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  1. Chapter 2 Retailing in Electronic Commerce 1 © Prentice Hall, 2000
  2. 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 intermediaries „ Identify the typical products that sold well in the electronic market 2 © Prentice Hall, 2000
  3. Learning Objectives (cont.) „ Observe the reactive strategy of traditional department stores „ Discuss whether electronic commerce should always target global markets „ Describe 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 3 © Prentice Hall, 2000
  4. Overview of Electronic Marketing Structure „ Consumer-oriented Electronic Marketing (B2C) ƒ Mostly online; on the Internet ƒ Growing offline too, mainly by using smart cards, although it is still experimental „ Business-oriented Electronic Marketing (B2B) ƒ Needs more precise record keeping, trackability, accountability, and formal contracts, usually with high volume of transactions and large amount payments 4 © Prentice Hall, 2000
  5. Advantages of Electronic Marketing „ Customers can order from cyberstores 24 hours a day, 7 days a week from any place in the world Direct marketing ƒ Customization ƒ Online customer service ƒ Electronic shopping malls: ƒ ‚ Intermediaries (e.g. Internet Mall) ‚ Stores (e.g. Amazon, J.C.Penney Online) ƒ Electronic intermediaries ƒ Global marketing 5 © Prentice Hall, 2000
  6. Forecast of the B2C Electronic Markets Forecasting Institutions 1997 2000 IDC 1,000 117,000 VSAComm 48 3,500 VeriFone 350 65,000 Actif Media 436 46,000 Killen & Assoc. 775,000 Yankee 850 144,000 Jupiter 45 580 E-land 450 10,000 EU 228,000 USA 200 EITO 363 200,000 AEA/AU 200 45,000 Hambrecht & Quest 1,170 23,200 Forrester 518 6,579 [Source: OECD, 1997] Initial Forecast of B2C Electronic Market Size 6 © Prentice Hall, 2000
  7. Forecast of the B2C Electronic Markets (cont.) „ Kinds of items sold (Unit: Millions of U.S. Dollars) Items 1997 2000 Apparel 46 322 Gifts/flowers 45 658 Books 16 Not available Food/drink 39 336 Clothing 89 322 Entertainment 85 1,250 Subscription services 120 966 Pornography 52 Not available Music 9 186 Online games 127 1,013 Consumer finance 68 Not available Consumer insurance 30 1,110 [Source: OECD, Sept. 1997] Initial Forecast of B2C Electronic Market Segments 7 © Prentice Hall, 2000
  8. Forecast of the B2C Electronic Markets (cont.) „ What sells on the Internet? ƒ Items with high brand recognition ƒ Goods that can be transformed to digitized goods like books, music, and video ƒ Items with security guarantee given by highly reliable or known vendors ƒ Relatively cheap items ƒ Repetitively purchased items such as groceries ƒ Commodities with standard specification ƒ Items whose operating procedures can be more effectively demonstrated by a video ƒ Packaged items which are well known to customers and which cannot be opened even when customers physically visit the store 8 © Prentice Hall, 2000
  9. Business Models of Electronic Marketing Direct Marketing Manufacturers Electronic Mall Vs. Vs. Indirect Marketing Manufacturers Electronic Store Active Strategic Posture Sales Vs. Vs. Reactive Strategic Posture Customer Services Global Marketing Full Cybermarketing Vs. Vs. Regional Marketing Partial Cybermarketing Electronic Store Generalized Mall Vs. Vs. Specialized Mall/Store Electronic Broker 9 © Prentice Hall, 2000
  10. Business Models of Electronic Marketing (cont.) „ Proactive Vs. reactive strategic posture toward cybermarketing ƒ 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 ƒ 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 „ 10 10 © Prentice Hall, 2000 © Prentice Hall, 2000
  11. Direct Marketing „ Active and full direct Marketing Dell Computer Corporation Case ƒ Founding spirit of dell: telemarketing ƒ Astonishingly high growth and returns ƒ Revenue via the Internet ƒ Dell’s products on the Internet 11 © Prentice Hall, 2000
  12. Direct Marketing (cont.) „ Dell’s Critical Success Factors ƒ Price competitiveness owing to mass- customization and direct marketing ƒ Database marketing and customer intimacy ƒ Global reach and value added services at a single contact point ƒ High reliability and reputation ƒ Delivery support ƒ Advanced web applications 12 © Prentice Hall, 2000
  13. Direct Marketing (cont.) „ Reactive and Partial Direct Marketing ƒ Sell their products mainly through traditional channels like department stores, discount stores, and franchises ƒ 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 13 © Prentice Hall, 2000
  14. Direct Marketing (cont.) „ Reactive and Partial Direct Marketing ƒ Ford’s reactive direct marketing model (procedure) Then the Online Coptionswilloflease or buy,willbudget, You can changeShopping Service options the provide Decidedealerdealer online you Selectother individualstyle Add hooseoption package(s) Selectwhether tocontact by The the a the body System Search brand accommodate the to car or truck Pick Pickinterior upholstery that paint color taste Send the “Vehicleforexterior suits your the your favorite financing the dealer Apply Summary” to to buildwith and dealer a appealstheSummary” configured with a price the aid thatname,ofconfiguration your youavailability city,youstate you most finalize the desire customized vehicle andwith Payment Calculator System comfortable, to or of “Vehicle you that interests vehicle you most useful ƒ Ford supports a pre-owned showroom in the following way : Select EnterConfirmyour deliveryoptions Choose adrive personal information ExploreSearchExtendedcode and Plan aTest Enter andyour order dealershipyourtest-drive your for acceptService delivery Secure the financing Confirmyou vehicle leasing or inventory Ford Print ZIP delivery order 14 © Prentice Hall, 2000
  15. 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 15 © Prentice Hall, 2000
  16. Active Electronic Intermediaries „ Pure electronic mall ƒ Company’s retailing business exists only on the Internet ƒ Electronic distributors ‚ take full responsibility of fulfilling orders and collecting payments ƒ Electronic brokers ‚ assist the search process of finding the appropriate products and their vendors „ Partial electronic mall ƒ Electronic mall as one of existing distribution channels 16 © Prentice Hall, 2000
  17. Active Electronic Intermediaries (cont.) „ Generalized Electronic Intermediaries ƒ Examples : Choice Mall, and iMall ƒ Provide a directory, keyword search engine, message encryption, optional Web site hosting service and a common platform of electronic payments ƒ 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 in finding the items needed • e-brokers should provide some differentiated attraction 17 © Prentice Hall, 2000
  18. Active Electronic Intermediaries (cont.) „ Specialized Electronic Distributors ƒ Cyber Bookstores ‚ Amazon, Barnes and Noble ƒ Cyber CD Stores ‚ Columbia House, Music Boulevard, CD Universe, and CDNow ƒ Digitized Products and Services Stores ‚ Software, games, CDs, and videos ƒ Cyber Flower Stores ‚ 1-800-FLOWERS 18 © Prentice Hall, 2000
  19. Reactive Electronic Department Store „ The J.C. Penney Case ƒ The Internet-based Internet- revenue amounts to only 1 Insurance based to 2% of $30.5 billion total 3% 1% sales of 1997 (3.5% in 1999) Drug Stores ƒ Updating prices and adding 32% new items to the electronic catalogs is convenient and Catalog Department inexpensive 13% Stores ƒ Overcoming the limitations of 51% paper catalogs without incurring extra distribution cost 19 © Prentice Hall, 2000
  20. Reactive Electronic Department Store (cont.) „ Electronic Department Stores Worldwide ƒ Marks & Spencer in the U.K., La Redoute in France, Jusco in Japan, Nordstrom in the U.S.A., and Lotte and Hyundai in Korea ƒ Common strategy is finding significant benefits from merchandising online ƒ Offering electronic service on the Internet is a supplementary channel of advertisement ƒ By 2000, 3.5% of all U.S. major retailing will be done online 20 © Prentice Hall, 2000
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