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April 19, 2006 Telecom How the Internet Works Telecommunication Markets
Issues Covered
How the Internet Works
IP addresses, TCP/IP, packet switching, and why you should care
Telecom markets
RBOCs, Cable, CLECs, VoIP, and more Crushing monopolies, shifting billions in wealth
Anatomy of a URL
URL
Uniform Resource Locator (web address)
http://www2.bc.edu/~gallaugh/directory/file.html
directory
file
case sensitive
Network Interconnections
dial-in web server www2.bc.edu users (56.6 Kbps) dorm users class/office users
modem pool
dorm LAN
office LAN
wireless
stanford.edu
The Internet
google.com whitehouse.gov
local ISP
TCP/IP
TCP/IP - the Internets common language TCP - Transmission Control Protocol. Breaks up transmissions (e-mail messages, web pages, etc.) into packets of no more than about 1500 characters each, checks the integrity of incoming packets, and reassembles packets on the other end IP - Internet Protocol. Routes packets.
Packet Traffic
Whats in a packet?
source address destination address error checking (checksum) time to live options (timestamp, record route, etc.) your data!
R
packet1 packet2 R packet3 packet2 E-mail message:
Prof. Gallaugher, I just wanted to let you know ...
R packet1
packet3
R
packet2
R
packet2 packet3
= router
packet3
US Internet Infrastructure
The Internet
Private Network VoIP (e.g. corporate VoIP) packets over private network, improved QoS
Private IP Network
Topics Covered
User-Contributed Web
Technologies Examples:
Blogs social networking sites Flickr Digg And more
Topics Covered
E-Commerce & The Five Forces of Industry Competitiveness Operational Effectiveness & Strategic Positioning Resources for Competitive Advantage
Characteristics Examples of key resources The Value Chain
Power of Suppliers
Industry Competitors
Power of Buyers
Value
Does the asset yield value to the firm/customers?
Imperfectly Imitable
Is the asset impossible to imitate?
Non-Substitutable
Is the asset without comparable substitutes?
Source: BandXChange
Value Chain
Infrastructure: general mgmt, planning, finance, IS HRM: recruiting, hiring, training, and development Tech. Development: R&D Procurement Inbound Operations Outbound Marketing logistics logistics & Sales
Service
Topics Covered
Online Advertising Spending/Growth Google
Firm background Revenue streams Weaknesses/challenges w/model Areas for development
Competitors
Yahoo, Microosft, & others Exploitable resources
Newspapers $49.6B
Broadcast TV $46.7B
Radio $21.0B
YP $14.5B
Internet $11.3B
Other $53.0B
Google Growth
Revenue ($ Millions)
$7,000 $6,139M $6,000 $5,000 $4,000 $3,189M $3,000 $2,000 $1,000 $0 2002 2003 2004 2005 $440M $0.45 $0.41 $0 $2 $1,466M $1.46 $1
Revenue EPS (diluted)
EPS (diluted)
$6 $5.02 $5 $4
$3
Licensing
AdSense
The Power of the Tail
Coverage for advertisers beyond search targeting
AdSense network covers nearly every topic imaginable Matches highly targeted advertising with niche content
Source: TNS-MI; 2005 and 2003 US online display advertising, excludes companies with online spend less than $400K in 2003
Straightforward Reporting
Intuitive Targeting
61
Targeted Advertising
Google Code
20%
Enterprise Book Search
Google Reader
Google Suggest
Gmail
Core 70%
Search
AdSense
Google Pack
Orkut
Ads
WiFi
Cookies
stored in a text file on your hard drive usage track users (unique ID) save passwords / prefs. temporary storage (shopping basket) each cookie can only be accessed by the domain that placed it (ads have own domain) may be disabled (prefs) a cookie single user
Targeting
Targeting Options site categorization visitor frequency geography domain name service provider SIC codes company size (emp, $) browser type operating system click stream
Objectives
In this chapter, you will learn about: Finding and evaluating Web hosting services Basic functions of electronic commerce software Advanced functions of electronic commerce software Electronic commerce software for small and midsize businesses Electronic commerce software for midsize to large businesses
Electronic commerce software for large businesses that have an existing information technology infrastructure
Dedicated hosting
Service provider makes a Web server available to a client
Co-location
Service provider rents a physical space to the client to install its own server hardware
CRM
Content Management Software Knowledge Management Software
Catalog Display
Catalog
Listing of goods and services
Static catalog: Simple list written in HTML that appears on a Web page Dynamic catalog: Stores information about items in a database
Shopping Cart
Early shopping carts relied on forms for submitting orders. Problems with forms-based shopping:
Shoppers have to write down product information before going to the order form Customers sometimes forgot whether they had clicked the submit button Confusing and error prone
Transaction Processing
Transaction processing occurs when a shopper proceeds to the virtual checkout counter by clicking a checkout button The server must then perform any necessary calculations
Computing taxes and shipping costs Provisions for coupons, special promotions, and time-sensitive offers
Application server
Computer that takes request messages received by the Web server and runs application programs
Business logic
Rules used in the business
Database manager
Software that stores information in a highly structured way
Web Services
Combination of software tools that let application software in one organization communicate with other applications over a network
Companies are using Web services to offer improved customer service and reduce costs
Offer free or low-cost electronic commerce software for building electronic commerce applications
Valueweb.com Tophosts.com Interland.com
Example CSPs
eBay Stores Bigsteps.com
Data mining
Looking for hidden patterns in data
Intershop Enfinity
Intershop Enfinity MultiSite provides:
Search and catalog capabilities Electronic shopping carts Online credit card transaction processing The ability to connect to existing back-end business systems and databases
Includes:
Catalog templates Setup wizards Advanced catalog tools
Provides many predefined reports for analyzing site activities and product sales data
Enterprise-class software
Typically provides good tools for linking to and supporting supply and purchasing activities
Must also gather data about customer activities on the companys Web site and any other points of contact
Summary
A company must first choose between paying a service provider to host the site and self-hosting External hosting options
Shared hosting, dedicated hosting, and colocation
Summary
Commerce service provider (CSP)
Used by small enterprises just starting an electronic commerce initiative
If a company already has computing equipment and staff in place, purchasing a midrange electronic commerce software package provides more control over a site Large enterprises with high transaction rates need to invest in larger, more customizable systems
CHAPTER 8
E-COMMERCE APPLICATIONS
E-COMMERCE TECHNOLOGIES
Electronic commerce the electronic transmission of buyer/seller transactions and related information between individuals and businesses or between two or more businesses that are trading partners
Page 239
E-COMMERCE TECHNOLOGIES
Will we see continued growth in e-commerce (Internet) applications? Consider Metcalfes Law: The value of a network to each of its members is proportional to the number of other users, expressed as (n2 n) / 2
There are increasing returns to be gained as more organizations and people use the Web
Page 240
E-COMMERCE TECHNOLOGIES
Commercial History of the Internet
Page 241
Improvements for online sales or auction bidding New channels for customer service Collection of clickstream metrics and personal data from Web site users Acceptance of Web cookies stored on users hard drive to enable customization of Web sites Web browser improvements with multimedia
Page 240
Page 242
EDI Constraints:
Page 242-243
Page 242-243
Page 243
Use of a firewall devices that sit between the Internet and an organizations internal network to block intrusions from unauthorized users and hackers
How to ensure that security of a given communication is not violated?
Encryption based on two decoding keys and mathematical principles for factoring a product into its two prime numbers, where one key codes a message and the other decodes it
Page 243-244
(Adapted from Applegate, Holsapple, et al. 1996; Kalakota and Whinston, 1996)
Page 244
Page 244-246
1. Supplier power
2. Customer power 3. Threat of new entrants
Page 246
Page 246
Internet transforms corporate purchasing from a labor-and paperwork-intensive process into a self-service application
Intermediaries
Content providers companies that use the Internet to distribute copyrighted content, including news, music, games, books, movies, and many other types of information Online brokers intermediaries between buyers and sellers of goods and services Market makers intermediaries that aggregate three services for market participants A place to trade Rules to govern trading An infrastructure to support trading
Types of Intermediaries
E-BUSINESS MODELS
B2C Applications
Page 249
B2B Applications If Buyers and Sellers are Fragmented, Independent Intermediaries are likely to be successful. If Sellers are Concentrated, Sellers are likely to dominate.
Page 250
E-BUSINESS MODELS
Atomic Business Models
E-BUSINESS MODELS
Atomic Business Models
Page 251
E-BUSINESS MODELS
Atomic Business Models
Page 251
DIRECT-TO-CUSTOMER EXAMPLES
Amazon.com
Dot-com pioneer in online retailing of thirdparty products Began as bookseller competitor Now a multi-store, online mall First profitable year 2003 Provides excellent online shopping experiences for millions of customers
Page 252
Page 253
DIRECT-TO-CUSTOMER EXAMPLES
Dell.com
Traditional direct seller and market leader of made-to-order microcomputers Developed custom software to support mass customization strategy Took advantage of early penetration of Internet market
Page 254
Page 254
DIRECT-TO-CUSTOMER EXAMPLES
Landsend.com
Traditional catalog company that developed capability to give online tools to customers so they could make orders for new custom clothing via its Web site
Page 255
Page 256
DIRECT-TO-CUSTOMER EXAMPLES
Successful Online Models
All developed B2C Web sites that use advanced technologies to support customized interactions with customers
Page 256
DIRECT-TO-CUSTOMER EXAMPLES
Successful Online Models
Page 257
INTERMEDIARY EXAMPLES
Page 257
INTERMEDIARY EXAMPLES
eBay
A dot-com pioneer in electronic auctions One of first to achieve profitability Now is a C2C, B2B, and B2C intermediary
Page 258
These materials have been reproduced with the permission of eBay, Inc. Copyright eBay, Inc. All rights reserved.
Page 259
INTERMEDIARY EXAMPLES
Yahoo!
Early dot-com intermediary Has recently leveraged IT innovations and business acquisitions to become a leading portal As a portal, site owns only the customer relationship Primary source of revenue is advertisements Through acquisition, now offers online job searches
Page 259-260
(Reproduced with permission of Yahoo! Inc. Copyright 2004 by Yahoo! Inc. YAHOO! And the YAHOO! Logo are trademarks of Yahoo! Inc.)
Page 260
INTERMEDIARY EXAMPLES
Manheim
Traditional B2B intermediary for sale of used cars Has leveraged the Internet to reduce purchasing and sales costs Provides remote, real-time bidding during physical auctions
Page 260-261
Page 261
Types of Intermediaries
Page 262
Page 262
E-commerce is a new way of conducting business, and as with any other new application of technology, it presents both opportunities for improvement and potential problems
Identify several advantages of e-commerce Outline a multistage model that describes how ecommerce works Identify some of the major challenges that
E-commerce requires the careful planning and integration of a number of technology infrastructure components
Outline the key components of technology infrastructure that must be in place for ecommerce to succeed
Identify the major issues that represent significant threats to the continued growth of e-commerce
Consumer-to-consumer (C2C) e-
E-Commerce Challenges
Define an effective e-commerce model and strategy Need to change distribution systems and work processes Integrate Web-based order processing with traditional systems
Figure 8.4: Web-Based Order Processing Must Be Linked to Traditional Back-End Systems
Supply planning
Demand fulfillment
Disintermediation: elimination of intermediate organizations between the producer and the consumer
Growth of C2C is responsible for reducing the use of the classified pages of newspapers to advertise and sell personal items
Global E-Commerce
Localization: adapting an existing U.S.centric Web site to another language and culture Steps involved in localization
Recognizing and conforming to the nuances, subtleties, and tastes of local cultures Supporting basic trade laws such as those covering each countrys currency, payment preferences, taxes, and tariffs
Mobile Commerce
Mobile commerce (m-commerce) relies on the use of wireless devices, such as personal digital assistants, cell phones, and smart phones, to place orders and conduct business Issues confronting m-commerce
User-friendliness of the wireless device
Network speed
Manufacturing
To raise profitability and improve customer service, many manufacturers move their supply chain operations onto the Internet Electronic exchange: an electronic forum where manufacturers, suppliers, and competitors buy and sell goods, trade market information, and run backoffice operations
Marketing
Market segmentation: the identification of specific markets to target them with advertising messages Technology-enabled relationship management: use of detailed information about a customers behavior, preferences, needs, and buying patterns to set prices, negotiate terms, tailor promotions, add product
Hardware
Storage capacity and computing power required of the Web server depends on:
Software that will run on the server
Website hosting
E-Commerce Software
Catalog management
Product configuration
Certificate authority (CA): a trusted third party that issues digital certificates Secure Sockets Layer (SSL): a communications protocol used to secure sensitive data
Credit card
Charge card Debit card
Threats to E-Commerce
E- and m-commerce incidents Theft of intellectual property
Intellectual property: music, books, inventions, paintings, and other special items protected by patents, copyrights, or trademarks Patents on business processes
Fraud
Phishing: bogus messages purportedly from a legitimate institution to pry personal information from customers by convincing them to go to a spoof Web site Online auction fraud Spam: e-mail sent to a wide range of people and Usenet groups
Fraud (continued)
Pyramid schemes Investment fraud Stock scams
Summary
In business-to-consumer (B2C) ecommerce, customers deal directly with the organization In business-to-business (B2B) ecommerce, the participants are organizations
Summary (continued)
Supply chain management is a key value chain composed of demand planning, supply planning, and demand fulfillment Mobile commerce (m-commerce) uses wireless devices to place orders and conduct business Electronic retailing (e-tailing) is the direct sale from business to consumer through electronic storefronts
Summary (continued)
Threats to e-commerce include e- and m-commerce incidents, theft of intellectual property, fraud, and invasion of consumer privacy Strategies for successful e-commerce
Developing an effective Web presence Putting up a Web site Building traffic to your Web site
Objectives
Define e-commerce and understand its role as a transaction processing system List the three types of e-commerce, and explain how e-commerce supports the stages of the buying process and methods of marketing and selling Discuss several examples of ecommerce applications and services
207
Objectives
Define m-commerce, and describe several m-commerce services List the components of an e-commerce system, and explain how they function together to provide e-commerce services
208
Chapter Content
The Roots of E-Commerce Overview of Electronic Commerce E-Commerce Applications Mobile Commerce E-Commerce Implementation
209
Electronic Commerce
Electronic commerce (e-commerce)
Systems that support electronically executed business transactions The fundamental purpose of e-commerce is to execute transactions
210
Electronic Commerce
Electronic commerce (e-commerce)
211
Electronic Commerce
212
E-Commerce History
EDI
Uses private communications networks (VANs) to transmit standardized transaction data between business partners and suppliers
Internet
213
E-Commerce History
214
Transaction Processing
Transaction
An exchange involving goods or services
Batch processing
Transactions are collected over time and processed together in batches useful in situations where transactions take place away from the computer system
Data editing
Checking the validity of data entered
Data correction
Implemented if an error is found in the entered data
216
Data storage
Altering databases to reflect the transaction
Data output
Receipts, picking lists, and other documents
217
218
Purchasing system
Supports the purchase of goods and raw materials from suppliers
219
220
Types of E-Commerce
Business-to-consumer e-commerce (B2C)
Connects individual consumers with sellers , cutting out the middleman E.g. Amazon.com
Types of E-Commerce
222
224
225
227
Challenges
Established businesses must alter systems and business practices Security, privacy, reliability: E-commerce can survive only if all involved can trust the system Social concerns
228
229
E-Commerce Applications
E-Commerce
Playing an increasingly important role in our personal and professional lives Allows us to discover new and interesting products Allows us to find better deals Used to monitor bank accounts and transfer electronic funds
230
E-tailing options
Set up an electronic storefront Lease space in a cybermall
Web site that allows users to browse through a wide variety of products offered by several different retailers
231
232
eBay.com
Most popular auction/marketplace
233
Electronic exchange
an industry-specific Web resource created to provide a convenient centralized platform for B2B e-commerce among manufacturers, suppliers, and customers Promotes cooperation between competing companies
234
Marketing
Web is used for
Unsolicited advertising
Banner: A rectangular area embedded in the Web page content for advertising, often across the top of the page
Market research
Traditionally done by interviewing customers Market segmentation divides customer opinions based on various criteria E-commerce allows market segmentation to take place on an individual level
235
Marketing
236
Online brokerages
Able to execute trades fast, within seconds
237
Mobile Commerce
M-Commerce Technology
Technologies and standards
Wireless Application Protocol (WAP)
a communication standard used by developers to create m-commerce applications
240
Using Short Message Service (SMS) text messaging or Multimedia Messaging Service (MMS) Using short-range wireless technology, such as infrared
Proximity payment system
241
242
E-Commerce Implementation
Implementing e-commerce
Requires large investment and expertise
E-Commerce host
A company that takes on some or all of the responsibility of setting up and maintaining an e-commerce system for a business or organization
243
Infrastructure
E-Commerce requires significant infrastructure changes Businesses must have employees who are technically savvy B2C e-commerce
Often connects manufacturers directly with consumers, cutting out the middleman Requires shipping individual products directly to consumers
244
Infrastructure
245
246
Software
Web Server Software
Responds to requests for Web pages
E-Commerce Software
Supports e-commerce activities Includes catalog management, electronic shopping cart, and payment software
247
Software
Web Site Design Tools
What-you-see-is-what-you-get (WYSIWYG) applications or wizards
Graphics Applications
Design and create graphic elements of Web sites
Software
Web services
Programs that automate tasks by communicating with each other over the Web Systems developers can provide tools for automating trivial or repetitive tasks Important in transaction processing
249
Building Traffic
The 3Cs Approach
Content, community, and commerce
Building Traffic
Marketing
Online advertising methods include banner ads, pop-up ads, and e-mail
market segmentation: customer opinions are divided into demographic variables such as race, gender, income, education, and age to determine which segment a product appeals to most
Offline advertising methods include magazines, newspapers, radio, and
251
Building Traffic
252
E-cash benefits
Privacy - hides account information from vendors Convenient if seller cannot process a credit card
Smartcards
Credit cards with embedded microchips that can store
and process data and can be used as electronic wallets
253
254
255
International Markets
Internet users of all nationalities will have access to your products First consideration of a global e-commerce strategy
Visitors of all nationalities and cultures should feel comfortable while viewing your Web content
Costly approach
Create multiple versions of your Web site, each in a different language
Once the international market is won over, etailer faces other challenges
256
257
260
Summary
E-Commerce
Systems that support electronically executed transactions
Summary
Retail Web sites
Allow consumers to comparison shop
Mobile commerce
A form of e-commerce that takes place over wireless mobile devices
E-Commerce
Requires investment in networking, hardware, and a wide variety of software
Requires changes in infrastructure
263
Issues Covered
Amazons strategy
competitive advantage
Inventory efficiencies
turns & float
Challenges
Amazons Strategy
Turnover
16 times / year avg. book in house 22 days avg. 28 days of float / title
Inventory
shelf & warehouse stock 30% returns
Inventory
all warehouse stock few returns
53 Supplier Paid
Inventory Turns for Full Product Line, 2004 Amazon = 16 B&N = 3, Home Depot = 5, Best Buy = 5, Wal-Mart = 7
Marketplace
3rd party inventory, AMZN product detail pages
Issues Covered
Channel Pressure
Power & partners, pressure & innovation limits
New Intermediaries
examples, impact, threats, market creation
Auction Models
markets of first choice and last resort
Channel Conflict
Internet Retailers customer
supplier
Distributors
customer
customer
customer
We recognize that a vendor has the right to sell through whatever distribution channels it desires. However, we too have the right to be selective in regard to the vendors we select and we trust that you can understand that a company may be hesitant to do business with its competitors.
buyers
sellers
members
Search for opportunities to add value: e.g. high customer search costs, switching costs, low customer satisfaction Wield new power by consolidating traditional buyers & customers. Become the first-line interface with consumers.
Auction Formats
Liquidation Auctions: (e.g. Priceline)
Seek first to maximize existing channels & reduce inventory Seek lowest price on widely available goods and services suppliers customers
auction
suppliers
auction
customers
IPO Inefficiencies
pays a 7% fee $27/share $45/share
Company JetBlue PayPal NetScreen Technologies Magma Design Automation Global Power Equipment Simplex Solutions Transmeta CoSine Active Power StorageNetworks VA Linux Red Hat mp3.com Efficient Networks Tibco Software China.com CommTouch eToys iVillage AutoWeb Auto-by-Tel Prodigy VerticalNet Healtheon Pacific Internet Theglobe.com
Date 4/12/2002 2/15/2002 12/11/2001 11/19/2001 5/17/2001 5/1/2001 11/7/2000 9/26/2000 8/8/2020 6/30/2000 12/9/1999 8/11/1999 7/20/1999 7/15/1999 7/14/1999 7/13/1999 7/13/1999 5/19/1999 3/18/1999 3/23/1999 3/24/1999 2/11/1999 2/11/1999 2/11/1999 2/5/1999 11/13/1998
Shares Underwritt en 5,500,000 5,400,000 10,000,000 4,850,000 7,350,000 4,000,000 13,000,000 10,000,000 8,000,000 9,000,000 4,400,000 6,000,000 12,300,000 4,000,000 7,300,000 4,200,000 3,000,000 8,300,000 3,500,000 5,000,000 3,500,000 8,000,000 3,500,000 5,000,000 3,000,000 3,100,000
Underwritin g Share Price $27 $13 $16 $13 $20 $12 $21 $23 $17 $27 $30 $14 $28 $15 $15 $20 $16 $20 $24 $14 $23 $15 $16 $8 $17 $9
First Day Close Share Price $45 $20 $24 $19 $31 $21 $45 $63 $53 $90 239 1/4 $52 $63 $53 $40 $67 $24 $77 $56 $28 $40 $28 $45 $31 $48 $64
Difference $ 99,000,000 $ 37,854,000 $ 77,200,000 $ 29,051,500 $ 84,157,500 $ 36,800,000 $ 315,250,000 $ 400,600,000 $ 286,000,000 $ 569,250,000 $ 920,700,000 $ 228,375,000 $ 434,343,750 $ 152,000,000 $ 182,500,000 $ 197,862,000 $ 24,000,000 $ 473,100,000 $ 112,000,000 $ 71,250,000 $ 60,375,000 $ 105,040,000 $ 102,830,000 $ 116,900,000 $ 93,000,000 $ 168,950,000
Percent Undervalu ed 67% 54% 48% 46% 57% 77% 115% 174% 210% 234% 698% 272% 126% 253% 167% 236% 50% 285% 133% 102% 75% 88% 184% 292% 182% 606%
Topics Covered
Collapsing Channels
Failures & successes the role of value gaps
Disintermediation
Price
Unit Sales
Producer
W holesaler
Producer
W holesaler
Retailer
Consumer
$41.34
28%
Producer
W holesaler
Retailer
Consumer
$20.45
62%
Value Gaps
Value Added = A, Expense = X
source firm distributor
Expense Savings = (X+Y) - Cost of New Effort Value Gap = (A+B) - Value Added by New Effort
Source: Wired
Source: Video Rental Developments & the Supply Chain: Netflix Inc., WUSTL.EDU case http://www.olin.wustl.edu/workingpapers/pdf/2004-03-225.pdf
Topics Covered
A first look at online businesses
FreshDirect how is this pure play business different from more traditional rivals?
Value proposition Dealings with suppliers Operations differences Customer acquisition issues
Incumbent
Issues Covered
Single Channel Case Study
ING Direct
A bad customers might Call customer service too often Ask for paper copies of statements Demand special treatment b/c they have high account balances
Banker in store retrieves all saved application data and can Complete the application.
E-Commerce:
Fundamentals and Applications
Chapter 1 : Introduction
Outline
Electronic commerce and physical commerce The DIGITAL phenomenon Looking at e-commerce from different perspectives Different types of e-commerce Examples of the types of e-commerce Some e-commerce scenarios Effect of e-commerce Advantages of e-commerce Myths about e-commerce development and implementation System model of this book
Types of Commerce
Commerce Electronic Commerce Physical or Traditional Commerce
Internet Commerce
Digital Phenomenon
What do you think? Data networks the drivers of e-commerce? What are
Intense competition Globalization Information age Technologies Automation Low cost high quality products/services
DIGITAL
Customer (individual)
Examples
B2C: www.amazon.com C2C: www.eBay.com B2B: www.tpn.com C2B: www.priceline.com
Lets visit these web sites in turn and discuss its features.
E-commerce scenarios
Retailing Servicing Publishing Supply chain management
Discussion
How should different departments participate in an e-commerce project?
Management Marketing Production Finance Procurement Customer support
Client side
Service system
Backend system
Backend system
Web Server
Application Server
Internet
Database
Firewall
Intranet (Secure)
Client side
Server side
CS 155b: E-commerce
Lecture 17: April 12, 2001 Introduction to B2C E-Commerce
(Acknowledgement: Helen Chiang)
E-Commerce Definitions
Electronic commerce is a set of technologies, applications, and business processes that link business, consumers, and communities
For buying, selling, and delivering products and services For integrating and optimizing processes within and between participant entities
What is B2C?
B2C Commerce: Interactions relating to the purchase and sale of goods and services between a business and consumerretail transactions. Novelty is that retail transaction is done on the Internet, rather than a brick and mortar store location. Technical evolution of B2C from brick and mortar model not new.
Revenue Models
Sell goods and services and take a cut (just like B&M retailers). (e.g., Amazon, E*Trade, Dell) Advertising
Ads only (original Yahoo) Ads in combination with other sources
Transaction fees Sell digital content through subscription. (e.g., WSJ online, Economist Intelligence Wire)
Billions of Dollars
4th Q 1999 1st Q 2000 2nd Q 2000 3rd Q 2000 4th Q 2000
Source: eMarketer
16-25
11-15
6-10
1-5
Online buyers in the U.S. spent, on average, $898 last year shopping online. Worldwide: Median online expenditure total was $460.
$4,001+ 9% $1-200 32% $2,001-$4,000 10% $1,001-$2,000 13% $201-$500 20% $501-$1,000 16%
$4,001+ $2,001-$4,000 $1,001-$2,000 $501-$1,000 $201-$500 $1-200
s ic ng r" er ts nt ys ks ns oo oduc mus lothi vatio To sume inme ty aid Oth B pr C ser ed rta eau on ted ecord ll "c ente nd b a r s/re l a a ed -re , ket sm ter CD Tic ts, s, film health c pu , du o om pro Vide nces dc n ic a n gr rs a tro , fra lec ute E tics mp me Co s Co
First-Generation B2C
Main Attraction: Lower Retail Prices B2C Pure Plays could eliminate intermediaries, storefront costs, some distribution costs, etc. Archetype: www.amazon.com
In 1999, multi-channel retailers (i.e., B&Ms or traditional catalog companies that also sell online) made up 62% of B2C e-commerce. Mostly high-margin sales, e.g., computers, tickets, and financial service. Projected to reach 85% in next 5 years. (Source: Boston Consulting Group)