E-commerce and Digital

Marketing
IT0041
 Module 3

Retailing In Electronic Commerce

Products And Services
LEARNING OBJECTIVES: Upon completion of this module,
you will be able to:
• Describe the B2B field, major types of B2B models
• Discuss sell-side intermediaries, characteristics of the buy-side marketplace and
• Describe e-procurement, B2B aggregation and
• Discuss group purchasing models, B2B portals, third-party exchanges
• Discuss how B2B can benefit from social networking and web 2.0.
• Discuss other b2c services: from dating services to wedding planning
• Describe online purchasing-decision aids
• Discuss the new face of retail competition: retailers versus e-tailers
• Discuss issues in e-tailing and lessons learned
Internet Marketing And B2C Electronic Retailing

• The amount and percentage of goods and services sold on the Internet is increasing rapidly, despite
the failure of many dot-com companies.

• Internet users shop online and conduct research online about a product before purchasing the item,
whether online or in a physical store.
Electronic Retailing

• A retailer is a sales intermediary between manufacturers and customers. Even though many
manufacturers sell directly to consumers, they usually do so to supplement their major sales through
wholesalers and retailers.

• In the physical world, retailing is done in stores (or factory outlets) that customers must visit physically
in order to make a purchase, although sometimes customers may order by phone.

• Retailing conducted over the Internet is called electronic retailing (e-tailing) , and sellers who conduct
retail business online are called e-tailers .
• B2C e-commerce is growing rapidly, especially in developing countries (e.g., China, Russia, Brazil and India).

• Internet users shop online and conduct research online about a product before purchasing the item, whether online
or in a physical store.

• Despite the inconsistency of the data, it is clear that B2C is growing each year. This is due both to more shoppers and
to more money spent online.

• The first-generation of B2C e-commerce sold books, software, and music – simple to understand small items (known
as commodity items) that were easily shipped to consumers. The second wave of online growth started in 2000, as
consumers started researching and buying complex products such as furniture, large appliances, and expensive
clothing.

• Today consumers research product information and purchase online from categories such as bedding, spas,
expensive jewelry, designer clothes, appliances, cars, flooring, big-screen TVs, and building supplies.
Goods with the following characteristics are expected to sell the
most:

• Brand name recognition (e.g., Apple, Dell, Sony). A service

guarantee provided by well known vendors.(For example, return
policies and expedited delivery; free shipping.
• Digitized format (e.g., software, music, e-books, or videos).
• Relatively inexpensive items (e.g., office supplies, vitamins).
• Frequently purchased items (e.g., books, cosmetics, office
supplies, prescription drugs).
• Commodities for which physical inspection is not necessary
(e.g., books, CDs, airline tickets).
• Well-known packaged items that you normally do not open in
a physical store (e.g., canned or sealed foods, chocolates,
vitamins).
 • Enable small companies to compete with larger
companies.
Advantages of E-Tailing • Better understand customers and interact with
them.
• Sell specialized items country-wide, or even
E-tailing provides advantages both to sellers and buyers. worldwide
• Engage customers in interesting search,
• Lower product cost, thus increasing competitive advantage.
comparison, and discussion activities.
• Reach more customers, many outside the vendor’s region,
• Contact customers who are not reachable by
including going global. For example, some Chinese and
traditional methods of communication.
Taiwanese e-tailers operate sites that sell electronic products
• Pay less than in traditional or even discount
all over the world.
stores.
• Change prices and catalogs quickly, including the visual
presentation. Such flexibility increases competitive advantage. • Find products/services not available in local
• Lower supply chain costs stores.
• Provide customers with a wealth of information online as a • Shop globally: compare prices and services.
self-service option, thus saving customer service costs. • Shop anytime and from anywhere.
• React quickly to customer needs, complaints, tastes, and so • Find it unnecessary to go to the store wasting
forth. time and gasoline, and being pressured by
• Provide customization of products and services, self salespeople.
configuration, and personalization of customer care. • Create their own designs and products.
• Find collectors’ items.
• Buy in groups: buy with friends and engage in
social shopping.
E-tailing business models can be classified in five
categories:

1. Traditional mail-order retailers that also sell online.

2. Direct marketing by manufacturers.

3. Pure-play e-tailers.

4. Click-and-mortar (“brick-and-click”) retailers.

5. Internet (online) malls.

6. Flash sales.

The idea of selling both online and offline is part

of a model or strategy known as a multichannel
business model .
A business model , as defined is a description of how an organization intends to generate revenue through its
business operations. Various B2C models are:

 Direct Marketing by Mail-Order Companies - direct marketing describes marketing that takes place without
physical stores.

 Direct Sales by Manufacturers and Make-to-Order - describes the process by which customers can configure and
 order online from manufacturers.

 Virtual (Pure-Play) E-Tailers - are companies with direct online sales that do not need physical stores.

 Click-and-Mortar Retailers and Multichanneling - This is probably the most commonly used model of e-tailing
competing with pure play e-tailers.

• A click-and-mortar retailer is a combination of both the traditional retailer and a webstore.

• A brick-and-mortar retailer conducts business exclusively in the physical world. In some cases, sellers also might
operate a traditional mail-order business.
 Retailing in Online Malls
There are two types of online malls: referring directories and malls with shared shopping services.

• Referring Directories This type of virtual mall contains a directory organized by product type. Banner ads at the
mall site advertise the products or vendors. When users click on the product and/or a specific store, they are
transferred to the webstore of the seller, where they can complete the transaction.

• Malls with Shared Services In online malls with shared services, a consumer can find a product, order and pay for
it, and arrange for shipment. The hosting mall provides these services.
 Other B2C Models and Special Retailing

B2C Social Shopping

 Flash Deals (Deals of the Day) These are sales in which companies offer heavily discounted products to
consumers for a limited time
 Online Group Buying In these depressed economic times, more people are using the Internet as a smart
way to save money.
 Event shopping is the B2C model in which sales are designed to meet the needs of special events.
 Online private shopping club , like an offline shopping club (e.g., Costco), enables members to shop at a
discount, frequently for short periods of time (just few hours or days).
 Group Gifting Online In many cases, a group of friends can collaborate on gifts for events such as a wedding.
 Location-Based E-Commerce (l-commerce) is a wireless-based technology used by vendors to send
advertisements relevant to the location where customers are at a given time by using GPS.
 Shopping in Virtual Worlds B2C in virtual worlds is also available. The objective is to foster user interaction
with one another and the products in the virtual world, hopefully leading to purchases in the real world.
• Online services are provided by many travel vendors.
• Online travel services generate income from commissions,
advertising fees, lead-generation payments, subscription fees, site
membership fees, etc.
• Online travel agencies offer almost all the same services delivered
by conventional travel agencies, from providing general
information to reserving and purchasing travel accommodations
and event tickets.
• Many online travel services offer travel bargains. Consumers can go
to specialty sites, such as those offering standby opportunities and
last minute bargain tickets.

Other special services include:

 Wireless services
 Advanced check-in
 Direct marketing
 Alliances and consortia
• The use of mobile device is increasing rapidly, with hundreds of apps related to
comparing prices, making reservations, looking at travel reviews, and finding the best
travel deals available.

• Travelers are using sites like Facebook, YouTube, Twitter, IgoUgo, Gogobot, Flickr,
Foursquare, and TripAdvisor to plan their trips and share experiences (both good and
bad) afterward.

• The benefits of online travel services to travelers and travel providers are extensive. The
amount of free information is voluminous, and is accessible at any time from any place.
Shoppers can find the lowest prices. Travel providers also benefit by eliminating
commissions and selling other wise empty spaces. Finally, processing fees are reduced.

• Online travel services do have some limitations. First, complex trips are difficult to
arrange and may not be available on some sites because they require complicated
arrangements. Therefore, the need for travel agents as intermediaries remains, at least
for the time being.

• The corporate travel market is huge and its online portion has been growing rapidly in
recent years. Corporations can use all the online travel services mentioned earlier where
they may receive special services.
• The online job market connects job seekers with potential employers. An online
job market is now very popular with both job seekers and employers.

• The following are examples of activities in social networks related to job search:

• Search for posted positions

• Track people in your field
• Learn from the experts
• Engage and communicate with people and ask for help
• Make connections

• job referral social networking sites solve the need for finding the right people
for the job

• Virtual job fairs as well as recruiting via social networks are becoming popular
for expeditiously finding qualified candidates at a reduced cost.

• To facilitate recruitment, top recruiters are seeking the benefits of using new
tools like video conferencing to interview and connect with candidates from
remote locations.
• Online infrastructures enable additional marketing channels, new
business models, and provide new capabilities.

• Changes in online real estate information search and transactions

significantly impact the way that business is conducted.

• An increasing number of companies use the Internet to offer

standard insurance policies, such as auto, home, life, or health, at a
substantial discount, mostly to individuals.

• With online trading, there are no busy telephone lines, and the
chance to err is small, because there is no oral
• communication in a frequently noisy environment. Orders can be
placed from anywhere, at any time, and there is no biased broker to
push a sale.
• Electronic (online) banking (e-banking) , also known as cyberbanking , and virtual
banking , refers to conducting banking activities online.

• E-banking saves users time and money. For banks, it offers a rapid and inexpensive
strategy to acquire out-of-the-area customers.

• Banking applications can be divided into the following categories: informational,

administrative, transactional, portal, and others.

• Virtual banks have no physical location and conduct only online transactions.

• Online banking enables the move of personal loans to the Web in what is called
online person-to-person money lending , or in short P2P lending .

• Many financial institutions (e.g., Bank of America, Wells Fargo, and Citibank) allow
customers to view images of all of their checks, and other related material online.

• Many people prefer online payments of monthly bills such as mortgage payments, car
loans, telephone, utilities, rent, credit cards, cable, TV, and so on.
• Most e-tailers use third party logistics carriers to deliver products to customers. They might use the postal system within their
country or they might use private shippers such as UPS, FedEx, or DHL.

• e-grocer takes orders online and provides deliveries on a daily or other regular schedule or within a very short period of time,
sometimes within an hour.

• An express delivery option is referred to as an on-demand delivery service . In such a case, the delivery must be done quickly after
an order is received.

• Speed of delivery is critical not only for groceries and perishable items but also for other on-demand and large items.

• Certain goods, such as software, music, or news stories, can be distributed in physical format (such as hard copy, CD-ROM, DVD,
and newsprint), or they can be digitized and delivered over the Internet.

• Online entertainment is growing rapidly and is now the most popular medium among young people.

• Social TV is an emerging social media technology that enables several TV viewers who are in different locations to interactively
share experiences such as discussions, reviews, and recommendations while watching the same show simultaneously.

• Internet gaming is comprised of all forms of gaming such as arcade gaming, lotteries, casino gaming, and promotional incentives.
• Online dating enables people to identify potential mates and contact them, usually via the service’s e-mail or chat
functions.

• The wedding planning business is going online also. A large number of companies are active in online wedding
planning.

• For many the idea of buying cars online seems crazy. However, today, more and more cars are being sold online; or
at least some of the steps in the purchasing process are completed online.

• There are hundreds of unique services available online. Here we present only a short representative list:

 Online pharmacies are all over the Internet

 Stamps online
 Online flower delivery
 Online food ordering
 Virtual farmer’s marketplace
• Many sites and tools are available to help consumers with online purchasing decisions. Some sites offer price
comparisons as their primary tool.

• Shopping portals are gateways to webstores and e-malls. Specifically, they host many online stores simultaneously.
Like any other portal, they can be comprehensive or niche-oriented.

• Shopping robots ( shopping agents, shopbots) are search engines that look for the lowest prices or other search
criteria.

• Ratings and reviews by friends, even by people that you do not know (e.g., experts or independent third-party
evaluators), are usually available for social shoppers.
The Oxford Handbook of the Digital Economy from oxfordhandbooks.com provides a comprehensive study by Lieber and Syverson
( 2012 ), which describes the nature of the competition as well as the interplay of online and offline retail markets.

 Customers’ search cost

 Delivery time
 Distribution costs
 Tax differences
 Price
 Information available to buyers
 Other influencing factors
 The following are representative issues and problems (and some lessons learned from them) that need to be addressed when
conducting B2C EC.

 Disintermediation refers to the removal of an intermediary that is responsible for certain activities between trading partners.

 Consumers might have problems selecting an online vendor, vendors might have problems delivering goods to customers, and both
might need an escrow service to ensure the transactions. Thus, new types of intermediaries
might be needed, and services might be provided by new or by traditional intermediaries. This new activity is called reintermediation.

 Intermediaries that may be eliminated, or whose status and pay may decrease, might resist the change.

 Channel conflict refers to the case in which online sales damage the well being of an existing channel partner.

 Pricing a product or service on the Internet, especially by a click-and-mortar company, is complicated. One reason is that prices need to
be competitive both on the Internet and in the physical stores.

 The Internet also allows for easy self-configuration (“design it your way”). This creates a large demand for customized products and
services.

 A major problem in B2C is the increasing rate of online fraud. This can cause losses both to buyers and sellers.
If you have any question, kindly leave a
comment on the discussion for Module 3.