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Amazon.com: King of E-Tailing

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Title: Amazon.com: King of E-Tailing


1
Amazon.com King of E-Tailing
Chapter 3 Retailing in E-CommerceProducts and
Services
  • The Problem
  • Amazon.com has recognized that it must
    continually enhance its electronic store by
    expanding product selection and improving the
    customer experience
  • The Solution
  • Results

2
E-Tailing and B2C Market Growth
  • A retailer is a sales intermediary, a seller that
    operates between manufacturers and customers
  • Electronic retailing (e-tailing)retailing
    conducted online, over the Internet
  • Catalog sales free a retailer from the need for a
    physical store
  • Manufacturer sells directly to the customer,
    cutting out the intermediary

3
Size and Growth of the B2C Market
  • Statistics for volume of B2C EC sales come from
    many sources
  • emarketer.com
  • jmm.com
  • Statistics on e-tailing can be found at
  • Cyberdialogue.com
  • Business2.com
  • Substantial deviations in the reported data due
    to how the numbers are derived

4
What Sells Well on the Internet?
  • Computers and electronics
  • Sporting goods
  • Office supplies
  • Books and music
  • Toys
  • Health and beauty
  • Entertainment
  • Apparel
  • Cars
  • Services
  • Others

5
Characteristics of Successful E-Tailing
  • Brand recognition and guarantees
  • Guarantee provided by highly reliable or
    well-known vendors
  • Digitized products
  • Inexpensive items
  • Frequently purchased
  • Commodities with standard specifications
  • Well-known packaged items that cannot be opened
    even in a traditional store

6
E-Tailing Business Models
  • E-tailing business models can be classified in
    several ways
  • By the scope of items handled
  • General-purpose
  • Specialty e-tailing
  • By scope of the sales region covered
  • Global
  • Regional
  • Two main models
  • Direct selling model
  • Distribution channel

7
Classification by Revenue Model
  • Product sales models
  • Charge customers directly for products or
    services
  • 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)

8
Classification by Distribution Channel
  • Direct marketingmanufacturers sell directly from
    company sites to individual customers
  • Pure-play e-tailershave no physical stores, only
    an online sales presence
  • Click-and-mortar retailerstraditional retailers
    with a supplementary Web site

9
Direct Marketing by Manufacturers or Mail-Order
Companies
  • Direct marketingbroadly, marketing that takes
    place without intermediaries between
    manufacturers and buyers in the context of this
    book, marketing done online between the seller
    and the buyer
  • Disintermediationremoval of organizations or
    business process layers responsible for certain
    intermediary steps in a given supply chain

10
Exhibit 3.1 Disintermediation in the B2C Supply
Chain
11
Direct Marketing by Manufacturers or Mail-Order
Companies (cont.)
  • Parties in direct marketing have a greater
    opportunity to influence each other
  • Make-to-order onlinedirect sales by
    manufacturers are gaining popularity due to the
    ability to customize products or services

12
Virtual (Pure-Play) E-Tailers
  • Virtual 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

13
Buying Cars OnlineBuild to Order
  • Traditional systembuild-to-stock
  • Manufacturers conduct market research to estimate
    which features and options will sell well
  • Make the cars they wish to sell
  • Cars are sold from stock at a loss when there is
    insufficient demand for a particular vehicle
  • Auto giants intend to transform themselves from
    build-to-stock to
  • build-to-order companies
  • Cutting inventory requirements in half
  • Giving customers exactly what they want

14
Buying Cars OnlineBuild to Order (cont.)
  • Using a virtual car at jaguar.com
  • Consumers custom configure their cars features
    and components, see it online, price it, have it
    delivered to a nearby dealer
  • Web site helps with the research process
  • The configuration is transmitted to the
    production floor
  • Reducing delivery time
  • Contributing to increased customer satisfaction

15
Click-and-Mortar Retailers
  • Brick-and-mortar retailersretailers who do
    business in the non-Internet, physical world in
    traditional brick-and-mortar stores
  • Click-and-mortar retailersbrick-and-mortar
    retailers with a transactional Web site from
    which to conduct business
  • Traditional retailing frequently involves a
    single distribution channel, the physical
    storemay also operate a mail-order business
  • Multichannel storefirm that operates both
    physical stores and an online e-tail site

16
Other Business Models
  • Viral marketing
  • Market makers
  • Make-to-order
  • Service providers
  • Electronic mall
  • Transaction brokers
  • Information portals
  • Communities portal
  • Content creator or disseminators

17
Travel and Tourism Services Online
  • The Internet is an ideal place to plan, explore,
    and arrange almost any trip and save money
  • Travel-related information available at many
    sites including
  • Expedia.com Orbitz.com
  • Travelocity.com Asiatravel.com
  • Travelweb.com Trip.com
  • Eurovacations.com Priceline.com
  • Lonelyplanet.com

18
Travel and Tourism Services (cont.)
Services provided
  • Outlet for travel accessories and books
  • Experts opinions
  • Major international and travel news
  • Driving maps and directions
  • Chat rooms
  • Frequent flier deals
  • Online travel auctions
  • Information and bookings
  • Travel tips
  • Electronic Travel magazine
  • Fare comparisons
  • Currency conversion calculators
  • Fare tracker
  • Worldwide business and places locator

19
Travel and Tourism Services (cont.)
  • Special services
  • Very low airfares and discount accommodations
  • Last-minute trips can also be booked
  • Special vacation destinations
  • Sites that offer medical advice and services for
    travelers
  • World Health Organization (who.int)
  • Governments (cdc.gov/travel)
  • Private organizations (Healthcenter.com)

20
Travel and Tourism Services (cont.)
  • Wireless services
  • Customers with WAP cell phones can check their
    flight status, update frequent flyer miles, and
    book flights
  • Direct marketing
  • Build customer profiles and target specific
    customers with tailored offers
  • Alliances and consortia
  • Increase sales or reduce purchasing costs

21
Travel and Tourism Services (cont.)
  • Benefits
  • Free information is tremendous
  • Free information is accessible anytime
  • Substantial discounts
  • Limitations
  • Not all people use the Internet
  • It may take a long time to find what you want
  • People are still reluctant to provide credit card
    numbers

22
Impacts of EC on the Travel Industry
  • Impacts of EC on the travel industry into 10
    categories including
  • Product promotion, new products, new business
    models
  • Only the value-added activities of travel
    agencies will not be automated
  • Performed by a new type of organization
  • Will serve certain targeted markets and customers
  • Entering the market will be
  • Travel superstores that will provide
  • Innovative individuals operating from their homes

23
Intelligent Agents in Travel Services
  • Step 1 visit an online travel site and enter
  • Desired destination
  • Dates
  • Available budget
  • Special requirements
  • Desired entertainment
  • Step 2 computer dispatches an intelligent agent
    that shops around

24
Intelligent Agents in Travel Services (cont.)
  • Step 3 agent attempts to match your requirements
    with what is available, negotiates with vendors
  • Step 4 agent returns within minutes with
    suitable alternatives, modifies as per your
    wishes, books the vacation
  • Voice communication with agent may be possible by
    2005

25
Real Estate
  • You can view many properties on the screen
  • You can sort and organize properties
  • You can find detailed information about the
    properties
  • You can search, compare and apply for loans

26
Real Estate (cont.)
  • In some locations, real estate databases are only
    available to realtors over private networks in
    their offices
  • Builders use virtual reality technology on their
    Web sites to demonstrate three-dimensional floor
    plans to home buyers
  • Virtual models enable buyers to walk through
    three-dimensional mock-ups of homes

27
Insurance Online
  • Insuranceauto, home, life, and health at a
    substantial discount
  • Insureate.com
  • Order.com
  • Quotesmith.com

28
Online Stock Trading
  • Costs between 5 and 29 per transaction (vs. 10
    - 35 in traditional brokerage)
  • No waiting on busy telephone lines
  • No oral communication, less chance for errors
  • Place orders from anywhere, any time, day or
    night
  • No biased broker to push you
  • Considerable amount of free information

29
Banking Personal Finance Online (cont.)
  • 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 Home banking
  • Electronic banking
  • Saves time and money for users
  • Offers an inexpensive alternative to branch
    banking
  • Many traditional banks around the world offer
    diversified e-banking services
  • main.hangseng.com

30
Capabilities of Home Banking
  • Get current account balances any time
  • Obtain charge and credit card statements
  • Pay bills
  • Download account transactions
  • Transfer money between accounts
  • Balance accounts
  • Send e-mail to the bank
  • Expand the meaning of bankers hours
  • Handle finances when traveling
  • Additional services
  • Free phone banking
  • Waive checking fees

31
International and Multiple-Currency Banking
  • Some international retail purchasing can be done
    by credit card
  • Other transactions may require international
    banking support
  • Hong Kong Banks HEXAGON provides e-banking in
    Asia
  • Tradecard and MasterCard developed a
    multiple-currency system for global transactions
    (tradecard.com)
  • A multidealer foreign exchange service that
    enables faster and cheaper foreign exchange
    transactions (fxall.com)

32
Implementation Issues in Online Financial
Transactions
  • Using bank intranets
  • Banks provide large business customers with
    personalized service by allowing them access to
    the banks intranet to access accounts,
    historical transactions, intranet-based
    decision-support applications
  • Imaging systemsallow customers to view images of
    all
  • Incoming checks
  • Invoices
  • Other related online correspondence

33
Personal Finance Online
  • Bill paying and
  • e-checks
  • Tracking bank accounts etc.
  • Portfolio management
  • Investment tracking
  • Stock quotes and prices (past and current)
  • Budget organization
  • Record keeping
  • Tax computations
  • Retirement goals, planning and budgeting

34
Online Billing and Bill Paying
  • Automatic transfer of mortgages
  • This method has existed for several years
  • The payer authorizes its bank to pay the
    mortgage, including tax escrow payments
  • Automatic transfer of funds to pay monthly
    utility bills
  • Paying bills from online banking account

35
Online Billing and Bill Paying (cont.)
  • A merchant-to-customer direct billing
  • A merchant posts bills on its Web site
  • Customers can view and pay their bill
  • Using an intermediary
  • A third party consolidates all bills related to
    each customer in one site in a standard format
  • Collects a certain commission
  • Makes it convenient to complete transactions

36
Online Billing and Bill Paying (cont.)
  • Person-to-person direct payment
  • Paypal.com (now an eBay company)enables you to
    send funds to another individual over the
    Internet
  • Online billing and bill-paying can be classified
    into B2C, B2B, or C2C.
  • Opportunities exist in B2B servicescan save
    businesses about 50 percent of billing costs
  • In Hong Kong, CitiCorp links suppliers, buyers,
    and banks on one platform, enabling automatic
    payments

37
On-Demand Delivery Service (ODDS)
  • On-demand delivery service (ODDS)express
    delivery made fairly quickly after an online
    order is received
  • On-Demand Delivery Services (ODDS)
  • May own a fleet of delivery vehicles for regular
    deliveries and delivery within short time period

38
Who Are the Online Grocery Shoppers?
  • Shopping avoiders
  • Necessity userslimited by their ability to shop
    offiline
  • New technologists
  • Time-starved consumers
  • Consumers who gain a sense of self-worth from
    online shopping
  • Older individuals who enjoy shopping in any type
    of store

39
Who Are the Online Grocery Shoppers? (cont.)
  • Repeat customers with an ongoing relationship
    with the grocer
  • Parknshop.com in Hong Kong offers a personal
    shopping list that helps customers easily order
    repetitive items
  • Tesco.com in the United Kingdom is another
    successful e-grocer

40
Who Are the Online Grocery Shoppers? (cont.)
  • Offers grocers an additional channel to increase
    their sales volume and serve customers
  • Increases their publicity by maintaining an
    Internet presence
  • Despite the promise that on-demand delivery seems
    to hold, virtual e-grocers have not been
    successful in this competitive market

41
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 owners manual
    and warranty card
  • Download from Web site after payment

42
New Developments in Digital Delivery
  • Custom-publishing music CD sitescollection of
    personal favorites
  • Disintermediation of traditional print media
  • Journals and magazines
  • Newspapers (e.g., Wall Street Journal)
  • Comprehensive portals
  • Links to many different sellers
  • Shopping comparison sites
  • Comparison tools are available

43
Shopping Portals (cont.)
  • Shopping portalsniche oriented
  • Specialize in a certain line of products
  • Some collect referral fee only
  • Others have formal relationships with affiliates
  • Shopbots and agentstools 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

44
Successful Click-and-Mortar Strategies
  • Click-and-mortar hybrid strategies
  • Speak with one voice
  • Empower the customer
  • Leverage the channels
  • Return item purchased online at physical store
  • Order via the Web at the physical store items not
    available there
  • Large, efficient established retailers are able
    to create the optimum value proposition for their
    customers by providing a complete offering of
    services

45
Alliance of Virtual with Traditional Retailers
Amazon and Toys R Us
  • 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

46
Problems with E-Tailing Lessons Learned
  • Profitability
  • Lose money on every sale as they try to grow to a
    profitable size and scale
  • Underlying cost and revenue models were not sound
  • Long-run success requires financial viability
  • Manage new risk exposure
  • Local companies contend with local customers and
    local regulations
  • National firms have more constituents
  • Global firms deal with numerous cultural
    perspectives

47
Problems with E-Tailing Lessons Learned (cont.)
  • Brandingdrive to establish brand can lead to
    excessive spending
  • Starting with insufficient funds
  • Keep it interesting
  • Static design is a turn-off
  • Dynamic sites with rich databases of information
    appeal most to customers

48
Disintermediation Reintermediaries
  • Disintermediationmanufacturer sells directly to
    consumer
  • Reintermedieariesnew intermediary roles in the
    digital environment offer new ways to
  • Reach new customers
  • Bring value to customers
  • Generate revenues

49
Intermediarys New Role
  • Role will shift to one that emphasizes
    value-added services such as
  • Assisting customers in comparison shopping from
    multiple sources
  • Providing total solutions by combining services
    from several vendors
  • Providing certifications and trusted third-party
    control and evaluation systems

50
Reintermediaries
  • Reintermediariesintermediaries that have
    restructured their roles in the purchase process
  • Kbb.compricing information for consumers
  • Edmunds.cominformation about the dealers true
    costs
  • Lead services that
  • Direct buyers to member dealers
  • Offer direct sales of new cars
  • autobytel.com
  • carsdirect.com (Amazon.coms partner)

51
Cybermediation and Hypermediation
  • Cybermediation (electronic intermediation)use of
    software (intelligent) agents to facilitate
    intermediation
  • Hypermediationextensive use of both human and
    electronic intermediation to provide assistance
    in all phases of an
  • e-commerce venture

52
Conflict and Personalization
  • Channel conflictsituation in which an online
    marketing channel upsets the traditional channels
    due to real or perceived damage from competition
  • Personalizationcustom designed marketing plan
  • Tailored to buying patterns
  • Appeal to sense of value
  • Excellent customer service
  • Mass customization

53
Managerial Issues
  • Should we grab a first-mover advantage or wait
    and learn?
  • What should our strategic position be?
  • Are we financially viable?
  • Should we recruit out of town?
  • Are there international legal issues regarding
    online recruiting?
  • Do we have ethics and privacy guidelines?
  • How will intermediaries act in cyberspace?
  • Should we set up alliances?

54
Summary
  • E-tailing business models
  • The major e-tail markets
  • Click-and-mortar strategy
  • How online travel/tourism services operate
  • The online job market,its drivers,and benefits
  • The electronic real estate market

55
Summary (cont.)
  • Online stocks and bonds
  • Cyberbanking and personal finance
  • On-demand delivery service
  • Delivery of digital products
  • Aiding consumer purchase decisions
  • Critical success factors
  • Disintermediation and reintermediation
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