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Digital Commerce, ICT = Information, Communication, Technology, read again…
Digital Commerce
Marketplaces as two-sided markets
2-sided markets/ marketplace
Definition
Functions
Opp & Risk
(+) Frequency of platform visit, new & potential customers, lowering marketing & transaction cost, highly modern digital commerce functions, help again credit risks...
(-) Low loyalty, direct comparability with competitors, indirect consumer contact, data availability to potential competitor
Network effects
The larger, the better:
Network effects refer to an increase (or, more general: change) of value through a
growing number of users. Thus, “externalities” exist.
Power and market structures
Value of several marketplaces in the same product category?
Economies of scale (customer acquisition, brand reputation, logistics,...)
lock-in effects
monopoly
market places in the sharing economies
Sharing Economy makes assets of some people in the community accessible to other people in the
community, leading to a reduced need for ownership of those assets (adapted from Stephany 2015)
Criteria for sharing assets
high price
low capacity utilization
predictable/transparent quality
predictable depreciation
(platform is also a form of intermediated trust)
amazon & alibaba
Marketplaces and platforms in different B2C and B2B sectors
Marketing and transactions in DC
Attracting customers
Instrument/ Drivers
Online Advertising Categorization (paid, owned, earned)
Strengths and Weaknesses of Different Communication Tools to
Attract Visitors to an Online Presence (p.187)
Assortment
Options for Online Assortments
Attractive assortment
Width of assortment
Exclusive/ owned brands/ Private labels
Mass customization
Tangible products/ Digital products/ (non-digital) services
Pricing
Increased price transparency
Pricing Issues in Digital Commerce
Pricing in a multichannel situation
“New” pricing models (auctions, rental, flat rates,...)
Price discrimination
Pricing services / price bundling
Dynamic pricing
Shop design, product presentation, transactions
The Role of Trust in the Online Purchasing Process
Trust: in vendor, product, enforcement possibility,...
Perceived Risks: Financial risk, quality risk, risk of non-delivery, risk of data misuse, risk of fraud,...
Some antecedents of the conversion rate (customer perspective)
simplicity to find the product
support to select a product/ make the product decision
trust in vendor
professional web design, product data
personal contact option (hotline)
certificates
Positive performance (repeat purchase, review)
simple process to order or complete transaction
Some instruments to increase basket size
Delivery fee
Minimum order value
Upselling
Cross-selling
Web analytics and data analytics
Definition
Web analytics process
Collection of data
Processing data into information
Developing KPIs
Define actions
Actors in the DC distribution channel
Disintermediation vs. intermediation
Functions
Definition
Theoretical perspectives
Transaction cost approach (TCA)
Principle-agent theory
Main types of intermediaries in Digital Commerce
Pure players
Profitability of pure players is often hard to reach
Customer acquisition is major cost --> Solution: Customer loyalty & brand knowledge
Long patience to finally rule the market?
Foreign players
E-Commerce in Switzerland: Steadily Increasing
Relevance of Foreign Players
Advantages & Disadvantages
( + ) Easy entry & exit, Foreign warehouse, Brand cognition, Competitive price, Cost effectiveness
( - ) Host-country competition, Local market insight, Brick & Mortar (Convenience,
Experience), Quality & Trust, Touch & Feel
Multi-channels players
Provide several distribution channels (standard in home improvement retailing)
Marketplace providers
Marketplaces: Not only an Alternative but a Complementary and Linking Channel
Amazon, an Online Department Store and a Marketplace
Disintermediation: Manufacturers selling direct
Motives for Verticalisation (D2C)
Increase sales/ Attract new consumers
Reduction of distribution costs (save the middlemen’s margin)
Strengthening the brand appearance
Presenting full product ranges and collections --> Improve cross selling
Improving sales advice and service
Improve csm's experience
Establishing direct customer contact
Establishing own retail/wholesale know-how, gathering information
Seamless customer journey from first contact to purchase
All digital marketing activities drive traffic to brand landing page
Risks & Costs
Conflicts with channel partners
Costs for own retail/wholesale, i.e. the online shop
Marketing costs (attracting frequency)
Too low frequency compared to multibrand online shops
Attraction only of brand customers
Further (non-intermediating) actors
Typologies and Developments of DC
Typologies based on exchange parnters
B2C, B2B, C2C,...
R2B (Retail), B2B2C...
Digital channels
SoLoMo
Individualization and Personalization
Multi-, cross- and omni-channel-commerce
Strengths and weaknesses of different channels / customer journey
Each "Channel" has Advantages and Disadvantages (p.132/ 66)
Showrooming vs Webrooming
Options for channel integration
Conceptualizations of Channel Integration in Academic Studies
Bendoly et al. (2005)
Schramm-Klein (2011)
Herhausen et al. (2015)
Li et al. (2018)
Channel Integration by Functional Fields
(p. 142)
Characterisation of the three concepts
Multi channel
Multi-channel-commerce refers to a situation in which one retailer has several distribution channels (under the same brand?) and offers in these channels the same or at least an overlapping assortment
Cross channel
Cross-channel-commerce = Multi-channel plus various and comprehensive links between the different channels (with the objective of a seamless, cross-channel purchasing process).
Omni-channel
Omni-channel-commerce = Cross-Channel plus seamless customer experience, communicating with the (identified) customer via various sales and communication channels («touch points») (website, social media, terminals, etc.), analysis of customer data across the various touch points (360° view on the customer).
Advantages of an Integration and a Separation Strategy (P. 162/ 81)
Separation
less complexity, lower infrastructure cost (IT), better segmentation,...
Integration
more traffic & sales, lower marketing cost, higher customer loyalty,...
O2O: Online retailers opening stores
online to offline (trend in technical consumer goods, various retail sectors)
Retail formats and business models in DC
Retail Formats in Digital Commerce
Price formats
Experiential Shopping
Solution providers
Customizers
Community based
Merchandise experts
Retail branding and brand portfolios
Branded house
Sub branding
House of brands
Business models in Digital Commerce
Business model canvas
A business model describes the rationale of how an organization creates,
delivers, and captures value.
A business model is a „business layer (acting as a sort of glue) between
business strategy and processes.“ (Osterwalder)
9 building blocks
Customer segments
Value Proposition
Channels
Customer Relationships
Key Resources
Key Activities
Key Partnerships
Revenue Stream
Cost structures
Introduction: Relevance of DC
E-Business
E-commerce/ Digital Commerce
Grocery online in selected countries
Basic options
Different options for sources of goods
Different options for delivery organization
Different options for level of preparedness
Different delivery times
Different options for outsourcing
Challenges
Costs
Quality
Margins (Larger basket, higher margin)
Willingness to pay
Stocking vs. Convenience
Overview on IT and logistics of a Digital Commerce company
Architecture of the IT systems
Logistics (incl. returns) in Digital Commerce
Changing conditions and requirements
Distribution centers / warehouses: Where do the goods come from?
Transport: How are the goods transported (in particular on the last mile)?
Delivery destination: Where are the goods delivered?
Make or buy: Who carries out the logistics activities?
Returns
Reasons for Returns
Return Rates – Only a Problem with Clothing and Shoes
Measures to Reduce Costs Caused by Returns
Reduce return cost
optimization of return handling process
optimization of sell-off
Reduce returns
professional and many photos, 360°-pictures
pictures with measurements
product videos, catwalk videos, etc.
promote hotlines, chats, etc., to clarify questions before purchase
adapt size information, integrate size charts, etc.
offer fabric samples
put large labels on clothing and indicate that merchandise can only be returned with labels
indicate the environmental impacts of product returns
quick delivery, tracking and tracing, announcement of delivery
stable packaging for safe transport
eliminate products with high return rates from assortment
change merchandise mix towards less return-prone articles (Zalando)
ICT = Information, Communication, Technology
read again p138 - 142
Seamless shopping experience for customers
Sales generation in DC
Sales = Visitors (new + repeating)
x Conversion Rate x Avg. Basket Size
Measure to improve Growth & Margin (p. 173 174)
pricebots that collect competitors’
prices and determine own pricing with (simple) algorithms based on that information