E-commerce Models

E-Commerce
Overall Coverage of Module
Basics of Internet and e-commerce Models for e-commerce B2B, B2C etc Components of a business model How E-commerce works Designing of e-commerce websites Use Cases Business Dimensions/Strategy for a e-commerce website Community based models Intranet/Extranets / VPNs etc Benefits and limitations of e-commerce Revenue streams Case Studies : T-Shirt, Dell, GHX, e-Bay/ Alibaba, Intermediaries in e-Commerce Business Process Reeingineering/transformation - Case Network Mediated Platforms / Pure Play e-Commerce sites - case Social networking sites Digital marketing Misc Future of Internet/e-commerce, Internet Security etc

Internet and its components

A Host : machine connected to the Internet with a Network Adaptor Each Host is identified uniquely by an IP Address An IP Address is a 32 bit binary or decimal form 123.210.012.111

To make it easy for users a name eg Infosys.com is used instead

The Domain Name Server (DNS) is the cross reference Name::IP Primary task of Web Server is to Publish Web Pages (HTML pages) The router helps in connecting a company Network to the Internet. The Browser

A few technical Characteristics of the Internet

Internet works on the TCP/IP Protocol Internet is a packet Switched Network The World Wide Web is a large File system which holds HTML files Each File on the WWW is identified using a URL The HTTP protocol is used to access any resource on the internet HTTP is a connection-less Protocol

Technologies for the Internet Wire Line

Medium
Basic Telephone Line Analog Broad Band Cable Twisted pair Copper cables within a building Optical Fibers

Technologies
T1(1.54 Mbps) lines DSL Digital Subscriber loop (1.76kbps) ISDN Integrated Services Digital Network (14.44 kbps1.54Mbps)

Technologies for the Internet Wireless

VSATs Global System for Mobile Communication GSM (TDMA) 9.6kbps EDGE Standard- Enhanced Data Rate for GSM evolution Carrier Detection Multiple Access -CDMA Wi-Fi 802.11 Standard Wireless Application Protocol WAP General Packet Radio Service (GPRS) Other technologies Bluetooth etc

The Internet & Intranet

Servers
Clients Legacy systems Public/External Internet Users Intranet E-mail servers ERP

Firewalls Databases

Web servers

Basic Concept of Extranets

Extranet Suppliers Enterprise
VPN VPN

Consumers Internet

Intranet
Clients

Intranet
VPN VPN

VPN

Remote Employees

Intranet

Distributors

Intranet
Business Partners

Intranet

Internet Applications
The World Wide Web : a Large Global File System E-Mail : SMTP and POP3 protocols Web Development Languages Front end HTML, VB Script, Java Script, Applets Back End Languages ASP, JSP, Java Data Base Access Oracle PL/SQL, SQL Cookies

Search Engines and web crawlers

Web Sites and portals

E-commerce Basics
What is e-Commerce
The buying and selling of information-based products as well as physical goods and services on the internet is known as e-Commerce

E-Business versus e-Commerce

E-business is a meta term which covers any/all aspects of business being conducted using the Internet. This includes e-commerce as also other activities such as sending information brochures to customer, delivering after sales service, taking customer feedback etc

Components of e-Commerce
Portals , Vortals and Hortals Search Engines Payment Gateways Digital Certificates and Digital Signatures E-markets and Market Platforms E-auctions forward and reverse auctions

E-Business Models B2B, B2B C2C etc

M-commerce

Benefits of e-commerce Buyers View

Can buy from any where in the world Can buy from a source which offers the best deal in terms of
Landed cost Price Best product based on product comparisons available on the net Auctions etc can create competitive pressures giving the best deal

Can buy from the direct source thereby reducing intermediaries Reduced overall cost of material sourced Reduced Ordering time Reduced transaction costs

Benefits of e-commerce sellers point of view

Greater access to customers The World is flat Size doesnt matter a small company can also compete Cost of setting up a physical store can be avoided + global visibility Cost of setting up web front is negligible Overall Transaction Cost comes down dramatically Dis-intermediation helps in reducing cost of distribution Distribution cost can be completely eliminated in some cases Customer service costs also can come down Self Help /Pull Internet based Marketing can be enhance visibility quickly CRM can be enhanced thru a combination of Push and Pull Can help develop a community of followers Can help understand underlying behaviour of customers

Issues and Limitations of e-commerce

Needs tight Integration between web store front and backend processes Legal , Tax and Intellectual Property issues Security issues Limited Internet Access /penetration Lack of Awareness, trust and confidence among buyers Internet provides a near perfect market customers can compare E-Markets only create more clutter of similar products affecting visibility Current e-commerce volumes and value only a fraction of current revenues of most organizations Channel Conflict Brand related issues Pricing issues Should there be a discount for Online Customers ?

Developing an e-Commerce Website

Broad Business Considerations Goal/Purpose of the website Nature of Products/Services/Information and their impact Target audience Geographical Focus/regional Focus Language Currency Profile of customers desired and their Personas What is the Need it fulfills and Value to each stakeholder Customers other Business Partners payment gateways, suppliers, sponsors, content providers etc Architecture of Engagement Competitive Positioning of the site Branding and Visibility of the Site Technology /Platform Choices

Developing an e-Commerce Website

Broad Business Considerations

Revenue Streams and Basis for charging Pricing Considerations Backend processes required to ensure delivery of service Legal /Tax and Intellectual Property Considerations Disclaimers if any Usage Policy to be signed

Developing an e-Commerce Website

Design Considerations Name of the Domain and URL Choice of Key words and Search Engine Optimization (SEO) Corporate Branding Considerations eg colors, logos etc Type of Website Content Static/Interactive/Dynamic Text/graphic/video/sound etc Information Architecture and Site structure (Frames)

Users and Use Cases

Website Flow and Navigation from Home Page downwards

Developing an e-Commerce Website

Design Considerations
Design of the Home Page and other Pages Layout, Color, aesthetics Visibility of Functions performed Use Cases for the given User Profile Functional and Non Functional Requirements No of clicks required to reach desired information Site Admin Considerations Usability Considerations Interaction Style Personalization Features Hot-spots Consistency across pages Information about Context and you need to go Hanging Links

Developing an e-Commerce Website

Broad Business Considerations Getting Additional information about a user (privacy Issues) Promoting the Site SEO and other ground and online promotions Converting a prospect to a customer Payment options Backend process integration Status updates CRM features and engagement with customers After Sales Processes if any Technology, Hosting and Infrastructure
Space, Speed, Cost, Platforms, Security, Metrics, other services

Organisation for Web Management Up-dation of the Site Business Continuity and Disaster Recovery

What is a Business Model

It is a description of the value a company offers to one or several segments of customers and of the architecture of the firm and its network of partners for creating, marketing, and delivering this value and relationship capital, to generate profitable and sustainable revenue streams. Osterwalder, Pigneur and Tucci (2005)

Components of a Business model

Core capabilities Value Proposition Partner Network Value Configuration Target Customers Distribution Channels Customer Relationships Cost Structure Revenue Structure

Key Questions about Business Models

Who are the customers that we wish to serve ? What are their needs ? What products /services do we wish to provide them to meet their needs ? How can we differentiate ourselves with others who seem to fulfill the same or similar needs ? How do we intend to satisfy and keep them coming back or atleast engaging with us on a continued basis . How do we plan to deliver these products /services ? What are the various sources of revenue that we see ? What is the basis of charging the customers for the products/services in each of the revenue streams ? .

Classification of e-commerce models

Based on what was virtual versus physical product, agent or process (Remember the 3 Dimensional Cube ?) Based on Parties involved eg B2B, B2C, P2P Based on market Structures Extranets, Auction, Exchange etc Based on Nature of services
Information on product, customer, etc Opportunity economy of scale, scope etc Guarantees - helps in trust building etc

Based on Positioning or role played by the site

Direct to Consumer Intermediary Content provider etc

Based on Nature of Engagement

Push/Pull, Platform based,, Community

Based on Source of Revenue

Subscription based, Sponsorship, Advertising,

The New Intermediaries

Portals Directories Search Services Malls Publishers Virtual resellers Website Evaluators Auditors Financial Intermediaries Electronic Market Makers Intelligent Software Agents Infomediary

E-commerce Revenue Streams

source - website : Motley Fool + Consulting Contracting Controlling Connection Commercials Commerce Content Community

Landscape of systems in an organisation

Types of systems from Top to bottom of the organisation Executive Information Systems Enterprise Systems - ERP Extra Organizational Systems Supply chain and CRM Project Lifecycle Management Systems Process Automation Systems Machine automation

Decision Support Systems can occur anywhere in the organisation and are tailor made for a particular decision

The Internet & Intranet

Servers
Clients Legacy systems Public/External Internet Users Intranet E-mail servers ERP

Firewalls Databases

Web servers

27

Basic Concept of Extranets

Extranet Suppliers Enterprise
VPN VPN

Consumers Internet

Intranet
Clients

Intranet
VPN VPN

VPN

Remote Employees

Intranet

Distributors

Intranet
Business Partners

Intranet

28

B2B Sites Supply Side

Systematic

MRO Sites Catalog Hubs Eg Ariba

Approach to Sourcing

Yield Managers Spot

Exchanges

Operations Input Type of Items Sourced

Manufacturing Input

Pros and Cons - B2B

Pros One of the largest segment of e-commerce Stable segment and has high potential for e-commerce Can lead to Value Chain Transformation/Convergence SMEs contribute a large chunk of GDP will benefit by B2B Can expand reach of many companies across the globe Can provide opportunity to source from the best and the cheapest JIT can be implemented on either side i.e Customer and Supply side

Cons /Challenges Standards related issues Integration with backend ERP

Pros and Cons - B2C

Pros Benefits of Ecommerce can touch the lives of the Consumer. Eliminates middle men and reduces overall cost to the conumer Enables company to gain valuable insights about consumer need Helps implement customization/ personalization Consumer gets a wider and a more informed choice on the internet Cons Low internet and e-commerce penetration Fear of the Unknown and some genuine security fears Trust related issues quality, cost, delivery etc Privacy Issues consumers end up revealing too much

Types of communities
Information

Board Rings and Lists

Group focus

Social Interaction

rooms Dungeons

Loose Social Structure

Tight Kotimets (1999)

Community Engagement
Member Motivation Opportunities to engage Members loyalty to community Content Attractiveness Loyalty Draw more Members Generate Relevant Content Community

Member Profile Use for targeting products

Transaction Offerings
Draw vendors Get members to spend

From Brick and Mortar to Click

Steps involved in e-Business Transformation Inform Automate Integrate Innovate (Re-invent)

From Brick and Mortar to Click

Steps involved in e-Business Transformation
Web presence Create a website SEO activities Use of Internet for Marketing mass mailing etc Getting/floating requirements on the Website Allowing transactions on the website Customer or Suppliers Integrating with backend automated processes Fulfillment and Delivery of Goods and Services
For Physical goods through own or partner (Dealers/Logistic Provider or Supplier support ) For Digitizable products allowing downloads etc Information flow /routing through Internet and ERP systems etc

Payments either on delivery, manually, banks, ECH or Credit Cards etc Developing a community Full fledged Portal

From Brick and Mortar to Click

Key Challenges in e-Business Transformation Building the e-commerce portal Change Management on the Customer Side Customer Segmentation Issues Pricing Issues Channel Conflict BPR and Back end Integration and 24x7 Availability Organization Structure for e-Commerce Security & Legal Considerations

Pure play e-Commerce Companies

Organisations which deal with digitizable products or services hence entire commerce can be on the internet eg
Music stores Shaadi.com

Internet based Organizations which facilitate others to do ecommerce eg

Search engines eg Google Payment systems eg Paypal Market Places eg eBay, MCX, NSEIT, IndiaMart.com Information Portals who host Others Google, Amazon etc

Companies which began with Direct Selling of Physical Products but offer most of the transaction on the internet
Eg Dell

Pure Play e-Businesses

Examples of Pure Plays
File Sharing Info and News portals Horizontal portals with email etc Search engine E-Retail Hosting and Cloud services Job Sites Ticketing Sites Auto Portal E-broker Matrimonial Multisided platform for buy/sell CRM myspace.com Wiki and Times website yahoo.com google.com futurebazaar.com amazon cloud Naukri.com, Monster Yatra.com, IRCTC.com AutomartIndia.com ICICI-Direct.com BharatMatrimony.com ebay.com Salesforce.com

Pure Play e-Businesses

Considerations in implementing a Pure play e-business Purpose and Goals Website Development and challenge of Visibility Strategies for driving traffic Building Trust Community Building and Architecture of Engagement Business and Revenue Models Monetization when and how ? Funding Issues Channel Conflict Building a reliable Backend Scalability Competition and continuous evolution and innovation Organisation Culture

Platform Mediated Network Businesses

Definitions & Concepts What is a Platform A platform In the context of networked businesses is the set of components and rules used by several users who interact with each other for business purposes

in the context of a product a common set of components and architecture shared across different products within the same product family

Platform Mediated Network Businesses

Definitions & Concepts Examples of Platforms Platforms could be in any field for eg the operating system platform MS-Windows provides a common work environment to users across the world. The Basic Chasis design shared between a Maruti 800 and Maruti Omni is like a common platform. In the e-Commerce space there are several platforms Amazon provides a cloud for any business to run on. E-Bay provides a auction/trading platform etc.

Categories of Platforms Platforms can be one-sided, Two sided or multi-sided Platforms can be proprietory, Joint Venture or Shared

Platform Mediated Network Businesses

Definitions & Concepts

Perceived Value of a Platform

As Number of Users

This is known as the Network Effect

Network effects based on platforms can lead to Winner Takes all Outcomes

Advantages of a Platform
Increases the reach of a buyer as well as seller Standardizes connections between buyers and sellers Lowers the overall cost of transaction for both buyer and seller Quite often provides guarantees, builds trust , provides value adds Eliminates effort and cost in building e-commerce infrastructure for every buyer and seller Can lead to Winner Takes it all outcomes for the platform owner

Disadvantages of a Platform
Loses exclusivity seller may find many competitors may also be present on the platform Proprietory platforms in particular can lead to user lock in Failure of the platform can leave existing users stranded Homing costs can become prohibitive over time Multi-homing can become even more expensive /cumbersome The real value to the user is largely limited to the target segment of users whom the user is interested in connecting and large number of users may not mean much

Pure Play e-Business

Challenges in Managing Two sided and Multi sided Platforms
Attracting buyers and sellers to join the platform Pricing , Homing Costs for the platform and lowering barriers to entry Standards and Plug and Play Trust level and Risks associated with the transactions Managing performance and scalability of the platform Ensuring that perceived value to users is maintained at all times Managing rapid growth to grab Winner takes it all Outcome Outwitting competing platforms to prevent an Envelopment attack Funding issues Revenue model and monetization of the platform Managing Innovation particularly as the platform matures Creating and Renovating Platforms is akin to Betting the company

Key points of Case Studies Discussed

GE B2B Case
Used a specially created Extranet called GIES Minimised purchase cost, people, time required for purchase Provides Visibility of the delivery process to Customers Customers can book pickups Helps manage Global deliveries from any where to anywhere Would have been unthinkable to do manually Industry Consortium initially a supplier based initiative The top Pharma and Medical equipment suppliers) to reduce their costs funded this initiative on a not for profit basis Invited their customers Hospitals and large Distributor Networks to become either alliance partners or members Created a unique Corporate structure - All were members with equally voting rights Purpose was to take decisions about a market place which helped all stakeholders Gradually, other Exchanges either were bought over or joined as alliance partners Decided to charge for services to make self sufficient

FedEx B2B and B2C

GHX

Key points of Case Studies Discussed

T-Shirt
Community based model , example of Open Innovation, Crowd Sourcing of Designs Deep Understanding of what motiviates of T-Shirt consumers, designers Requires a componentized product, young techn savy customer, upbeat and high energy organisation Requires deep commitment to the community both engage but also involve community in all decisions

Cylinder Business Business Process Re-engineering (BPR)

understanding the Functional Processes of a company Ask What is done or what happens ? Identify Critical Success Factors (CSFs) and select 1-3 such CSFs Make the process subservient to these CSFs Visualise a new process and drive the change in the organisation Definition of BPR - Dramatic Improvement, Radical Change, IT

Key points of Case Studies Discussed

Otis Elevator
First round of transformation focused on centralizing Lift Maintenance Call handling process. Quick Dispatch of calls, well equipped service vans, Online information of Lift History resulted
in lesser time to service - 3 Hrs instead of industry average of 6-8 hrs Better visibility to customers complaints Higher customer satisfaction which also helped in higher repeat sales

The Second round of transformation involved a new vision for the company from a product manufacturing company to a Customer focused Service Company
Saw its role in Customer Service and Relationship, Product Design & Technology, Orchestrating efficient supply chain and Delivery processes Benchmarked with other pure service companies instead of mfg companies Changed the entire processes, incentive schemes IT systems, cut factories Built alliance partners and managed the supply chain

Key points of Case Studies Discussed

Citibank
In the first phase aimed to Centralize treasury Get a single view of the customer globally Focused on Serving large Corporates with Global operations Sensed that customers were also moving to the Internet and required somebody to help in ecommerce payments and trust building Created platforms for large as well as SMEs for direct trading Provided efficient movement of money in multiple currencies/locations

Dell

Believed in - Directly deal with customers, Meet his needs and hold no Inventory Customer Self Help - pioneered the concept of configurability Built up huge information about customers hardware infrastructure and proactively suggested upgrade The growth in business helped drive efficiencies on Supply side Suppliers set up Warehouses next to Dell Factories Zero Inventory for Dell Benefits
lower supply side and inventory costs and therefore higher margin/competitive pricing, Faster launch of new products Deep understanding of Customer needs

Dell met with trouble in China due to barriers such as cultural, language, low IT/Internet Penetration rates, China Government Controls, Logistics issues etc

Key points of Case Studies Discussed

Google
Identified the problem of bad search engines generating spam results Developed a better search algorithm Provided search technology to other leading platforms such as Yahoo Developed search based advertisements based on a much better page rank algorithm enusured that only relevant ads got displayed Overtook others in the search and Adsense business Identified several new opportunities
Took over Double Click for Banner ads Took over You tube for Video Content, Maps etc Identified the convergence between Internet and mobile phones Developed the Android platform and beat Nokia in its game

Future of Internet and e-Commerce

IP ver 6 Broad Band Penetration Mobile Penetration and Mobile Broad Band Technology Convergence Mobile, TV and Internet, Telecom Web 3.0 The Semantic Web Cloud Computing and its impact on e-commerce Futuristic Interfaces and their effect on e-commerce Global Issues