What is Electronic Commerce?
“Technology-mediated exchanges
between parties (individuals or
organizations) as well as the
electronically based intra- and interorganizational activities that facilitate
such exchanges”
Rayport and Jaworski, 2001
Four Categories of ECommerce
Business Originating From….
Business
Selling to….
Business
B2B
Example: Covisint
B2C
Example: Amazon
Consumer
Consumer
C2B
Example: SpeakOut
C2C
Example: eBay
Ripples
Business Originating From….
Business
Selling to….
Business
Consumer
Consumer
B2B
C2B
Publisher orders paper supplies
from paper companies
Potter fans band together for
bulk purchase from Amazon
Amazon orders extra copies
from publisher
B2C
Consumers buy
thousands of Harry
Potter books from
Amazon
C2C
Consumers resell Harry
Potter books on eBay
Business Models
Four decisions/choices/issues
Value proposition or value cluster
Online customization allows targeting
multiple segments
Marketspace offering
Product, service, information, or combination
Unique, defendable resource system
A financial model
1. The Value Cluster
Multiple rather than singular proposition
Technology allows focus on several segments
and several benefits
Must identify
Target Segment
Market size and growth, unmet needs, weak
competition
Focal Customer benefits
One or more benefits? Is there product
commoditization on the web?
Differentiating factors
What is it about an online company that makes its
offerings significantly better than competition?
2. Marketspace Offerings
Three tasks for senior management
Identify scope of offering
Category-specific (www.squashgear.com)
Cross-category (www.thesportsauthority.com)
Metamarkets (“customers tend to think in terms of
activities while firms tend to think in terms of
products” – Sawhney, 2001)
– Companies sometimes called metamediaries
(www.babycenter.com)
Identify customer decision process
Map offering to decision process
3. Defendable System
Resource
Choice of actions and assets used to deliver
value cluster
Identify core benefits in value cluster
Identify capabilities needed to provide each benefit
Link resources to each benefit
Identify degree to which firm can deliver capability
Identify partners who can complete capabilities
Stress in online world is on strategic partnerships
Can include
– portal agreements (AOL)
– anchor-tenant agreements (major provider of service for
retailers)
– or promotion agreements (example, frequent flier miles with
purchase)
4. Financial Models
Revenue Models
Advertising, product sales, transaction fee,
subscription
Shareholder Value
Company plans to increase profits over time
Examples
Company-derived value creation
– Best information, widest assortment,lowest prices, most
personalized, best experience, broadest user network…
User- and company-derived value creation
– Metamarket switchboards (brings buyers and sellers together
based on common activity)
– Traditional and Reverse Auctions
– Category Switchboard
Common B2C Models
Virtual Storefront
Marketplace Concentrator
Information Broker
Transaction Broker
Electronic ClearingHouse
Reverse Auction
Digital Product Delivery
Content Provider
Internet Business Models
1. Virtual Storefront
Sells physical
goods or services
online instead of
through a physical
retail outlet
2. Marketplace
Concentrator
Concentrates
information about
products and
services from
multiple providers at
one central point
Internet Business Models
3. Information
Broker
4. Transaction
Brokers
Provide product,
pricing, and
availability
information. May
also facilitate
transaction
Buyers can view
information but
primary goal is to
complete transaction
Internet Business Models
5. Electronic Clearing Auction like setting
Houses
where price and
availability change in
response to consumer
actions
6. Reverse Auction
Consumers submit
bid to multiple
sellers to buy goods
or services at a
buyer-specified price
Internet Business Models
7. Digital Product
Delivery
Sells and delivers
software, multimedia,
and other digital
products over the
internet
8. Content Provider
Creates revenue by
providing content.
Customer may pay to
access content or
revenues may be
generated through ads