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E-Tailing and B2C Market Growth
Business-to-business (B2B) Requires precise record keeping, trackability,
accountability, and formal contracts, usually with high volume of transactions and large amount payments
Also online retailing Business-to-consumer (B2C)
Ability to create direct relationships with consumer without intermediaries like distributors, wholesalers, or dealers
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E-Tailing and B2C Market Growth (cont.)
The B2C Market success is derived from: Offering quality merchandise at good prices Excellent customer service Convenience
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Characteristics of goods leading to high online sales volumes Brand recognition and guarantees Digitized products Frequently purchased, inexpensive items Well-known items with standard specifications
E-Tailing and B2C Market Growth (cont.)
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Consumer Purchase Processand Marketing Plan
Purchase decision process Prepurchase steps
Awareness of need for purchase Identify basic need or want
Actual purchase Establish decision criteria Seek recommendations and information Make purchase
Postpurchase steps Assistance with installation or setup Online help desks and instruction manuals
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Consumer Purchase Processand Marketing Plan (cont.)
Time-starved consumers Shopping avoiders New technologists Time-sensitive
materialists or click-and-mortar consumers
Traditionalists Hunter-gatherers Brand loyalists Single shoppers
Types of online shoppers
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Decision Criteria
Value proposition—customer service, better prices, higher quality
Personal service—treat the customer as a unique individual
Convenience—self-contained site that serves all the customer’s needs
Other criteria—service after the sale
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A Marketing Plan
Influence the consumer’s decision process through the “marketing mix” Product—portfolio of items available Price of the products Promotion of products (advertisements and
giveaways) Packaging and delivery
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Online Purchasing Aids
Shopping portals Comprehensive portals
Links to many different sellers Shopping comparison sites Comparison tools are available
Niche oriented Specialize in a certain line of products
(dogtoys.com) Some collect referral fee only Others have formal relationships with affiliates
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Online Purchasing Aids (cont.)
Shopbots and agents—tools that scout the Web for specific search criteria requested by consumers Mysimon.com - best prices on multiple items AutoBytel.com – cars Zdnet.com/computershopper – computers Office.com – office supplies
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Online Purchasing Aids (cont.)
Business ratings sites—sites that rate e-tailers Bizrate.com—compiles results provided by a
network of shoppers Gomez.com—consumer identifies relative
importance of different criteria
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Online Purchasing Aids (cont.)
TRUSTe seal of assurance E-tailers pay TRUSTe for use
of seal Hope consumers use seal as
proxy for actual research about their site
BBBOnLine Yearly license fees based on
company’s annual revenue
Secure Assure Yearly license fees based on
company’s annual revenue Ernst and Young
Created its own service for auditing e-tailers
Offers some guarantee of integrity of business practices
Trust verification sites—evaluate and verify trustworthiness and integrity of e-tailers
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Online Purchasing Aids (cont.)
Other shopping tools Escrow services—3rd party to assure quality
Proper exchange of money and goods Research information Payment-processing support
Communities of consumers Epinions.com—searchable recommendations on
products PriceGrabber.com—comparison shopping
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E-Tailing Business Models
Subscription models: charge monthly or annual subscription fee for service
Transaction fee models: charge service fee based on the level of transaction offered
Advertising-supported models: charge fee to advertisers instead of customers
Sponsorship models: companies sponsor the business through donations (usually supplemental income)
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Figure 3-2Disintermediation in the B2C Supply Chain
Source: M. Warkentin, et al. (2000). Used with permission of Dr. Merrill Warkentin.
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E-Tailing Business Models (cont.)
Direct marketing—sell directly to consumers Manufactures can sell directly to customers
Disintermediation—removal of business process layers in the value chain
Shortens the distribution chain Eliminates inefficiencies Shortens delivery time Builds closer relationships with consumers
Click-and-mortar Additional marketing channel to the conventional one Effectively supports build-to-order requests
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E-Tailing Business Models (cont.)
Pure-play e-tailers—sell over the Internet without a physical sales channel General purpose e-tailers (Amazon.com)
Broad range of products Large number of consumers
Specialty or niche e-tailers (CatToys.com) One specific product area High demand items in the area Effective practices for customer appeal
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E-Tailing Business Models (cont.)
Traditional retailers with Web sites Physical store May include mail-order or catalog sales Multichannel store operates both
Physical store E-tail site
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ODDS: Grocery Market Case
On-Demand Delivery Services (ODDS) Own fleet of delivery vehicles
Regular deliveries (weekly bases) Delivery within short time period (1 hour or same day)
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ODDS: Grocery Market Case (cont.)
Potential online grocery shoppers Shopping avoiders Necessity users—limited by their ability to shop New technologists Time-starved consumers Responsible consumers Traditionals
Repeat customers Example: Parknshop in Hong Kong
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Digital Delivery
Digital (“soft”) goods Music, movies, videos, software, newspapers,
magazines, graphics, etc. Can be delivered in “hard” or “soft” form
Computer program on CD-ROM with owner’s manual and warranty card
Download from Web site after payment
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Digital Delivery (cont.)
Napster experience—person-to-person sharing tool Enables individual users to download music
files from each other’s computers Phenomenal growth of Napster community New version of its file-swapping software
includes a “buy button” linked to CDNow May be beneficial to overall music sales as
individuals easily sample a broader range of music
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Digital Delivery (cont.)
New developments Custom-publishing music CD sites—collection of
personal favorites Disintermediation of traditional print media
Journals and magazines Newspapers (e.g., Wall Street Journal)
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Successful Click-and-Mortar Strategies
Click-and-mortar hybrid strategies Speak with one voice—link all back-end systems to
create an integrated customer experience Empower the customer—powerful channel for
service and information Leverage the channels—offs advantages of each
channel to customers from all channels Return item purchased online at physical store Order via the Web at the physical store items not
available there
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Successful Click-and-MortarStrategies (cont.)
Circuit City Case: transform to click-and-mortar (CircuitCity.com) Educates customers about features and
capabilities of products Customers can perform powerful searches to
find most appropriate products Offers extensive amount of information on
electronics etc., organized very flexibly Online purchases are smooth, secure and
seamless
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Amazon and Toys R Us: alliance of pure-play with traditional retailer Toys R Us had limited logistics capabilities
including distribution centers Amazon failed in the toy market lacking
supplier relationships with toy manufacturers Alliance allows each partner to leverage each
others core strengths Innovative model still working out problems
Successful Click-and-MortarStrategies (cont.)
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Disintermediation & Reintermediaries
Disintermediation—manufacturer sells directly to consumer
Reintermediaries—new intermediary roles in the digital environment offer new ways to: Reach new customers Bring value to customers Generate revenues
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Channel Conflict & Personalization
Channel conflict—members antagonistic over: Incentives Rewards Policies Support
Personalization—custom designed marketing plan Tailored to buying
patterns Appeal to sense of
value Excellent customer
service Mass customization
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E-Tailing : Lessons Learned
Profitability—online marginal sales don’t lead to marginal profits
Branding—drive to establish brand can lead to excessive spending
Performance—Web sites need to function in a fast, user-friendly manner
Static design—dynamic sites with rich databases of information appeal most to customers