E-commerce 2009 Part 2

EBAY: The world's largest auction website

Question:

Lessons learned

Factors that ensure success

Maybe you are interested!

Compare with a website in the same industry in Vietnam

Ebay

To date, eBay is one of the most successful and

has the highest profit margin today. The business idea came to Pam Omidyar, an antique collector, and was developed by Pam's boyfriend Pierre Omidyar into a very successful online auction model.

Solution

In 1995, Omidyar founded an auction company called AuctionWeb, which was later renamed eBay, with an average of 500,000 items being auctioned every day. Today, there are about 20 million eBay users. eBay's first business was to provide an electronic marketplace for C2C auctions. In this model, computers act as auctioneers. On eBay, people can bid on almost anything. eBay charges a fee for posting an auction and the value of the auction transactions. The fee for posting auction information is also divided into different levels, with the highest fee reserved for auction items posted on the home page.

The auction process begins when the seller fills out an information form and posts it on eBay. The seller must also set a minimum bid and the length of time the offer will be valid. If the auction is successful, the buyer and seller can negotiate payment, shipping, warranties, and other terms. eBay acts as an intermediary through which the buyer and seller can conduct the transaction.

eBay does not engage in activities such as warehousing and shipping like Amazon.com and other retailers. eBay primarily serves individual customers, but it also has services extended to business customers.

In 2001, eBay began to participate in art auctions with www.icollector.com and www.sothebys.com. Due to lack of profit, in 2003, eBay and Sothebys separated into two operating segments, whereby eBay promoted Sothebys' traditional auction activities on Live Auction and at the same time promoted auction activities for antiques and fine art. In addition, eBay expanded its operations internationally, to date there are about 31 participating countries, typically the US, Canada, France, Sweden, Brazil, UK, Australia, Singapore and Japan. eBay also has its own sites in some countries such as China, India, Korea and Japan where activities currently account for 46% of eBay's sales. Buyers from more than 150 countries participate in eBay's activities. eBay also allows businesses to participate in auctioning products for both B2B and B2C models.

eBay has built 60 auction centers in the US, allowing buyers to find products in their neighborhoods, or even meet in person to conduct transactions. In addition, eBay also has specialized auction sites such as cars at eBay Motors. Transactions can be made anywhere, anytime. Wireless e-commerce transactions are also deployed.

In 2002, eBay Seller Payment Protection was implemented to ensure that payments were made more securely. Sellers were better protected against fraudulent card and check payments. As eBay became successful and had tens of millions of customers, it began to expand into retail. This may have been a response to Amazon.com's auction service, but it may also have been a logical step in diversifying its business. By the end of 2003, eBay had built several niche sites.

Another successful model is eBay Stores, where eBay rents space to individuals and businesses. Customers can use the space to buy and sell or bid on auctions. In 2002, eBay introduced the Business Marketplace, at ebay.com/businessmarketplace. This site brings together all of the business leads so businesses can find everything they need in one place.

Result

eBay has had a huge impact on e-commerce. eBay's model is not only to make money but also to build a large community to sustain its activities. With a total membership of 125 million people in 2004. According to the company's financial report, eBay sales reached 40 billion USD, bringing the company about 3 billion USD in revenue and about 500 million USD in profit.

It is evident that the only place where people are now doing more online than traditional commerce is e-auctions. E-retail is still 5% lower than traditional retail.

AMAZON.COM: Fulfill orders online

Question:

Lessons learned

Factors that ensure success

Compare with a website in the same industry in Vietnam

1. Difficulties:

In traditional retailing, customers go to the store to buy and take the goods home. In online retailing, customers order online and the goods are shipped to their homes. Therefore, warehousing becomes essential. However, this requires a lot of cost and time, even eliminating the advantages of online retailing. Amazon.com, the king of online retailing, has also faced this problem.

When it was founded in 1995, the first business model was “Virtual Retailing” with no stores, no inventory, and no distribution system. The original business idea was to simply accept orders online and accept payment. Then let the rest of the parties fulfill the orders. In a short time, Amazon.com realized that this business model could work for small retail stores but could not work for a giant retail store.

2. Solution:

Amazon.com decided to change its business model and handle its own inventory. The company invested about $2 billion to build warehouses across the United States. And quickly became a leader in warehouse management, warehouse automation, packaging, and supply chain management. The company outsourced the distribution of goods to customers to UPS and USPostal-Service.

any?

Amazon.com has fulfilled millions of orders so efficiently.

Step 1: When a customer places an order online, the computer checks the location

of the items. The computer also determines which distribution center within Amazon.com’s network will fulfill the order. Alternatively, the computer may also determine which supplier will fulfill the order if Amazon.com is acting as a middleman or retailer. The order is transmitted directly to the distribution center or supplier. The steps in order fulfillment at Amazon.com’s distribution centers, which are approximately 80,000 square feet in Ferny, Nevada.

Step 2: Warehouse management, the warehouse manager at the distribution center receives all orders and coordinates them online to specific employees.

Step 3: Items (books, games, CDs, etc.) are stored in shelves. Each shelf has a red light and a control button. When an order for an item is confirmed, the red light will automatically turn on. The delivery person walks along the shelf and picks the item out of the order. After picking up the item, the employee presses the button to reset the shelf. If the light stays on, they pick up another item. This repeats until the light goes out.

Step 4: The items are placed on a conveyor belt in a conveyor system approximately 15,000m long at each warehouse.

Step 5: The goods on the conveyor belt are transferred to a central location where the item code is checked against each order. They are then transferred to the packing area. The computer system processes the orders simultaneously, allowing items to be picked from multiple locations in the warehouse. Transferred to the same location for packing.

Step 6: If the customer requests gift wrapping, this will be done manually.

Step 7: Packages are packed, weighed, labeled, and delivered to one of the warehouse's 40 shipping ports. From there, they are shipped to UPS or

USPS. Throughout the entire process, goods are always scanned to get information about the status of the goods.

3. Results

Each warehouse can ship 200,000 items a day. All five warehouses can ship up to 3 million items a day during the peak holiday season. However, in 2004, the warehouses were only able to ship 1 million items a day, because of delays during peak hours. Amazon.com leases some of its warehouses to other retailers - Target and Toyrus. This system gives Amazon.com lower prices and greater competitiveness, especially since the company has become an online giant with thousands of items sold regularly. The company has been profitable since 2004.

To increase delivery efficiency, items are consolidated into one shipment. Returns are handled by a specialized company, Alterac.com, located in Aborn, Washington.

4. Lesson:

Amazon.com illustrates the complexity of order fulfillment for a major online retailer. Order fulfillment is a large part of e-commerce and is critical to the success of online retailing.

SEARCH WARS: Search Engine Model

Question:

Lessons learned

Factors that ensure success

Compare with a website in the same industry in Vietnam

1. Problem

One of the most competitive areas on the Internet today is Search Engines. The leading brands include Excite, Lycos, Altavista, Inktomi. These search engines rely primarily on keyword analysis – the frequency of keyword positions on Web pages. So far, the profits from search engines are very limited. For example, Altavista was developed by Digital Equipment to demonstrate high-performance hardware, but it did not bring any profit to Digital.

The war on the Web began in 1998 when Google introduced popular links. Google quickly became the leading search engine and the first to make a profit, with Google's revenue coming primarily from advertising and a successful IPO in mid-2004.

In February 2004, Yahoo changed its Web Directory model to an Internet Portal with Yahoo Search built on technologies from Altavista, Inktomi and AlltheWeb. In September 2004, Amazon.com introduced A9.com, which allows users to store search information and notes directly on the Web. In November 2004, Microsoft launched a test version of MSN search.

Google also faces many smaller companies in the Web search field such as Teoma.com, dipsie.com, clusty.com, snap.com… All of these companies want to be the next Google. With profits and reputation second Google. According to the founder of Internet Archeive 20% of Web transactions are concentrated on the top 10 Websites.

2. Solution

To face this competition, Google has launched many tools based on its search technology capabilities. Many of these tools are available in beta including: Froogle.com, catalogs.google.com, news.google.com, scholar.google.com, Google has also introduced google wireless, google groups, google answers. Strategically, Google is leveraging its leading brand in technology and areas beyond Web search. Sometimes these projects put Google in direct competition with e-commerce giants.

Print.google.com is similar to amazon.com “search inside the book” function; Gmail.google.com is directly competing with hotmail and yahoo; Google desktop is competing with windows search function.

3. Results

The new services that Google has launched that leverage its search technology to search for e-mail, books, and files on computers have gone beyond the scope of searching the web. These strategies by Google are aimed at fulfilling its mission “to organize the world‟s information and make it universally useful and accessible”.

Financially, Google has also proven successful, with sales of $806 million in the second quarter of 2004 alone. In November 2004, Google was valued at $52 billion, which was equal to the combined value of Ford and General Motors.

What is Google’s next strategy? According to financial experts, Google’s main business is search technology, sales and profits are mainly from advertising, just like the portals MSN and Yahoo. Will Google’s expansion strategies into new areas dilute the reputation and profits of the world’s number 1 search engine? Are these strategies necessary to support Google’s strategic development? What is Google’s real business model? The answers to these questions will determine Google’s next strategy in the digital space.

E-commerce 2009 Part 2 - 24

Comment