1/11/11

Internet Marketing

Shopping and Buying Online

The industrial model supply chain involves complex warehousing and logistics, with
excess inventories at all levels…this is an expensive, slow, low-tech model

BTFbuilt to forecast
(before-Men’s shirts)
Manufacturerdistributorsretailer

Each stage of the chain has incomplete information as to the business of the other
stages…all but the retailer lack knowledge of the consumer

The digital model supply chain compresses time and space…less time to react and
more intense competition…may disintermediate suppliers

Traditional distribution channels (b-t-f)

Manufacturerdistributorretailerconsumer

Networked economy (b-t-o)

Manufacturer---------(internet)--------consumer
Distributor retailer

Value added and selling price: traditional channels

Manufacturer Distributor Retailer
Value added $20.45 $11.36 $20.92
Selling price $20.45 $31.31 $52.72

Because disintermediation is possible, should the manufacturer do so?

Sales equaled approximately $150b in 2010…substantial room to increase
Amazon about $20b
Total us retail sales: $3.7trillion
24 percent of the US population is not online
instant gratification of purchasing in stores
internet marketing is much broader than on-net sales…complex mix of on/off net
shopping and buying…online marketing generates $3.50 to $4.00 of store sales for
each $1.00 of online sales.
All products can be purchase online…but some relatively more than others
All products can be sold online…but some more suitable than others…digital goods
most suitable
Product characteristics affecting online salability
1) high degree of customization/fit required (store)
2) highly personal/embarrassing (online
3) high cost to ship (store)
 4) instant gratification (store) vs. delay acceptable (online)
5) social and recreational value of store experience (store)
6) tactility – touch and feel necessary before purchase (store)
7) price differences (neutral – could be higher/lower online)
8) information intensity – high level of time & effort to acquire complete and
reliable information (less “search hassle” online)
9) complex product : requires human contact (store)
10)very high value reduces buyer comfort to buy online (store)

Some segments will not be accessible online…requires offline channel marketing

and sales strategy
1) truly disconnected
2) net dropouts
3) net evaders
4) intermittent user
if bricks, then clicks…if clicks, then may not be bricks…bricks only very rare
the web may be thought of as a distribution channel…for an established company,
one of many options…for a new company the only channel or the first of many