IT for Management: On-Demand Strategies for Performance, Growth, and Sustainability

Twelfth Edition

Turban, Pollard, Wood

Chapter 8

Omnichannel Retailing, E-commerce, and Mobile Commerce Technology

Learning Objectives (1 of 5)

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Omnichannel Retailing

E-commerce—Online Retailing

Mobile Commerce

Mobile Payment and Financial Services

In-Store Retail Technology

Introduction (1 of 2)

Traditional brick-and-mortar stores face increasingly intense competition.

Consumers, armed with mobile devices, have more information than ever before about products, prices, and alternative places to shop.

Showrooming: consumers visit a store to look at merchandise, seek information and advice from salespeople, maybe even try on clothes, and then leave the store to make their purchases from an online retailer that offers lower prices.

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Introduction (2 of 2)

Online retailers also face significant challenges:

Maintaining an e-commerce website requires an ongoing investment in new technologies designed to enhance the online shopping experience

increase operational and logistical efficiency

maintain high levels of customer satisfaction

Companies with mobile commerce also face challenges:

Artificial intelligence

virtual reality

recommendation systems

new types of payment systems

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Keeping Up with Consumer Demands and Behavior (1 of 2)

Convenience

Retail shoppers hold price, product selection, and convenience to be the most important factors in their buying decisions

Consumers do price comparisons and product selections using the Web and mobile technology

Convenience, the differentiating factor, means:

being able to find just the right product without spending a long time searching

being able to pick up or return a product with little or no hassle.

being able to checkout or purchase products easily

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Keeping Up with Consumer Demands and Behavior (2 of 2)

Marketing Strategy

New tactics such as same day delivery, buy online pick-up in store, and curbside delivery are all examples of ways that retailers are trying to optimize convenience for their customers. Different business models:

Subscription-based retailing

Fulfillment as a service (FaaS)

online marketplaces,

Web and cloud services

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Digital Connections

Advances in Web technologies: APIs, symantec search technology, digital voice assistants (DVAs), and recommendation systems

Advances in mobile technologies: Growth of 5G networks

Social commerce: Social networking services become platforms for retailing goods and services

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Consumers Still Love to Shop in Stores

Advantages for traditional retailers:

Empowered employees

Critical “node” in the supply chain

Optimize shopping history data

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Supply Chain Is More Important Than Ever

Logistical infrastructure refers to the organization of a complex system of facilities, equipment, transportation, and other requirements necessary for the delivery of goods and services from the point of origin to the point of sale to the end user.

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The Omnichannel Retailing Concept

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E-commerce or “electronic commerce” is the buying and selling of goods and services on a computer network, such as the Internet or the World Wide Web.

M-commerce or “mobile commerce” is the buying and selling of goods and services using mobile devices (such as a smartphone) and a telecommunications or computer network.

Omnichannel retailing is a business strategy that provides customers with a seamless and integrated experience across multiple retail channels such as in-store, online, mobile and other sales and product distribution channels.

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Omnichannel Retailing: Questions

Describe the three factors that are most likely to influence consumer shopping behavior.

List some examples of things that retailers (online or in-store) do to increase convenience for their customers.

Why are retailers likely to view technology as both a blessing and a curse?

What is subscription-based retailing? List a couple examples of how different companies are applying this concept.

Explain why omnichannel retailing provides a better shopping experience for consumers.

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Learning Objectives (2 of 5)

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Omnichannel Retailing

E-commerce—Online Retailing

Mobile Commerce

Mobile Payment and Financial Services

In-Store Retail Technology

Changes in Consumer Shopping Behavior

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Customers frequently make use of multiple channels to make a purchase.

Increasingly, customers utilize mobile devices while shopping in a store.

Customers that shop in stores want to be able to check out or pay for their purchase using some form of mobile payment.

Most shoppers are willing to allow collection of data about their shopping and purchase behaviors.

Experiential shopping

In-Store Tech Improves Convenience and Enhances the Shopping Experience

Free, In-Store Wi-Fi to Aid Shoppers Using Mobile Devices

Autonomous Shopping Carts

Nike Speed Shop

Increased Use of In-Store Digital Displays

Novel Payment Systems

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In-Store Retail Technology: Questions

When evaluating new services and/or technologies that might attract shoppers to a store-based retailer, what criteria should managers consider when evaluating innovations? In other words, what areas of performance should innovations be expected to improve in today’s competitive retail environment?

If you were a retail manager, how would you evaluate the Nike Speed Shop service described in this section? Is this the kind of service that can scale over time? Would it become a sustainable competitive advantage for retailers who decided to provide the service?

What are some examples of experiential retail that are likely to appeal to younger shoppers in their late teens and early 20s?

Why does it make sense to offer free in-store Wi-Fi connections given the way that people like to shop these days?

Out of the three most important factors that influence where people shop, why is convenience probably the one that retailers should focus on the most (instead of product and price)?

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Learning Objectives (3 of 5)

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Omnichannel Retailing

E-commerce—Online Retailing

Mobile Commerce

Mobile Payment and Financial Services

In-Store Retail Technology

Types of E-commerce Markets: Business to Consumer (B2C)

Pure play e-commerce retailers are retailers that only operate online (the Web) and do not use other channels such as mobile or in-store retailing

When a retailer operates in both e-commerce and store-based channels, it creates opportunities for omnichannel retail practices that consumers say they like

Most of the top 10 U.S. e-commerce retailers also have physical store-based operations

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Business to Consumer (B2C)

Some relatively new e-commerce trends occurring today:

Mass Personalization

Use of Artificial Intelligence Applications

Recommendation Systems

A/B Testing of Product, Price, and Promotional Tactics

Consumer Use of DVAs for Search, Research, and Ordering

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Business to Business (B2B) E-commerce and E-procurement

Business-to-business (B2B) Markets

The buyers, sellers, and transactions involve only organizations

Enterprise forms electronic relationships with distributors, resellers, suppliers, customers, and other partners

B2B e-commerce will reach $1.8 trillion and account for 17% of all B2B sales in the United States by 2023

Business models for B2B applications:

Sell-side marketplaces

E-sourcing (the buy-side marketplace)

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Business to Business (B2B): Sell-side Marketplaces

Two types of e-commerce in sell-sideB2B markets: direct and marketplace.

Direct e-commerce model: the buyer organization is expected to come to a single seller’s site to view catalogs and place an order.

Marketplace e-commerce: the products of multiple companies are offered for purchase by one marketplace operator.

Creates greater competition for sellers (a buyer advantage)

Similar to B2C model, but the ‘C‘ is an organization.

Amazon Business; Alibaba wholesaling Chinese products; Dell Computer auctions through eBay; Overstock.com for obsolete of excess assets

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Business to Business (B2B): E-sourcing

Different procurement methods that make use of an electronic venue for identifying, evaluating, selecting, negotiating, and collaborating with suppliers.

Primary methods include: Online auctions, Request for Quotes (RFQ) processing, and private exchanges.

Secondary activities include: trading partner collaboration, contract negotiation, and supplier selection.

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Business to Business (B2B): E-procurement

Corporate procurement (corporate purchasing): transactional elements of buying products and services for operational and functional needs.

Direct procurement: buying materials to produce finished goods.

Indirect procurement: buying materials for daily operations.

E-procurement: reengineered procurement using e-business technologies and strategies.

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Business to Business (B2B): E-procurement Goals

Control Costs & Simplify Processes (streamlining)

Streamline within an organization’s value chain.

Align the organization’s procurement process with those of other trading partners, which belong to the organization’s virtual supply chain.

Analyze spending patterns in an effort to improve spending decisions and outcomes.

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Other E-commerce Markets

Direct-to-consumer (D2C) marketplace: composed of businesses that ship their products directly to consumers without using wholesalers, distributors, or other middlemen. Ex: Dollar Shave Club and Warby Parker (glasses and prescription eyeglasses).

Peer-to-peer (P2P) marketplace: exchanges that occur between two individuals. Ex: eBay and Craigslist

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Challenges to E-commerce (1 of 3)

Resolving channel conflict:

It is a conflict between an online selling channel and physical selling channels.

Channel conflict has forced some companies to limit their B2C efforts or not to sell direct online.

An alternative approach is to try to collaborate in some way with the existing distributors whose services may be restructured.

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Challenges to E-commerce (2 of 3)

Resolving conflicts within click-and-mortar organizations:

When an established company sells online directly to customers, it creates conflict with its own offline operations.

Conflicts may arise in areas such as pricing of products and services, allocation of resources, and logistics services provided by the offline activities to the online activities (e.g., handling of returns of items bought online).

To minimize this type of conflict, companies may separate the online division from the traditional division.

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Challenges to E-commerce (3 of 3)

Managing order fulfillment and logistics

Determining viability and risk of online retailers

Identifying appropriate revenue (business) models

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E-commerce Business and Strategic Planning

Online business and planning recommendations:

Build the marketing plan around the customer, rather than on products.

Monitor progress toward the one-year vision for the business in order to identify when adjustments are needed, and then be agile enough to respond.

Identify all key assumptions in the marketing plan. When there is evidence that those assumptions are wrong, identify the new assumptions and adjust the plan.

Make data-driven, fact-based decisions and plans.

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E-commerce—Online Retailing: Questions

Explain the differences between the various types of e-commerce marketplaces.

Why does channel conflict sometimes occur when companies sell their products through both traditional and online channels?

Explain the challenges faced by e-commerce companies that use personalization strategies to customize the advertisements and product recommendations that customers see when shopping online. How do some companies try to increase transparency regarding how they use consumer data?

Describe some of the new technologies being used by e-commerce retailers to improve service, convenience, and user experience.

List three online marketing planning recommendations.

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Learning Objectives (4 of 5)

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Omnichannel Retailing

E-commerce—Online Retailing

Mobile Commerce

Mobile Payment and Financial Services

In-Store Retail Technology

Mobile Commerce

Mobile Commerce, or M-Commerce:

The buying or selling of goods and services using a wireless, handheld device such as a cell phone or tablet (slate) computer.

Mobile E-Commerce

The use of a wireless handheld devices to order and/or pay for goods and services from online vendors.

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Mobile Commerce: Retailing & Marketing

Mobile Retailing

The use of mobile technology to promote, enhance, and add to value to the in-store shopping experience.

Mobile Marketing

A variety of activities used by organizations to engage, communicate, and interact over Wi-Fi and telecommunications networks with consumers using wireless, handheld devices.

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Mobile Advertising

Some advertisements are analogous to television advertisements. For instance, many “free” mobile apps are supported by in-app advertisements.

Frequently, mobile app developers will offer two versions of an app:

One will be free, but feature advertisements during use, and the other will require payment for the app that can then be used without displaying ads.

Another type of advertisement is unique to mobile devices. Location-based advertisements can be pushed out to a user’s home screen or text message app when certain criteria are met.

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Mobile Apps

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Many retail businesses can benefit by encouraging customers to download brand specific mobile apps.

Successful apps typically provide features that provide enhanced convenience and service to customers using the app.

Many companies that have developed and distributed apps have found that they can increase brand value to customers, enhance brand loyalty, and boost company sales and profits.

Information: Competitive Advantage in Mobile Commerce

In-Store Tracking

Tracking how a customer moves through a store, noting what displays the customer looks at, or what departments the customer spends the most time in can be extremely helpful for understanding individual consumer preferences as well as creating optimal store layout.

Systems for tracking customers based on signals emitted from smartphones and other mobile devices are being deployed.

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QR Codes in Mobile Marketing

Quick Response (QR) Codes

Customers scan the QR code containing a link to an Internet webpage.

Easier alternative to typing a URL address into a mobile browser.

Some experts believe, however, that QR code technology will never be as popular in the United States as it is in Asia.

Many smartphone users simply do not know what to do with a QR code.

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Mobile Entertainment

Many mobile apps have been created for music, movies, videos, games, adult entertainment, sports, and gambling apps.

Apps exist to check game scores; track news about specific athletes, teams, or sports; take part in fantasy team contests such as fantasy football; and participate in sports-oriented social networking services.

Apps are available to record workout times, schedule training exercises, record heart rates and a variety of other information related to athletic training.

The iTunes Store, Google, and Amazon continue to be leading distributors of digital music, movies, TV shows, e-books, and podcasts.

While still relatively small, the mobile gambling industry is expected to grow substantially over the next few years. Some predict that this type of mobile commerce could generate as much as $20 billion soon.

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Hotel Services and Travel Go Wireless

Smartphones and other mobile devices have become essential travel aids.

Most major airlines, hotel chains, and Internet travel agencies have developed mobile apps to help travelers manage their arrangements.

Airlines frequently give passengers the option of receiving up-to-date information about their flights through an app or via short message service (SMS) text messaging.

Google Maps is perhaps one of the most popular apps used by travelers

Other interesting mobile travel tools include apps that translate voice or text when traveling abroad, apps for finding nearby Wi-Fi hotspots, and apps created by several popular travel guides.

Most large hotel chains, independent hotels, and inns offer guests in-room, wireless high-speed Internet connections, although this is not always a free service.

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Mobile Social Networking

Facebook and other popular social media sites have added mobile access in recent years to stay competitive.

Snapchat is completely app-based.

All the most popular social networking sites offer apps that allow users to access their accounts from a smartphone or other mobile device, making social media a primary driver of growth in the mobile app industry.

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Mobile Commerce: Questions

Describe some of the ways that people are using mobile devices to shop for products and services.

What are some ways in which traditional brick-and-mortar retailers can use mobile technology to enhance a customer’s in-store shopping experience?

List four to five types of mobile entertainment apps that are widely available to consumers today.

List some ways that travelers and travel-related businesses are using mobile technology.

How are companies using QR codes to promote products and services to mobile consumers? Why are QR codes not as popular in the United States as they are in Asia and other parts of the world?

Explain why the mobile gaming market represents such a lucrative market opportunity for advertisers.

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Learning Objectives (5 of 5)

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Omnichannel Retailing

E-commerce—Online Retailing

Mobile Commerce

Mobile Payment and Financial Services

In-Store Retail Technology

Mobile Payment Systems (1 of 2)

Charge to Phone Bill with SMS Confirmation

It requires users to set up an account with a payment company such as Boku (https://www.boku.com). The amount of the charge is then added to the payer’s phone bill, and the telecom carrier remits this amount to the payee.

Near-field communication (NFC)

At checkout, the mobile user simply passes or taps their phone next to a merchant terminal and payment is transferred.

Mobile wallet systems

To make a payment, the shopper uses a password or fingerprint to open the payment app and then selects the credit card account they wish to pay with.

The mobile wallet app uses an NFC connection to transfer payment information to the retailer as described above.

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Mobile Payment Systems (2 of 2)

QR code systems

Several companies are developing mobile payment systems that generate a QR code on the user’s phone, which is, in turn, scanned by the retailer to complete the transaction.

Mobile Phone Card Reader

Phone attached device allows credit card swipe (Square.com, Paypal.com)

SMS and secure payment screens

Payment is initiated when the retailer sends a text message to the purchaser’s phone (purchasers can also initiate payment by sending a text to the retailer’s short code).

Once the order has been placed, the retailer sends a text message containing a link to a secure payment page created by the payment processing company.

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Mobile Banking and Financial Services

Mobile banking is generally defined as using a handheld device to perform banking transactions and other related activities

Uses combination of mobile media channels

(SMS, mobile Web browsers, customized apps)

The services offered include bill payments and money transfers, depositing checks, account administration, balance inquiries, accessing account statements

Mobile banking is a natural extension of online, or Web-based banking services.

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Short Codes

Banks and financial service organizations have two basic options for providing mobile services:

Smartphone users can download dedicated apps to conduct banking transactions.

The other option is to provide service through SMS text message technology.

A short code works like a telephone number, except that it is only five or six characters long and easier to remember.

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Mobile Banking Security Risks

Cloning Duplicating the electronic serial number (ESM) of one phone and using it in second phone, the clone. This allows the perpetrator to have calls and other transactions billed to the original phone.
Phishing Using a fraudulent communication, such as an e-mail, to trick the receiver into divulging critical information such as account numbers, passwords, or other identifying information.
Smishing Similar to phishing, but the fraudulent communication comes in the form of an SMS message.
Vishing Again, similar to phishing, but the fraudulent communication comes in the form of a voice or voicemail message encouraging the victim to divulge secure information.
Lost or stolen phone Lost or stolen cell phones can be used to conduct financial transactions without the owner’s permission.

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Mobile Payment and Financial Services: Questions

What are the two basic technologies used for mobile banking and financial services?

Why have e-wallets not been widely adopted and what will makers of e-wallets need to do to make this payment method more attractive to consumers?

What are the most common types of mobile banking activities consumers perform?

What are the most common security risks associated with mobile banking?

Research some of the mobile payment systems currently available to merchants and consumers so that you understand how each system differs from others.

What is a micropayment and why is it beneficial to consumers and businesses that mobile payment systems can process these types of transactions?

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Copyright

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