E-Commerce and Entrepreneurship. Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 2 The Internet: Changing the Face of Business The

E-Commerce andEntrepreneurship

Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 22Chapter 13 E-CommerceChapter 13 E-Commerce

The Internet: Changing The Internet: Changing the Face of Business the Face of Business The most successful companies The most successful companies

embrace the Internet as a mechanism embrace the Internet as a mechanism for transforming their companies and for transforming their companies and for changing for changing everythingeverything about the way about the way they do business.they do business.

E-commerce has launched a E-commerce has launched a revolution, a new industrial order.revolution, a new industrial order.


The Internet: Changing The Internet: Changing the Face of Business the Face of Business In the world of e-commerce, In the world of e-commerce, speedspeed and and flexibilityflexibility matter much more than matter much more than size .size .

High-volume, low-margin, commodity High-volume, low-margin, commodity products are best suited for selling on products are best suited for selling on the Web. the Web.

Example: FreshDirect, Inc. Example: FreshDirect, Inc.


The Internet: Changing The Internet: Changing the Face of Business the Face of Business Most commonly cited reasons among Most commonly cited reasons among

owners of small and medium-sized owners of small and medium-sized businesses for taking their companies businesses for taking their companies to the Web:to the Web: Reach new customersReach new customers Sell goods and servicesSell goods and services Disseminate information more quicklyDisseminate information more quickly Keep up with competitorsKeep up with competitors Reach global marketsReach global markets

Source: United Nations Conference on Trade and Development: E-Commerce and Development Report, 2003

Internet Users Worldwide

Africa1.3%

Asia/Pacific Rim35.8%

Europe28.1%

Canada/United States28.8%

Latin America6.0%


Benefits of SellingBenefits of Sellingon the Webon the Web

78% of small business owners whose 78% of small business owners whose companies have Web sites report that companies have Web sites report that their businesses benefit by having a their businesses benefit by having a site.site.

Opportunity to increase revenuesOpportunity to increase revenues Ability to expand into global marketsAbility to expand into global markets Ability to remain open 24 hours a day, Ability to remain open 24 hours a day,

seven days a weekseven days a week Capacity to use the Web’s interactive Capacity to use the Web’s interactive

nature to enhance customer servicenature to enhance customer service


Benefits of SellingBenefits of Sellingon the Webon the Web Power to educate and informPower to educate and inform Ability to lower the cost of doing Ability to lower the cost of doing

businessbusiness Capacity to improve efficiency in Capacity to improve efficiency in

the purchasing processthe purchasing process Ability to spot new business Ability to spot new business

opportunities and capitalize on opportunities and capitalize on themthem

Power to track sales resultsPower to track sales results


E-CommerceE-Commerce

Survey: Just 43% of U.S. companies Survey: Just 43% of U.S. companies with fewer than 100 employees have with fewer than 100 employees have Web sites...Web sites...

Only 40% of those actually sell Only 40% of those actually sell merchandise online.merchandise online.

Small companies account for more Small companies account for more than 50% of all retail sales in the U.S., than 50% of all retail sales in the U.S., but they generate only 6% of online but they generate only 6% of online retail sales. retail sales.

Why?Why?


Factors to Consider Factors to Consider Before Launching into E-Before Launching into E-CommerceCommerce How a company exploits the Web’s How a company exploits the Web’s

interconnectivity and the opportunities interconnectivity and the opportunities it creates to transform relationships it creates to transform relationships with suppliers, customers, and others with suppliers, customers, and others is crucial to its success.is crucial to its success.

Web success requires a company to Web success requires a company to develop a plan for integrating the Web develop a plan for integrating the Web into its overall strategy.into its overall strategy.


Factors to Consider Factors to Consider Before Launching into E-Before Launching into E-CommerceCommerce Developing a deep, lasting relationship with Developing a deep, lasting relationship with

customers takes on even greater customers takes on even greater importance on the Web.importance on the Web.

Creating a meaningful presence on the Creating a meaningful presence on the Web requires an ongoing investment of Web requires an ongoing investment of resources – time, money, energy, and resources – time, money, energy, and talent.talent.

Measuring the success of a Web-based Measuring the success of a Web-based sales effort is essential to remaining sales effort is essential to remaining relevant to customers whose tastes, needs, relevant to customers whose tastes, needs, and preferences constantly change. and preferences constantly change.


12 Myths of E-12 Myths of E-CommerceCommerce

Myth 1: Setting up a business on Myth 1: Setting up a business on the Web is easy and inexpensive.the Web is easy and inexpensive.

0%

5%

10%

15%

20%

25%

30%

35%

4 to 8 9 to 12 13 to 24 25 to 52 More than 52

Number of Weeks

Time Required to Develop an E-Commerce Site



Myth 1: Setting up a business on Myth 1: Setting up a business on the Web is easy and inexpensive.the Web is easy and inexpensive.

Myth 2: If I launch a site, Myth 2: If I launch a site, customers will flock to it.customers will flock to it.

Myth 3: Making money on the Web Myth 3: Making money on the Web is easy.is easy.

Myth 4: Privacy is not an important Myth 4: Privacy is not an important issue on the Web. issue on the Web.


Privacy and the WebPrivacy and the Web

Privacy on the Web Privacy on the Web doesdoes matter! matter! Jupiter Communications survey: Jupiter Communications survey:

64% of Web customers distrust 64% of Web customers distrust Web sites.Web sites.

Post a privacy policy and stick to Post a privacy policy and stick to it.it.

Safeguard information your Safeguard information your company collects from customers. company collects from customers.



Myth 5: The most important part of Myth 5: The most important part of any e-commerce effort is any e-commerce effort is technology. technology.

Myth 6: Strategy? I don’t need a Myth 6: Strategy? I don’t need a strategy to sell on the Web! Just strategy to sell on the Web! Just give me a Web site and the rest give me a Web site and the rest will take care of itself. will take care of itself.



Myth 7: On the Web, customer Myth 7: On the Web, customer service is not as important as it is service is not as important as it is in a traditional retail store. in a traditional retail store.


The Importance of The Importance of ServiceServiceon the Webon the Web Jupiter Research Study: 72% of Jupiter Research Study: 72% of

online buyers cite service as a online buyers cite service as a critical factor in their online critical factor in their online shopping satisfaction.shopping satisfaction.

Unfortunately…Unfortunately… Only 41% said they were satisfied Only 41% said they were satisfied

with the service they receive from with the service they receive from online merchants. online merchants.


The Importance of The Importance of ServiceServiceon the Webon the Web Research by Jakob Nielsen: 56% Research by Jakob Nielsen: 56%

of the time an online shopper is of the time an online shopper is unable to complete an e-unable to complete an e-commerce transaction.commerce transaction.

Cost: Billions of dollars in lost Cost: Billions of dollars in lost sales due to poor customer sales due to poor customer service. service.


The Importance of The Importance of ServiceServiceon the Webon the Web Study: 75% of Web shoppers who fill Study: 75% of Web shoppers who fill

their on-line shopping carts become their on-line shopping carts become frustrated and leave the site before frustrated and leave the site before checking out.checking out.

Reasons:Reasons: Shipping charges too highShipping charges too high Delivery times too longDelivery times too long Checkout process required Checkout process required

too much informationtoo much information Insufficient product informationInsufficient product information

availableavailable


Tips for Reducing Tips for Reducing Shopping Cart Shopping Cart Abandonment RateAbandonment Rate Streamline the steps in the Streamline the steps in the

checkout processcheckout process Include a progress indicator on Include a progress indicator on

each checkout pageeach checkout page Provide a link back to the items Provide a link back to the items

in the shopping cartin the shopping cart Allow customers to see if an Allow customers to see if an

item is in stockitem is in stock


Tips for Reducing Tips for Reducing Shopping Cart Shopping Cart Abandonment RateAbandonment Rate Include product photos in the Include product photos in the

shopping cartshopping cart Make it easy for customers to change Make it easy for customers to change

the contents of their cartsthe contents of their carts Give customers the option of calling to Give customers the option of calling to

resolve problems they encounter resolve problems they encounter during checkoutduring checkout

Make it easy for customers to pay for Make it easy for customers to pay for their online purchases.their online purchases.



Myth 8: Flash makes a Web site Myth 8: Flash makes a Web site better.better.

Myth 9: It’s what’s up front that Myth 9: It’s what’s up front that counts. counts.

Myth 10: E-commerce will cause Myth 10: E-commerce will cause brick-and-mortar retail stores to brick-and-mortar retail stores to disappear. disappear.



Myth 11: The greatest opportunity Myth 11: The greatest opportunity for e-commerce lies in the retail for e-commerce lies in the retail sector. sector.

$50 $150$433

$919

$1,929

$3,632

$5,950

$8,530

$-

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

Mill

ion

s o

f $

1998 1999 2000 2001 2002 2003 2004 2005

B2B E-Commerce Sales



Myth 11: The greatest opportunity for Myth 11: The greatest opportunity for e-commerce lies in the retail sector. e-commerce lies in the retail sector.

Myth 12: It’s too late to get on the Myth 12: It’s too late to get on the Web. Web.


Strategies for E-Strategies for E-SuccessSuccess Focus on a market nicheFocus on a market niche Develop a communityDevelop a community Attract visitors by giving away Attract visitors by giving away

“freebies” “freebies” Make creative use of e-mail, but Make creative use of e-mail, but

avoid becoming a “spammer” avoid becoming a “spammer”


Strategies for E-Strategies for E-SuccessSuccess Make sure your Web site says Make sure your Web site says

“credibility”“credibility” Consider forming strategic Consider forming strategic

alliancesalliances Make the most of the Web’s global Make the most of the Web’s global

reachreach Promote your site online and Promote your site online and

offline offline


Strategies for E-Strategies for E-SuccessSuccess Develop an effective search Develop an effective search

marketing strategy marketing strategy Jupiter Media Metrix study: 77% of Jupiter Media Metrix study: 77% of

Internet shoppers go straight to a Internet shoppers go straight to a search engine to find the products search engine to find the products and services they want. and services they want.

Bad news: Business owners invest Bad news: Business owners invest less than 1% of their marketing less than 1% of their marketing budgets on search engine budgets on search engine marketing. marketing.


A Search Marketing A Search Marketing StrategyStrategy Natural listingsNatural listings - the result of “spiders,” - the result of “spiders,”

powerful programs that crawl the Web, powerful programs that crawl the Web, looking at key words, links, and other data.looking at key words, links, and other data.

Paid (sponsored) listingsPaid (sponsored) listings – short text ads – short text ads with links to the sponsoring company’s Web with links to the sponsoring company’s Web site that appear on the results page of a site that appear on the results page of a search engine. search engine.

Paid inclusionPaid inclusion – when a company pays a – when a company pays a search engine for the right to submit either search engine for the right to submit either selected pages or the contents of its entire selected pages or the contents of its entire Web siteWeb site


Designing a Killer Web Designing a Killer Web SiteSite Start with your target customer.Start with your target customer. Select a domain name that is Select a domain name that is

consistent with the image you consistent with the image you want to create for your company want to create for your company and register it.and register it. ShortShort MemorableMemorable Indicative of a company’s businessIndicative of a company’s business Easy to spellEasy to spell


Designing a Killer Web Designing a Killer Web SiteSite Be easy to find.Be easy to find. Give customers what they Give customers what they

want.want.

51%

53%

62%

77%

81%

90%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Proportion of Shoppers

High rating from an independentsource

Ability to save personalinformation for fast checkout

A published privacy policy

Ability to track shipping ofpurchases

Discounts to frequent customers

Free shipping

Fea

ture

Features that Make U.S. Shoppers More Likely to Buy from a Web Site


Designing a Killer Web Designing a Killer Web SiteSite Be easy to find.Be easy to find. Give customers what they want.Give customers what they want.

Establish hyperlinks with other Establish hyperlinks with other businesses, preferably those businesses, preferably those selling complementary selling complementary products.products.

Include an e-mail option, an Include an e-mail option, an address, and a telephone address, and a telephone number in your site.number in your site.


Designing a Killer Web Designing a Killer Web SiteSite Give shoppers the ability Give shoppers the ability

to track their orders online.to track their orders online. Offer Web shoppers a Offer Web shoppers a

special all their own.special all their own. Follow a simple design.Follow a simple design.


Web Site Design TipsWeb Site Design Tips

Avoid clutterAvoid clutter Avoid huge graphicsAvoid huge graphics Include a menu bar at top of Include a menu bar at top of

pagepage Include navigation buttonsInclude navigation buttons Incorporate meaningful Incorporate meaningful

content into the sitecontent into the site



Include an “FAQ” sectionInclude an “FAQ” section Include privacy and return Include privacy and return

policiespolicies Avoid fancy typefaces and Avoid fancy typefaces and

small fontssmall fonts Watch for “typos” and Watch for “typos” and

misspelled wordsmisspelled words



Avoid small fonts on “busy” Avoid small fonts on “busy” backgroundsbackgrounds

Use contrasting colors for text Use contrasting colors for text and graphicsand graphics

Be careful with framesBe careful with frames Test the site on different Test the site on different

browsers and different size browsers and different size monitorsmonitors



Collect information from visitors, but Collect information from visitors, but don’t put them through a tedious don’t put them through a tedious registration processregistration process

Include a search function and Include a search function and company contact informationcompany contact information

Avoid automated music Avoid automated music Make sure the page looks appealingMake sure the page looks appealing Remember: Simpler is betterRemember: Simpler is better


Designing a Killer Web Designing a Killer Web SiteSite Assure customers that their Assure customers that their

online transactions are secure.online transactions are secure. Follow up every online Follow up every online

transaction with an order-transaction with an order-confirmation e-mail. confirmation e-mail.

Keep your site updated.Keep your site updated. Consider hiring a professional to Consider hiring a professional to

design your site. design your site.


Tracking Web ResultsTracking Web Results

CounterCounter Log-analysis softwareLog-analysis software Click-stream analysisClick-stream analysis ClusteringClustering Collaborative filteringCollaborative filtering Profiling systemsProfiling systems Artificial intelligenceArtificial intelligence


Return on Investment Return on Investment (ROI)(ROI)

Common measures of ROI:Common measures of ROI: Cost per action (CPA)Cost per action (CPA) - the cost of - the cost of

producing a particular customer action, producing a particular customer action, such as registering for a newsletter, such as registering for a newsletter, requesting information, etc.requesting information, etc.

Cost per order (CPO)Cost per order (CPO) – the cost of – the cost of generating a customer order. Can be generating a customer order. Can be calculated across all product lines or calculated across all product lines or for a single product. for a single product.


Ensuring Web PrivacyEnsuring Web Privacy

Take an inventory of the Take an inventory of the customer data collected.customer data collected.

Develop a company policy for the Develop a company policy for the information you collect.information you collect.

Post your company’s privacy Post your company’s privacy policy prominently on your Web policy prominently on your Web site and follow it. site and follow it.


Ensuring Web SecurityEnsuring Web Security

Virus detection softwareVirus detection software Intrusion detection softwareIntrusion detection software FirewallFirewall Secure sockets layer (SSL) Secure sockets layer (SSL)

technologytechnology


Web SitesWeb Sites

All-Outdoors Whitewater RaftingAll-Outdoors Whitewater Raftinghttp://www.aorafting.comhttp://www.aorafting.com

Earth Treks Inc.Earth Treks Inc.http://www.earthtreksclimbing.cohttp://www.earthtreksclimbing.comm

REI, Inc.REI, Inc.http://www.rei.comhttp://www.rei.com

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E-Commerce and Entrepreneurship. Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 2 The Internet: Changing the Face of Business The