Oz – Foundations of Electronic Commerce© 2002 Prentice Hall

Business-to-Consumer E-Commerce

2 Oz – Foundations of Electronic Commerce© 2002 Prentice Hall

Learning Objectives Summarize the principles of the main

types of online business-to-consumer (B2C) activities

List the major players in the B2C arena

Explain the challenges of B2C firms Articulate the difficulties of e-retailing

in general and delivery in particular

3 Oz – Foundations of Electronic Commerce© 2002 Prentice Hall

Learning Objectives Explain the concept of channel

conflict Contrast failure and success

factors in online B2C ventures List the major future developments

that are anticipated in online B2C commerce

4 Oz – Foundations of Electronic Commerce© 2002 Prentice Hall

Business-to-consumer (B2C) hoopla

Why consumers shop on the Internet: Convenience Saving time Comparative shopping

Oz – Foundations of Electronic Commerce© 2002 Prentice Hall

The business of e-retailing

Characteristics, issues, and challenges

6 Oz – Foundations of Electronic Commerce© 2002 Prentice Hall

Retailing waves

IntimacySpecial services

Small varietyShopper picks, packs, delivers

Greater variety

Lower pricesNo intimacy

Shopper picks, packs, delivers

Huge varietyLower prices

Retailer picks, packs, delivers

No intimacyNo immediacy

Grocery market example

Corner grocer Supermarket Online grocer

7 Oz – Foundations of Electronic Commerce© 2002 Prentice Hall

Elements of e-retailing E-tailing site must:

Promote the items offered for sale Provide a search mechanism

Comparison software Provide the means to process

purchases and payments

8 Oz – Foundations of Electronic Commerce© 2002 Prentice Hall

Diminishing importance of brand names A brand name is a short cut when

there is no convenient access to information about a product

The plentiful and easily accessible information available on the Internet reduces the need to rely on brand names

9 Oz – Foundations of Electronic Commerce© 2002 Prentice Hall

Repeat business challenge Attract web surfers to spend more

time at the e-tailing site Convert visitors into buyers

A major challenge

Conversion rate - the rate at which visitors are converted into buyers

10 Oz – Foundations of Electronic Commerce© 2002 Prentice Hall

Delivery challenge Prompt delivery is the greatest

challenge for B2C businesses

11 Oz – Foundations of Electronic Commerce© 2002 Prentice Hall

Channel conflict A direct manufacturer-to-consumer

channel may compete with the traditional distribution channels

How to circumvent channel conflicts? Sell online items that are not distributed

through retailers Use a different brand name for items

sold online

Oz – Foundations of Electronic Commerce© 2002 Prentice Hall

Challenging warehouse-to-retail transition

13 Oz – Foundations of Electronic Commerce© 2002 Prentice Hall

Great difference in logistics between traditional and e-retail Labor & transportation costs shift

from the customer to the retailer

14 Oz – Foundations of Electronic Commerce© 2002 Prentice Hall

“Last mile” problemApproachApproach How it worksHow it works

Portal Aggregate demand across categories; economies of scale

Buildover Maintain your own warehouse

Caching Aggregate orders for delivery at a single destination

Speed Charge more for fast delivery or convenience store items

Niche Charge more for specialty items

15 Oz – Foundations of Electronic Commerce© 2002 Prentice Hall

Portal strategy A firm offers many different, but

related services to consumers By aggregating service requests,

economies of scale are achieved

16 Oz – Foundations of Electronic Commerce© 2002 Prentice Hall

Buildover strategy The firm builds its own

infrastructure by building fulfillment centers Significant investment

17 Oz – Foundations of Electronic Commerce© 2002 Prentice Hall

Caching strategy Filled orders are aggregated, or

cachedcached, in one delivery location Collection centers More convenient than home delivery

for both the firm and its customers

18 Oz – Foundations of Electronic Commerce© 2002 Prentice Hall

Speed strategy Quick delivery of products

Customers willing to pay more than if they purchase items the traditional way

19 Oz – Foundations of Electronic Commerce© 2002 Prentice Hall

Niche strategy A niche market on which the firm

specializes Does not require a new infrastructure Relatively narrow selection of

products

20 Oz – Foundations of Electronic Commerce© 2002 Prentice Hall

Successful B2C business models Reservation systems Consumer auctions Reverse auctions Stock trading Gambling Content

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Software sales Perishables online Bill presentment and payment “Do well by doing good” Online customer service

22 Oz – Foundations of Electronic Commerce© 2002 Prentice Hall

Failures: not all that glitters is gold

Reason for failure

What happens

Poor business model

There is no demand for the products/services

Insufficient logistical means

The firm runs out of funds before it has established adequate logistics infrastructure

Competition Cannot compete against stronger players

23 Oz – Foundations of Electronic Commerce© 2002 Prentice Hall

Reason for failure

What happens

Over reliance on advertising

Traffic at the site is too small to generate enough advertising revenue

Critical mass Failure to reach within a reasonable period of time a large enough audience

24 Oz – Foundations of Electronic Commerce© 2002 Prentice Hall

Boo.com Foofoo.com Cookexpress.com Toysmart.com

25 Oz – Foundations of Electronic Commerce© 2002 Prentice Hall

Ingredients for success Meet a consumer need

Consumers buy only what they need

Total service Offer a host of related services as one

package Aggregate online products and services

offered in a traditionally fragmented industry

26 Oz – Foundations of Electronic Commerce© 2002 Prentice Hall

Interaction and personalization Enable customers to conduct live

human-to-human interaction with the firm

Create customer profiles

Use of technology Use the latest technology to update

your site

27 Oz – Foundations of Electronic Commerce© 2002 Prentice Hall

Trends in B2C commerce Mergers of B2C firms Clicks-and-mortar gravitation Sounder business models Mobile commerce

M-commerce

Oz – Foundations of Electronic Commerce© 2002 Prentice Hall

Business-to-Consumer E-Commerce