Internet Service Learning Objectives Describe different Internet business models. Contrast an electronic and traditional service. Understand the importance of scalability to E-commerce success. Distinguish among the E-business models. Technology Convergence Enabling E-Business Internet Global telephone system Communications standard TCP/IP (Transfer Control Protocol/Internet Protocol) Addressing system of URLs Personal computers and cable TV Customer databases Sound and graphics User-friendly free browser Purpose of Web-site A retail channel (Amazon.com) Supplemental channel (Barnes & Nobel) Technical support (Dell Computer) Embellish existing service (HBS Press) Order processing (Delta Airline) Convey information (Dr. Koop) Organization membership (POMS.org) Games (Treeloot.com) E-Business Models (Weill & Vitale, Place to Space, HBS Press, 2001) Content Provider: Reuters Direct to Customer: Dell Full-Service Provider: GE Supply Co. Intermediary: eBay Shared Infrastructure: SABRE Value Net Integrator: Seven-Eleven Japan Virtual Community: Monster.com Whole-of-Enterprise: Government Service Package and E-Service Selling (providing) information Selling valueadded service Selling services with goods Selling goods Used car prices Online travel agent Computer support Online retailer Kelly Blue Book Biztravel.com Everdream Amazon.com Information dominates service package Goods dominates service package Electronic and Traditional Services Features Electronic Traditional Interaction Screen-to-face Face-to-face Availability Anytime Working hours Access From anywhere Travel to location Market Area Worldwide Local Ambiance Payment Electronic interface Credit card Physical environment Cash or check Speed Immediate Physical waiting Privacy Anonymity Social interaction Grocery Shopping Comparison On-line Shopping Advantages Convenience Saves time Less impulse buying Disadvantages Forget items Less control Need computer Delivery fee Traditional Shopping See new items Memory trigger Product sampling Social interaction Time consuming Waiting lines Carry groceries Impulse buying E-Business Supply Chain (Network) Elements Major entities including firm of interest and its customers, suppliers, and allies Major flows of product, information, and money Revenues and other benefits each participant receives Critical aspects: participants, relationships, and flows Example: 7-Eleven Japan Economics of E-Business Sources of Revenue: - Transaction fees - Information and advice - Fees for services and commissions - Advertising and listing fees Ownership - Customer relationship - Customer data - Customer transaction Economics of Scalability Information vs goods content of service package Degree of customer contact Standardization vs customization Shipping and handling costs Cost of after sales service Why did living.com fail? Economics of Scalability Dimensions High Scalability Selling valueadded service Low E-commerce continuum Selling information (E-service) Selling services with goods Selling goods (E-commerce) Information vs. Goods Content Information dominates Goods dominate Degree of Customer Content None Need for call center Standardization vs. Customization Mass distribution Fill individual orders Shipping and Handling Costs None Yes - costs depend on item ordered Cost of Aftersales service None Returns possible Example Service Used car prices Online travel agent Computer support Online retailer Example Firm Kelly Blue Book Biztravel.com Everdream Amazon.com Topics for Discussion Can an Internet service encounter be a memorable experience? What is the “front-office” of an Internet service? What is the contribution to gross national product (GNP) of “self-service” activities? Position the following websites on the electronic services product-process matrix: cookingpost.com, chocoholic.com, peapod.com, raisinrack.com, and win.com. Amazon.com How would you contrast Amazon’s business design with that of Barnes & Noble before Barnes & Noble went online? From a customer’s perspective, what are the advantages and disadvantages of each design? Amazon.com (cont.) Why has Amazon.com not turned a profit yet and what needs to be done to achieve profitability? Will amazon continue to be successful against “click and mortar” competitors, such as Barnes & Nobel, which go online? Is Amazon.com a model for the future of retailing?