Assignment 2 -- Possible Interview Questions in Careers in E-Commerce

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E-commerce 2019: Business. Technology. Society.

Fifteenth Edition

Chapter 9

Online Retail and Services

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Learning Objectives

9.1 Understand the environment in which the online retail sector operates today.

9.2 Explain how to analyze the economic viability of an online firm.

9.3 Identify the challenges faced by the different types of online retailers.

9.4 Describe the major features of the online service sector.

9.5 Discuss the trends taking place in the online financial services industry.

9.6 Describe the major trends in the online travel services industry today.

9.7 Identify current trends in the online career services industry.

9.8 Understand the business models of on-demand service companies.

Slide 2 is list of textbook LO numbers and statements

Blue Nile Sparkles for Your Cleopatra

Class Discussion

Why is selling (or buying) diamonds over the Internet difficult?

How has Blue Nile developed its supply chain to keep costs low?

How has Blue Nile reduced consumer anxiety over online diamond purchases?

What are some vulnerabilities facing Blue Nile?

Would you buy a $5,000 engagement ring at Blue Nile?

What’s New in Online Retail

Retail mobile e-commerce exploding

Social networks experiment with social e-commerce

Local e-commerce skyrockets to around $80 billion

Online retail still the fastest growing retail channel

Selection of goods increases, includes luxury goods

Specialty retail sites show rapid growth

New subscription-based model for online retailing

Big data used for predictive marketing

The Online Retail Sector

Most important theme in online retailing is effort to integrate online and offline operations

$20.4 trillion U.S. economy

U.S. retail market

Personal consumption of goods and services accounts for $13.9 trillion (about 69%) of total gross domestic product (G D P)

The Retail Industry

7 segments (clothing, durable goods, etc.)

For each, uses of Internet may differ

Information versus direct purchasing

Mail order/telephone order (M O T O) sector

Most similar to online retail sector

Sophisticated order entry, delivery, inventory control systems

Figure 9.1 Composition of the U.S. Retail Industry

Figure 9.1, Page 602

The retail industry can be grouped into seven major segments.

SOURCE: Based on data from U.S. Census Bureau, 2012.

Full description: An image shows composition of the U S retail industry. There are seven major segments of the U.S. retail industry, which are Consumer Durables, Specialty Stores, Food and Beverage, M O T O, Gasoline and Fuel, Online Retail, and General Merchandise.

E-commerce Retail: The Vision

The Vision

Reduced search and transaction costs; customers able to find lowest prices

Lowered market entry costs, lower operating costs, higher efficiency

Traditional physical store merchants forced out of business

Some industries would be disintermediated

Few of these assumptions were correct-structure of retail marketplace has not been revolutionized

Internet has created new venues for omni-channel firms and supported a few pure-play merchants

The Online Retail Sector Today (1 of 2)

Smallest segment of retail industry (about 10%)

Growing at faster rate than offline segments

Computers and consumer electronics generate highest percentage of revenue, followed by the apparel and accessories category

Around 80% of Internet users will buy online in 2018

Primary beneficiaries:

Established offline retailers with online presence (e.g., Staples)

Pure-play online retailers (e.g., Amazon)

The Online Retail Sector Today (2 of 2)

Omni-channel integration

Integrating web operations with physical store operations

Leverage value of physical store

Types of integration, e.g. online order, in-store pickup

Social e-commerce growth

Location-based marketing of local goods and services

Rapidly growing mobile platform

Figure 9.2 Online Retail Revenues by Category, 2017

Figure 9.2, Page 605

Computers and electronics is the leading online purchase category in terms of revenue generated, accounting for over 22% of all online retail revenues.

SOURCES: Based on data from eMarketer, Inc., 2018a, 2018b; authors’ estimates.

A bar graph shows online retail revenues by category for the year 20 17. The graph shows percentage of revenue on the y axis and sales in billions on the x axis. The data is as follows. Computers and electronics, 100 billion dollars and 22.1% of sales. Apparel and Accessories, 90.15 billion dollars in sales and 19.9%. Auto and auto parts, 43.18 billion dollars and 9.5%. Furniture and home furnishings, 42.27 billion dollars and 9.3%. Books, music, and video, 33.65 billion dollars and 7.4%. Health and personal care, 30.55 billion dollars and 6.7%. Toys and hobby, 22.93 billion dollars and 5.3%. Office equipment and supplies, 12.52 billion dollars and 2.9%. Hardware and home improvement, 13.14 billion dollars and 2.9%. Food and beverage, 12.61 billion dollars and 2.8%. Specialty, 10.88 billion dollars and 2.4%. Sporting goods, 5.89 billion dollars and 1.3%. Jewelry, 3.17 billion dollars and 0.7%. Other, 31.23 billion dollars and 6.9%.

Figure 9.3 The Growth of Online Retail in the United States

Figure 9.3, Page 606.

Online retail revenues will be an estimated $526 billion in 2018, and are expected to increase to $892 billion by 2022, almost doubling since 2017.

Full description: A graph shows growth of online retail revenues in the United States between the years 20 13 and 20 22. The x-axis shows years and the y-axis shows revenue in billions, ranging from 0 to 900 in increments of 100. The years and the corresponding revenues are shown as follows. 20 13, 261 billion dollars. 20 14, 298 billion dollars. 20 15, 343 billion dollars. 20 16, 391 billion dollars. 20 17, 455 billion dollars. 20 18, 526 billion dollars. 20 19, 604 billion dollars. 20 20, 691 billion dollars. 20 21, 787 billion dollars. 20 22, 892 billion dollars.

Analyzing the Viability of Online Firms

Economic viability:

Ability of firms to survive as profitable business firms during specified period (i.e., 1-3 years)

Two business analysis approaches:

Strategic analysis

Focuses on both industry and firm itself

Financial analysis

How firm is performing

Strategic Analysis Factors (1 of 2)

Key industry strategic factors

Barriers to entry

Power of suppliers

Power of customers

Existence of substitute products

Industry value chain

Nature of intra-industry competition

Strategic Analysis Factors (2 of 2)

Firm-specific factors

Firm value chain

Core competencies

Synergies

Technology

Social and legal challenges

Financial Analysis Factors (1 of 2)

Statements of Operations

Revenues

Cost of sales

Gross margin

Operating expenses

Operating margin

Net margin

Pro forma earnings-Earnings before interest, taxes, depreciation, and amoritization (E B I T D A)

Financial Analysis Factors (2 of 2)

Balance sheet

Asset

Current assets

Liabilities

Current liabilities

Long-term debt

Working capital

E-commerce in Action: Amazon (1 of 3)

Vision:

Lowest prices, best selection, most customer-centric

Business model:

Retail, third-party merchants, and Amazon Web Services

Financial analysis:

Continued explosive revenue growth, profitable

Strategic analysis/business strategy:

Maximize sales volume, lower costs and prices, acquisitions, mobile shopping, new products and services

E-commerce in Action: Amazon (2 of 3)

Strategic analysis/competition:

Online and offline general and catalog merchandisers, web services

Strategic analysis/technology:

Largest, most sophisticated collection of online retailing technologies available

Strategic analysis/social, legal:

Sales tax, patent lawsuits

E-commerce in Action: Amazon (3 of 3)

Future prospects:

Amazon has turned corner to sustainable profitability

Increased profits from Amazon Web Services

Amazon Prime

Continues to invest in future products and services

E-Tailing Business Models

Virtual merchant

Amazon, Newegg, Overstock, Wayfair, Blue Nile

Omni-channel merchants (bricks-and-clicks)

Walmart, Macy’s, J C Penney, Staples, Target

Catalog merchant

Lands’ End, L.L. Bean, C D W Corp, Cabela’s

Manufacturer-direct

Apple, Dell, Sony

Digital native verticals: Warby Parker, Everlane

Figure 9.4 Share of Online Retail Sales by Type of Company

Figure 9.4, Page 613

Virtual merchants account for 45% of online retail sales, although this percentage is heavily skewed by the dominance of Amazon, which by itself accounts for over 30%.

SOURCES: Based on data from Davis, 2018a, 2018b; eMarketer, Inc., 2016; authors’ estimates.

Full description: A pie chart shows a share of online retail sales by type of company. The information is as follows. Catalog merchants, 8 percent. Manufacturer-direct, 16 percent. Omni-channel merchants, 31 percent. Virtual merchants, 45 percent.

Common Themes in Online Retailing

Online retail fastest growing channel in retail commerce

Profits for startup ventures have been difficult to achieve

Disintermediation has not occurred

Established merchants need to create integrated shopping experience to succeed online

Growth of online specialty merchants (e.g., Blue Nile)

Extraordinary growth of social, local, and mobile e-commerce

Increasing use of big data analytics by retailers

Insight on Technology: Big Data and Predictive Marketing

Class Discussion

How does big data enable predictive marketing?

Are there any drawbacks to the increasing use of predictive marketing?

Have you experienced predictive marketing in your own shopping? If so, what was the experience like - were suggestions accurate and helpful?

The Service Sector: Offline and Online

Service sector:

Largest and most rapidly expanding part of economies of advanced industrial nations

Concerned with performing tasks in and around households, business firms, and institutions

Includes doctors, lawyers, accountants, business consultants, and so on

Employs 4 out of 5 U.S. workers

About 80% of U.S. G D P

Service Industries

Major service industry groups:

Finance

Insurance

Real estate

Travel

Professional services-legal, accounting

Business services-consulting, advertising, marketing, and so on

Health services

Educational services

Online Financial Services

E-commerce has transformed banking and financial services

Major institutions deploy online services

Online financial consumer behavior

Most online consumers use financial services sites

Fintech: Startup companies seeking to disrupt traditional financial services by using technology to unbundle services and deliver targeted solutions

Online Banking and Brokerage

Established brand-name national banks have taken substantial lead in market share

Almost 60% of U.S. adults use online banking

Online banking provides significant savings for bank

Early innovators in online brokerage (E*Trade) have been displaced by established brokerages (Fidelity, Schwab)

Online financial advisors (robo-advisors)

Examples include Betterment, Wealthfront, and Personal Capital Corp.

Multi-Channel versus Pure Online Financial Service Firms

Online consumers prefer multi-channel firms with physical presence

Multi-channel firms

Growing faster than pure online firms

Lower online customer acquisition costs

Pure online firms

Cannot provide all services that require face-to-face interaction

Financial Portals and Account Aggregators

Financial portals

Comparison shopping services, independent financial advice, financial planning

Revenues from advertising, referrals, subscriptions

Example: Yahoo! Finance, Quicken, M S N Money

Account aggregation

Pulls together all of a customer’s financial data at a personalized website

Privacy concerns: control of personal data, security, and so on

Example: Yodlee

Online Mortgage and Lending Services

Market is slowly growing; dominated by:

Established online banks, brokerages, and lending organizations

Traditional mortgage vendors

Pure online mortgage firms

Online mortgage industry has not transformed process of obtaining mortgage

Online lending services

Examples include Quicken Loan's Rocket Mortgage, Lending Club, Prosper, Social Finance Inc., among others

Online Insurance Services

Online term life insurance

One of few insurance products with lowered search costs, increased price comparison, lower prices

Most insurance still not purchased online

Online industry geared more toward

Product information, search; price discovery; online quotes; influencing offline purchase decision

Insurtech: startup companies using technologies such as big data, machine learning, and artificial intelligence to disrupt traditional insurance industry

Example: Lemonade

Online Real Estate Services

Early vision: Disintermediation of a complex industry

However, major impact is influence of purchases offline

Impossible to complete property transaction online

Main services are online property listings, loan calculators, research and reference material, with mobile apps increasing

Despite revolution in available information, there has not been a revolution in the industry value chain

Fintech example: OpenDoor

Online Travel Services (1 of 2)

One of the most successful B2C e-commerce segments

More travel is booked online than offline

Online travel services revenues in 2018: Over $200 billion

For consumers: More convenient than traditional travel agents

For suppliers: A singular, focused customer pool that can be efficiently reached through onsite advertising

Online Travel Services (2 of 2)

Travel an ideal service/product for Internet

Information-intensive product

Electronic product-travel arrangements can be accomplished for the most part online

Does not require inventory

Does not require physical offices with multiple employees

Suppliers are always looking for customers to fill excess capacity

Does not require an expensive multi-channel presence

Figure 9.5 Online Travel Services Revenues

Figure 9.5, Page 637

U.S. online leisure/unmanaged business travel service revenues are expected to reach over $228 billion by 2022.

Full description: A bar graph shows an increasing trend in revenues generated by online travel services. The x-axis shows years and the y-axis shows total online travel booking revenue in billions, ranging from 0 to 250 billion dollars in increments of 50 billion dollars. The years and the corresponding revenues are shown as follows. 20 16, 181 billion dollars. 20 17, 191 billion dollars. 20 18, 200 billion dollars. 20 19, 208 billion dollars. 20 20, 215 billion dollars. 20 21, 222 billion dollars. 20 22, 228 billion dollars.

The Online Travel Market

Four major sectors:

Airline tickets

Greatest source of revenue

Hotel reservations

Car rentals

Travel packages

Corporate online-booking solutions (C O B S)

Online Travel Industry Dynamics

Intense competition among online providers

Price competition difficult

Industry consolidation

Industry impacted by meta-search engines

Commoditize online travel

Mobile applications are also transforming industry

Social media content, reviews have an increasing influence on travel purchases

Insight on Society: Phony Reviews

Class discussion:

Should there be repercussions to individuals and/or businesses for posting false reviews of products or services?

Can phony reviews be recognized and moderated?

Do you rely more on some types of reviews or comments on websites and blogs over others?

Online Career Services

Two main players: CareerBuilder, Monster

Indeed, Glassdoor, SimplyHired, LinkedIn

Five traditional recruitment tools:

Classified and print ads, career expos, on-campus recruitment, staffing firms, internal referral programs

Online recruiting

More efficient, cost-effective, reduces total time-to-hire

Enables job hunters to more easily distribute resumes while conducting job searches

Ideally suited for Web due to information-intense nature of process

It’s Just Information: The Ideal Web Business?

Recruitment ideally suited for the Web

Information-intense process

Initial match-up doesn’t require much personalization

Saves time and money for both job hunters and employers

One of most important functions:

Ability to establish market prices and terms (online national marketplace)

Online Recruitment Industry Trends

Social recruiting

87% recruiters use social recruiting, LinkedIn

Mobile

Millennials and Gen X use primarily mobile devices

Job search engines/aggregators:

Data analytics and algorithms

Hiring by algorithm

Sifting online applications for key words

On-Demand Service Companies

Platforms for users to share/lease assets and resources

Bikes, cars, homes, rooms with beds, etc.

Fees collected from sellers and buyers

Use of online reputation systems, peer review

Successful firms are disrupters, lowering cost of services

Uber

Airbnb

Insight on Business: Food on Demand: Instacart and Grubhub

Class discussion:

What features or practices have made Instacart successful?

What challenges do grocery and meal delivery services face?

Have you used any grocery or meal delivery services? If so, what was your experience?

Careers in E-commerce

Position: Associate, E-commerce Initiatives

Qualification/Skills

Preparing for the Interview

Possible Interview Questions

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