Marketing and Eletronic Commerce

1. Retail vs. Wholesale Transactions
2. Retail vs. Promotion
3. In-store vs. Non-Store Retailing
4. Issues in Designing an Effective Retail Site
   1. Trust
   2. Ease of Purchase
   3. Incentive to Purchase Now
5. Applications of WWW for Transactions
   1. Changing the Limiting Factors for Retailing Reach
   2. Bringing Buyers and Sellers Together
   3. Disintermediation
   4. Business to Business Transactions

Popular non-store retailing methods include TV shopping (need to find out) and mail order retailing ($75 billion in 1996). While both these media have developed a significant portion of the non-store retailing dollar sales they have fundamental flaws when compared with WWW (approx. $500 million, 1996).

Using WWW as the non-store retailing medium a company may offer the consumer two options, to close the sale online, through the medium, or to close the sale offline, perhaps through a 1-800 number or a fax (currently 2/3rds of WWW transactions are completed outside the medium). The second option is similarly to a catalog or TV shopping purchase. The first option highlights a key advantage of WWW as a non-store retailing medium. The customer can interact with the medium and make the purchase requests directly with the medium . Other advantages of using WWW as a retailing medium compared with other retail environments include:

• Consumers have control over accessing information when they want. A web-site is available 24 hours a day, 365 days a year (advantage over all other retail environments).
• It is very cost effective (inexpensive) to establish and maintain a retail site (advantage over all other retail environments).
• WWW offers an immediate, global, presence (advantage over all other retail environments).
• Consumers can query for extensive product information, enough to close the sale (advantage over TV and catalog shopping)

1. Trust
2. Ease of purchase
3. Reason to purchase now

Companies with strong brand names are able to gain consumers' trust. The brand name creates familiarity with the organization and hence reduces the reliance on online information to educate the consumer about the product/organization. Smaller companies must take additional steps to develop consumers' trust online. This can be achieved by offering:

1. extensive product warranties, moving the risk of purchase from the consumer back to the retailer.
2. significant discounts to first time consumers (free shipping etc.), the first transaction then creates the confidence the consumer initially lacks. Once satisfied the customer is more likely to return.
3. detailed information on the company including history, philosophy and executive biographies with pictures. A seal of approval from a WWW business that authenticates WWW retailers, eTRUST for example.

One possible solution to security concerns is to ask the customer to set up an account offline, one time. This allows the retailer to obtain all the sensitive information. The customer can then purchase products online without sending a credit card number along with the purchase. The First Virtual Payment System is an independent third party that performs the above for both retailers and customers. Once a customer has registered with First Virtual, s/he can make online purchases with any retailer which has also registered with First Virtual, using a unique PIN number.

A number of companies are developing (have developed) secure payment systems online. These systems use encryption technology to keep sensitive information secure. Companies that are poineering this field include:

• CyberCash
• DigiCash
• W3C and CommerceNet

Ease of purchase
It is very important that the online retailer makes the purchase as simple as possible. Since this is a new retailing environment customers need to adopt new buying behaviors. The online retail store should allow a customer to:

• easily navigate the store. This can be achieved from excellent design as well as online sales promotions that encourage the browser to navigate the entire store (product line).
• understand "how" to make a purchase. This includes giving the consumer the option to purchase online and offline (include 1-800 numbers etc.). There must be clear directions as to how to purchase online. The retailer should promote online purchasing as much as possible because many customers will have to leave the online retail store to make an offline purchase since they will be dialing in via their only telephone line. By asking the consumer to leave the store before making the purchase, you are increasing the likelihood of the consumer not closing the transaction.
• track the purchases s/he is making as s/he is browsing the retail store. This can be done by using "shopping cart" software. This should allow a customer, at anytime, to review his/her purchases as s/he is shopping. The customer should be allowed to delete products from the cart at anytime (and be told explicitly that s/he can do this so that the customer is willing to add products to the cart). The customer should also be allowed to exit the store and check out the cart when s/he wishes.
• include contact order information on each page to facilitate offline sales.
• include an option to download the catalog and browse it offline. This is very important when considering that many potential customers pay for the time they spend online. They would be more likely to consider purchasing from the online store if they had a copy of the catalog that they could view, at their leisure, offline.

1. reduced Product Cost
2. Availability of Product

Cost savings occur through the following areas:

• Printing costs
• Inventory costs
• Transactional costs

If WWW is the only source (or at least significantly more accessable than other sources) for purchasing the product then this will give the target audience incentive to purchase. via WWW.

1. Changing the Limiting Factors for Retailing Reach
2. Bringing Buyers and Sellers Together
3. Disintermediation
4. Business to Business (Wholesale) Applications

Culinary Software is a good example of an existing niche marketer benefiting from a global audience. 15% of its revenue now comes via its web-site. All business derived from its web-site is new business, and 15% of it is from overseas. The site has only been open since September, 1996, so growth in business from WWW can be expected.

Large retailers are also able to take advantage of WWW as a global retailing presence, to complement other retailing efforts. L.L. Bean and Land's End and two good examples. Success for these retailing efforts should be measured in two ways. The revenue generated from the sites, as well as the cross-promotion the sites create, increasing the revenue from traditional sources.

Bringing Buyers and Sellers Together
WWW allows for the gathering of buyers and sellers on a scale that no other medium, or in store retail environment, can facilitate. The following examples illustrate the ability of WWW for achieving this. You will note that each example is of a virtual company that has no off-line presence.

1. Provenance
   Provenance is an example of using WWW to bring buyers and sellers together in a way that no other medium can facilitate. Provenance is an online art gallery. The goal of Provenance is to fill the online gallery with digital images of 5,000 works by artists worldwide. Customers can search the site by entering price ranges, size, medium, and school of art and can see the results of the search immediately. This gives customers choice in one store that they have never had available before, a choice that is not overwhelming due to the effective site design and search capabilities. Each artist (many very small) is exposed to a target audience they have never had before, truly bring buyers and seller together in a powerful fashion.

2. Amazon.com
   Amazon.com is another excellent illustration of bringing buyers and sellers together in a unique fashion. It is a comprehensive bookstore with over a million titles. Amazon.com does not actually stock the books but will order them from the publisher once an order has been requested. Amazon.com's various services include book reviews, fostering communication among its users with chat rooms (developing a sense of community), offering discounts of 10-30% on over 300,000 books, and Emailing users when a new title is available that may be appropriate for that user. The cost to "stock" a book virtually is much less significant than in a traditional store, thus books that are usually out of stock may be available through Amazon.com. Much like the Provenance example above (bringing artist and art affecianados together in great numbers), Amazon.com brings book publishers and readers together to facilitate mutually benefical transactions.

3. CD Now
   CD Now facilitates online retailing for CDs much like Amazon.com does for books. CD Now boasts 165,000 shoppers per month who can purchase CDs, browse through the 12,000 biographies of recording artists or take advantage of many other WWW enabled services.
4. Internet Liquidators
   Internet Liquidators allows WWW shoppers to bid against other shoppers for a wide range of products. Shoppers can participate in real-time dutch auctions. A dutch auction is a little different from the traditional bidding-up style auction. A dutch auction steadily reduces the price until all the stock, for the product, has been taken. Thus the later you bid, the cheaper the product, but you increase the risk the product has already been purchased. Shopper can see current auction status as information changes. The site continuously shows the current price of the item, the number of items remaining and the time left. WWW has truly broadened the target audience of the auction and creates a significant market place for many items.

1. Quick Quote
   Traditionally when you consider life insurance or other similar products you would deal with a salesman that specializes in this area. That person would advise you on appropriate actions and would be compensated by commission based on the value of your investment. Now you can use Quick Quote, which includes a database of products, nationwide. Customers can now order policies online avoiding the need to use an intermediary (salesperson). This is a real time saver for those who cannot arrange to meet with a sales person, and the reach of the search insures that the results are very competitive.
2. Microsoft Expedia Travel Services
   Microsoft Expedia Travel Services is an excellent example, from the travel industry, of being able to use WWW to avoid an intermediary (traditional travel agents). At this site, a travel customer can reserve hotel rooms, rent a car and purchase airline tickets. Users can receive Email of low cost flights to favorite destinations, links to weather sites, a currency converter and forums for sharing travel tips among other travellers. This is a richer service than a customer would usually expect from their regular travel agent.
3. E*Trade
   E*Trade is a good illustation of how personal investing is very suitable for WWW, and can replace the need for your traditional stockbroker. Investors can access a wealth of information on individual stocks. You can look at basic company information, charts showing a stock's performance history, up-to-minute stock quotes and earnings estimates. E*Trade also has an excellent new feature that will give breaking news of a company that the customer queries. The cost per trade is very competitive, at $14.95 and a receipt is sent to the customer the instant a transaction has been made. All the remaining resources are free.

1. Dell Computer Corp.
   The majority of sales for Dell Computer Corp. are to businesses. They are a direct marketer who began in 1984 using mail order to market their computers. Dell reports that it does $1 million in sales a day from its web-site, and this is increasing at a rate of 20 percent a month. Dell tailors web pages to individual corporate customers for online ordering and is implementing new features like a digital order confirmation that is sent to customers within five minutes of placing an order. According to Michael Dell "The Internet is the ultimate direct sales model." Dell's aggressive use of the web compliments its internal processes that create very efficient customer order turnaround. An order placed at 9:00 AM one morning is on a delivery truck by 9:00 PM the following evening.
2. Industry.net
   Industry.net is an excellent example of innovative use of WWW in business-to-business commerce. Companies can post their supply requirements such that anyone can now bid on them. This is a reversal to the more conventional purchasing model where companies may request bids of a few suppliers.
3. GE Trading Process Network
   This site was established in 1994 so that vendors could quickly make bids on GE electronics component contracts. GE is able to get more companies competing for business by offering the opportunity for vendors to bid and suppliers incur lower selling costs. GE has opened up the site to all businesses as a place to conduct business-to-business commerce. Buyers can browse an electronic catalog of goods and services, generate electronic purchase orders and pay for their purchases on-line (or off-line for small companies who are not equipped to receive electronic funds.)
4. Manheim Online
   Manheim Online brings WWW to the supply chain for used automobiles. This includes a network of auto makers, banks, leasing companies, rental companies and users of fleet vehicles. Used car dealers can now browse through vast inventories of used cars nationwide and order the cars online. This really brings together the buyers and sellers of used cars together in such a way for the first time.