ECT%20455%20E-Commerce%20Web%20Site%20Engineering

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ECT 455E-Commerce Web Site Engineering

• Lecture 2
• Consumer Internet Commerce

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Agenda

• Market News
• Types of Consumers and Purchases
• Business Models and Value Propositions
• e-Commerce Value Chain
• Assignments Website Analysis
• Project Deliverable B

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A Quick Poll

• What types of shoppers are you?
• How do you shop online?

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Types of Consumers

• Types of Buyers
• Impulsive Buyers quick purchasing
• Patient Buyers price comparison
• Analytical Buyers research first
• Shopping Experiences
• Utilitarian task-completion and rational
• Hedonic involvement and entertainment

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Types of Online Purchases

• Specifically Planned Purchases
• Generally Planned Purchases
• Reminder Purchases
• Unplanned Purchases
• Implications for Strategies and Design?

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Amazon

• How does Amazon site support different types of
  shoppers, purchases, and shopping behaviors?

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Meeting Customer Expectations

• Top 3 Reasons for Shopping Online
• Good selection of items
• Competitive pricing
• Convenience
• Shopping carts are frequently abandoned
• Placed products in the cart but did not complete
  the purchase (78) because
• Shipping cost too high (45)
• Price check (37)
• Changed mind (34)
• Price to high (24)
• Check out process was long/unclear (18)

EY Global Retailing
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User Profile Information
GVU Web User Survey
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(No Transcript)
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The e-Commerce Value Chain
Get and keep customer interest
Turn interest into orders
Service customers
Manage orders
Attract
Act
React
Interact
Catalog Sales static dynamic
AdvertisingMarketing channels media
Order capture-- Shopping Cart Payment Fulfillment
goods
Customer service Order tracking
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The 2006 State of Retailing Online

• Online retail was projected to rise 20 to 211.4
  billion in 2006, 4.7 of all retail sale (174
  retailers)
• Projected strong growth in 12 sectors, including
  travel, home/office, computer hardware and
  software, health beauty, apparel, flowers,
  cards, and gifts.
• Increasing trends toward channel integration 79
  have consistent pricing across channels 46
  allow their customers to buy and redeem gift
  cards online and in stores, 33 support
  cross-channel loyalty program. 22 of offline
  sales are influenced by the Web.

shop.org/Forrester Research May 2006
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The e-Commerce Value Cycle
Attract
React
Interact
Act
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Attract Customers (Marketing)

• Purpose
• Build brand awareness, attract customers, and
  entice them to buy
• Merchandizing Methods
• Advertising
• Coupons
• Sales and Promotions
• Frequent buyer programs
• 11 marketing

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Beyond Price, Research and Brand

• Fast Search price
• Long search branding, delivery time, and other
  product characteristics

Brynjolfssor Search and product differentiation
at an Internet Shopbot. MITSloan School of
Management, Dec 2004.
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Interact with Customers (Sales)

• Purpose
• Turn interest into orders
• Catalog, Product and Service
• Techniques
• Registration with Internet search engines
• Hyperlinks
• Onsite product search
• Product and price comparison
• Dynamic vs. static contents
• Pricing

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Act on Customer Instructions (Order Management)

• Purpose Manage order and shopping experience
• Order Processing
• Shopping cart and order aggregation
• Order validation Application of coupons or
  discounts
• Cross selling
• Calculation of sales, taxes, shipping and
  delivery charges, rolled-up order
• Payment handle multiple payment methods (cash,
  credit, credit cards, debit cards)
• Act Fulfillment
• Delivering the goods ordered to their destination
• Transmission of order information to warehouse,
  packing or order assembly for shipping, shipping
  and delivery

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React to Inquiries (Service)

• Purpose customer satisfaction, experience, and
  repeat visits
• Methods
• 24X7 service capacity
• Proactive and Immediate feedback voice and
  email
• Access to status information
• Self-help (FAQ)
• Multi-language support

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Online Retail 2005 Holiday Seasons

• Free shipping remains the king of online
  marketing promotions (62), Recommendations 52
  gift ideas, suggested items page (39), featured
  sale item (32)
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• Search engines and affiliate marketing help
  retailers find customers, direct e-mail
  promotions (92.4), paid search engine marketing
  (71.4), natural search engine marketing (53.3)
  and affiliate/loyalty programs (40.1).
• Shop.org/BizRate 2004 eHoliday Mood study.
  December 2005

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The State of Retailing Online 7.0

• Profitable online operations, 43 (2000) ? 56
  (2001) -gt 70 (2002) ? 79 (2003)
• Overall Operating margins ? 21 catalogers 28
  online retailer ? -1 (from -16 in 2002)
• Marketing costs Web based retailers (10/per
  order), store-based (5), and catalog-based (7)
  shifting toward performance based affiliate
  marketing and search engine marketing (investment
  in operational efficiency)
• Overall marketing costs 8/per order ? 4/per
  order Web-based (10/order ? 2/order)
• Customer acquisition costs 29? 14 repeat
  buyers 4?53 of revenue.
• Customer service costs 1.9? 2.3 fulfillment
  6.3? 9.8
• 24 of offline sales in 2003 were influenced by
  Web, up from 15 in 2002

Source shop.org/Forrester Research, May 2004
2003 report (6.0)
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Multi-Channel Retailing

• Multi-channel strategies 45 research on
  catalog ? buy online 21 research online ? buy
  from catalog (2004 eholiday mood study)
• Retail chains accounted for 40 of online sales,
  compared with gt25 for pure-play internet
  retailers (eMarketer, 2006)

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Multi-Channel Retailing Implications

• How do cross-channel shoppers differ from single
  channel shoppers
• What are the implications of cross-channel
  shopping to retailers?
• What strategies are retailers using to manage
  their multiple sales channels?
• How do the Web sites of store retailers, catalog
  firms and Internet-only merchants compare in
  terms of sales volume and growth, conversion
  rates and customer satisfaction?

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Shopping Cart Abandonment

• A visitor enters the chick out process but leaves
  her shopping cart without completing the checkout
  process.
• What does shopping cart abandonment suggest?
• A loss of orders
• Loss of revenues
• A lower conversion rate

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What can you do to minimize shopping cart
abandonment?
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Amazon

• How does Amazon site implement the e-commerce
  value chain?
• Attract
• Interact
• Act
• React

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Value Propositions

• For Consumers/Customers/Users
• For the Firm/Organization

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Value Proposition for Customers

• Transform customer relationship from
  supplier-centered to customer-centered values
• self service, 11 choices delivery to customer
  location customer needs choice of service hours
• Displace traditional source of values
• Physical vs. digital value (information)
• Economies of scale vs economy of scope
• Mass produced vs mass customized
• Information vs. knowledge value
• Distribution as constraints vs. enabler
• Local vs. global

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Value Proposition for Firms

• Ability to reach a global market
• Reduced marketing and selling expense
• Increased efficiency of operation
• Ability to target consumers more precisely
• Ability to convey more accurate product and
  availability information

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Four Strategies

• Channel Master (Cisco Amazon)
• Customer Magnet (Yahoo)
• Value Chain Pirate (Autobytel.com etrade)
• Digital Distributor (Monster.com)
• Disintermediation and reintermediation
• New strategies participation

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B2C Business Models Generating Revenues

• Merchant Model
• virtual merchants
• Click Brick
• Multi-Channel
• Shopping Malls
• Advertising Model
• Horizontal portal
• Vertical portal
• Personalized portal
• Social network?
• Participation

• Intermediary (Brokerage)
• Buy/sell fulfillment
• Hypermediary (financial settlement)
• Auction broker
• Reverse auction

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Merchant Models (virtual, CB, MC, shopping
malls)

• Advantages
• Enables merchants to sell products on the Web
• Conduct business 24-by-7, worldwide
• An e-commerce storefront should include
• Online catalog of products
• Order processing (robust shopping cart)
• Secure online payment
• Timely order fulfillment
• CB or MC physical location, brand recognition,
  established customer base, cannibalization,
  channel integration
• Virtual Merchant avoid the cost of physical
  stores

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Portal Model (Advertising)

• Portal sites Give visitors the chance to find
  almost everything they are looking for in one
  place
• Horizontal portals Portals that aggregate
  information on a broad range of topics
• Yahoo!, Google
• Vertical portals Portals that offer more
  specific information within a single area of
  interest
• WebMD, IMDB, FirstGov
• Requires fresh and abundant content, and robust
  search engine to draw traffic
• Heavy reliance on advertising revenue, decline in
  effectiveness of online advertising

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Advertising Model for Web 2.0

• Key characteristics?
• Examples?
• Requirements?

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Auction Model

• Online auction sites
• Act as forums through which Internet users can
  log-on and assume the role of either bidder or
  seller
• Collect a commission on every successful auction
• Sellers post items they wish to sell and wait for
  buyers to bid
• Reserve price
• The minimum price a seller will accept in a given
  auction
• Reverse auctions
• Allow the buyer to set a price as sellers compete
  to match or even beat it

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Amazon vs. Google

• What are their customer value propositions?
• What are their business value propositions?
• What are their business models?
• Who are their competitors?

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Transition of an E-Customer
Interactive Marketing Transaction Processing
Online Relationship
Casual Visitor
Prospect
Buyer
Repeat Buyer
Evaluate interest Allow comparison
Support/Interact present options Enable
Transaction Develop relationship Prove
reliability
Push Offers
Conversion rate is low
Gartner Group
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Next Week

• Review reading assignments
• User-centered Web Site Engineering
• Deliverable B Due
• Market News