Business-to-consumer electronic commerce

Encyclopedia : B : BU : BUS : Business-to-consumer electronic commerce

Business-to-consumer electronic commerce (B2C) is a form of electronic commerce in which products or services are sold from a firm to a consumer.

Contents

1 Five Classifications of '''B2C''' E-Commerce

1.1 Direct Sellers

1.1.1 E-tailers:
1.1.2 Manufacturers:

1.2 Online Intermediaries

1.2.1 Brokers

1.2.1.1 Types of Brokers:

1.2.2 Infomediaries

1.3 Advertising-Based Models
1.4 Community-Based Models
1.5 Fee-Based Models

2 Advantages of B2C E-commerce
3 See also
4 Sources

Five Classifications of B2C E-Commerce

Direct Sellers

Companies that provide products or services directly to customers are called direct sellers. These types of B2C companies are the most well-known. There are two types of direct sellers: e-tailers and manufacturers.

E-tailers:

Upon receiving an order, the e-tailer ships products directly to the consumer or to a wholesaler or manufacturer for delivery.

Example: Amazon.com

Manufacturers:

The manufacturer sells directly to consumers via the internet. The goal is to remove intermediaries, through a process called disintermediation, and to establish direct customer relationships. Disintermediation is not a new idea as catalog companies have been utilizing this method for years.

Example: Dell.com

Online Intermediaries

Online intermediaries are companies that facilitate transactions between buyers and sellers and receive a percentage of the transaction’s value. These firms make up the largest group of B2C companies today. There are two types of online intermediaries: brokers and infomediaries.

Brokers

A broker is a company that facilitates transactions between buyers and sellers.

Types of Brokers:

Buy/Sell Fulfillment
*A corporation that helps consumers place buy and sell orders.
**Example: eTrade
Virtual Mall
*A company that helps consumers buy from a variety of stores.
**Example: Yahoo! Stores
Metamediary
*A firm that offers customers access to a variety of stores and provides them with transaction services, such as financial services.
**Example: Amazon zShops
Bounty
*An intermediary that offers a fee to locate a person, place, or idea.
**Example: BountyQuest (now defunct)
Search Agent
*A company that helps consumers compare different stores.
**Example: Shopping.com
Shopping Facilitator
*A company that helps consumers use online shops easier and potentially in a user customized interface, by providing currency conversion, language translation, payment and delivery solutions.
**Example: MyOrbital.com

The B2C model can save time and money by doing business electronically but customers must be provided with safe and secure as well as easy-to-use and convenient options when it comes to paying for merchandise. This minimizes internal costs created by inefficient and ineffective supply chains and creates reduces end prices for your customers. This could be beneficial especially if you are in the business of commodity-like products where you must be innovative and accommodating to gain and retain customers (Haag et al., Management Information Systems for the information age: Third Ed., 2006, p.338-339)

Payment Options for B2C e-commerce businesses: The following are types of online payment options that could be used in B2C e-commerce:

Financial cybermediary: an internet based company that facilitates payment between two individuals online usually by credit card. E.g. www.paypal.com

Electronic Cheque: transferring money from your chequing account to another over the internet. E.g. www.tdcanadatrust.com

Electronic bill presentment and payment (EBPP): a Computer system that generates electronic bills and sends them to customers over the internet. E.g. www.CheckFree.com

Smart Card: a.k.a. Debit cards that contain information about how much money you have and deduct purchases from that total. Provided by all banks.

B2C can be used no matter what product is being offered online. The following are the types of merchandise that can be sold easily online by a B2C e-commerce business: Convenience Goods: low priced products but that are bought frequently Specialty Goods: high priced merchandise that is ordered rarely and usually requires customization Commodity-like Goods: products that are the same where ever they are bought and are highly substituted. Digital Goods: products that are created and sent electronically. These are the best to provide given their low cost to keep in inventory and ship (Haag et al., Management Information Systems for the information age: Third Ed., 2006, p.338-339).

Infomediaries

An infomediaryTAE

Advertising-Based Models

In an advertising-based system, businesses’ sites have ad inventory, which they sell to interested parties. There are two guiding philosophies for this practice: high-traffic or niche. Advertisers take a high-traffic approach when attempting to reach a larger audience. These advertisers are willing to pay a premium for a site that can deliver high numbers, for example advertisements on Yahoo! or AOL. When advertisers are trying to reach a smaller group of buyers, they take a niche approach. These buyers are well-defined, clearly identified, and desirable. The niche approach focuses on quality, not quantity. For example, an advertisement on WSJ.com would chiefly be viewed by business people and executives.

Community-Based Models

In a community-based system, companies allow users worldwide to interact with each other on the basis of similar areas of interest. These firms make money by accumulating loyal users and targeting them with advertising.

Example: Yahoo! Groups

Fee-Based Models

In a fee-based system, a firm charges a subscription fee to view its content. There are varying degrees of content restriction and subscription types ranging from flat-fees to pay-as-you-go.

Advantages of B2C E-commerce

Shopping can be faster and more convenient.
Offerings and prices can change instantaneously.
Call centers can be integrated with the website.
Broadband telecommunications will enhance the buying experience.

Challenges Faced by B2C E-Commerce The two main challenges faced by B2C e-commerce are building traffic and sustaining customer loyalty. Due to the winner-take-all nature of the B2C structure, many smaller firms find it difficult to enter a market and remain competitive. In addition, online shoppers are very price-sensitive and are easily lured away, so acquiring and keeping new customers is difficult.

What Separates the Best from the Rest? A study of top B2C companies by McKinsey found that:

Top performers had over three times as many unique visitors per month than the median. In addition, the top performer had 2,500 times more visiters than the worst performer.
Top performers had an 18% conversion rate of new visitors, twice that of the median.
Top performers had a revenue per transaction of 2.5 times the median.
Top performers had an average gross margin three times the median.
There was no significant difference in the number of transactions per customer and the visitor acquisition cost.

Essentially, these masters of B2C e-commerce (eBay, Amazon, etc.) remain at the top because of effective communication and value to the customer..

Sources

Krishnamurthy, Sandeep. E-Commerce Management. Mason, Ohio: Thomson/South-Western, 2003.

Haag, Stephen, Maeve Cummings, Donald J. McCubbrey, Alain Pinsonneault, and Richard Donovan. Management Information Systerms: For the Information Age. 2nd Canadian ed. New York: McGraw-Hill Ryerson, 2004..

From Wikipedia, the Free Encyclopedia. Original article here. Support Wikipedia by contributing or donating.
All text is available under the terms of the GNU Free Documentation License See Wikipedia Copyrights for details.