RETAILING IN ELECTRONIC COMMERCE: PRODUCTS AND SERVICES Spring 2011 e-commerce Implementation 1
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What product categories well on the Internet? Apparel and accessories Books, CDs, DVDs Cars Computers and electronics Flowers and gifts Food and drug Health and beauty Housewares/home furnishings Jewelry Office supplies Sporting goods Toys and hobbies Travel Ideal online products Recognized, quality brand name Backed by guarantee provided by reliable, well-known company (reduces consumer risk) Easy to display, describe, depict online Relatively inexpensive Commonly or frequently purchased Standardized commodity type products (standard specifications, usage) Products not needing close examination even in traditional store 13
Transitioning to online sales 4 common backgrounds to e-commerce companies Pure-play online retailers Click-and-mortar retailers Mail order retailers that move online Experience with marketing directly to consumers Experience in logistics of order fulfillment Manufacturers that begin selling online Able to forge direct contact with customers 14
Established online industries Nature of some industries made them particularly suitable to embrace e-commerce. Travel Real Estate Banking and investing Online Travel Industry Online travel: probably the most successful e-commerce industry implementation Major players: Expedia, Travelocity, Priceline, Orbitz Typical services: Providing general travel information Promoting fare comparisons Reserving and purchasing tickets, accommodations, entertainment, etc. Providing travel tips and expertise Publishing electronic travel magazines or newsletters Growing: Wireless/mobile services 15
Online Travel Companies How do they make money? Direct revenue commissions from sales Revenue from advertising Consultancy fees from other industry participants Subscription or membership fees (typically for corporate travel offices, etc.) How to be unique? Interface differences and tools Industry experts with opinions, information Bulletin boards and forums to promote user involvement Frequent-traveler deals or packages Online Travel Industry Benefits for consumers Access to timely free information from anywhere Substantial discounts More direct understanding of options. More control. Benefits for industry players Airlines, hotels, cruise lines higher participation. Selling otherwise-empty spaces Direct selling reduces commission and processing needed Limitations May be difficult for inexperienced Internet users Complex trips require specialized knowledge 16
Online Real Estate Industry WWW has made it much easier to find, buy, and sell a home. View properties online, saving time for buyer and broker Search by specific criteria and preview exterior and interior design Sell/buy home without employing a broker Online real estate financing Shop for best loan rates online Apply for and receive approval for financing online Real-estate lending portals: LendingTree, eloan, etc Online Banking and Investing Banking Virtual banks Investing Boom in 1990s with day trading Process buy and sell stock transactions from a home PC. Online Discount Brokers provide information and transactional support for private investors, but no personal expert advice. 17
Online grocery sales? Biggest problem: delivery logistics. Grocery industry operates on a thin margin, cutting costs difficult. Primary advantage: convenience. Amazon began to sell non-perishable groceries online summer of 2006. Track record of many failures (Webvan lost over $1 billion) makes potential investors wary. 18
Why not go online? Top reasons retailers give for not going online: Product is not appropriate for Web sales Lack of significant opportunity High cost Technological immaturity Online sales conflict with core business Keys to success Don t ignore profitability what is the revenue and profit plan? Manage new risk exposure what risks will this venture expose us to? Watch the cost of branding how can we build our name without breaking our budget? Do not start with insufficient funds do we have enough funds to see our plans to completion? The Web site must be effective is our Web presence functional and usable for guests? Secure? Keep it interesting what is our plan for building loyalty and repeat customer visits? 19
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