{Active and Full direct Marketing}

Direct Marketing

<b>Dell Computer Corporation Case</b>

 _{Founding Spirit of Dell : Telemarketing}
 _{Astonishingly High Growth and Returns}
 _{Revenue via Internet}

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

_{Dell’s Critical Success Factors}

Direct Marketing

<i>(cont.)</i>

 _{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}

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

_{Reactive and Partial Direct Marketing}

Direct Marketing

<i>(cont.)</i>

 _{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}

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 _{Ford’s reactive direct marketing model (procedure)}

Direct Marketing

<i>(cont.)</i>



_{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 vehiclePick the interior upholstery that suits your tastePick your favorite exterior paint color
Then the Online Shopping Service System will provide

you with a “Vehicle Summary”

You can change options to accommodate the budget,
and finalize the configuration

Decide whether to lease or buy,

with the aid of Payment Calculator System
Search a dealer online by

dealer name, city, or state

Send the “Vehicle Summary” to the dealerThe dealer will contact you

with a price and availability of the vehicle you configuredApply for financing

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

Enter your ZIP code
Search the inventory

Enter your personal informationSecure your vehicle

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Online Customer Service



_{Provided in conjunction with online sales}



_{Provided to products which are sold offline}



_Example:

<b>_{Service and Support homepage of}</b>

<b>Hewlett Packard (HP)</b>



_{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

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Active Electronic Intermediaries

_{Pure electronic mall}

 _{Company’s retailing business exists only on the}
Internet

 _{Electronic distributors}

_{take full responsibility of fulfilling orders and collecting}
payments

 _{Electronic brokers}

 _{assist the search process of finding the appropriate}

products and their vendors

 _{Partial electronic mall}

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

_{Generalized Electronic Brokers}

Active Electronic Intermediaries

<i>(cont.)</i>

 _{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}

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

_{Specialized Electronic Distributors}

Active Electronic Intermediaries

<i>(cont.)</i>

 _{Cyber Bookstores}

_{Amazon, Barnes and Noble}
 _{Cyber CD Stores}

 _{Columbia House, Music Boulevard, CD Universe,}

and CDNow

 _{Digitized Products and Services Stores}

 _{Sold software, games, CDs, and videos together}

 _{Cyber Flower Stores}

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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%

Internet-based
1%
Department
Stores
51%

 _{Updating prices and adding}

new items to the electronic
catalogs is convenient and
inexpensive

 _{Overcoming the limitations of}

paper catalogs without

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

_{Electronic Department Stores Worldwide}

Reactive Electronic Department Store

<i>(cont.)</i>

 _{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}

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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

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<b>Procedures for Internet Shopping :</b>

<b>The Consumer’s Perspective</b>

1.

Preliminary requirement determination to

meet the needs

2.

Search for the available items that can

meet the requirements

3.

Compare the candidate items with

multiple perspectives: specification, price,

delivery date, and other terms and

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4.

Place an order

5.

Pay the bill

6.

Receive the delivered items and inspect;

possible while using

7.

Contact the vendor to get service and

support, or to return if disappointed

<b>Procedures for Internet Shopping :</b>

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Aiding Comparison Shopping



_{Search on Hypertext Files by Agents}



_{Search on a Web-based Database both for}

Human and Agents within an e-Mall



_{Comparable Item Retrieval and Tabular}

Comparison



_{Comparisons over Multiple Malls}



_{Comparisons as a Multiple Criteria Decision}

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<b>The Impact of EC on Traditional Retailing System</b>



_{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,}

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

_{Impact on Manufacture’s Distribution Strategy}

<b>The Impact of EC on Traditional Retailing System </b>

<i>(cont.)</i>

 _{Manufacturer’s monopolistic Internet-based}

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

 _{Coexistence with the dealers:}<b>_{This is the case in the}</b>

<b>car distribution.</b>

 _{Regionally mixed strategy:}<b>_{Nike sells on the Internet,}</b>

<b>but only in the U.S.A.</b>

 _{Mass Customization for Make-to-Order:}

<b>Manufacturers have to be adoptive to the customized </b>
<b>orders of ultimate consumers. This means the </b>

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Managerial Issues



_{From a manufacturer’s point of view:}

<b>Fully committed to</b>
<b>direct marketing,</b>

<b>restructuring the</b>
<b>current manufacturing</b>
<b>and distribution systems</b>

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

_{From an intermediary’s point of view:}

<b>Commit to the</b>
<b>directory service</b>

<b>Retailing a</b>
<b>specialized breed</b>

<b>of items</b>
<b>OR</b>

Managerial Issues

<i>(cont.)</i>



_{For existing retailer in the physical space:}

 _{How to transform its business posture to get the}

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