global marketing program (mas) electronic commerce a global perspective
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Global Marketing Program (MAS) Electronic Commerce A Global Perspective. Professor: Jacques Nantel, Ph.D HEC Montréal Canada. E-commerce and Retailing Several myths, one reality. The e-sky is falling! (Amazon.com). Yet…. There are more consumers surfing - PowerPoint PPT PresentationTRANSCRIPT
Global Marketing Program (MAS)
Electronic Commerce
A Global Perspective
Professor: Jacques Nantel, Ph.D HEC Montréal Canada
E-commerce and RetailingSeveral myths, one reality
The e-sky is falling!(Amazon.com)
Yet….
• There are more consumers surfing
• Who stay longer on the net
• And who buy more and more
“…global marketing information from a global research company, with
unequalled expertise and experience in internet issues …”Taylor Nelson Sofres Taylor Nelson Sofres
Interactive -Interactive -GGloballobaleeCommerceCommerceRReport 2001eport 2001
Taylor Nelson Sofres Taylor Nelson Sofres Interactive -Interactive -GGloballobaleeCommerceCommerceRReport 2001eport 2001
What it all comes down to:eCommerce is growing, and the future looks bright
for e-businesses• Between 2000 and 2001, the proportion of internet users that
shop online has increased by 50%. From 10% of all Internet users globally in 2000, to 15% globally in 2001.
• Integrated offline and online shopping activities continue to contribute to revenue opportunities for businesses: fully 15% of all Internet users globally have shopped offline for goods as a result of information they found online.
• Online security is the biggest single concern for those Internet Users who have not shopped online. However, over 60% of non-shoppers did not state this reason.
• Younger internet users are not being persuaded to spend as much online as older users.
Key findings 2001...Internet usage
• Scandinavian countries continue to lead the way in the adoption and use of the internet. Norway, has 63% of the total adult population using the internet in the past 4 weeks, and Denmark (at 62%) have both pushed ahead of last year’s leader, the USA.
• Although growth has varied considerably across all countries, it is still universally true that under 30 year olds are driving the adoption of this medium.
Online shopping
• The USA retains its position as the nation with the greatest proportion of Internet Users being online shoppers - at 33%. This compares with the global average of 15%. Germany and Great Britain have also seen a big increase in this area over the past year.
GeR
Key findings 2001...To shop, or not to shop...• Last year saw more online dropouts than shoppers, but this
year 15% of internet users are still dropping out and 15% have actually shopped online.
• 55% of internet users have done none of the following: bought online, dropped out, bought offline or plan to buy online in the future.
Total Internet related shopping behaviour• Over a quarter of internet users globally have actively
engaged in either online or offline purchases in the past month.
GeR
Offline shopping• 15% of all Internet users have bought goods or services outside the
Internet as a direct result of information found online.
• Younger people’s (under 20) offline spending is not being influenced by information found online as much as the older internet users.
• While it may be possible to convert offline into online sales in the future, this result emphasises the need for integrated online and offline business models. This is evident in the commercial success of established offline brands in the online world.
Future online shopping
• 17% of all internet users plan to shop online in the next 6 months. However, of these, a quarter have already purchased online.
• Confidence in eCommerce therefore appears not to have diminished despite media attention highlighting security problems.
GeR
Products purchased online• Books and CDs continue to be the most popular
items to purchase online. However, smaller proportions have purchased both when compared to last year.
• Clothes have become the third most popular category to be purchased online.
• There appears to be a broader spread of product categories purchased in 2001, as people become more confident in purchasing different items online.
GeR
Reasons not to shop• The biggest reasons for not purchasing online are security related.
25% of abstainers stated that they didn’t want to give credit card details and 21% citing general security concerns. (Please note: that 8% highlighted both of these as reasons)
• Germany was the most reluctant nation to provide credit card details (71%), and was only surpassed by the Czech Republic when it came to general security concerns.
• In addition to security, the tangibility and physical experience of shopping offline was identified as a barrier to online purchasing. 19% of abstainers stated it was easier / more fun to buy in a store.
• Only 6% did not buy online for price related reasons.
GeR
Mobile phone penetration• Almost 2 out of 3 people represented in this study have access to a
mobile phone.
• This figure would have been higher but for the fact that 64% of over 60 year olds stated they did not have access.
• Finland leads the way - with 85% of the total adult population having access to a mobile phone.
GeR
Mobile phone usageAlthough access figures are high - only 46% use a mobile for speaking to people.
The second highest usage type was for receiving text messages, followed closely by sending them.Finnish mobile phone users were the most active text messagers, with 71% of the adult population receiving text messages.
Key numbers 2001...
GeRCountry average
2001
Country average
2000
Year on year
changeLowest Highest
Internet users 31% 27% + 4% 4% 63%Indonesia Norw ay
Online shoppers 15% 10% + 5% 1% 33%Philappines/
Turkey USA
Online dropouts 15% 15% no change 0% 34%Hungary Korea
Offline shoppers 15% 13% + 2% 0% 31%Hungary Hong Kong
Future online shoppers 17% 14% + 3% 0% 41%Hungary Japan
Internet users across the world 2001
4 4
911
13 1315 15 16 16 17
19
2426 26
3033 33 33 34
3639 40 40
4345
48 4851 52
5760
62 63
0
10
20
30
40
50
60
70
Indo
nesi
a
Ukr
aine
Lith
uani
a
Phi
lippi
nes
Indi
a
Latv
ia
Por
tuga
l
Pol
and
Turk
ey
Arg
entin
a
Hun
gary
Thai
land
Mal
aysi
a
Spa
in
Cze
ch
Italy
Fra
nce
Bel
gium
Est
onia
Gre
at B
ritai
n
Ger
man
y
Irela
nd
Isra
el
Taiw
an
Hon
g K
ong
Fin
land
Sin
gapo
re
Aus
tral
ia
Kor
ea
Net
herla
nds
US
A
Can
ada
Den
mar
k
Nor
way
Per
cen
tag
e o
f to
tal a
dult
popu
latio
n
Percentage of the population who have personally used the Internet during the past month
Country average (31%)
GeR
Japan results = 68% (data collected in the TNS AP M-commerce study)China results = 23% (data collected in the TNS AP M-commerce study)
Internet users across the world 2000/2001
4 4
911
13 1315 15 16 16 17
19
2426 26
3033 33 33 34
3639 40 40
4345
48 4851 52
5760
62 63
0
10
20
30
40
50
60
70
Indo
nesi
a
Ukr
aine
Lith
uani
a
Phi
lippi
nes
Indi
a
Latv
ia
Por
tuga
l
Pol
and
Turk
ey
Arg
entin
a
Hun
gary
Thai
land
Mal
aysi
a
Spa
in
Cze
ch
Italy
Fra
nce
Bel
gium
Japa
n
Est
onia
Gre
at B
ritai
n
Ger
man
y
Irela
nd
Isra
el
Taiw
an
Hon
g K
ong
Fin
land
Sin
gapo
re
Aus
tral
ia
Kor
ea
Net
herla
nds
US
A
Can
ada
Den
mar
k
Nor
way
2001 2000
Per
cen
tag
e o
f to
tal a
dult
popu
latio
n
Percentage of the population who have personally used the Internet during the past month
Country average (31%)
GeR
Japan results (2001) = 68% (data collected in the TNS AP M-commerce study)China results (2001) = 23% (data collected in the TNS AP M-commerce study)
1 12 2 3 3 3 3 3 4 5 6 6 6 7 7 8 9 9 9
1012
1416
17 17 18 18 18 18 18 19 19
24
28
33
0
5
10
15
20
25
30
35
40
Tu
rke
y
Ph
ilip
pin
es
Th
aila
nd
Ind
ia
Ind
on
es
ia
La
tvia
Lith
ua
nia
Arg
en
tina
Hu
ng
ary
Ma
lays
ia
Po
lan
d
Es
ton
ia
Ch
ina
Ukr
ain
e
Ita
ly
Ho
ng
Ko
ng
Ta
iwa
n
Be
lgiu
m
Sin
ga
po
re
Sp
ain
Cze
ch R
ep
ub
lic
Fra
nce
Po
rtu
ga
l
Isra
el
Fin
lan
d
Ja
pa
n
Au
str
alia
De
nm
ark
Ne
the
rla
nd
s
Ca
na
da
Ire
lan
d
No
rwa
y
Ko
rea
Gre
at B
rita
in
Ge
rma
ny
Us
a
Per
cen
tag
e o
f In
tern
et u
sers
Percentage of Internet users who have bought goods or services onlineduring the past month
• The USA retains its position as the nation with the greatest proportion of online shoppers at 33%. This compares with the global average of 15%.
• In India, the Philippines,Thailand and Turkey, 2% or less of the online population shop online.
Country average (15%)
GeR
• As spending power increases with age (up to 40 years of age), so shopping online becomes a more popular option.
• The youngest age group is so unlikely to shop online that even the oldest (age 60+), internet users surpass them. This is likely to be due to the non-availability of credit (and cards), rather than any difference in attitude and willingness.
GeR
1516
13
7
14
17
1413
0
2
4
6
8
10
12
14
16
18
20
Total Male Female Under20
20-29 30-39 40-59 60+
Please note that percentages given for the different age groups exclude data from Portugal, France, Canada, Ireland, Israel and Japan - where different age bands are used
Per
cen
tag
e o
f to
tal i
nte
rnet
use
rs
12
4 4 4 45
6 67 7
8 89
10 10 10 1011
1415 15 15
16 1618
1920 20
21 2122
25 25
28
31
0
5
10
15
20
25
30
35H
un
ga
ry
Ind
ia
Arg
en
tina
Gre
at B
rita
in
Ph
ilip
pin
es
Po
rtu
ga
l
Ind
on
es
ia
Lith
ua
nia
Tu
rke
y
Fin
lan
d
Ukr
ain
e
Ch
ina
Ire
lan
d
La
tvia
Es
ton
ia
Ma
lays
ia
Po
lan
d
Th
aila
nd
Sin
ga
po
re
Cze
ch
Fra
nce
Isra
el
Ta
iwa
n
Be
lgiu
m
De
nm
ark
Ne
the
rla
nd
s
Sp
ain
Au
str
alia
Ca
na
da
Italy
US
A
Ko
rea
Ge
rma
ny
Jap
an
No
rwa
y
Ho
ng
Ko
ng
Per
cen
tag
e o
f In
tern
et u
sers
Percentage of Internet users who have bought goods or services offlineas a result of information found online during the past month
• The Internet as an information channel for offline purchasing continues to be important.
• Hong Kong, demonstrates this well, supplementing online purchasing with substantial offline revenues.
Country average (15%)
GeR
• The most significant demographics issue is that those in the youngest age group, although they are unlikely to purchase online because of practical issues, are also not purchasing offline.
• The youth market is strong in traditional sectors, but the internet appears to be failing in attracting youth spending.
GeR
15
17
1211
16 16 15
9
0
2
4
6
8
10
12
14
16
18
20
Total Male Female Under20
20-29 30-39 40-59 60+
Please note that percentages given for the different age groups exclude data from Portugal, France, Canada, Ireland, Israel and Japan - where different age bands are used
Per
cen
tag
e o
f to
tal i
nte
rnet
use
rs
0
34 5 5
7 7 79 10 10
11 11 12 12 13 1314 15 15 15
16 16
19 20 2022
23 23 23 2425 26
2830
41
0
5
10
15
20
25
30
35
40
45H
un
ga
ry
Lith
ua
nia
Po
lan
d
Po
rtu
ga
l
Th
aila
nd
Es
ton
ia
La
tvia
Ukr
ain
e
Ho
ng
Ko
ng
Be
lgiu
m
Ind
ia
Arg
en
tina
Sin
ga
po
re
Gre
at B
rita
in
Ta
iwa
n
Fin
lan
d
Tu
rke
y
Ma
lays
ia
Ca
na
da
Ind
on
es
ia
Ph
ilip
pin
es
Ch
ina
Isra
el
Italy
De
nm
ark
Sp
ain
Fra
nce
Ne
the
rla
nd
s
No
rwa
y
US
A
Ko
rea
Cze
ch
Ire
lan
d
Au
str
alia
Ge
rma
ny
Jap
an
Per
cen
tag
e o
f In
tern
et u
sers
Percentage of Internet users who plan to shop online within the next 6 months
• The future of online shopping looks healthy in many countries, with this metric predicting significant increases in eCommerce activity over the next 6 months.
• It should be remembered that this figure includes a number of people that have already shopped online (25% of future shoppers bought online in the last 6 months).
Country average (17%)
GeR
32 34 35 39 42 42 44 46 48 50 51 52 52 54 55 55 56 57 58 60 6167 69 71 72 73 74 74 74 74 76 76 78 79
84
96
68 66 65 61 58 58 56 54 52 50 49 48 48 46 45 45 44 43 42 40 3933 31 29 28 27 26 26 26 26 24 24 22 21
16
4
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%K
ore
a
Ge
rma
ny
US
A
Jap
an
Au
str
alia
Ire
lan
d
No
rwa
y
Italy
Isra
el
Ca
na
da
Ta
iwa
n
De
nm
ark
Ne
the
rla
nd
s
Ho
ng
Ko
ng
Fin
lan
d
Fra
nce
Be
lgiu
m
Gre
at B
rita
in
Ch
ina
Sp
ain
Cze
ch
Sin
ga
po
re
Ph
ilip
pin
es
La
tvia
Ma
lays
ia
Es
ton
ia
Ind
on
es
ia
Po
rtu
ga
l
Th
aila
nd
Tu
rke
y
Arg
en
tina
Po
lan
d
Ukr
ain
e
Ind
ia
Lith
ua
nia
Hu
ng
ary
Per
cen
tag
e o
f In
tern
et u
sers
Internet users who have never shopped online, and who do not plan to shop online Internet users who have shopped online or offline, or who will shop online in the near future
GeR
Products purchased online
26
17
13
11 10 109
87
5 5 4 4 4 4 42
1
18
0
5
10
15
20
25
30
Books
Mus
ic/ C
Ds
Clothe
s
Electro
nics/
Electri
cal G
oods
PC Har
dwar
e
PC Sof
twar
e
Holida
ys/ L
eisu
re T
rave
l
Groce
ries/
Foo
d
Tick
ets t
o Th
eatre
/ Cine
ma
etc
Toys
/ Gam
es
Video
s
Sports
Equ
ipm
ent
Toile
tries
/ Cos
met
ics
Trav
el (b
usine
ss o
nly)
Stock
s/ sh
ares
/ mutu
al fun
ds
Furnit
ure/
hous
ehold
furn
ishing
s
Jewell
ery/
Fashio
n Acc
esso
ries
Car
Other
Per
cen
tag
e o
f In
tern
et u
sers
who
sho
p on
line
GeR
Trends
ACTUAL SALES (BILLIONS)
Forcasts 1999 2000 2001
1997 4,8 $
1999 20,5 $ 38,7 $ 64,1 $
2000 48 $ 74 $
Source: eMarketer sept 2001
In brief, a growing market but one has to understand the real
opportunities
• Internet will not be the revolution that some had predicted
• It will not be a fad
• For most retailers it will be a necessary evil
• Building a new distribution network does not create any new demand
• There are not two types of consumers one virtual the other one tangible
• forget the first mover’s advantage
• Technology is important but brand equity and bricks are key
Some dying myths
1- The world of retailing
Sales trends
Forrester Mai 2000
Media
Software
Total convenience (millions)
Total US revenue (millions) 11%
28%
16%
51%
Music
Videos 21%
Event tickets
40%
17%
16%Flowers
Books 21%
$44,784
$6,670
$1,752
$1,801
$1,020
$350
$760
$15,445
$2,096
$73,926
$9,807
$2,465
$2,629
$1,666
$933
$1,266
$25,070
$2200
$110,748
$13,019
$2,983
$3,618
$2,463
$1,986
$1,812
$37,194
$3,955
$155,833
$16,513
$3,431
$4,726
$3,484
$3,289
$2,384
$52,664
$4,872
$207,270
$20,529
$3,814
$6,076
$4,837
$4,462
$2,944
$71,061
$5,802
$269,158
$25,817
$4,200
$8,007
$6,717
$5,626
$3,560
$93,001
$6,893
% of totalretail 20052000 2001 2002 2003 2004 2005
Total US revenue (millions) 11%
Recreation
Video games
Sporting goods
14%
28%
13%
Apparel 12%
Toys 11%
General apparel
Footwear
Jewelry
Accessories
13%
8%
13%
18%
$44,784
$2,626
$392
$828
$5,040
$1,406
$2,756
$367
$1,370
$547
$73,926
$4,148
$631
$1,524
$8,915
$1,994
$5,194
$642
$2,217
$862
$110,748
$5,916
$939
$2,567
$14,461
$2,410
$8,988
$1,035
$3,316
$1,123
$155,833
$8,227
$1,350
$4,117
$22,251
$2,760
$14,569
$1,559
$4,776
$1,348
$207,270
$11,172
$1,877
$6,181
$31,955
$3,114
$21,577
$2,161
$6,617
$1,600
$269,158
$14,874
$2,549
$8,733
$43,124
$3,591
$29,434
$2,792
$8,921
$1,979
% of totalretail 20052000 2001 2002 2003 2004 2005
“
Forrester Mai 2000
Total US revenue (millions) 11%$44,784 $73,926 $110,748 $155,833$207,270 $269,158
30%
Total researched 11%
Leisure travel
Electronics
Computer hardware
Consumer electronics
40%
22%
23%
Automobiles 6%
$23,373
$12,200
$6,096
$3,778
$2,317
$2,845
$38,529
$16,700
$11,856
$7,127
$4,729
$5,315
$56,922
$21,000
$18,306
$10,968
$7,338
$9,360
$77,459
$25,200
$24,119
$14,516
$9,602
$15,626
$98,111
$28,900
$28,781
$17,200
$11,580
$23,813
$119,549
$32,657
$33,244
$19,320
$13,923
$32,753
% of totalretail 20052000 2001 2002 2003 2004 2005
Forrester Mai 2000
Total US revenue (millions) 11%$44,784 $73,926 $110,748 $155,833$207,270 $269,158
Small appliances
Large appliances
Tool and garden
Furniture
Linens, home décor
6%
11%
10%
10%
4%
Home products
$493
$195
$603
$378
$563
$2,232
$857
$410
$1,630
$657
$1,106
$4,659
$1,291
$720
$3,481
$1,059
$1,705
$8,256
$1,756
$1,073
$5,812
$1,626
$2,248
$12,515
$2,207
$1,373
$8,009
$2,321
$2,707
$16,617
$2,677
$1,607
$10,325
$3,090
$3,198
$20,896 6%
% of totalretail 20052000 2001 2002 2003 2004 2005
Forrester Mai 2000
Total US revenue (millions) 11%$44,784 $73,926 $110,748 $155,833$207,270 $269,158
% of totalretail 20052000 2001 2002 2003 2004 2005
Total replenishment
Total miscellaneous*
Food, beverage, supplies
Health and beauty aids
Pet supplies
8%
11%
7%
3%
$3,107
$1,131
$1,352
$624
$2,859
$6,635
$2,455
$2,656
$1,523
$3,692
$12,041
$5,063
$4,460
$2,519
$4,590
$20,010
$10,441
$6,572
$2,996
$5,700
$31,169
$18,049
$8,672
$4,448
$6,929
$48,362
$31,392
$10,840
$6,130
$8,246
20%
Forrester Mai 2000
Different strategies for different productsStrategy Type of
productsDigital
products(music,video,
software)
Services(Banks,brokers,medical
services)
Productswith local
inventories(Food,drugs,
clothing)
Specialized products or tailormade
(automobiles, furniture,antiques)
Distribution Download Downloadsand mortar
ClickAnd mortar
Click
Barriers Few entrybarriers,
could createexit barriers
No entrybarriers.High exitbarriers(banks)
Few entrybarriers.
Could createexit
barriers(e-passports)
Few barriers
Branding Artist not site Key Key Product not site
Price sensitivity High High Low Variable
1-Digital products
• New networks
• Cost and price reduction
• Standard technology
Sales of music on the Internet(000 $ us)
0
1000
2000
3000
4000
5000
6000
2000 2001 2002 2003 2004 2005
CD Download
Source: Forrester Sept 2001
Source: MediaMetrix oct 2001
2- Services
• Travel agencies, Law, Medical services
• Cost reduction, standardization of basic functions
• Cross marketing and up-selling
3- Convenience goods
• Most of them are available within 1 mile from the source of demand
• 80% of consumption is made by 20% of goods (Pareto law)
Barnes&Nobles Amazon.com B&N.com
Sales 3 486 043,00 $ 1 151 765,00 $ 202 567,00 $Costs of goods sold 2 483 729,00 $ 887 567,00 $ 159 937,00 $Gross margin 1 002 314,00 $ 264 198,00 $ 42 630,00 $%Gross margin 28,75% 22,94% 21,04%
Sales and administartion 651 099,00 $MARKETING 269 924,00 $ 111553Technology 128 376,00 $ 21006DEPRECIATION 112 304,00 $ 163 368,00 $Other costs 6 801,00 $ 80 799,00 $ 32714Opertion costs 770 204,00 $ 642 467,00 $ 165273% Operation costs 22,09% 55,78% 81,59%Net margin 232 110,00 $ -378 269,00 $ -122 643,00 $%Net margin 6,66% -32,84% -60,54%
STOCKS 1 100 000,00 $ 200 000,00 $ 3 886,00 $Stock turnover 3,17 11,52 52,13
Thus...
• Consumers will want to shop in store AND surf on the net
• Retailers must provide both opportunities
• Retailers must provide real time information including their stocks
• Sell popular product in store with low margins
• Sell products with slow turnovers on line and increase margins
Make sure to play on both networks in a coordinated fashion
4- Specialty products
• Car, furnitures
• Inventory cost are often huge
• Yet consumers are still waiting often more than a month
2- What about advertising ?
Yet, there are opportunities
• Focus on the consumer not on the content
• Keep in mind that the consumer is active and searching
• Provide indication for your ROI
• Use personalization
Current StatusB2B
• The marginal contribution of e-commerce where EDI was already established– True opportunities for the standardization of protocols
• Winners: SAP, Oracle etc.– Important order givers gained power over small suppliers
• Market places– For commodities and indirect inputs
• Verticalnet Vs Dell computers
• Changing business models– From registration fees to transaction fees– Volume is the key
What have we learned ?• Internet per say will rarely be a competitive advantage• Internet should be seen as a complement to traditional
ways of competing• Make sure that it offer true added value, either as a
way to improve a process (banks) or as a way to distribute original content (MIT on line)
• Create an exit barrier not an entry one (Switching cost)• Central product must have unique value, do not rely on
advertising alone