Electronic Commerce Business Models and Strategies

Reference1. Net Ready, by Amir Hartman and John Sifonis, McGRaw-Hill, 2000. 2. Now or Never, by Mary Modahl, Harper Business, 20003. Designing Systems for Internet Commerce by G. Winfield Treese, Lawrence C. Stewart

(May 1998) Addison-Wesley Pub Co; ISBN: 0201571676 4. Net Results: Web Marketing that Works by Rick E. Bruner (Editor), Cybernautics, Usweb

Corporation Hayden Books; ISBN: 1568304145  5. E-Business : Roadmap for Success by Ravi Kalakota, Marcia Robinson, Don Tapscott 

(June 1999)  Addison-Wesley Pub Co (C); ISBN: 0201604809  6. Customers.Com: How to Create a Profitable Business Strategy for the Internet and Beyon

d by Patricia B. Seybold (Contributor), R. T. Marshak, Ronni Marshak 1 Ed edition (November 1998) Times Books; ISBN: 0812930371

7. Net Success : 24 Leaders in Web Commerce Show You How to Put the Web to Work for Your Business by Christina Ford Haylock, Len Muscarella, Ron Schultz, Steve Case  (May 1999) Adams Media Corporation; ISBN: 1580621147 

8. Creating the Virtual Store: Taking Your Web Site from Browsing to Buying, by Magdalena Yesil, Published by John Wiley & Sons, November 1, 1996

9. Understanding Electronic Commerce (Strategic Technology Series), by David R. Kosiur, Published by Microsoft Press, May 1, 1997.

OutlineEC Introduction

Introduction

The cycle of electronic commerce

EC and Business Process

EC statistics

EC Strategies 4Cs strategy: Customer, Content, Community, Commerce

Revenue streams

EC development process

EC Business ModelsB2C Virtual stores: physical and digital goods and services

Seller-side

Buyer-side

B2B marketspace

EC Introduction

• Introduction• The cycle of electronic commerce• EC and business process• EC statistics

Electronic Commerce: Introduction

E-Business

E-Commerce

Internet Commerce

Commerce

Electronic Commerce

• Electronic commerce is broadly as the ability to execute business activities (transactions, contracts, and partnership) over a computer network. The execution of these activities lead to the exchange of goods, services, and money.

• Online business activities are changing market dynamics and structures of various industries.

• Electronic commerce adds a new dimension "information" to business activities involving information goods, information services, and electronic money.

The Low-Friction Market

"[The Internet] will carry us into a new world of low friction, low-overhead capitalism, in which market information will be plentiful and transaction costs low."

-- Bill Gates, The Road Ahead

"Where there is a friction, there is opportunity!"

-- Net Ready.

The Cycle of Electronic Commerce

Customers Online Ads Online Orders

Standard Orders

Access

SearchesQueriesSurfing 冲浪

Distribution

Online: soft goodsDelivery: hard goods

Electronic Customer Support

Follow-on Sales

Source: Understanding Electronic Commerce (Strategic Technology Series), by David R. Kosiur, Published by Microsoft Press, May 1, 1997.

Components of Electronic Commerce

Institution

• Government 政府• Merchants 商家• Manufacturers 制造商• Suppliers 供应商• Consumers 消费者

Processes

• Marketing 市场• Sales 销售• Payment 支付• Fulfillment 履行• Support 支援

Networks• Intranet• Extranet• Internet

Source: adapted from David Kosiur, Understanding Electronic Commerce, Microsoft Press, 1997.

ElectronicCommerce

EC and Business Processes Seller Customer

Co

rpo

rate

Dat

abas

es

Provide Info

Get customer

Provide info

Fulfill order

Support

Identify need

Find source

Evaluate offerings

Purchase

Maintain, Repair,Operate

Phone, fax, e-mail

Web site

Newsgroups

Net communities

Web site

EDI

Web site, phone, fax, e-mail, e-mailing list

Credit cards, e-cashP.O.s

Demos, reviews

Send info

Data sheets, catalogs, demos

Request info

Web surfing

Web searches, web ads

Deliver soft goods electronically

Source: adapted from David Kosiur, Understanding Electronic Commerce, Microsoft Press, 1997.

World Wide Internet Commerce

Forester Research, Inc. June 1999

Business Internet Commerce Trends

B2C: Business to ConsumerB2B: Business to Business

Reference: http://cyberatlas.internet.com/

Business-to-Business E-Commerce• International Data Corporation forecasts that business-to-business e-

commerce revenue will jump from $80 billion worldwide in 1998 to $1.1 trillion in 2003. Forrester Research believes that number will go even higher to $1.3 trillion by 2003.

• Business-to-Business -- Vertical Industries – Computing and Electronics: For this year, businesses will invest $50

billion in computers and other electronic equipment online. Increase to $319 billion by 2002.

– Motor vehicles: Companies will spend $9 billion online to purchase fleets of cars and trucks this year. 2002—grow to $114 billion—more than a 1000% increase.

– Online utilities: Online trades of $15 billion in 1999 will grow to $110 billion by 2002.

– Food and agriculture: Expected to be about $3 billion in 1999--$20 billion by 2002.

– Pharmaceutical and medical: Forecasted $1 billion this year. Increase 20-fold by 2002.

Source: Business 2.0, March, 1999 re: Forrester Research

Statistics• Holiday Season 1998

– 2.1 million households shopped online for the first time

– Generated $2.3 billion

– Virtually all (98%) of AOL shoppers said they would shop online again in the next 6 months (Source: Jupiter Communications)

• By 2003 . . . – Consumers on the Web will spend more than $177 billion

worldwide.

– There will be an eight-fold increase in Web buyers worldwide to 143 million (International Data Corporation, March 1999)

– In Europe, 43 million households will be online. (Source: Nua Internet Surveys 12/98 re: DataMonitor)

– In Japan, buyers will spend one trillion Yen online. (Source: Nikkei Multimedia, 12/98)

• 1% of 5 million US merchants are able to collect payments via the Internet in 1999.

• 10% E-merchants by year 2003.

Retailing Trends

1950s 1960s-1970s 1980s 1990s

Main street

Main street

Malls

Malls

Superstores

Superstores

Web

Web

• Home Depot• CompUSA• Barnes and Nobles• Border

AOL Findings

• Buy brands

• Seek convenience

• Are increasingly time-starving

• Are not solely motivated by price

• Require simplicity

Source: America Online, 1999

Net Economy• 1940s - 1980s

– Manufacturing to information economy

– Local - regional - national - multinational

– Tangible brick-and-mortar assets 有形资产 : offices, shops, service centers, and warehouse

• 1990s - 21st Century– Net economy:

» Information & Knowledge

» Communication and interactions

– Global and virtual

– Business Focus: Information, channel, flow, customer loyalty, reliable service, relationship

– Intangible assets无形资产 : Knowledge, experiences, relationships

Internet Economy Driving Forces

• Changing customer demands

• Globalization

• Internet

• New technology

• New marketplace

Selling Points of Virtual Stores

• "The Internet is going to become a channel of distribution." -- The president of a major U.S. advertising agency

• Another firm advertise its virtual store as "The parking is easy, there are no checkout lines, we are open 24 hours a day, and we deliver right to your door."

• The trend toward point-of-sale moving into the home is accelerating.

Benefits to the Merchants

• Increased sales of existing products to generate additional revenues

• Use the web to target their offers to a niche market

• "The store is always open!"

• Establish better relationships with customers.

• Low cost information distribution

• Increased speed to market

• Expanded delivery channels

• Global exposure and reach

Benefits to the Consumers

• Convenience

• Informative

• Value presented upfront: Demo and free download

• No long wait times

• Easy flow and navigation

• Search capabilities

• Engaging presentation

• Constant updates

• Easy to buy

All 3 Steps in One Medium

• Web and EC allows you to integrate three major steps of markting and sales in one medium.

Get Attention Give More Information/Answer Questions

Informing Selling

• TV Ads

• Magazines

• Brochures• Sales People• Print/editorial

• Store• Telephone• Catalogue

Transact/Service

Branding

Internet Industry

Internet Economy

Consulting

Contentand

Activity

ElectronicCommerce

Infrastructure

Client/ServerSoftware

ISPNetworkServices

InternetEquipment

Commerce InstrumentsPortalsCommerce Servers

SportsMallsEntertainmentNewsfeedPublications

System Integrationand Design Browsers

Web ServerApplication ServersSecurityTools

Internet ServiceConsumer ServicesCarriers

Backbone RouterAccess EquipmentServer Computers

EC Strategies

• 4Cs Strategy: – Customer– Content– Community– Commerce

• Revenue Streams• EC Development Process

• Most Visited Retailers:1. Bluemountainarts.com

2. Amazon.com

3. AOL.com

4. Ebay.com

5. Etoys.com

6. Barnesandnoble.com

7. CNet.com (software)

8. Egghead.com

9. CDNow.com

10. Musicblvd.com

11. ColumbiaHouse.com

12. Classifieds2000.com

13. Beyond.com

14. Coolsavings.com

15. Valupage.com

Not in Top 25:• Towerrecords.com• Borders.com• Toysrus.com• Target.com• Gap.com• Macys.com• Sears.com• WalMart.com• “BigCompany.com”• • • YourCompany.com??

New Competition From Surprising Places

Moving Your Business Online

• Companies are motivated by either fear or greed（既有所畏惧又翘首相望） to move to their businesses to the net.

• To .com your company is becoming an imperative.

• They have to obsolete（作废） their current business models and work very hard to search a new business model.

Your competitor is just one-click away

Electronic Commerce Applications and the Cycle of Commerce

Marketing

Sales

Production/Logistics

Billing/C

ollections

ServiceSeller's Cycle of Commerce

Time

Electronic Commerce Applications and the Cycle of Commerce

Shopping/Testing

Procurem

entR

eceiving/Logistics

Paym

ent

Operation

Buyer's Cycle of Commerce

Time

EC Strategies: 4 Cs

CommerceCommerce

ContentContentCommunityCommunity

CustomersCustomers

Customers

• Obsess over your customers

• Remember that the Web is an infant– What do you have to offer that the physical world

cannot in order to attract customers?

• If you make one customer unhappy, he won't tell five friends -- he'll tell 5,000 on newsgroups, list servers, and so on.

– "Word of mouth" factor gets amplified on the Net

• The shifts of balance of power away from business and toward customer.

- Jeff Bezos

Self Assessment: Customer Caring

What do your customers need? What requests do they make of you?

How do you respond to customer’s requests?

What kind of information can they get from you?

What process do they go through? How do you produce and distribute it to them?

What are the steps that your customers have to take

to complete a purchase transactions?

How do they get shipment status?

How are exceptions handled?

What do you need from customer? What do you know about customer preferences?

What information could you use to better target your

product and service offerings?

What can you do to build relationships? How can you engage customers in an ongoing dialog?

How can you continue to provide information, products,

and services to reinforce your ongoing relationships?

5 Steps to Success in EC• Set strategy

– Make it easy for customers to do business with you!

• Focus on the end-customer– Identify end-customers and their needs– Distinguish from channel partners– Identify other internal and external stakeholders

• Redesign customer-facing business processes• Wire your company for profit and success• Foster customer loyalty

– Determine and prioritize objectives– Decide what to measure and how to measure– Measure profitability and other critical success

indicators

Source: Adapted from Customer.com by Patricia Seybold, 1998

Foster Customer Loyalty • The key to profitability in EC• Achieving higher revenues via customer

acquisition获得 and customer retention保持– Acquisition costs– Base profit– Revenue growth– Cost savings– Referrals– Price premium

• Benefits: – No-cost acquisition – Experienced customer

• Strategies– Increase customer “inventory” （保有量）– Increase customer “tenure”（保有期）

8 Critical Success Factors

• Target the right customers

• Own customer's total experience

• Streamline business processes that impact the customer

• Provide a 360-degree view of relationships with your customers

• Let customers help themselves

• Help customers do their jobs

• Deliver personalized services

• Foster community

Target the Right Customers

• Know who your customers and prospects are

• Find out which customers are profitable

• Decide which customers you want to attract (or keep from losing)

• Decide which customers influence key purchases

• Find out which customers generate referrals

• Don't confuse customers, partners, and stakeholders

Own the Customer's Total Experience

• Deliver a consist and branded experience

• Focus on saving customer time

• Offer a peace of mind

• Work with partner to deliver consistent service and quality

• Respect the customer individuality

• Give customers control over their experience

Creating Sustainable Value in EC

• Develop a brand based on consumer experiences– The brand emerges as the two-way communication on

the net and off the net.

• Develop superior physical distribution– Physical distribution is a choke point in EC

• Leverage customer information – Use personal information to more convenience

shopping and customized services» Privacy issue

» Ask customer explicitly for such data

» Require a more subtle approach

– Use collective data » Use it to adjust pricing, product offering, and target market

Virtual Communities

Virtual Community

Users

• Money

• Content• Demographics

Providers

• Content• Hard goods• Games• Services

Other Websites

Advertisers

• Advertising

Consumers' Needs for Community• Communities of transaction: Facilitate the buying and selling of

products and services and deliver information related to those transactions.

– Bring in a critical mass of sellers and buyers to facilitate certain types of transactions.

– Virtual Vineyards (wine.com)

• Communities of Interest: Bring together participants who interact extensively with one another on specific topics.

– Higher degree of interpersonal communication.

– GardenWeb: www.gardenweb.com

– Motley Fool created by David and Tom Gardners on AOL (fool.com)

– Parents Place: www.parentsplace.com

• Communities of Fantasy 虚拟社区– Chat rooms: Red Dragon Inn

– Virtual Team competition at ESPNet: espnet.sportszone.com

• Communities of Relationship: People come together around certain life experiences that are very intense and can lead to the formation of deep personal connections.

– Cancer Forum on CompuServe

www.parentsoup.com

www.iVillage.com

Geocities: www.geocities.com• This collection of themes cyberhoods is populated by a half-million

"homesteaders" who get free home pages.

http://geocities.yahoo.com/home/

Quick Test for Technographics

More Men More Women

More Educated Less Educated

High Income Low Income

Have Children No Children

Younger Age Older

LaggardsEarly Adopter

Mainstreams

Time

Nu

mb

er o

f n

ew u

sers

Source: Now or Never, 2000

Technology-Fit: Customer and Product

Cu

sto

me

r N

ee

d fo

r P

rod

uct I

nfo

rmat

ion

High

Low

Customer Demographics MatchPoor High

Earlier AdopterSecond Wave

Second WaveWeb Laggards

TideDenny's

AAFedExpMicrosoft

NikePepsi

Jenny CraigChrysler

Source: Forrester Research

Challenge• Consumers: Everything on the Internet should to be free.

• Merchant: How can I make a profit if everything is free.

• Examples: – Free web browsers: Netscape Communicator and Internet Explorer

– Free email: Juno, mail.yahoo.com and hotmail.com

– Free Internet Access: Freeserve in Britain

– Free PC: eMachine and CompuServe; Free-PC

– Free web hosting: Geocities, Angelfire, Zoom

– Free ...

Pri

ce

Year

$250

$0

1930 1999

Cost of a 3-minute Long Distance Call

Gilder's Law All tangible and intangible items that can be copied adhere to the law of inverted pricing and become cheaper as they improve.

Anticipate this cheapness in your pricing strategy and product/service development strategy

All tangible and intangible items that can be copied adhere to the law of inverted pricing and become cheaper as they improve.

Anticipate this cheapness in your pricing strategy and product/service development strategy

Revenue Streams

• Advertising / Sponsorship

• Transaction

• Subscription / Listing Fee

• Value-added services

Multifaceted Model for Web-Based EC Design• ATTRACT: Hits

– Communities of interest

– Changing topics for repeat customers

– Features that encourage customers to explore

• ENGAGE: Leads– Special areas encourage customer to register (i.e. selection of articles customized for

visitors interests)

• PARTICIPATE: Sales revenue– Free download (video, audio, & software)

– Shopping– Chat and News

– Subscription

• JUMP: Advertising revenue

– Other products of interest to customer– Other sites of interest to customer

Adapted from Netscape Communications Inc., 1996.

Attract

Engage

Participate

Jump

EC Companies Transform the Revenue Mix

Pricing

Value

Customers

NewCustomers

NewValues

NewPricing

The mix: Who pays for what and how much.

Highly interrelated!

Source: Now or Never, 2000

What To Do Now

1. Define your eBusiness strategy FAST

2. Assess readiness: – customers

– products/services

– organization

– technology

– infrastructure

Rap

id in

novati

on

Rap

id in

novati

on

What To Do Now3. Identify the target:

– Business objectives– Customer segment– Application area

4. Build it in less than 6 months -- Flexibility -- Scalability -- Extendibility

5. Keep extending the function -- new products and services, new customer interfaces, enhance performance, security and capability

6. START NOW !

You are never done!You are never done!

Four Strategies to Start Online Business

• Integration

• Subsidiary

• Partnership

• Buyout

Co

st

Low

High

Tim

e to

Mar

ket

Slow

Fast

Ris

k

Low

High

Top Three Concerns

• Retailers– Conflict with investment in physical stores; – Technology issues; and – Lack of distribution and fulfillment network.

• Manufacturers– Products not appropriate for online sales; – Potential risk to channel relationships; and – Consumers won’t buy online– Many manufacturers simply weren't capable

of shipping a single box of Tide or a bottle of Advil. They had no experience in dealing directly with consumers.

Becoming Virtual

• Egghead to Egghead.com

• Computer Literacy to Fatbrain.com

• Romac International to KForce.com

Kinder Toys is Moving to www.toydomain.com

(Find us on the web after June 1st)

Kinder Toys is Moving to www.toydomain.com

(Find us on the web after June 1st)

Your 3 Biggest Problems/Opportunities

• What should our strategy be?

• How do we build it in 3 to 6 months?

• How do we stay on the edge of innovation for life?

Web Experiences for Consumers

• A many-to-many rather a one-to-many experience

• Fresh content

• Access to detail information

• Communities unbounded by space and time

• The multimedia appeal of TV

• A redefinition of privacy and identity

• Hyper-impulsivity: The web permits a closer conjunction of desire, transaction, and payment than any other environment.

E-Business Creation Process

E-Vision

BusinessDrivers

TechnologyDrivers

E-BusinessStrategy

RapidImplementation

• Customer feedback• Benchmark data• Competitive analysis• Market forces• Usage statistics• Customer needs• Current capabilities

• Personalization• ROI• Profiling• Segmentation• Experience

modeling• Expanded

business opportunities

• Systems and networks

• Web architecture• Business

infrastructure• Technology

components• Web technology

strategy

Source: Adapted from Digital Transformation, 2000

EC Development Process

• Knowledge building and market evaluation to identify a need and a niche

• Competitive and capability analysis

• EC Business model design and feature identification

• Determine what you have to offer (merchandizing)

• Set your e-business goals and priorities

• Design your EC architecture

• Assemble your EC teams

• Build your web site

• Set up a system to handle sales

• Provide customer services

• Advertise your online business (online and offline)

• Evaluate your performance and moving on

Popularity Adds Value in a Network

Val

ue

to U

ser

Number of Compatible User

Vicio

us c

ycle

Vir

tuou

s cy

cle

Networks• Real: LAN, Internet, Fax • Virtual: Virtual community, Chat

room, Instant messenger

Positive Network

Externality

Keys to Long Term Success

• Fast deployment

• Evolutionary implementation

• First mover advantages

• Promotion, promotion, promotion

• Customer focus and services

• Interaction with customers

• Integrating emerging technologies

• Redefining and redesigning business models

• Comprehensive database and data warehouse design

• Integrating back office operations with the virtual store fronts

•

EC Business Models

• Virtual stores: physical and digital goods and services

• Infomediaries: Seller-side

• Informediaries: Buyer-side • Infomediaries: B2B marketspace

Types of Virtual Stores• Hard goods:

– Food – Clothes– Computer hardware and Electronics– Packaged software

• Soft goods (Bits delivered on-line) – Information

» Database» Publishing » Research

– Software» Computer games» Java applets» Application software

• Services– Selling time:

» Computer game play» Consulting » Legal and medical services

– Selling information (subscriptions) » Dating services» Legal and medical advice

– Reservations and tickets» Airline tickets» Event tickets» Hotel and restaurant

Is EC Appropriate for You?

Industries who set up virtual storefronts

What Consumers Are Buying Online• Computer-related products 49%

• Books 35%

• Consumer electronics 34%

• Travel Reservations 28%

• Cars, boats 19%

• Clothing and apparel 18%

• Recorded music, CDs 18%

• Larger household goods (furniture, major appliances) 15%

• Filmed entertainment, videos 13%

• Gifts delivered by mail (flowers, candy) 12%

• Publication subscriptions 8%

• Investment or financial services 8%

• Food and drink 8%

• Artwork, poster, etc 4%

• Other 13%

» Source: Ernst & Young Internet Shopping Study 1998

EC Business Models

• Payment direction: – Buy-side– Sell-side– Marketspace: Business is being transacted with both

suppliers and customers.

• Trading parties: Most analysts predict the B2B model will have a more rapid adoption rate, but that the volume of transactions in the B2C model will, in the long run, greatly surpass that of B2B.

– Business to Business– Business to Consumer

• Type of product or service that is being provided. – Physical goods and services– Digital goods (contents) – Digital services

Sell-Side E-Commerce Model

Selling Merchant

Buyer A

Buyer C

Buyer B

EDI

HTML & FormsHTML & XML

OBIOnline Selling

Co

ns

um

er o

r Bu

sin

es

s

Sell-Side Storefront

• Primary model used in current business-to-consumer scenarios

• Single seller, typically a distributor, constructs a Web storefront to sell to many consumers (i.e. Amazon.com)

• Unless a single distributor can aggregate all the suppliers in a given industry, the buyer remains responsible for comparison shopping between stores

• Expensive for buyer; does not meet the needs of corporate procurement organizations.

Buy-Side E-Commerce Model

Buyer

Seller A

Seller C

Seller B

EDI

HTML & FormsHTML & XML

OBIOnline Procurement

Bu

sin

es

s

Buy-Side eProcurement• Buy-side applications generally consisting of a

browser-based self-service front end to ERP and legacy purchasing systems

• Corporate procurement aggregates many supplier catalogs into a single “universal” catalog and allows end-user requisitioning from the desktop, facilitating standard procurement for the organization and cutting down on “maverick” purchasing

• Purchases made through this system are linked to the back-office ERP or accounting system, cutting time and expense from the transaction and avoiding potential bookkeeping errors

• Model yields reduced transaction costs but not lower purchase costs; no impact on size of supplier base, no enablement of dynamic trade; buying organizations must set-up and maintain catalogs for each of their suppliers; too costly and technically demanding for most medium and small-sized businesses.

Marketplace E-Commerce Model

VirtualMarketspace

Seller A

Seller C

Seller B

EDI

HTML & Forms

HTML & XML

OBI

Buyer A

Buyer C

Buyer B

EDI

HTML & Forms

HTML & XML

OBI

• eBay.com• Pricelines.com• Egghead.com• Amazom.com Auction• www.chemdex.com

Infomediacy (Content Aggregator)

• No vendor loyally• No switching costs• Time-insensitive• Short-term• Casual• Many vendors• Products differentiated

on price, image

• Relationship-based• Very high switching costs• Extremely time-sensitive• Long-term• Mission-critical• Few partners• Partners differentiated on

reliability, flexibility

Business-to-ConsumerBusiness-to-Consumer Business-to-BusinessBusiness-to-Business

Business-to-Business vs. Business-to-Consumer

B2B Marketspace

• Latest evolution of B2B eCommerce, enabling a many-to-many relationship between buyers and suppliers

• Buyers and suppliers leverage economies of scale in their trading relationships and access a more “liquid” marketplace

• Sellers find buyers for their goods, buyers find suppliers with goods to sell

• Many-to-many liquidity allows the use of dynamic pricing models such as auctions and exchanges, further improving the economic efficiency of the market.

• Examples: – E-Steel.com– verticalnet.com

Channel Conflict: How About the Distributors

• The concept of complete dis-intermediation - the elimination of the middleman - remains a theory. New intermediaries are emerging.

• Cisco System has 2 billion dollars annual sales on the Web.

• 70% of Cisco online business comes from VARs and distributors.

• Fruit of Loom Inc. has 31 of its 55 distributors up on its extranet called Activewear Online. Distributors have to do lot of value-add and customer support to survive.

Retailers and Manufacturers Co-exist on the Web

• US retail sales revenues 1998:– Brick-and-mortar stores 93%

– Catalog sales: 6%

– E-commerce 1%

• Cases: – Levi Strauss sells jeans at www.levis.com but won't allow retailers

to sell them online.

– Estee Lauder sells Clinique cosmetics at www.clinque.com but doesn't offer retail promotion.

– Waterford sells a limited selection at www.waterford.com like chandeliers and corporate gifts.

• Strategies: – Manufacturers want to maintain channels while stay in direct touch

with their customers.

– Provide online dealer locators.

– Share customers information back and forth.

Clicks-and-Mortar

• Clicks-and-mortar has become the new buzzword in retailing circles.

• It means having an integrated, multi-touchpoint strategy that takes advantage of your physical retail outlets and integrates them seamlessly into your Web strategy.

• A good clicks-and-mortar strategy uses the Web to drive traffic to your stores and uses your stores to drive traffic to the Web.

YourSherpa.com

Brick-and-Click

Business Channel: Multi-Channel Presence

Buyer Seller

• Brick-and-mortar – Face-to-Face

• Mail order– Mail – Printed catalog

• Phone order – Telex– Phone– Fax

• Electronic commerce • EDI• Email• Web

Multi-channel plays will have extraordinary power if companies elegantly blend and synchronize those channels.

Cli

ck a

nd

Mo

rtar

Pure Play

Business Models Based on the Value Chain in the Marketplace

Raw material producer

Manufacturer

Distributor

Retailer

Consumer

ExchangeExchange

• B2B: Vericalnet.com• B2C: Amazon.com

• C2B: Priceline.com• C2C: eBay.com

C2B

B2C

B2C C2CNew Middleman

Business Models: Multiple Dimensions

• Buy-sell direction: Buyer-side, seller side, and marketplace

• Industry covered: single vs. multiple (Vertical vs. Horizontal)

• Ownership: Buyer, seller, independent, software vendor, consortia

• Service: Core vs. extended services

• Products: Core vs. MRO; Direct vs. Indirect;

• Pricing: Fixed price, Auction, Reversed auction, negotiated

• Timing of purchase: Contact vs. spot vs. ad hoc

Big Big BuyerBuyerBig Big

BuyerBuyer

Big Big SupplierSupplierBig Big SupplierSupplier

e-Procuremente-Procurement

Direct SalesDirect Sales

Net Net MarketMarket

Small SuppliersSmall Suppliers

Small SuppliersSmall Suppliers

Small SuppliersSmall Suppliers

Portfolio of Buying & Selling Strategies

Small Buyers

Small Buyers

Size of Buyers and Seller

Number of Sellers and Buyers

The Goldman

Sachs B2B Windmill in the Age of Consortia