http://bm.nsysu.edu.tw/tutorial/mis
Official Website
eCommerce:
Digital markets, Digital goods
The new frontier of business
Groupon’s Business Model:
social & local
• Offers subscribers daily deals from local
merchants
– Group of people (usually at least 25) has to
purchase the discounted coupon (a “Groupon”)
• If you really want 50% off discount of your favorite
Italian restaurant
• You need to message your friends to pay for the
Groupon
– Groupon takes a 50% cut of the revenue
– Merchant receives the rest
• 75% off the list price
• Receive many (sometimes too many) customers
– Lost money in this single offer
– Hope to generate repeat purchases, loyal customers, and a
large customers base
• Customer acquisition cost
• Groupon
– Founded 2008
– Go public in June 2011
– Struggle to show a profit
• Revenue is $1.6 billion (in 2011)
• Spend $768 millions in marketing
• Lost $254 millions
• Critics of Groupon’s business model
– Revenue per customer has been falling
– Conversion rate of customers into subscribers is
slowing down
– Emails Groupon used is poorly targeted
– Increasingly fewer Groupons sold per customer
– Revenue per Groupon is falling
• Groupon’s solutions
– Scale: getting big really quick and develop the
brand
• Competitors will never be able to find an audience
– Fast enough customer growth
– Acquisition
• Help its position in the small and medium-sized
business market
• Reality
– Merchants report not creating large group of
repeat customers
• Price-sensitive customers never return for regular
price
– Competitors springing up everywhere
• Google offer
• AmazonLocal
10.1 eCommerce and the Internet
10.2 eCommerce: Business & Technology
10.3 mCommerce
10.4 Building an E-commerce Presence
10.1 eCommerce & Internet
• eCommerce
– The use of the Internet and the Web to transact
business
• Digitally enabled commercial transactions
• Exchange of values
– First eCommerce
• 1995, Netscape.com accept first Ads
• New medium for advertising and sales
The Growth of E-Commerce
• The “dot-com” bubble
– 2001, burst
• A large number of company failed
• Some results still positive
– Amazon
– eBay
– Google
– eCommerce outlook is positive
• Online consumer sales will still increase in 2008
– Cyber Monday
» Thanksgiving (black Friday, traditional)
• On the average day,
– 140 million send email
– 5 million write blogs
• B2B eCommerce will continue to expand
• 雙 11光棍節
–
–
–
–
淘寶網、天貓網
營業額 55秒就破1億人民幣
總交易額超過 400億人民幣
快遞業務量超過3.23億件
• Why eCommerce is different
– Unique features of the Internet & Web
• Ubiquity
– Traditional commerce
» Marketplace is a physical place
bookstore, classroom
– eCommerce
» Everywhere
beyond traditional boundaries
» any time
remove from temporal
– Customers’ viewpoint
» Reduce transaction cost
no need to spend money and time
to reach market
less mental efforts for purchasing
• Global reach
– Cross cultural and national boundaries
» Conveniently
» Cost effectively
– Potential market size
• Universal standards
– Internet standard
» Shared by all nations
» Regardless of the technology platform
– Lower market entry cost
– Reduce search cost
• Richness
– The complexity and content of a message
» Traditional sale rep
Great richness
personal, face-to-face service
» Web
• Interactivity
– Allow two-way communication
– Similar to face-to-face experience
• Information density
– The total amount and quality of info available
– eCommerce
» Reduce info costs
collection, storage, processing, communication
» Greatly increase quality
currency, accuracy, timeliness
– Customers
» Price transparency
» Cost transparency
– Merchants
» Discover more about customers
segment markets
» Price discrimination
selling the same goods
or almost the same goods
to different group at different prices
• Personalization / customization
– Personalization
» Adjust the message to customers’ interests and past
purchases
– Customization
» Changing the delivered products and services based
on a user’s preference
– Ex: Wall Street Journal
» Customers choose types of news first
»…
– Social technology
• User content generation
• Social networking
– Expanding the number of business & social contacts by
making connections through individuals
– Allow user to create and share contents
» Text
» Video
» Music
» Photo
• Key concepts in eCommerce
– Info asymmetry
• One party of transaction has more info
– Important to transaction
– Help determining bargaining power
– Digital market
• More transparent in info
• Reduced search and transaction cost
• Lower menu price
– Merchant’s cost of changing price
• Lower price discrimination
Ex: Auto sales
– Dynamic pricing
• Price varies on the demand characteristics
– Switching cost
• Increase or reduce
– Immediate gratification
• Can
– Digital music downloaded
• Can not
– Clothes purchased
– Disintermediation
• Removal of organizations and business process layer
• Digital Goods
– Goods that can be delivered over a digital
network
•
•
•
•
•
•
Music
Video
Software
Newspaper
Magazine
eBooks
– Cost structure
• Producing another copy
– Marginal, (zero)
• Producing the original
– Relatively high
– The impact of the Internet
• Music industry
– Loss CD sales, reach more customers
• Books
• Video
10.1 eCommerce and the Internet
10.2 eCommerce: Business & Technology
10.3 mCommerce
10.4 Building an E-commerce presence
10.2 electronic commerce
• Categories
– Classify by the nature of the participant
• Business-to-consumer (B2C)
– Retailing
– amazon.com
• Business-to-business (B2B)
– 企業採購作業 business procurement
– 台塑採購網
• Consumer-to-consumer (C2C)
– eBay
• C2B:揪團
– Classify by participant’s connection
• Wired network: PC
• Mobile commerce (m-Commerce)
– The use of wireless Internet appliance
E-Commerce business models
• Business Model:
– How you planned to make money (product,
service)
• Portal
• E-tailors
• ……
• Portal
– Google, Bing, Yahoo!, MSN, AOL
• Powerful web search tools
• Integrated package of content and services
– Revenue
• Ad placement
• Collect referral fees
• Charge for premium services
• E-tailers
– Online retail stores
•
•
•
•
Convenient
Low cost
24/7
Large selections
– Types
• Bricks-and-clicks: Walmart
• e-tailer: Amazon
• Content provider
– Content: all forms of intellectual property
• Text, music, movie
– Podcasting
• Publish audio and video content from i-store
– Streaming
• Flow a continuous stream of content
• without being stored locally
• Transaction broker
– Process transactions for consumers
• Financial service
• Travel service
• Market creator
– Build digital environments
• eBay
• Priceline.com
• Service provider
– Offer services online
• Online backup and storage
• Google apps
• Gmail
• Community provider
– Create online environment where people with
similar interests can transact
• Facebook, MySpace
E-Commerce revenue models
• Advertising revenue model
– Exposing advertisements to visitors
• Most widely used revenue model
• Yahoo: banner ads
• Google: keywords
• Sales revenue model
– Selling goods, information, or service
– Amazon, iTune
• Subscription revenue model
– Charge a subscription fee for access contents or
services
• Netflix
• Wall Street Journal
• Free/Freemium revenue model
– Offer basic services or content for free
– Charge a premium for advanced or special
feature
• FarmVille on Facebook
• Transaction fee revenue model
– Fee for enabling or executing a transaction
• eBay
• E*Trade
• Affiliate revenue model
– Referral fee
– Percentage of the revenue from any resulting
sales
• Amazon logo on blogs
Social networking
& The wisdom of crowds
• Link people through their mutual business
or personal connection
– Enable to mine their friends & friends’ friend)
• Sales leads
• Job-hunting tips
• New friends
– Social networking sites sell
• Banner, video, and text ads
• User preference info to marketers
• Product
– P&G, MySpace’s fictional character “Miss Irresistable”
– Social shopping
• Swap shopping ideas with friends
– Ideal venues to employ viral marketing techniques
» Fat wallet
– Word-of-mouth marketing
– The wisdom of crowds
• Firm should consult as many customers as possible
– Establish relationships first
• Actively solicit comments
• Understand how products and services are used and
appreciated (or rejected)
– The wisdom of crowds techniques
• Crowdsourcing
– Involve crowd of customers for ideas
– Netflix offer $1 million for ideas to predict what movie
customers like
• Prediction markets
– Peer-to-peer betting markets
» Participants make bets on specific outcomes
» For example, political elections
• E-commerce marketing
– Long tail marketing
• Find potential customers for which demand is very
low
• e.g. independent music
– Behavioral targeting
• Tracking the click-streams to understand their
interests and intentions
– Clickstream tracking
• Collect data on customer activity at website
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– Web personalization
• Modify webpages presented to each customer
– Collaborative filter
» Compare info collected about a specific user’s
behavior
» to data about other customers with similar interests
Ex: www.books.com.tw
買這本書的人，也會購買 …
people bought this book also bought …
Web personalization
• Behavior targeting on advertising network
– Track users across thousands of websites
• Google’s DoubleClick
• Yahoo’s RightMedia
• AOL’s Ad Network
– Target their ads to precisely the groups and
individuals they desire
How an Advertising Network Works
• Social e-commerce & social network
marketing
– Social network (offline)
• Collection of people who voluntarily communicate
with each other, over an extended period of time
– Digital social graph
• Mapping of all significant online social relationship
– Small world theory
• Everyone is only six links away from any other
person on earth
– Product & service you buy will influence the
decision of your friend
• Within social network
– Share interests and values
– Communicate and influence one another
– Fortune 500 companies
• 72% had twitter account
• 66% had facebook account
• 62% had youtube account
• B2B e-commerce:
– New efficiencies & relationship
– EDI
• Electronic data interchange
– Proprietary
• 80% of B2B e-commerce
– Computer-to-computer exchange of transactions
» Invoices, Orders …
» Just-in-time inventory / continuous replenishment
– Internet and web based
• Public network
– Flexible and low cost
• Extranet
– Private intranet extend to authorized users outside the
company
» Fedex.com
– Private industrial network
• B2B extranet
• Collaboration and supply chain management
– Suppliers
– Distributors
– Business partners
• Private exchange
– VWGroupSupply.com
» Volkswagon
– Net marketplace
• Transaction oriented digital market
– Sellers
– Buyers
• Types of net marketplace
– Direct goods
– Indirect goods
– Vertical markets
» 鋼鐵業 Steel
– Horizontal market
» 家具 office furniture
– Industry-owned net marketplace
• Exostar
– Aerospace and defense industry
» Boeing
» Lockheed Martin
» Raytheon …
– Exchanges
• Independently owned third-party net marketplaces
– Foodtrader.com
• Many have failed
– Suppliers reluctant to join
» Encourage competitive bidding
Drive price down
» Did not offer long term relationship
Make lowering price un-worthwhile
» Do not offer delivery timing, customization, and
quality of products
10.1 eCommerce and the Internet
10.2 eCommerce
10.3 mCommerce
10.4 Building an E-commerce presence
10.3 m-Commerce
– Use wireless mobile devices
• Purchasing
• Transmitting message
• Location-based service and application
– Geosocial service
• Tell us where our friends are meeting
– Geoadvertising
• Tell us where is the nearest restaurant
– Geoinformation
• Tell the price of a house we are looking at
• Info about special exhibits at museum you are
passing by
– Wikitude.me
• Use 800,000 points of interest available on
wikipedia
• Display info to your smartphone about what you are
looking at
– Foursquare
• Find your friends by “checking in” to the service
• Other mobile commerce service
– Bank
• Check balance and transfer fund
– Mobile advertising
• Display ads linked to cell phone searches
• Identify cell user within a specified distance and
feed ads message
• Games and Entertainment
– Portable entertainment platform
• Downloadable and streaming
–
–
–
–
–
Digital games (angry bird, candy crush)
Movie
TV shows
Music
……
10.1 eCommerce and the Internet
10.2 eCommerce
10.3 mCommerce
10.4 Building an E-commerce presence
10.4 Building an E-commerce presence
• Building a successful e-commerce presence
– Corporate website, social network site
(Facebook Fan page), Tweeter account,
smartphone app
• Challenges
– Business objectives
– Choose the right technology
• Business objectives, system functionality,
and information requirements
– Business objectives
• Capabilities your site to have
– System functionality
• Types of information capabilities needed to achieve
business objectives
– Information requirements
• The information elements that the system must
produce
• Building the Web site
– In-house vs. Outsourcing
• The building decision
– Pre-built template
• Yahoo merchant solutions, Amazon stores, eBay
• Least costly and simplest solution
• Limited “look and feel” and functionality
– Build your own site
• Adobe Dreamweaver, Microsoft SharePoint
Designer
• Built exactly what you want
• Cost is high
– Complexity of features
» Shopping carts
» Credit card authentication
• Long and difficult learning curve
– Poor design
• The hosting decision
– Outsourcing
• site is “live” or accessible 24 hours a day
– Web server maintenance (hardware & software)
– Telecommunication link
– backup
• Monthly fee
– $4.95 ~ several hundred thousands
» Size, bandwidth, storage, support
• Website Budgets
Interactive session
(Minicase)
– Organization
• Location-Based Marketing and Advertising
• P. 417
– Management
• Social commerce creates new customer relationships
• P.427