SMART COOKIES: Living with the internet - Once, the internet was ripe with the promise of many B2C business models. How did they pan out? Smart Cookie reviews his own web habits

SMART COOKIES: Living with the internet - Once, the internet was ripe with the promise of many B2C business models. How did they pan out? Smart Cookie reviews his own web habits - What were the different B2C business models?

by ANDREW WILEMAN, a strategy and organisation consultant;e-mail: wilemanae@aol.com
Last Updated: 31 Aug 2010

What were the different B2C business models?

They were the three or four Cs: Connectivity, or Communication (like an ISP); Content (a portal, FT.com, MapQuest); Commerce (Amazon); and Community (such as ... well, Community disappeared rather quickly). In practice, these propositions overlap. AOL gives you ISP connectivity and portal content, and tries to sell you stuff. Napster was free content and might become commerce. Portals support communities - for example, game players.

Which models have been successful so far?

As a user, I've had great value on all three C-fronts. I'd rank the impact thus: first, connectivity; second, commerce; third, content. E-mail communication has transformed my work and personal life. E-commerce has transformed my buying behaviour in certain areas. Internet content has had a big but narrow impact, mainly on my professional consulting life.

In terms of profitability for the business providers, I'd change the ranking: commerce, connectivity, then content.

So how are you using the net now for e-commerce?

I've become totally internet-dependent in travel, financial services and IT - which together account for 20% to 25% of my annual expenditure.

I book online directly with the low-cost airlines for most of my personal flights in Europe (easyJet and Ryanair are great models for how to do online transactions). I use Expedia for car rental. Hotels are still a pain, but thehotelshop.com is pretty useful - and I always use the net to track down independent hotels, B&Bs and summer villas. I'd like to do intercontinental business bookings and package tours on the net, but Trailfinders and Kuoni need to get their online act together.

In financial services, my two main relationships are totally online: First Direct for banking, and Schwab for trading European and US stocks. I get high interest rates and low charges, no physical statements, and instant access to information. When I'm looking into buying a new financial product, if it isn't online on a decent site, forget it.

As for IT, we're talking Dell. There is no less painful way of buying a new laptop than configuring it on Dell's web site and then getting the sales rep on the phone for the close. Fujitsu, Sony and IBM are so poor online that I can't switch.

And are these all business successes?

In America, the two leading new online travel agencies, Expedia and Travelocity, are now the top intermediaries for 'simple' leisure and small-business travel, with billion-dollar valuations. In the UK, EasyJet and Ryanair take more than 80% of their bookings online. In the US, individual stock trading is done primarily over the net. Here, all my friends are converting to online banking and investment. Dell makes almost all its sales worldwide over the net.

The net has driven down transaction costs in these categories by 90% compared with bricks-and-mortar branches and stores, and by 50% or more compared with closing a sale by phone alone. It's a sneaky kind of cost reduction: much of the time and work is done by consumers. But they still find it a more efficient, higher-quality experience, usually at a better price.

Most big B2C e-commerce successes are clicks-and-mortar businesses. There are only a handful of real net-era start-up successes, all of them early players in the US: the American travel sites, Amazon, e-Trade, e-Bay. The big marketing spends needed to make it as an e-tailer have actually increased barriers to entry.

Where next for B2C e-commerce? Where are the untapped opportunities?

The biggest are infrequent large purchases, such as new and second-hand cars, property, architects and builders, utility contracts - where you may not close a transaction online but you'll use the net for research and developing a short-list. (A personal example: I just booked myself a residential language course in Spain, and I chose Don Quijote because its web site was way above any other.)

I'm less enthusiastic about frequent physical purchases, like groceries. Tesco.com is getting some take-up, but for me there's too much hassle in home delivery (timing, returns, substitutions, set-up). And this isn't a lower-cost model: supermarkets spent decades training consumers to pick their own groceries; now they're re-inventing the milk round.

That's Commerce. How about the other Cs?

It's a cliffhanger - to be continued in your January MT.

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