Ch. 8: Online Retail & Services Flashcards
What are the 7 major firm types that the retail industry can be divided into
- general merchandise
- durable goods
- specialty stores
- food & beverage
- gasoline & fuel
- MOTO
- online retail firms
What are the 4 original aspects in the vision for e-commerce retail (hyper mediation)
- the Internet reduced both search and transaction costs
- entry costs to the online market < those needed to establish physical storefronts
- As prices fell, traditional offline physical store merchants would be forced out of business
- For certain industries, the market would be disinter mediated as manufacturers/distributors entered to build a direct relationships w/the consumer-destroying retail intermediaries
What concept is hyper-mediation based on
A virtual firm in which online retailers would gain advantage over established offline merchants by building an online brand name and outsourcing expensive warehousing & order fulfillment functions
What are 4 characteristics of the online retail sector today
- online market entry costs underestimated + cost of acquiring new customers
- traditional firms taking over as the top online retail sites
- disintermediation didn’t occur
- ->multi-channel integration - growth in social e-commerce
- ->location-based marketing, growing mobile platform, marketing and purchasing on social network sites
What are the 4 types of online retail business models
- virtual merchants
- bricks-and-clicks
- catalog merchants
- manufacturer-direct
virtual merchants
single-channel web firms that generate almost all of their revenue from online sales
What are 3 characteristics/challenges of virtual merchants
- most build a business and brand from scratch
- online stores: no costs for building and maintaining physical stores, but rather a website, order fulfillment infrastructure, and developing a brand
- high customer acquisition costs and steep learning curve
bricks-and-clicks
companies that have a network of physical stores as their primary retail channel, but have also introduced online offerings
What are 3 challenges in the bricks-and-clicks business model?
- high cost of physical buildings
- high cost of large sales staff
- need to coordinate prices across channels
What is a benefit of the bricks-and-clicks business model
less expensive to acquire customers b/c of brand name
catalog merchants
established companies that have a national offline catalog operation that is their largest retails channels, but who have recently developed online capabilities
What are 3 challenges to the catalog merchants business model?
- high costs for printing & mailing
- the need to leverage existing assets and competencies to the new technology environment
- building a credible website
What is a benefit of catalog merchant business model?
already have very efficient order entry and fulfillment systems
manufacturer-direct
single or multi-channel manufacturers who sell directly online to consumers w/o the intervention of retailers
What are 3 challenges to the manufacturer-direct business model?
- channel conflict
- quickly developing a rapid-response online order and fulfillment system
- switching from a supply-push to demand-pull model (product made prior to orders based on estimates to products built upon receiving demand)
channel conflict
physical retailers of products must compete on price and currency of inventory directly agains the manufacturer who doesn’t face the cost of maintaining inventory, physical storage or sales staff
What is a benefit of the manufacture-direct business model?
should have higher margins b/c of established brand name, existing customer base and lower cost structure
What are 5 characteristics in online retailing?
- consumers have been willing to accept higher prices in return of the convenience of shopping online
(allows merchants more pricing freedom) - disintermediation didn’t occur and middlemen didn’t disappear
(use the web as an informational resource to driver consumers to traditional retail channels) - in order to succeed online, established merchants need to create an integrated shopping environment
- the growth of online specialty merchants selling high-end, fashionable, and luxury goods or discounted items
- growth in social e-commerce, local marketing and mobile commerce
transaction brokering
acting as an intermediary to facilitate a transaction
What are 4 online financial services?
- banking & brokerage
- mortgage & lending
- insurance
- real estate
online financial consumer behavior
consumers are attracted to financial sites b/c of the desire to save tie and access info; not really to save money
Characteristic of online banking and brokerage
online consumers prefer to visit financial services sites that have physical outlets or branches (multi-channel)
financial portals
sites that provide consumers w/comparison shopping services, independent financial advice, and financial planning
account aggregation
the process of pulling tighter all of a customer’s non/financial data at a single personalized website
What are 3 characteristics of the online mortgage and lending services
- early pure-play mortgage institutions had difficulties developing a brand name at an affordable price and failed failed to simplify the mortgage generation process
- suffered from high start-up and admin costs, high customer acquisition costs, and poor strategic execution
- now slowly growing
What are 3 characteristics of the online insurance services?
- term life insurance successfully leverage its commodity product status on the Internet
- for other product lines, the Internet provide the opportunity for differentiation and price discrimination
- most customers only obtain a quote online
What are 4 characteristics of online real estate services?
- impossible to complete a property transaction online
- leverage Internet to influence offline decisions
- primary service is listing available houses
- industry value chain unchanged
What are 5 reasons why online travel services are so popular?
- more info and options than traditional agents
- aggregate consumers into a focused pool efficiently reached through ads
- more efficient marketplace bringing customers and suppliers together in a low transactions cost environment
- travel is an information-intense product and can be completed online
- no inventory required–always seeking to fill vacant rooms
What are 5 dynamics of the online travel industry?
- travel agency sites are a comity so competitive is intense
- price competition is difficult so sites focus on scope of offerings, ease of use, payment options, and personalization
- industry consolidated to build stronger multi-channel travel sites
- impact of mobile devices and apps
- influence of user-generated content (reviews)
What are 3 characteristics of online career services?
- free posting of individual resumes; post job openings for a fee
- overcomes limitations through a more efficient and cost-effective means of linking employers and potential employees
- rationalization of wages, greater labor mobility
