Chapter 3 Retailing in Electronic Commerce: Products and Services Learning Objectives

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Chapter 3

Learning Objectives

  • Describe electronic retailing (e-tailing) and its characteristics.
  • Define and describe the primary e-tailing business models.
  • Describe how online travel and tourism services operate and their impact on the industry.
  • Discuss the online employment market, including its participants, benefits, and limitations.
  • Describe online real estate services.

Learning Objectives

  • Discuss online stock-trading services.
  • Discuss cyberbanking and online personal finance.
  • Describe on-demand delivery of groceries and similar products/services.
  • Describe the delivery of digital products and online entertainment.
  • Discuss various e-tail consumer aids, including comparison-shopping aids.
  • Describe disintermediation and other B2C strategic issues.

Internet Marketing and Electronic Retailing

    • electronic retailing (e-tailing)
    • Retailing conducted online, over the Internet.
    • e-tailers
    • Retailers who sell over the Internet.
      • Manufacturer sells directly to the customer, cutting out the intermediary
      • Catalog sales free a retailer from the need for a physical store

Internet Marketing and Electronic Retailing

    • ($70,$90 billion for 2004, 2005) = 2-4 of total retails in US.
    • A growth of about 20% per annum.

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

Basic Principles for E-TAILING Success

    • Sound business thinking, visionary leadership, thorough competitive analysis and financial analysis, and the articulation of a well-thought-out EC strategy are essential.
    • Ensure appropriate infrastructure, particularly a stable and scalable technology infrastructure to support the online and physical aspects of EC business operations.

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

E-Tailing Business Models

    • Direct marketing by mail-order retailers that go online
    • Direct marketing by manufacturers
    • Pure-play e-tailers
    • Click-and-mortar retailers
    • Internet (online) malls

E-Tailing Business Models

E-Tailing Business Models

    • direct marketing
    • Broadly, marketing that takes place without intermediaries between manufacturers and buyers; in the context of this book, marketing done online between any seller and buyer.
    • Direct Sales by Manufacturers
    • Pure-Play E-Tailers
      • virtual (pure-play) e-tailers
      • Firms that sell directly to consumers over the Internet without maintaining a physical sales channel.

E-Tailing Business Models

    • click-and-mortar retailers
    • Brick-and-mortar retailers that offer a transactional Web site from which to conduct business.
    • brick-and-mortar retailers
    • Retailers who do business in the non-Internet, physical world in traditional brick-and-mortar stores.
    • multichannel business model
    • A business model where a company sells in multiple marketing channels simultaneously (e.g., both physical and online stores).

E-Tailing Business Models

    • Retailing in Online Malls
      • Referring directories
      • Malls with shared services
    • Online Group Buying
    • Virtual Shopping

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:

Travel and Tourism Services

  • Information and bookings
  • Travel tips
  • Electronic Travel magazine
  • Fare comparisons
  • Currency conversion calculators
  • Fare tracker
  • Worldwide business and places locator
  • 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
  • Services provided:

Travel and Tourism Services

  • 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 (
    • Governments (
    • Private organizations (

Travel and Tourism Services

  • 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

Travel and Tourism Services

  • 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

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

Corporate Travel

  • Many large corporations receive additional services from large travel agencies
    • Online optimization tools provided by travel companies (
    • Travel authorization software that checks availability of funds and compliance with corporate guidelines
  • This is a huge and rapidly growing market
    • Oracle’s e-Travel provides software to automate and manage online booking

Corporate Travel

    • American Express,Microsoft and MCI have developed AXI system that displays:
      • Airline seat charts
      • Maps showing hotels
      • Information on nearby health clubs
      • Weather information
      • Creates profiles for travelers and their preferences
      • Attempts to satisfy both travelers and corporate travel managers

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”

Intelligent Agents in Travel Services

  • 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

The Employment Placement and the Job Market

  • Job markets
    • Employers are looking for employees with specific skills, and individuals are looking for jobs
    • Very volatile market
    • Moved to the Internet
    • Millions of job seekers, hundreds of thousands of jobs

The Internet Job Market

  • The Internet offers a perfect environment; it is especially effective for technology-oriented jobs
    • Job seekers
    • Job offerers
    • Recruiting firms
    • Government agencies and institutions

Benefits of the Electronic Job Market

  • For job seekers
    • Find very detailed and timely information on a large number of jobs world-wide
    • Quickly communicate with potential employers
    • Post resumes for large-volume distribution
    • Search for jobs quickly from any place at any time
    • Obtain several support services at no cost
    • Assess their market value
    • Find out how to use their voice in an interview
    • Can access newsgroups that are dedicated to finding jobs

Benefits of the Electronic Job Market

  • For employers
    • Advertise to a large number of job seekers
    • Save on advertisement costs
    • Lower the cost of processing (using electronic application forms)
    • Provide greater (‘equal opportunity’) for job seekers
    • Find highly skilled employees

Limitations of the Electronic Job Market

  • Many people do not use the Internet
    • Companies may use both traditional advertising approaches and the Internet
    • Clear trend: more and more of the job market are going to the Internet
  • Security and Privacy
    • Resumes and other online communications are usually not encrypted
    • Possibility that someone at your current place of employment may find out that you are job hunting

Limitations of the Electronic Job Market

  • Electronic job market may also create high turnover costs for employers by accelerating employees’ movement to better jobs
  • Finding candidates online is more complicated:
    • There is a large number of resumes available online
    • Some sites offer prescreening of candidates to help alleviate this problem (

Virtual Job Employment Agent

Real Estate Online

  • 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
  • For Sale

Real Estate Applications

  • Advice to consumers on buying or selling a home
  • International Real Estate Directory and News is a comprehensive real estate Web site
  • National listing of properties for sale
  • Commercial real estate listings
  • Rental properties
  • Real estate related maps

Insurance Online

  • Insurance—auto, home, life, and health at a substantial discount

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

Online Stock Trading

Banking Online

  • 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

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 “banker’s hours”
  • Handle finances when traveling
  • Additional services
    • Free phone banking
    • Waive checking fees

International and Multiple-Currency Banking

  • Some international retail purchasing can be done by credit card
  • Other transactions may require international banking support
    • Hong Kong Bank’s HEXAGON provides e-banking in Asia
    • Tradecard and MasterCard developed a multiple-currency system for global transactions (
    • A multidealer foreign exchange service that enables faster and cheaper foreign exchange transactions (

Implementation Issues in Online Financial Transactions

  • Using bank intranets
    • Banks provide large business customers with personalized service by allowing them access to the bank’s intranet to access accounts, historical transactions, intranet-based decision-support applications
  • Imaging systems—allow customers to view images of all:
    • Incoming checks
    • Invoices
    • Other related online correspondence

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

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

Online Billing and Bill Paying

  • 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

Online Billing and Bill Paying

  • Person-to-person direct payment
    • (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 services—can save businesses about 50 percent of billing costs
    • In Hong Kong, CitiCorp links suppliers, buyers, and banks on one platform, enabling automatic payments

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

On-Demand Delivery Services Model

The Case of E-Grocers

  • E-grocer—a grocer that will take orders online and provide regular deliveries on a daily or other regular schedule or will deliver items within a very short period of time
    • All e-grocers offer consumers the ability to order items online and have them delivered to their house
    • Some e-grocers offer free regular “unattended” weekly delivery based on a monthly subscription model

The Case of E-Grocers

    • Others offer on-demand deliveries with a surcharge or additional delivery charge added
    • One e-tail grocer sells only nonperishable items shipped via common carrier
    • Many offer additional services
      • Dry cleaning pickup and delivery
      • “Don’t run out” automatic reordering
      • Fresh flower delivery
      • Movie rentals
      • And more

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

Problems with E-Tailing & Lessons Learned (cont.)

  • Branding—drive 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

Disintermediation & Reintermediaries

  • Disintermediation—manufacturer sells directly to consumer
  • Reintermediearies—new intermediary roles in the digital environment offer new ways to:
    • Reach new customers
    • Bring value to customers
    • Generate revenues

Intermediary’s 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


  • Reintermediaries—intermediaries that have restructured their roles in the purchase process
    •—pricing information for consumers
    •—information about the dealer’s true costs
  • “Lead services” that
    • Direct buyers to member dealers
    • Offer direct sales of new cars
      • (’s partner)

Cybermediation and Hypermediation

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

Conflict and Personalization

  • Channel conflict—situation in which an online marketing channel upsets the traditional channels due to real or perceived damage from competition
  • Personalization—custom designed marketing plan
    • Tailored to buying patterns
    • Appeal to sense of value
    • Excellent customer service
    • Mass customization

Issues in E-Tailing

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