E-commerce in action
Retail
Main sectors in second generation
e-commerce





retailing on the web;
online service industries;
B2B E-commerce;
auctions, portals and communities;
online content providers.
2
Retailing on the web








E-commerce is changing every kind of business – offline
as well as online:
in the USA women now outnumber men online;
the average age of web surfers is increasing;
teenagers spend as much time on the internet as they do
watching TV;
online consumers are rapidly becoming just like offline
ones;
over 240 million Americans have web access;
UK spent more than £2 billion online in 2008 – massive
growth;
all categories of services and products are involved;
Walmart now conducts all business over a private B2B
network.
3
E-Commerce influence on offline
spending
 a consumer purchasing behaviour change has taken place.
 online purchases are dwarfed by influence on offline
purchases.
 some 60 million customers in Europe bought goods offline
after having researched them online.
 in the USA 3 out of 4 shop for new cars online but most
buy offline;
 they often go to dealers with their web printouts, details
and deals;
 different countries have different habits, e.g. in Italy and
Spain people are twice as likely to buy offline after internet
research whereas in England and Germany (the two most
developed markets) the numbers are evenly split;
 used car sales are one of the biggest online growth areas
in USA.
4
A merger of online and offline
worlds
Multichannel selling will involve a combination of :–
–
–
–
–
–
traditional shops
printed catalogues
home shopping on TV
phone-in order service
e-commerce enabled web site
option of collecting goods from a physical shop (old
fashioned but very popular).
5
The lure of retail e-commerce
 lower transaction costs by automating processes;
 larger purchases per transaction e.g. Amazon gives a
description of a book but also shows related books which
people are buying;
 integration into business cycle e.g. FedEx made more
information available when they introduced online tracking;
 people can shop in different ways e.g. the ability to :–
–
–
–
build an order over several days
configure products and see actual prices
build complicated custom orders easily
compare prices between multiple vendors
6
The lure … (cont)
 larger catalogues – imagine trying to fit the information in
Amazon’s database into a paper catalogue;
 improved customer interaction – automated software tools
help interaction e.g. a customer gets an email on
confirmation of the order, another when it is shipped, and
one after it arrives.
 the motive is obvious – a happy , satisfied customer is
more likely to be loyal and buy again.
7
Hard aspects of retail
e-commerce





getting traffic to come to your site;
getting traffic to return to your site a second time;
differentiating yourself from the competition;
getting people to actually buy something;
integrating an e-commerce site with existing
business data.
8
Major sectors of retail
e-commerce
 small business start-ups –using ASPs or simple systems
from online suppliers;
 established pure web operators like Amazon and eBay;
 established MOTO vendors like Dell and LandsEnd;
 large traditional companies like M+S , Debenhams and
Tesco;
 sometimes called ‘clicks and brick’ or ‘clicks and mortar’
9
Major sectors –small
businesses/start- ups
 wide range of suppliers on the web for both systems and
application software, economically priced;
 venture capitalists slowly coming back to dot.coms witness
early IPO for Salesforce after ecommerce 1;
 easier entry for niche markets;
 use of big sites like Amazon and eBay is now available to
small players to show off their wares;
 in a recent study eBay found over 5 million people in the
USA alone now make a full-time living from trading on its
site.
10
E-scenario – start-ups
Starting an e-business
 the Internet has dramatically reduced the cost of setting up a business
and especially reaching potential customers
What is needed ?
 a personal computer;
 high speed broadband connection with space for a good website;
 marketing costs low;
 commission eBay, Amazon etc. to list your wares;
 use Paypal for payments (credit card) which saves the cost
 of opening a merchant account;
 use UPS or other carrier to deliver anywhere and provide tracking
facilities.
 Use drop shipping to reduce inventory
11
Established pure web operators –
Amazon








created in 1998;
in 1998 on sales of $609 million loss was $124 million;
in 2000 on sales of $2.7 billion the loss was $1.4 billion;
in 2003 on sales of $5.3 billion the profit was $35 million;
In 2012 Amazon sold $ 48 billion;
heavy marketing costs initially;
then cost of building warehouses;
hiring thousands of employees and training them.
12
Amazon - business model
Five fundamentals: low prices
 an enormous selection
 availability
 convenience
 good information about products.
13
Amazon – products
 Amazon started with books – a huge selection
online with very keen prices;
 added other media – music, dvds , videos etc.
 media sales in 2003 were some $4 billion while
the rest was electronics and general merchandise;
 latest ventures are health products, jewellery,
sports/leisure, toys and footwear
 CEO Jeff Bezos thinks he can sell most things on
line.
14
Amazon – trading platform
Its aim is to become Earth’s most customer-centric
company
 example: “search inside the book”, online equivalent of people
browsing through a book in a physical bookstore.
 allows a customer to search the text of over 800,000 books plus print
on demand
 already encouraging people to buy more books
 now allows large retailers to sell through its website
 arranged a number of affiliate relationships e.g. ToysRus, Debenhams,
Miss Sixty, Calvin Klein
 in fact it is becoming a huge trading platform for other companies
 now allows merchants to sell Amazon products - AStore
 ACSI says Amazon hits 88% for customer satisfaction – as close as
any company has come to matching the ideal.
 (American Customer Satisfaction Index)
15
Amazon – cost containment
 profits are helped by rigorous cost cutting at
regular intervals;
 the Toyota principle – reducing defects and
problems in its highly sophisticated order process
as early as possible;
 one main quality measure is the number of
contacts per unit ordered, i.e. the number of times
an employee has to intervene;
 keeping this measurement low means lower costs
and greater customer satisfaction.
16
Established MOTO vendors





Dell, founded in 1984, is the world’s largest direct
computer manufacturer. It is a systems supplier
that aims to:custom build computers for customers
eliminate middlemen and keep prices low
more effectively meet the technology needs of its
customers
keep inventory as low as possible
create a ‘manufacturer direct’ channel.
17
Dell – manufacturer direct
 sells directly to consumers without retailers or distributors
 (Going back to retailers slowly – TESCO and office
suppliers)
 retailers must compete on price and inventory
 manufacturer does not have cost of inventory, physical
storage or sales staffs
 Dell adopted the demand-pull model
 traditional manufacturers use the supply-push model and
have some difficulty in adapting to the demand-push
model.
18
Dell – demand-pull
 products are not made until an order is
received;
 Dell adopted this build-to-order strategy
from the outset;
 inventory turnover is faster;
 reduces component and finished goods
inventory levels;
 virtually eliminates stock obsolescence.
19
Dell – business model





the direct model simplifies operations;
eliminates supporting a wholesale and retail network;
saves money because of no costly mark-ups;
gives complete control over its customer database;
allows Dell to build and ship custom computers nearly as
fast as a mail order supplier;
 industry rivals typically carry 50+ days of inventory;
 Dell carries 5 days which reduces capital tied up.
20
Dell business model online
Dell early on recognised its model could move online relatively
straightforwardly.
 It has made it easy for customers (particularly corporate) to:
–
–
–
–
investigate product offerings;
complete order forms and purchase orders;
track orders in real time;
review order histories online.
 It has developed hundreds of thousands of premier pages for its
corporate clientele worldwide.
 For small businesses it has created;
– an online virtual account executive;
– a spare parts ordering system;
– virtual help desk – direct access to technical support data.
21
Business model – technology
 a sophisticated MIS is at the core of its operation;
 it enables it to track each unit from initial sale to post-sales
support and service;
 links manufacturing facilities and operations worldwide;
 coordinates:
–
–
–
–
–
shipments and deliveries of components
order configurations
inventory levels
marketing
deliveries
22
Business model – strategy




move everything online;
keep minimum sales staff for corporate customers;
outsource telephone and enquiry systems;
add more ‘beyond the box’ offerings :–
–
–
–
–
warranty,
product integration and installation services
software,
peripherals
technology consulting
 includes over 30,000 software and peripheral products from leading
manufacturers.
 maintain facilities in North America, Europe, Asia and South America.
23
Large offline ‘clicks and bricks’
companies




Companies with large physical stores who
have added the Internet as a sales channel.
Examples :M+S – clothes and food;
Sears – bought LandsEnd as a catalogue
internet company;
Tesco – largest UK supermarket chain.
Littlewoods – developed from catalogue
company
24
Sears (LandsEnd)




Sears is a large USA department store;
it has a growing online sales channel;
it bought LandsEnd in 2002;
LandsEnd is a catalogue merchant with a growing
and innovative presence on the web;
 it has the advantage of very efficient, fast
response order entry and fulfilment systems.
25
LandsEnd
 sells stylish (?) clothing, accessories, shoes, luggage and household
goods;
 now is the largest seller of clothing online;
 rated as one of the most effective and innovative websites in the world;
 invests some $40 million a year in IT;
 innovations like ‘Live and Shop’ allow assistance from a service
representative viewing the same website together;
 using clever algorithms it now offers a system for custom-made clothes
– a sort of Saville Row by mouse click:
– groups of customers have their bodies scanned;
– they answer questions and the algorithm works out the perfect fit;
– it learns as it goes along interpreting the answers.
26
Tesco
 U.K’s largest supermarket chain;
 took the lead in online groceries;
 goods ordered over the internet are picked from the shelves of the
nearest supermarket and delivered to homes within set time slots;
 the order process is simple and each customer has a record
 of what is bought;
 if certain items are not available – the nearest match is sent;
 if not wanted it can be returned;
 special software has been written to study buying patterns;
 In contrast, Webvan , a Californian supermarket, chose an elaborate
central warehouse system but couldn’t make it pay.
27