Overstock.com E-Business Essay Example

Overstock.com E Overstock.com E-Business Essay Overstock.com E-Business Essay The e-commerce system chosen is the Overstock. com. Overstock. com is an online retailer offering a broad variety of high-quality, branded name goods at discount prices, including bedding, home decor, appliances, watches, jewellery, electronics, sporting goods, clothing and shoes. At the beginning, Overstock. com sold surplus and returned merchandise on an online E-commerce marketplace and liquidating the inventories of the failed dot-com companies at below-wholesale prices (Drummond, 2006). Recently, it has expanded to sell new merchandise and also offering manufacturers, distributors and other retailers an alternative sales channel for liquidating their inventory. In addition to its direct retail sales, Overstock. com has also offered online auctions on its website. The company’s major competitors are eBay and Amazon. com (Mann, 2005). b. The e-Marketplace. Overstock. com is considered as a private e-marketplace that is owned by a single company. In a sell-side e-marketplace, such as Overstock. om will sell either standard or customised products to individuals (B2C) or to business (B2B), this type of selling is considered to be one-to-many (Turban, King, Lee, Liang amp; Turban, 2010). Overstock. com uses the Internet to create a more efficient market for liquidation, closeout and other discount merchandise by providing consumers and businesses with quick and convenient access to high-quality, brand-name merchandise at discount prices. Besides that, Overstock. om operates the part of their website as an online auctions business, a marketplace for the buying and selling of goods and services-as well as online sites for listing cars and real estate for sale (Mann, 2005). Overstock. com is an example of virtual e-tailers that sell directly to consumers over the Internet without maintaining a physical sales channel. Virtual e-tailers have the advantage of low overhead costs and streamlined process (Turban et al. , 2010). General e-tailers, such as Overstock. om, selling a vast range of goods and services online, capitalize on the internet to offer such variety to a diverse group of customers geographically without the need to maintain a large physical storefront network (Mincedmedia, 2008). 2. Research into the e-business components. a. Organization. i. Possible internal organization functions involved the system. The internal organization of the Overstock. com is formed by few different departments. The sales and marketing department will find and retain customers by building effective customers relationships to increase the sales of the firm. Marketers of the Overstock. com uses several types of online advertising methods such as banner ads, e-mail advertising and video ads (Turban et al. , 2010). The engineering department will be in charge of the firm’s e-commerce system, online security, payment systems, IT compliance, application software, website design and maintenances and also data management. The firm’s IT engineer will be responsible to use technology expertise such as the defence and e-commerce security strategy, e-commerce payment systems, application of software and the knowledge in the web 2. to facilitate the online business of Overstock. com (Kelly, 2005). The accounting and finance department will be responsible in partnering with other county departments to leverage resources that are essential toward achieving related objectives and also ensuring that quality financial services and information is provided. In addition, the operations department does the day to day operation of the business. The operations department of the Overstock. com consist of the merchandise operational coordinator, co-op manager and system administrative. They handle all the clerical functions having to do with clearance, settlement, and execution of trades (Mincedmedia, 2008). This department keeps customer records and handles the day-to-day monitoring of margin positions. ii. Possible firms, suppliers and business partners. Part of Overstock. coms merchandise is purchased by or manufactured specifically for Overstock. com. Merchandise is obtained either by buying excess inventory, referred to as the companys direct business, or by selling the merchandise of other retailers, catalogue companies, and manufacturers on a commission basis (Mann, 2005). Among their products are handmade goods produced for Overstock by workers in developing nations. The shopping business of the Overstock. com includes both a direct business and a fulfilment partner business. Products from the fulfilment partner segment are from various industry verticals, such as florist supplies, restaurant supplies, and office supplies (Wang, Liu Koong amp; Bai, 2009). Overstock. com form partnerships with companies such as Hewlett-Packard, Kenneth Cole, Simon amp; Schuster, Samsonite, and Cuisinart. These fulfillment partners, constituting the former commission side of Overstock. coms business, drove the companys revenue growth high and following its IPO. iii. Possible business process associated with the system. The shopping business of the Overstock. com includes both a direct business and a fulfilment partner business (Overstock. com). The fulfilment partner business is one of the business process associated with the system, Overstock. com sell merchandise of other retailers, cataloguers or manufacturers ) through their Website. Overstock. om currently has fulfilment partner relationships with approximately 1,250 third parties on their website (Ferguson amp; Hlavinkha, 2007). Overstock. com also provides an online auction service on the Website. The Auctions business allows sellers to list items for sale, buyers to bid on items of interest, and users to browse through listed items online. The revenue for the merchandise returned to the Company that we sell at auction is recor ded on a gross basis. Revenue from the auctions business will be included in the fulfilment partner segment. Besides that, an online site for listing cars for sale was provided as a part of the Website. The cars listing service allows dealers to list vehicles for sale and allows buyers to review vehicle descriptions, and allows purchasers to contact sellers for further information and negotiations on the purchase of an advertised vehicle. Revenue from the cars listing business is recorded net and is included in the fulfilment partner segment. In addition, an online site for listing real estate for sale was provided as a part of the Website. The real estate listing service allows customers to search for active listings across the country. Listing categories include foreclosures, live and on-line auctions, for sale by owner listings and also broker or agent listings. Revenue from the real estate listing business is recorded net and is included in the fulfilment partner segment (PR Newswire, 2010). b. Possible technologies. i. Hardware, Software and Network telecommunications technology. Overstock. com needed equipment that would perform consistently and handle the traffic peaks that occur in the fourth quarter of the year without service degradation therefore, they chosen Foundry’s BigIron MG8 high-performance 10-Gigabit switches to power the backbones at its headquarters. Foundry is a leading provider of high-performance enterprise and service provider switching, routing and Web traffic management solutions and also an application service provider for Overstock. com, Inc. Foundry has helped them achieve the level of performance with a solution that will accommodate future growth and the payoff can be enormous in terms of customer experience and cost savings (Foundry Network, n. d. ). Overstock. com is using the OptiMine Software, a provider of intelligence software for advertising optimization. Their flagship product, OptiMine Paid Search Bid Management Application, forecasts the performance of each paid search ad placement each day and automatically sets optimal bids. Overstock. com also uses many other software such as Breach Security’s web defend and VPNs for website security purpose. Besides that, software like EDIs are used for online data interchange via emails and chat rooms; EFTs are used for the purpose of e-payment systems (â€Å"Breach†, 2009). Overstock. om uses the internet and extranet, private network that uses Internet protocols and network connectivity (VeriSign, 2008). Overstock. com uses these network and telecommunications technology to operate the online shopping, online auctions and online listing cars and real estates. It has been described as a state of mind in which the Internet is perceived as a way to do business with a selected set of other companies, the fulfillment partner companies to sell their products online (â€Å"Success St ory†, 2009). ii. Payment systems and security technologies. The payment system used by Overstock. com is majorly based on online credit card payment. In the United States, credit card holders of the American Express, Discover Card, MasterCard and Visa card are able to purchase goods online directly from Overstock. com website. ‘Bill Me Later’ is a payment method offered on the websites of many well-known merchants, including Overstock. com. The site offers credit through CIT Bank, allows purchases to be made online without using a credit card. Besides that, the payment systems of Overstock. om also have many special features, such as secure ordering/Payment system, on-line ordering shopping cart system, on-line order tracking system, customers info is confidential, gift services available and also live customer representative (Steiner, 2006). Lately, Overstock. com has integrated Auction Checkouts payment service into its auction platform. Third-party sellers on Overstock. com Auctions can now accept credit card payments for auct ion sales without having a credit-card merchant account (McDonald amp; Dunbar, 1998). One of the most important issues for a desirable e-payment system is the system should be based on well-established security principles (Turban et al. , 2010). Overstock. com uses the methods of address verification, manual review and fraud screens and automated decision models in preventing financial frauds in the payment system. For securing the networks of Overstock. com, the company uses firewalls, VPNs and IDSs and also teaming with some leading provider of application security assessment to optimize their Web security systems (Overstock. com, 2010). For example, Overstock. om chose Breach Security’s WebDefend web application firewall (WAF) to provide immediate compliance with the latest Payment Card Industry (PCI) Data Security Standard (DSS) (VeriSign, 2008). The system ensures that all web-facing application be protected against known attacks via web application firewall vulnerability scans or code review. c. Value of the e-business system. i. Tangible benefits. The ef fect of e-business in Overstock. com has brought several tangible benefits to the firm itself. The sales of Overstock. com have increased due to the some of the factors. Revenue has increased by having new customers from new markets, from existing customers due to the repeat-selling and also cross-selling (Turban et al. , 2010). By using the e-business technology, costs can be reduced as the efficiency of search and transaction costs have been improved. Marketing cost also can be reduced as we reduce time for customer service, reduce printing and distribution costs of marketing communications. Besides that, Overstock. com’s supply chain cost also can be reduced by reducing the levels of inventory and having a shorter cycle time in ordering. In addition, administrative cost also can be reduced from more efficient routine business processes such as recruitment, invoice payment and holiday authorization (Schwartz, 2002). E-commerce system allows Overstock. com to carry out businesses without the barriers of time or distance and therefore people can save time and cost. Customers can log on to the Internet at any point of time, be it day or night and purchase or sell anything one desires at a single click of the mouse. The relationship between the customers and Overstock. om also can be improved because the website also includes a support home page where the customer support, customer care contacts and also some frequently asked questions. Overstock. com also provides personalization services whereby the firm will notify customers by e-mail when there are new products, according to the specific user’s preferences (Deeter-Schmelz, amp; Kennedy, 2004). ii. Intangible benefits. The use of e-business system by the Oversto ck. com also brings a lot of intangible benefits to the organizations, individual customers and society. One of the benefits is the enhancement of products, with the e-business system Overstock. om get to expand its business by selling their own product and also selling some ‘fulfilment partnership’ products, and further on manages an online auction site and provides car and real estate listings. Besides that, the e-business system brings more rapid, more responsive marketing communications including public relations to the firm (Turban et al. , 2010). A faster product development lifecycle will also enabling faster response to market needs (Ferguson amp; Hlavinkha, 2007). A better customer service will be served as well because of the customer service home page on the Overstock. com web page. Customers can solve their problems quickly by searching the web page. The firm can also easily collect feedback from customers on products. This can assist the firm in meeting customer’s expectations (Drummond, 2006). The strategic position of the company can be improved as the Overstock. com includes value propositions such as complementarities and novelty. Overstock. com provides complementarities such as the bundling of products and services, for example, the website offers a wide variety of products and after purchasing these products, shipping services from will be also included by the company. The novelty of what Overstock. om introducing is about using innovative ways for structuring, connecting partners and fostering new market. For example, Overstock. com helps some firms to liquidate their inventories and also sell their products on the website under the â€Å"fulfilment partner† category. Besides that, Overstock. com also provides online auction, listing car and real estate for sale which encourages the fostering of new market. Overstock. com also can make out new partners and supporting existing partners more efficiently and effectively with a better management of marketing information, customer information and business partners’ information (Schwartz, 2002). ii. Alignment with company vision, mission and objectives. By using the e-business system, Overstock. com has significantly cut down the cost associated with marketing, customer care, processing and information storage. It also reduces the time period involved with business process re-engineering and customization of products to meet the demand of particular customers, increasing productivity and customer care services. Electronic commerce reduces the burden of transportation to conduct businesses and thereby raises the amount of funds available for profitable investment. It also enables efficient customer care services. Alternatively, it collects and manages information related to customer behaviour, which in turn helps develop and adopt an efficient marketing and promotional strategy (Deeter-Schmelz, amp; Kennedy, 2004). In fact all these benefits will help out Overstock. com to achieve their vision, missions and objectives. Overstock. com’s vision is to provide online shoppers with the best price and a superior customer experience with the values of honest, helpful, efficient, accountable, and trustworthy, and committed to profitability and service. The value and benefits of e-business systems in Overstock. om can help to reach its vision as the cost reduction of firms and the improved customer service and relationship will allow customers to buy products with a cheaper price and enjoy a superior customer experience (Wang, Liu Koong amp; Bai, 2009). Overstock. com’s main mission is to save consumers’ money (Overstock. com). With the e-business system in the Overstock. com, con sumers can compare and shop online for the lowest prices and also get information easily with details and demos. The standard of living of the consumers also can be improved as consumer can afford to buy cheaper goods and services. The e-business system also helps Overstock. com to achieve its mission. The objective of the Overstock. com is to become the dominant internet-based closeout solution for holders of brand-name merchandise, allowing them to dispose of that merchandise discreetly and with high recovery values, and to ultimately become a one-stop Internet-based discount shopping destination. 3. Possible e-business issues a. Security and privacy issues The lack of trust in Internet commerce applications may result in cautious business operators and clients to abstain from using the Internet for now and revert back to traditional ways of doing business. This eradication of trust being fuelled by continued stories of hacker attacks on e-commerce sites and intrusion of consumer data privacy (Marchany amp; Tront, 2002). There are two major threats faced by Overstock. com: Denial of Service (DOS) and financial fraud. DOS is still an attack in which many major e-commerce sites suffer whereby hackers rely on software and zombie PCs to launch the attacks. DOS attacks can be difficult to stop; a series of steps could be costly to combat these attacks. Overstock. com consumers use credit cards for online purchases where security and fraud are the major issues in making e-payments. Due to this issue, wide variety of tools such as address verification and other authentication services are employed to reduce the problems while considering the ease of use and the fit within the overall business context. However, it is impossible to totally overcome security and fraud issues as the victimized industries, users, and organizations are still vulnerable due to the failure of taking necessary precautions to avoid becoming a victim (Turban et al. , 2010). Consumer privacy is becoming the most common security issue following theft and fraud as top concerns in e-commerce. For example, selling consumer data without the customer knowledge or permission is the major internal threat to consumer privacy. This type of issue will be a resistance for people to participate in certain types of e-commerce transactions if the assurance of privacy is low or non-existent. If the majority of businesses are not considered to be secure, the confidentiality and integrity of the customer information will be in doubt (â€Å"Breach†, 2009). Hence, e-commerce security needs to be addressed not only at the business site with its servers/network ut also on the client side, which includes direct connected home computers. Despite of all the security and privacy issues flooding the society, security architecture of e-commerce sites has to be tailored to ensure consumer data privacy and company resources are not used to attack other Internet sites. There are guidelines for securing systems and networks to educate the consumer on these e-commerce security issues. Consumers playing their part in solving these issues are the most critical element of the e-commerce security architecture (Turban et al. , 2010). Besides that, training and orientation programs are critical to increase the general public awareness of security on the Internet. IT and financial control groups within the e-commerce site should form an alliance to overcome the general resistance to implementing security practices at the business level while industry self-regulation of consumer privacy should make recommendations to congress in order to introduce legislation on privacy issues. b. Marketing issues. One of the marketing issues faced by Overstock. com is competition. Two major competitors of Overstock. com are eBay and Amazon. om (Overstock. com, 2010). These two competitors are well known e-marketplace for the internet surfers (Mann, 2005). Overstock. com has an oligopoly market structure in which a small number of firms supply most of the market. There are only a few firms dominating the market such as big firms with large share of market sales. Firms in an oligopoly market structure are interdependent whereby they watch each other closely because of the competitive strategy. Oligopoly firms such as the Overstock. com normally use non-price competition accrue greater revenue and market share. It has a high barrier to enter the market and large existing firms enjoy economies of scale. However, new entrants tend to face higher production and set up costs. Overstock. com has to spend enormous amount of money on advertising to win and retain their customers and brand loyalty. Consumer behaviour is also one of the marketing issues faced by Overstock. com. It is difficult to create customer loyalty as it is very fast and easy for consumers to switch loyalty online. Hence, enhancing loyalty through methods such as e-loyalty programs is a must. Besides that, building trust is very difficult since people do not know or see each other. Amazon. com is using one-to-one marketing which can increase the degree of loyalty. This one-to-one marketing strategy is not exercised by Overstock. com which leaves them in the losing end if compared to its competitors (Mincedmedia, 2008). In order for Overstock. com to survive in this competitive market, their possible market strategy and segmentation is to set up their e-business system as their storefront and gain new market target and new market opportunities on online selling sites of car and real estate listing (Overstock. com, 2010).