E-Commerce

Jason C.H. Chen, Ph.D. School of Business Administration Gonzaga University, Washington, U.S.A. Senior Consultant, Taskco.com
chen@gonzaga.edu Nov. 20, 2000

Topics
E-Commerce: From B2C to B2B and Beyond e-Bid Process Features of a B2B application. Business plan for an e-Marketplace (next year) e-CRM and 1-1 Marketing (next year)

E-Commerce: From B2C to B2B and Beyond

Jason C.H. Chen, Ph.D. School of Business Administration Gonzaga University, Washington, U.S.A. Senior Consultant, Taskco.com
chen@gonzaga.edu Nov. 22, 2000

Outline of Topics
EC, B2C and B2B and their models. How big is B2B? Where is the Evidence? What are the revenue models in B2B? What is driving adoption of B2B? Why now? TASKCo.com

eBusiness Key Concepts

eBusiness
The strategy of how to automate old business models with the aid of technology to maximize customer value

eCommerce
The process of buying and selling over digital media

eCRM (eCustomer Relationship Management)

The process of building, sustaining, and improving eBusiness relationships with existing and potential customers through digital media

What is E-Commerce ?
Electronic commerce (EC) is an emerging concept that describes the buying and selling of products, services and information via computer networks, including the Internet.

Figure: E-commerce on the rise. Source: 1999 SG Cowen/Datamation Networked Computing Survey

24% 21%

26% 22% 15% 8% 9% 6% 6%

In pilot stage

Starting to implement 1998 1999

In use

1997

Figure: E-commerce apps are a big driver for storage. Average installed online storage in gigabytes. Source: 1999 SG Cowen/Datamation Networked Computing Survey

E-commerce status at sites

775 623 364 434

No plans

Start in 99/00

Expand in 99/00 Largely done

Table: E-commerces most promising potential benefits

Benefit

% of Respondents

New channel for existing business 25%

Improved customer service 23%

Enabled entire new line of business 18%

Reduced operating costs 7%

Improved cycle time

5%

Benefit % of Respondents

Keep pace with technology 5%

Reduced cost Other of sales 4% 6%

Not available 4%

None

3%

eBusiness Processes
WHY Customer Relationship Redesign Business Processes (OutsideIn) Applying Technology

WHAT

HOW

eBusiness Processes
WHY Customer Relationship Redesign Business Processes (OutsideIn) Applying Technology

WHAT

HOW

Traditional versus E-Business Models?

B
C: Individual Consumer B: Business

What is B2C?
B2C (or Extranets) is just web-enabled relationships between existing partners; they tend to be run by a single company seeking to lower the cost of doing business with its current suppliers or individual customers. Examples?
Amazon.com Egghead.com

Figure: A B2C e-business Model

Enterprise User Profiles Workflow Business rules Payment Analytics

Internet

Intranet

B2C Applications
Electronic storefront Electronic malls Advertising online Service online
selling books, toys, computers e-banking (cyberbanking) online stock trading online job market, travel, real estate

Figure : B2C and B2B Internet Commerce in the U.S. (Source: Forrester Research)
Billion

$ 1 ,6 0 0 $ 1 ,4 0 0 $ 1 ,2 0 0 $ 1 ,0 0 0 $800 $600 $400 $200 $0 1998 B2C B2B

1999

2000

2001

2002

2003

What is B2B?
B2B is business-tobusiness commerce conducted over the Internet (called B2B e-commerce space, or e-marketplaces)

B2B e-Markepplaces: A CEOs Perspective

The next chapter in the e-business revolution involves the transformation of entire markets and the redefinition of industries. We will see the rise of a new class of entities -- eMarketplaces -- that will help online buyers and sellers find each other, attack the inefficiencies of traditional markets, and carve out for themselves important roles in the ebusiness economy.
Louis V. Gerstner Jr. Chairman of the Board and CEO IBM Corporation

E-Market is Web-based marketplace

e-market is Web sites Sellers where buyers and sellers come together to communicate, exchange ideas, advertise, bid in MarketSite auctions, conduct transactions, and coordinate inventory Buyers and fulfillment

Figure : A B2B Model

(Source: Goldman Sachs Investment Research Report)

Banks, Financial Institutions eCredit.com

Suppliers

Enterprise

Customers

Production materials Operating goods, services

Logistics Celarix, NTE

Focus on e-Business Applications

Knowledge Management/Business Intelligence

E-Commerce
E-Customer Relationship

Businesses & Consumers

Businesses

Procurement Network M:1

Trading Network M:N

E-Channel Management 1:N

E-Portal Management E-Services

SCM/ERP/Legacy Appls

B2B Applications
Advertising Auctioning Procurement Channel management E-commerce

How Big is B2B?

1800 1500 1200 ($ Billions) 900 600 300 0 1998 1999 2000 2001 2002 2003 2004 $39 $114 $522 $294 $782 $ 1 ,1 1 3 B2 B $ 1 ,5 0 0

Figure: The Goldman Sachs B2B Sizing in USA

Where is the Evidence

Three highlights from the Goldman Sachs B2B survey 1.0:
E-Commerce spending on proprietary Web site, e-market, and procurement (75% say, in 2000) Business are increasingly likely to develop B2B e-markets and to favor online auctions (74% say, in 2000) Outsourcing e-commerce spending is commonplace among businesses (25% say, up to 75% of e-C spending)

B2B Revenue Model

B2B companies exhibit varying business models, depending on the key products and services they offer. The models include:
transaction fees, auction-driving commissions, advertising, content subscriptions, software licensing

B2C vs. B2B

B2C B2B

Switching Costs Low with multiple suppliersHigh when integrated with efrastructure; few qualified suppliers Relationship Transactional Long term, mission critical Type Transaction Type Smaller average selling price arger average selling price L Revenue M odel Traffic volume is critical; Dont need every customer, only need the Large customer base is key right customers

Source: Goldman Sachs Investmenet Research

The Magnificent Seven B2B Drivers

Increasing competition and globalization Growing interactivity Financial opportunity Efficiencies and cost savings Enhanced market and customer reach Real-time needs Regulatory and taxation issues
N

Small Business Likely to Fuel B2B

Small businesses will fuel the B2B market
the use of and dependence on the Internet by small businesses as a medium for marketing, distribution, and commerce will likely fuel the B2B market. as more small business access the Internet and set up corporate Web pages, the more they will employ the Internet to execute their business strategy.

Benefits of B2B
B2B solutions create competitive dynamics through:
cost savings
the composition of cost (product versus process costs) the number of intermediaries in the supply chain.

new financial (revenue) opportunities

the rate of industry-wide B2B adoption business model
N

Why Now?
B2B catalysts are now arising to stimulate adoption (mentioned earlier). Interactive networks have recently become ubiquitous and inexpensive, accelerating the use of B2B applications. A viral effect will spur copycat behavior throughout the market as more companies continue to implement B2B applications.

Which Industries are Likely to Embrace B2B Solutions

Industries that are B2B inclined exhibit certain key characteristics:
the supply chain is highly diffuse, techno-innovators dominate the culture, process represents more than 20% of total costs, products exhibit complex configurations, expense pressure is intense.

 Research show that leading industries migrating online and adopting B2B solutions include the following:
Aerospace/Defense: 35% Electronics: 25% Chemicals: 20% Motor vehicles and parts: 18% Medical equipment and transport: 17%

What Makes a B2B e-market Company Succeed?

Five Critical Success Factors for e-markets:
Business model, market size, industry expertise, branding and distribution, management execution hustle (not just the formulation of strategy)
N

Solutions for e-Enterprise Organizations

Sellers

Streamlines buying and selling between trading partners Maximizes trade efficiency across the entire supply chain Strategic e-commerce capabilities in Internet time

MarketSite

Buyers

Delivers compelling ROI

Solutions for Internet Market Makers

Turn your supply chain into a revenue generation opportunity Leverage your industry domain expertise into strategic e-commerce solutions Brings e-commerce to businesses of any size, across all industries

Your Portal

Global Solution for Businesses: The Global Trading Web

Global Trading Web

Connect once to trade with anyone,anytime, anywhere in the world.

European e-markets
B2C e-commerce in Europe is likely to remain approximately two to three years behind the U.S. . B2B in Europe currently lags the U.S. by two years. How about in Asia?

TASKCo Mission
Leveraging Internet to Help Customers to:

Expand Markets

Fundamental Business Drivers Have Not Changed

Retain Customers Improve Efficiencies