Electronic Commerce School of Library and Information Science Ecommerce channels: portals, auctions, communities I. The shape of the “new” economy Internet

Electronic Commerce

School of Library and Information Science

Ecommerce channels: portals, auctions, communities

I. The shape of the “new” economy

• Internet indicators

II. Strategies: B2C

• Portals, auctions

• Marketmakers, syndicators

III. The etailing challenge

• Marketing to the e-consumer

Electronic Commerce


http://www.ucomics.com/tomtoles/viewtt.htm

Electronic Commerce


Center for Research in Electronic Commerce. (2001). The Internet Economy Indicators http://www.internetindicators.com/


Infrastructure layer

Applications infrastructure layer

Intermediary layer

Commerce layer

Electronic Commerce


Infrastructure layer

This layer includes companies that produce the wires, boxes, and code that make up the physical structure of the net

Telecom companies: AT&T, SBC, MCI

ISPs: AOL, MSN, Earthlink, United Online

Internet backbone carriers: Qwest, Alcatel, WorldCom

“Last mile” access companies: Time-Warner, AT&T, SBC, Verizon, Insight Communications, Smithville Telephone

Manufacturers of networking equipment: Cisco, Corning

Servers and client hardware: Dell, IBM, Apple

Electronic Commerce


Applications infrastructure layer

The work occurring at this layer is a fundamental basis for e-commerce and other functionality on the Internet

Most of the activity on this and the previous layer is b-2-b

Web development software: Adobe, Macromedia, Vignette

Companies enabling web transactions: Yahoo Store, Oracle, SAP, Microsoft, Google

Transaction intermediaries: Paypal, Microsoft

Consultants, Ibuilders: Scient, Viant, Razorfish, IXL

Online training: Sylvan Prometric, SmartPlanet

Electronic Commerce


The businesses are predominantly Internet pure-play

They do not generate revenues directly from transactions

Revenues through advertising, subscription fees, and commissions

Many companies are

Content providers/aggregators: ClickZ, Commercenet

Market makers: VerticalNet, Ebay

Market intermediaries: eSteel, Orbitz

These businesses are likely to have a significant impact over time on the efficiency and performance of e-markets

Travel agency sites, brokerages, portals, malls

Intermediary layer

Electronic Commerce


Companies in this layer conduct web-based commerce transactions

Some are pure play: Amazon, Egghead, InformIT

It also includes bricks and clicks etailers: Barnes and Noble, Gateway

Some are OEMs: Dell, Dell

Companies may be engaged in B2B as well as B2C online sales

Many sell both to consumers and to businesses of all sizes

Commerce layer

Electronic Commerce


Infrastructure layer: $142.8 billion in revenues in the first half of 2000, (11.2% growth between Q1 and Q2)

Over 932,000 work in this layer

Applications layer: $ 72.8 billion in revenues (14.7% between between Q1 and Q2)


Intermediary layer: $64 billion in revenues (34.5% between Q1 and Q2)


Commerce layer: $127 billion in revenues (11% between between Q1 and Q2)

Over 1,000,000 work in this layer

Electronic Commerce


What this means: key findings from the 2000 Internet Indicators study

The internet economy as a whole added 612,375 jobs in the first half of 2000 and directly supports 3 million workers

It is projected to produce $830 billion in revenues in 2000, a 58% increase over 1999

Dot.coms are a small part of the internet economy

Only 9.6% of the firms studied are dot.coms with 95% or more of their revenue from the net

Employment in internet economy companies wasgrowing much faster (10%) than the jobs in the overall economy (6.9%) in 2000

http://www.internetindicators.com/keyfindings.html

Electronic Commerce


Internet Economy Indicators "Dot Com" Summary

Q1‘00 % of Total Q2‘00 % of Total Growth

Inet Economy Inet Economy Q1 - Q2

“DotCom” $16,114 9.3% $19,125 9.6% 18.7% Revenue($ Millions)

“Dot Com” 362,487 12.1% 360,718 11.7% -.5% Employees

From: http://www.internetindicators.com/keyfindings.html

Electronic Commerce


Most internet economy jobs are not IT

http://www.internetindicators.com/keyfindings.html

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http://www.census.gov/mrts/www/current.html

Estimated Quarterly U.S. Retail E-commerce Sales: Q4 1999 - Q3 2003

Bill

ion

s o

f $$

$

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Time All retail E-retail E-retail/Total Annual growth

1999 4th Quarter 787,362 5,393 0.7%

2000 1st Quarter 715,102 5,772 0.8 %

2nd Quarter 775,364 6,250 0.8 %

3rd Quarter 768,559 7,079 0.9 %

4th Quarter 812,667 9,248 1.1%

2001 1st Quarter 723,710 8,009 1.1% 40.0%

2nd Quarter 801,115 7,904 1.0%

3rd Quarter 777,882 7,894 1.0%

4th Quarter 850,608 10,788 1.3%

2002 1st Quarter 740,020 9,470 1.3% 18.2%

2nd Quarter 818,609 9,761 1.2%

3rd Quarter 822,125 10,465 1.3%

4th Quarter 864,653 13,770 1.6%

2003 1st Quarter 772,185 11,928 1.5% 26.0%

2nd Quarter 858,793 12,464 1.5%

3rd Quarter 872,506 13,29 1.5%

Estimated quarterly total and e-commerce retail sales

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II. Strategies: B2C





Electronic Commerce


Portals

A “portal” is a gateway

It is a web site that is (or wants to be) a major starting site for users when they go online

It is focused on the user

It intends to be an anchor site

As a single access point to all resources, the portal will:

Provide reliable, fast, secure access and guidance

Take people to the right information or service

Deliver the information in the correct context

Be available from anywhere at anytime

Electronic Commerce


Types of portals

Vertical portals (“vortals”)

A vertical industry, market, or specific group portal

Linking customers and vendors within a single site

Oriented towards a demographic, product or topical category

These cater to specific ethnic groups, specific age groups, alternative lifestyles, religions, and other groups that form a community or market

Also called “affinity” or “community” portals because of the demographic focus

Ivillage.com http://www.ivillage.comWebMD http://www.webmd.com

Electronic Commerce


Horizontal portals

These were the first, general interest (mega)portals

Yahoo and AOL, AltaVista, Yahoo, and NetCenter

They offer net access with a wide range of information and services

These were early adopters of personalization

Users select components and define their content or other properties

MyYahoo, My AltaVista, and My Netscape allow the user to choose which components they want to see (weather, news, stocks, etc.)

These portals were targets for early VC investment and then M&A

Electronic Commerce


Business to consumer portals

This is corporate extranet with community building services added on

Their primary goal is to market goods and services from a specific company directly to consumers

However, they offer services beyond their products that encompass a wider range of activities

Amazon, Dell, eBay allow people do do much more than purchase products

NBCi.com. offers TV schedules and news

It also includes such things as web search, e-mail, free home-page space, and shopping

Electronic Commerce


Enterprise portals

Similar to consumer portals, but built for the internal use of corporations or among organizations

Simplify access to and use of information

Allow integration of major business functions and resources

Users can organize and use a wide range of corporate information quickly and easily

This can change work flows and support individual and group decision making

Some see these as tools for knowledge management

Electronic Commerce


Enterprise portals can help employees find information and perform their jobs better

A consistent look and feel reduces cognitive load

The key issues in building a good intranet portal were political and organizational and not technical

Buying software won't get you a good portal unless you also manage internal company politics

Technology accounts for roughly one-third of the work in launching a good portal

Internal processes account for the restNielsen, J. (2003). Intranet Portals: A Tool Metaphor for Corporate Information http://www.useit.com/alertbox/20030331.html

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Companies that build enterprise portals provide content and commerce aggregation and syndication technology

Typically requires an enterprise server, a hosted service, or a combination of the two, depending on customer needs and requirements

Can involve personalization and customization

Allows people to access and work with information across the enterprise using centralized interface

Allows integration of diverse sources of enterprise data and control of heterogeneous IT environments

Vignette: http://www.vignette.com

SAP: http://www.sap.com/solutions/enterpriseportal/

Electronic Commerce


Portal sites have attracted investor interest because their main goal is to draw and hold traffic

This means large numbers of numbers of advertising viewers and higher rates

Typical services offered by portal sites include:

Services: shopping, chat, free email, webhosting

Resources: directories of web sites, news, weather information, stock quotes, phone and map information, a facility to search for other sites

Portals are moving towards personalization to make themselves sticky

Excite is among the first portals to offer users the ability to create a site that is personalized for them

Electronic Commerce


Some portals are large, all-purpose ecommunities with high ecommerce potential, including advertising revenue

84% of US online households rely on major portals for critical net services (AOL, MSN, Yahoo)

IDC Research (2002). Portals Hold the Key to Online Households http://www.idc.com/getdoc.jhtml?containerId=pr2002_07_15_104311

Portals do have some disadvantages

They dictate the content that you are able to find

They're a good aid for new users, but they only serve up a slice of the Internet

They often point to sites that live under the same corporate umbrella as they do, rather than to the most relevant or informative site on a given topic

Electronic Commerce


The term “portal space” means the total number of major sites competing to be one of the portals

Leading portals include Yahoo, Alta-Vista, MSN, Lycos, AOL, AskJeeves

With its own private array of sites when you dial in, AOL is also a portal to its own Web

A number of large ISPs also offer portals to the Web for their own users

Now, M&A

AOL --> Netscape ABC --> Go.com

Disney --> Infoseek NBC --> Snap.com

Terra Networks --> Lycos

Electronic Commerce


What is the future of portals?

One possibility is that they become the new desktop: the “webtop”

Sites offer web-based services that replace those provided by desktop software

Email, schedule and calendaring address databases, productivity applications

Then word processing, spreadsheets

This personalized desktop can be accessed from anywhere on the net with any device

The network is the computer (assuming big bandwidth)

Yourwebtop.com http://www.yourwebtop.com/

Electronic Commerce


This would create a shift in the business model of portals

They were doorways, now they are “data guardians” and “full service providers”

They take on the responsibility for maintaining and upgrading shared software

They have to guarantee privacy, security, universal access, and reliability

They compete with software companies who would rather sell individual packages to users than one server version

Electronic Commerce


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Electronic Commerce


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Electronic Commerce


QuickTime™ and aTIFF (Uncompressed) decompressor

are needed to see this picture.

http://www.unt.edu/.../2002/january02/ cartoon.htm

Electronic Commerce


Auctions

Web auctions are based on the ability to negotiate in near real-time

They allow best price bargaining, guaranteed sales, minimal collusion

It is a one to many negotiation based solely around price

Some auction forms allow rounds of negotiation, others do not

The rules of the negotiation are clearly spelled out for all participants

Electronic Commerce


An auction is an economic mechanism for determining the price of an item

It requires a pre-announced methodology, one or more bidders who want the item, and an item for sale

The item is sold publicly to the highest bidder

It requires a web page displaying information about a good or service

A picture

A list of features

A suggested comparison price

Instructions on how to bid

Description of payment and fulfillment

Electronic Commerce


What makes auctions work?

A successful auction must have repeat business

This requires building a loyal community

The community is based on the development and maintenance of mutual trust

Social practices create and maintain trust

Posting comments about buyers and sellers and link these comments to specific auctions

Target the advertising for auctions (appropriate newsgroups and lists)

Have clear statements about privacy and security

Electronic Commerce


A standard online auction of an item will often contain a:

Registration procedure

Picture of the item

List of features

Suggested comparison price

Instructions on how to bid for the item

Forms to fill out to place your bid

Description of the rules of the auction

Electronic Commerce


Requirements

Support for a variety of auction formats

Integration of auctions with business’ back-end applications to allow automated trading processes

Security, based on cryptography and audit trails

Preventing hackers from sabotaging and buyers and sellers from cheating or disrupting the auction

Efficient notification to inform bidders of the latest bids

Electronic Commerce


Single and multiple round sealed bid auctions

Buyers must submit bids by a specified deadline

The bid information secret is until the deadline

Then bids are evaluated and the winners are declared

Single round auctions lack the bidding frenzy of open cry auctions where bidders try outbid their rivals

In a multiround sealed bid auction there is a deadline for each round of bids

At the deadline the auction is closed or the bids from the current round are publicized and a new round of bidding begins

Electronic Commerce


Dutch auctions

Starts with a very high asking price

Price decreases until buyers bid and specify the number of items they will purchase at the current price

The bid is lowered to sell more while inventory lasts

The auctioneer controls how fast the inventory sells by controlling the lowering of the bid

It closes at a pre-specified time, when the items are sold, or the price has fallen to a pre-specified level

These are good for perishable itemsShoreline Acoustic Music http://www.samusic.com/specials/dutchauction.shtml Homeschool Auctions.com http://www.homeschoolauctions.com/cgi-bin/auction1/auction.pl?action =dispalldutch

Electronic Commerce


The reverse auction

The buyer sets a price she is willing to pay

The auction house bids the price out to sellers

Sellers compete to meet the bid

If the bid is matched, the buyer must purchase the item

The auction house takes a cut of the transaction

Pricelinehttp://www.priceline.com

Electronic Commerce


The Vickery auction

Each submits one sealed bid

Bids are opened simultaneously and the winner is the one with the highest bid

But: the winner pays the price of the second highest bid

It is supposed to encourage bidders to bid the largest amount they are willing to pay

This has been used to set prices of IPO stock

It has also been used in contract bidding

Electronic Commerce


The auction process

Initial buyer and seller registration

Authentication of parties, exchange of public keys

Creation of a profile for each trader reflecting interests in products and spending limits

Setting up a particular auction event:

Describing the items being sold or acquired and setting up the rules of the auction

The auction rules explain the:

Type and procedures (open cry, sealed bid, Dutch)

Parameters (price, delivery dates, terms of payment)

Starting and closing dates and times

Electronic Commerce


Scheduling and advertising

Items to be auctioned in upcoming auctions are advertised, and potential buyers are notified

Popular auctions can be mixed with less popular ones to force people to be present in the less popular auctions

Bidding

This involves the collection of bids from buyers and implements the bid control rules of the auction

Minimum bid, bid increment, deposits required with bids...

For open cry auctions there is notification of the participants when new high bids are submitted

Electronic Commerce


Evaluation of bids and closing the auction

The auction closing rules are applied and the winners and losers of the auction are notified

Trade settlement, involving

Payment to the seller

Transfer of goods to the buyer

If the seller is not the auctioneer, payment of fees to the auctioneer and other agents (appraisers, consignment agents, etc.)

Electronic Commerce


Auction security

Auction house policy and seller instructions dictate whether the auction is accessible to the:

Public at large

Buyers/sellers registered with the auction services

Buyers registered to participate in the current auction

Access control mechanisms enforce these rules

Security mechanisms ensure that the site is not sabotaged by an outsider

This means preventing unauthorized bids and alterations and denial of service attacks

Electronic Commerce


Auction houses

One-to-many auction

The house provides access to goods and services auctions them to many buyers

Consumer-to-consumer auction

The house brings together many buyers and sellers at the same time and they negotiate with each other

Reverse auction

The house allows the buyer to set the price that sellers compete to match

Business to business auction

One company auctions off projects to contractors who submit bids (procurement) or unwanted inventory

Electronic Commerce


• Marketmakers and syndicators

Marketmakers bringing buyers and sellers together

The marketmaker provides industry-specific news andrelated product and service information

Buyers find the information they need to quickly locate, source and purchase products and services online

Suppliers generate sales leads by showcasing their products and services across multiple markets to reach qualified buyers

Revenue is generated from listings and % of transactions

Verticalnet http://www.verticalnet.com/

Electronic Commerce


Syndication is business to business ecommerce

“[It] is...the next-generation business architecture of the Internet”Neil Weintraub http://www.herring.com/mag/issue46/neil.html

Syndicators are horizontally specialized web sites that provide content and services to client sites

They are “syndicated” into collective business systems that lower costs for business and provide benefits to customers

Each participant of a syndicated business specializes in physical production, virtual experiences, or infrastructure

Electronic Commerce


Syndication divides the web-labor

It doesn’t matter to producers where customers see the product so long as many of them see it

Those who operate channels want to attract as many customers as possible

Who produces the message is of less concern

As producers and web administrators focus on their core businesses, they outsource work done by clerks, clearinghouses, and call centers to syndicators

This leads to aggregation and the pooling of resources

The difference between a showroom and a showroom of showrooms

NewsEdge http://www.newsedge.com/

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II. Strategies: B2C





Electronic Commerce


An e-commerce site that’s going to make money must be inviting, well-organized, secure and intuitive.

Vaughan-Nichols,. S.J. (1998). E-Commerce Step-by-Step ZDNet http://www.zdnet.co.il/devhead/stories/articles/0,4413,2185923,00.html

Electronic Commerce


Major challenges for ecommerce retailers

Brand development and promotion

Generating online sales

Attracting new customers

Boosting customer loyalty and retention

Improving after-sale customer service

Cutting costs in after-sales customer service

Boosting customer traffic to offline stores

Cutting costs of sales transactions

Accelerating inventory turns

Cutting general advertising and promotion costs

Electronic Commerce


Major obstacles

Understanding the technical requirements for an ecommerce site

Lack of a clear business model to guide development

Insufficient corporate resources

Consumer fears about security and privacy

The difficulty of integrating ecommerce web sites into the company’s other business processes

Electronic Commerce


What matters:

Having a well-designed, easy-to-use site is the most important factor in for online success

Having a strong company brand and well-known branded products

Using an effective site promotion strategy

Linking with the right search engines

Having a presence on the right portals or web communities

Offline promotion

Successfully marketing the web business

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What matters in a web site

Information organization and architecture: is it easy to navigate? Search?

Currency: how frequently is content updated?

Knowledge: do the pages educate visitors about products and their uses?

Interactivity: does it offer the ability to provide feedback, ask questions, etc?

Customization: does it allow visitors to tailor contentand information presentation?

Community: Does it allow visitors to share information with other visitors?

Speed: how quickly do pages download

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What else?

Having contact information on every page

Having a site that works under minimal conditions (text-`only...)

Making it easy for people to inquire about your services, while they are still online (mailto: links, short forms)

Having a way to ask your web site visitors for their e-mail addresses

This is an opportunity to resell them later, by sending them quality, informative helpful e-mail as a

follow-up

Electronic Commerce


The important question to ask is, "Can I deliver what I make or do anywhere in the world?"

1.Decide if the product or service you sell is deliverable to a Net audience

Can it be sent via the Net or delivered by physical means (FedEx, UPS)?

2.Determine the added costs of delivery

If the cost of delivering is too high, stop here

3.Find an e-commerce host and get a bid

Check carefully to make sure that the services and protections you want are offered

Electronic Commerce


Then:

4.Determine whether the extra revenue produces an adequate return

Minus the added cost of delivery and the hosting costs

5.If it does, it’s time to go into business

You may find that these steps do not produce a clear case for starting your e-commerce project right now

If they don’t, repeat the calculation quarterly until you find it’s time to start

Electronic Commerce


What must be managed?

Ecommerce sites need a reliable technical and social infrastructure to support the:

Practice of sales skills via the Internet

Orchestration and management of customer relationships and support

Creation of new relationships with customers, suppliers, partners, and even competitors

Electronic Commerce


Strategy for marketing to consumers

Awareness

Attraction

Visit-engagement

Purchase

Repurchase

Electronic Commerce


Awareness

Announcements: through letterheads, business cards, brochures, packages, newspapers, magazines and TV

Carefully chosen address: it should be similar to the company name and easy to remember

Attraction

Links from other sites

Search engines and indexes leading to the site

Site can be easily and quickly accessed

Electronic Commerce


Visit/engagement

Information about products and company

Facilities: careful use of scripting, search engines, sound, video and animation

Purchase

Multiple methods: ordering form, mail, fax, phone ordering and e-mail

Payment facilities: cash, check, credit card and direct account

Delivery/booking facilities: mail, fax, call phone and e-mail, package tracking

Interactivity: offers, interaction with others

Electronic Commerce


Revisit and re-purchase (stickiness)

Freshness: “What’s New”

Changing content and features

Extended interactivity: communities/clubs/user-to-user communication

Extensive help: “FAQs”

Link to other sites

Customization: collecting user information, meeting customer needs

Personalization:, optional menu and content requiring user input

Customer loyalty and service programs

Documents

Electronic Commerce School of Library and Information Science Ecommerce channels: portals, auctions, communities I. The shape of the “new” economy Internet