Learning Objectives

1. Describe electronic retailing (e-tailing) and its

characteristics.
2. Define and describe the primary e-tailing business models.
3. Describe how online travel and tourism services operate and
their impact on the industry.
4. Discuss the online employment market, including its
participants, benefits, and limitations.
5. Describe online real estate services.
6. Discuss online stock-trading services.

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 Learning Objectives
7. Discuss cyberbanking and online personal finance.
8. Describe on-demand delivery by e-grocers.
9. Describe the delivery of digital products and online
entertainment.
10. Discuss various e-tail consumer aids, including comparison-
shopping aids.
11. Identify the critical success factors and failure avoidance
tactics for direct online marketing and
e-tailing.
12. Describe reintermediation, channel conflict, and
personalization in e-tailing.

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 OPENING VIGNETTE Amazon.com:
The King of E-Tailing

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 OPENING VIGNETTE :
Amazon.com: The King of E-Tailing
• The opportunity (Problems)
o July 1995, e-tailing pioneer Amazon.com, offered
books via an electronic catalog from its Web site
(amazon.com)
o The company has continually enhanced its business
models and electronic store by:
• expanding product selection
• improving the customer’s experience
• adding services and alliances
• recognizing the importance of order fulfillment and
warehousing

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 E-Tailing (cont.)
• Technology used (Solutions)
o Amazon.com has expanded in a variety of directions:
• offers specialty stores (professional and technical store)
• expands its editorial content through partnerships with experts in certain fields
• increases product selection with the used and out-of-print titles
• expands its offerings beyond books (June 2002 became an authorized dealer of Sony
Corp. selling Sony products online)
• today: a diversified retailer of products and services

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 E-Tailing (cont.)
o Key features of the Amazon.com superstore are:
• easy browsing, searching, and ordering
• useful product information, reviews, recommendations, and personalization
• broad selection
• low prices
• secure payment systems
• efficient order fulfillment
• personalization

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 E-Tailing (cont.)
o Enjoyable features:
• “Gift Ideas” section features seasonally appropriate gift ideas and services
• “Community” section provides product information and recommendations
shared by customers
• “E-Cards” section, free animated electronic greeting

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 E-Tailing (cont.)
o Marketplace services:
• hosts and operates auctions
• zShops service hosts electronic storefronts for a monthly fee
• allowing small businesses the opportunity to have customized storefronts
supported by the richness of Amazon.com’s order-fulfillment processing

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 of
E-Tailing (cont.)
o Amazon.com is recognized as an online leader in CRM
• informative marketing front ends
• one-to-one advertisements
• free posting of restaurant menus from thousands of restaurants
• “Welcome back, Sarah Shopper” with recommendations of new
books from the customers preferred genre based on previous
purchases
• Sends purchase recommendations via
e-mail to cultivate repeat buyers
• Efficient search engine and other shopping aids
• Customers can personalize their accounts and manage orders
online with the patented “One-Click” order feature including
an electronic wallet

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 E-Tailing (cont.)
o In 1997, Amazon.com started an extensive
affiliates program
• by 2002, the company had more than 500,000
partners that refer customers to Amazon.com
• Amazon pays a 3 to 5% commission on any resulting
sale
• alliances with major “trusted partners” provide
knowledgeable entry into new markets
• Carsdirect.com allows it to sell cars online
• Drugstore.com connects to health and beauty aids
• AT&T, Nextel and others suggest service plans for
wireless phones

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 E-Tailing (cont.)
o September 2001 Amazon signed an agreement with Borders Group Inc
• allows Amazon.com’s users to pick up books, CDs, and other merchandise at
Borders’ physical bookstores
o It is becoming a Web fulfillment contractor for national chains such as:
• Target
• Circuit City

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 E-Tailing (cont.)
• The Results
o Is the number one e-tailer since 2001 generated $3.12 billion ($3,12 billion –
Italian way)
o Is becoming very successful in reducing its costs and increasing its profitability
o Annual sales for Amazon.com have trended upward (over $5 billion in 2003)

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 E-Tailing (cont.)
o $15.7 million in 1996 to $600 million in 1998 to about $4 billion by 2002
o In 2003 the site offers over 17 million book, music, and DVD/video titles to some 20
million customers
o Offers several features for international customers
o In January 2002, Amazon.com declared its first ever profit—for the 2001 fourth quarter

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 E-Tailing (cont.)
• What can we learn…
o demonstrates the evolution of e-tailing
o some of the problems encountered by
e-tailers
o solutions employed by Amazon.com to expand its business
o the opportunities for e-tailing
o Affiliate marketing

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 Affiliate Marketing
• Affiliate marketing can be simply defined as
o A commission based arrangement where referring sites (affiliates or publishers) receive a
commission on sales or leads by merchants (retailers)

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 3.1 Internet Marketing
and Electronic Retailing
• Overview and definitions of e-tailing
o Electronic retailing (e-tailing):
• Retailing conducted online, over the Internet
o E-tailers:
• Those who conduct retail business over the Internet

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 Internet Marketing
and Electronic Retailing
What Sells Well on the Internet?
• Travel
• Health and Beauty
• Computer Hardware and
• Entertainment
Software
• Apparel and Clothing
• Consumer Electronics
• Jewelry
• Office Supplies
• Cars
• Sport and Fitness Goods
• Services
• Books and Music
• Pet Supplies
• Toys

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 Internet Marketing and
E-Tailing (cont.)
• Characteristics of successful e-tailing
o high brand recognition (Lands’ End)
o guarantee provided by highly reliable or well-known
vendors (Dell)
o digitized format (software)
o relatively inexpensive items (office supplies)
o frequently purchased items (groceries)
o commodities with standard specifications (books), physical
inspection unimportant (unlike “Diamond”)
o well-known packaged items that cannot be opened even in
a traditional store (vitamins)
Pearson/Prentice Hall & Dr. Chen, Electronic Commerce
Pearson/Prentice Hall & Dr. Chen, Electronic Commerce
 3.2 E-Tailing Business
Models
• Classification by distribution channel
1. Mail-order retailers that go online
2. Direct marketing from manufacturers
3. Pure-play e-tailers
4. Click-and-mortar retailers
5. Internet (online) malls

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 Exhibit 3.3: E-Tailing Business Models – E-tailing an Enterprise EC System

Business
Distributor Customers
Partners

Supplier Supplier
B2B and Our Company
B2C Sales,
Supplier Supply Chain The E-Tailer Supplier
Enterprise Finance,
Marketing,
Management
Accounting, HRM, IT and CRM
(SCM)
Supplier Supplier
Enterprise Resource
Business Planning (ERP) Business
Partners “The Backbone” Partners

Facing supplier distributor/ Internal Operations B2C and Customer-Facing

Business Partner Objective: Facilitate internal Applications
Objective: Optimize operations & increase Objectives: Optimize business
Relationships with business productivity relationships with customers;
partners and reduce cost of increase service
goods sold effectiveness and sales
Pearson/Prentice Hall & Dr. Chen, Electronic Commerce
 E-Tailing Business Models
• direct marketing
Broadly, marketing that takes place without
intermediaries between manufacturers and buyers; in
the context of this book, marketing done online
between any seller and buyer
• virtual (pure-play) e-tailers
Firms that sell directly to consumers over the Internet
without maintaining a physical sales channel

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 E-Tailing Business Models
• click-and-mortar retailers
Brick-and-mortar retailers that offer a transactional Web site
from which to conduct business
• brick-and-mortar retailers
Retailers who do business in the non-Internet, physical world
in traditional brick-and-mortar stores

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 E-Tailing Business Models
• multichannel business model
A business model where a company sells in multiple
marketing channels simultaneously (e.g., both physical and
online stores)
• Retailing in Online Malls
o Referring directories
o Malls with shared services

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 E-Tailing Business Models
• Other B2C Models and Special Retailing
o Representative special B2C services
• Postal services
• Services and products for adults
• Wedding channels
• Gift registries

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 3.3 Travel and Tourism
Services Online
• Major travel-related
Web sites are:
o expedia.com
o orbitz.com
o travelocity.com
o asiatravel.com
o hotwire.com
o travelweb.com
o eurovacations.com
o priceline.com

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 Travel and Tourism
Services Online (cont.)
• Revenue models of online travel services include:
o
o Revenue from advertising
o Consultancy fees
o Subscription or membership fees
o Direct revenues (commissions)
Revenue-sharing fees
o Others

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 Travel and Tourism
Services Online (cont.)
• Services provided:
o Traditional services
• providing general information
• reserving and purchasing
tickets, accommodations, and
entertainment

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 Travel and Tourism Services
Online
• Special Services
o Wireless services
o Direct marketing
o Alliances and consortia

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 Travel and Tourism
Services Online (cont.)
• Unique services from
virtual travel agencies
o travel tips (a visa problem)
o electronic travel magazines
o fare comparisons
o currency conversion calculators
o worldwide business and place
locators
Pearson/Prentice Hall & Dr. Chen, Electronic Commerce
o outlet for travel accessories and
books
o experts’ opinions
o major international and travel news
o detailed driving maps and
directions
o chat rooms and bulletin boards
o frequent-flier deals
o online travel auctions
 Travel and Tourism Services
Online
• Benefits of Online Travel Services
o To travelers
• Free information accessible at any time from any place
• Substantial discounts are available
o To travel services providers
• Airlines, hotels, and cruise lines sell otherwise-empty spaces
• Direct selling saves the provider’s commission and its processing

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 Travel and Tourism Services
Online
• Limitations of Online Travel Services
o Many people do not use the Internet
o The amount of time and the difficulty of using virtual travel agencies may be significant,
especially for complex trips and for inexperienced Internet surfers
o Complex trips or those that require stopovers may not be available online because they
require specialized knowledge and arrangements

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 Travel and Tourism Services
Online
• Corporate Travel
o To reduce corporate travel costs, companies can make
arrangements that enable employees to plan and book their
own trips
• Impact of EC on the Travel Industry
o The Internet may be contributing to a sharp reduction in the
number of travel agents
o It has also driven the rise of intermediaries—third-party
online sellers and portals provide price comparisons and a
range of other value-adding services for the consumer

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 Travel and Tourism
Services Online (cont.)
• Intelligent (software) agents in travel services
o Agent is capable of acting autonomously, cooperatively,
and collectively to achieve the stated goal
o Involved in buyer-seller negotiations
o Agents may activate other agents to make special
arrangements, cooperate with each other, activate
multimedia presentations, or make special inquiries

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 3.4 Employment, Placement,
and the Job Market Online

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 Employment, Placement,
and the Job Market Online
• THE INTERNET JOB MARKET
o Job seekers
o Employers seeking employees
o Job agencies
o Government agencies and institutions
• A consortium of large employers and college careers advisors
• Global online portals

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 Employment, Placement,
and the Job Market Online

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 Employment, Placement,
and the Job Market Online
• Limitations of the Electronic Job Market
o The gap between those with skills and access to the
Internet and those without
o Companies find that they are flooded with applicants when
they advertise online, screening is a time-consuming and
costly process
o Security and privacy
o High turnover costs for employers by accelerating
employees’ movement to better jobs

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 Employment Placement and the Job Market
Exhibit 3.7 Intelligent Agents Match Resumes with Available Jobs

e-mails e-mails
Job Seeker Recruiter
Agent 1 Agent 2
Create “Job Search Create Resume Post Jobs Create “Resume
Agent” giving the (objective, target job, (category, locations, Search Agents”
search keywords and & company, location, job title & description, giving the search
frequency of receiving work status, experience, career level, position keywords and
e-mails education, affiliations, type, salary range) frequency of
skills, reference, etc.) receiving e-mails

Resume Job
Base Base
Agent 3
Matching around
the clock
Generate e-mails to Generate e-mails to
Job Seekers
Pearson/Prentice Hall & Dr. Chen, Electronic Commerce
Recruiters
 3.5 Real Estate, Insurance,
and Stock Trading Online
• Potential homebuyers can:
o view many properties online, at any time and from anywhere, saving time for the buyer
and the broker
o sort and organize properties according to specific criteria and preview the exterior and
interior design of the properties, shortening the search process
o potential homebuyers can find detailed information about the properties and frequently
get larger real estate listings than brokers will provide.

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 Real Estate, Insurance,
and Stock Trading Online
• Real Estate
o E-commerce and the Internet are slowly but surely having
an ever increasing impact on the real estate industry
• Real Estate Applications
o Advice for consumers on buying or selling
o Commercial real estate listings
o Links to house listings in all major cities
o Maps
o Information on current mortgage rates

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 Real Estate, Insurance,
and Stock Trading Online
o Real Estate Applications (cont.)
• Real Estate Mortgages
o Many sites offer loan calculators
o Mortgage brokers can pass loan applications over the Internet and receive bids
from lenders that want to issue mortgages
o “Name your own price” model
o Aggregation of loan seekers package placed for bid on the Internet

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 Real Estate, Insurance,
and Stock Trading Online
• Insurance Online
o Standard insurance policies are available online at a substantial
discount :
• Auto
• Home
• Life
• Health
o Third-party aggregators offer free comparisons of available
policies
o Several large insurance and risk-management companies offer
comprehensive insurance contracts online
• insurate.com; quotesmith.com; insurance.com; quicken.com

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 3.6 Banking and Personal
Finance Online
• electronic banking (e-banking): Various banking activities
conducted from home or the road using an Internet
connection; also known as cyberbanking, virtual banking,
online banking, and home banking
• Consumers can use e-banking to pay bills online or to secure a
loan electronically.

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 Banking and Personal
Finance Online (cont.)
• Home banking capabilities
o View current account balances and history at anytime
o Obtain charge and credit card statements
o Pay bills
o Download account transactions
o Transfer money between accounts
o Balance accounts
o Send e-mail to the bank
o Expand the meaning of “banker’s hours”
o Handle finances when traveling
o Use additional services

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 Banking and

Personal Finance Online

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 Banking and
Personal Finance Online
• Online Financial Transaction Implementation Issues
o Securing financial transactions
o Access to banks’ intranets by outsiders
o Imaging systems
o Pricing online versus offline services
o Risks
• risk of hackers; liquidity risk; susceptible to panic withdrawals

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 Banking and
Personal Finance Online
• Personal Finance Online
o Online Billing and Bill Paying
• Automatic transfer of mortgage payments
• Automatic transfer of funds to pay monthly utility bills
• Paying bills from online banking accounts.
• Merchant-to-customer direct billing
• Using an intermediary for bill consolidation
• Person-to-person direct payment
• Pay bills at bank kiosks
o Taxes

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 3.7 On-Demand Delivery
Services and E-Grocers
• E-grocer:
o A grocer that will take orders online and provide deliveries on a daily or other regular
schedule or will deliver items within a very short period of time
• On-demand delivery service:
o Express delivery made fairly quickly after an online order is received

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 On-Demand Delivery Services
Model

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 On-Demand Delivery Services
and E-Grocers (cont.)
• Who are e-grocery shoppers?
o Shopping avoiders
o Necessity users
o New technologists
o Time-starved consumers
• Webvan.com vs. Safeway
o Webvan case will be discussed in
Week#11

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 3.8 Online Delivery of Digital
Products, Entertainment, and Media
• Digital products: products that can be transformed
to digital format and delivered over the Internet

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 Online Delivery of Digital Products,

Entertainment, and Media

• Online Entertainment
o Examples of online entertainment
• Web browsing; Internet gaming
• Fantasy sports games
• Single and multiplayer games
• Adult entertainment; Card games
• Social networking sites
• Participatory Web sites
• Reading; Live events
o Entertainment-related services
• Event ticketing
• Restaurants
• Information retrieval
• Retrieval of audio and video entertainment

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 Online Purchase Decision Aids
• Business rating sites
o Bizrate.com
o Consumer Reports Online (consumerreports.org)
o Forrester Research (forrester.com)
o Gomez Advisors (gomez.com)
• Trust verifications sites:
evaluate and verify the trustworthiness of various e-tailers
o TrustE
o Versign
o BBB online
o Webtrust
• Other Shopping Tools
o Amazon.com’s A9 Search Engine
o Answers.com
Pearson/Prentice Hall & Dr. Chen, Electronic Commerce
 3.10 Problems with E-Tailing
and Lessons Learned
• The reasons that retailers give for not going online include:
o Their product is not appropriate for Web sales
o Lack of significant opportunity
o High cost
o Technological immaturity
o Online sales conflict with core business

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 Problems with E-Tailing
and Lessons Learned
• Lessons Learned
o Don’t ignore profitability
o Manage new risk exposure
o Watch the cost of branding
o Do not start with insufficient funds
o The web site must be effective
o Keep it interesting

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 Problems with E-Tailing
and Lessons Learned
• Successful Click-and-Mortar Strategies
o Speak with one voice
o Leverage the multichannels
o Empower the customer

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 3.11 Issues in E-Tailing
• disintermediation
The removal of organizations or business process
layers responsible for certain intermediary steps in a
given supply chain
• reintermediation
The process whereby intermediaries (either new ones
or those that had been disintermediated) take on new
intermediary roles

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 Issues in E-Tailing
• cybermediation (electronic intermediation)
The use of software (intelligent) agents to facilitate
intermediation
• hypermediation
Extensive use of both human and electronic
intermediation to provide assistance in all phases of
an e-commerce venture
• Unbundling

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce

 Issues in E-Tailing (cont.)
• Determining the right price
o prices competitive on the Internet
o prices should be in line with the corporate policy on
profitability
• Personalization
o use cookie files and other technologies to track the specific
browsing and buying behavior of each consumer
o marketing plan tailored to that consumer’s pattern
• Fraud and Other Illegal Activities
• How to Make Customers Happy

Pearson/Prentice Hall & Dr. Chen, Electronic Commerce