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Subject: Introduction to e-Commerce
Overview of Lesson Plan: In this first lesson, students participate in Internet-based research activities to familiarize themselves with e-Commerce websites and business models. They learn about the various ways businesses make money using the Internet and explore some of the most popular e-Commerce sites on the World Wide Web. Students can refer to these various models throughout this course, as they operate their ScoresUp site.
Suggested Time Allowance: 80 minutes
Objectives:
Students will:
- Define the term "e-Commerce Business Model."
- Review different e-Commerce business models:
- Identify the characteristics of an e-Commerce website that help to determine which business model the site follows.
- Explain how e-Commerce websites can and do incorporate characteristics of more than one business model.
- Explore www.restaurant.com, a website that uses a business model similar to that of the site your class will develop at ScoresUp.com.
Resources:
Review the following articles, "New Economy or Old Economy, a Shakeout is a Shakeout," at www.ebizchronicle.com/wharton01/29_shakeout.htm and, "Creating Value through e-Commerce Business Models," found at www.ebizchronicle.com/wharton/18_creating_value.htm. These articles will help you to set the stage for your students. (The website that these articles come from is www.ebizchronicle.com. You will most likely want to use this site for reference throughout the year, as well.)
As in most lessons, arrange access to the Internet and Netscape's "Navigator," or Microsoft's "Internet Explorer" (4.0 or better)
Note: The websites listed throughout the curriculum are mere suggestions. Please substitute or complement provided websites as you feel appropriate.
Activities:
- Discuss the term "Business Model" with your class. Make sure they understand that, in simple terms, a Business Model explains how a business intends to attract customers and make a profit. Explain that businesses can only succeed if they can create and deliver something (a product or service) that has value. Furthermore, explain that a successful business is one that can get a high enough price for its product or service that it can pay all of its costs and still make a profit. At this point in the discussion, talk about the dot.com crash in the Spring of 2000. Make sure your class understands that those companies that failed did so because they did not meet their own sales and profit/loss expectations.
- Go to www.ebay.com and ask your class if any of them have ever used the site. Ask any student who has used eBay to describe the purpose of the site. What you want the class to understand about eBay is that it provides people who want to sell things and people who want to buy things with an Electronic Marketplace. Ask the class the following questions about the eBay site:
Why do people who want to sell something use eBay?
Look for answers like:
- There are a lot of buyers at eBay
- Buyers can be from anywhere in the world
- eBay's search engine makes it easy for potential buyers to find a seller's product
- eBay's policies and rules help protect the seller from fraud
Why do people who want to buy something use eBay?
Look for answers like:
- There are a lot of things to buy at eBay
- eBay's search engine makes it easy for potential buyers to find the product they are shopping for
- eBay's auction format helps buyers find competitive prices
- eBay's policies and rules help protect the buyer from fraud
How does this site make money?
eBay makes money by charging sellers, who successfully sell their product at the site, a fee. eBay also charges for several specialized services available at their site, including the rental of electronic storefronts to sellers with many saleable items, and an online bill payment service that facilitates credit card transactions between eBay buyers and sellers. eBay also generates revenue by selling advertising space at their site.
How does this site identify its visitors?
In order to bid, buy, or sell a product at eBay, you must become a registered user. When you do, you tell eBay who you are and how you can be contacted. Discuss how collecting this kind of information is important for eBay*.
Before leaving the site, explain to your students that eBay was one of the first e-Commerce websites to generate a profit, over $11 million, as early as 1996. Point out that one of the biggest reason's that eBay's Auction Business Model is a success is that eBay does not have to produce, purchase, or ship the products sold at the site.
- The next site that the class will visit, Amazon.com, has over 10 million more users than eBay, and sold over $2 billion dollars worth of product in 2000, but still lost almost $1.5 billion during that same period. Using another search engine, like www.excite.com, have your students select a book that they would like to search for. Have them enter the name of the book into the search engine. The results page should include a graphic link promoting the availability of their specified book and other titles at Amazon.com. (Note: You need to make sure this search does result in the appearance of such an ad before asking the class to perform it. If it doesn't, go directly to www.amazon.com instead.)
Have your class answer the following question about the Amazon.com site:
Why would people visit this website even if they did not want to purchase something?
Some desired responses are:
- To see if a new book is available
- To check on price for various items
- To read a review from an actual customer
- To find books or references on a given topic
Go to the "About Amazon.com" page and invite different students to read sections of the page aloud. As they do, stop at appropriate times to discuss how shopping for an item at Amazon is different from shopping for an item in a traditional bookstore, or music store.
Do everything necessary to place an order for a chosen book, but do not submit the order. The purpose of this activity is to show students all of the customer information that is captured by Amazon's ordering process. This prepares students for understanding why they will want to collect user information for their ScoresUp site.
Before leaving the Amazon site, explain to the class that Amazon.com was a pioneer in e-Commerce. It has grown quickly because it used modern Internet technology to efficiently practice sound retail business practices. In order to purchase a book at Amazon, you have to identify yourself, making it easy for Amazon to find and contact you in the future. When you buy a book, Amazon's software remembers the purchase so that the next time a similar or related book comes out, you will receive e-mail from Amazon announcing it*. Because ordering books at Amazon is so easy and convenient, consumers are more likely to order additional products like CD's, DVD's, video games and toys, as the company expands into these new product fields. Point out that Amazon now conducts online auctions permitting customers to bid for items instead of charging everyone a standard price. Explain that this is an example of a website that uses two different Internet business models, Auction and Retail Distribution, at the same time.
Two important points to impress upon your students:
- e-Commerce sites collect user information
- e-Commerce sites use user contact information to send users promotional materials and announcements
*You can refer back to these examples in the future when you begin your discussion of promotion and your ScoresUp mass e-Mail function ("Mailing List").
Before leaving Amazon.com, discuss reasons for why the site continues to lose money. Explain that unlike eBay's auction model, Amazon's business model is basically retail, meaning that they purchase goods from manufacturers and wholesalers at one price and sell them to end users at a higher price. As a result, Amazon has to spend millions and millions of dollars handling the products they resell. They have to pay for shipping the products from their suppliers, storing the products in huge warehouses, preparing shipments of the products to customers, boxes, packaging material, etc.
Point out that one of the reasons Amazon is still around even though it has lost billions of dollars is because it has been successful increasing its sales every year. One of the ways it has increased sales is through rapid expansion into new product categories (i.e. from just selling books to selling music, videos, electronics, toys etc. etc.). Each new product category forces Amazon to spend lots of money to support it. Explain that Amazon's management has done a good job convincing investors that rapid and costly expansion into new product categories, while showing as a loss now, will soon pay off with huge and steady profits.
- Go to www.nytimes.com. Be sure you become a NY Times online subscriber prior to this class. At the home page, attempt to go to the complete article for today's top headline. When you do, you will be taken to a page asking you to become an online subscriber. The subscription is free so have as many members of your class sign up as possible. Ask the students how the NY Times can make money if the subscription is free.
Ask students how the NY Times can make money if the subscription is free.
Browse through the site to get answers to this question. As you do, you should hear the response advertising pretty quickly. When you do, click on one of the ads found at the site and show the class what happens.
Then go back to the NYTimes.com home page and click on "Media Kit" (one of the menu choices along the left-hand side of the home page). Then click on "audience and usage." Review the numbers with your class, stressing that the online version of the NY Times has over 11 million registered users and attracts 2.7 million visits per month. This means that advertisers get a tremendous amount of exposure. Explain that an ad that runs for about one month at the NY Times site currently costs approximately $70,000.
Explain that NYTimes.com uses an Advertising Internet business model for its site. Tell students that the site attracts a tremendous number of users by providing them with huge amounts of quality news coverage that changes on a daily basis. The site makes money by selling access to their 11 million users via advertising.
Discuss the fact that this is the same model that will be used for the class' ScoresUp site. Stress the importance of quality content. Without quality content, it is difficult to attract and retain users. Without users you do not have advertising value and will have a more difficult time attracting advertisers.
Before leaving the site, explain to the class that NYTimes.com also generates money from its free membership base by selling them additional services, such as access to archive articles, software that permits users to do the daily crossword puzzle, and products in the site's online store.
- Go to www.restaurant.com. Explain to the class that this site is a portal site. Portal is another name for doorway or entryway. Portal sites are those that offer Internet users a guided or controlled entryway into the Worldwide Web. Explain that search engine sites like Yahoo follow the Portal Business Model because web users stop there first to find the sites that they want to visit. They use Yahoo as their doorway to the Internet. Restaurant.com is a more specialized type of Portal site. It specifically focuses on helping users find, and do business with, restaurants.
Ask the class why team fans would visit such a site.
Look for answers like:
- To find a restaurant
- To make a reservation
- To see if a restaurant delivers or check its menu
- To see if a restaurant is open on a particular date & time
- To purchase a gift certificate
Explain that Restaurant.com drives business to participating restaurants by providing those restaurants with a website that attracts people looking for a place to eat. Explain that Restaurant.com site makes money by charging participating restaurants a fee.
Begin discussing how your class will do something similar to what Restaurant.com is doing. Tell them that they will form an in-class business that uses a website to drive customers to restaurants in their local community. Explain that instead of charging local restaurants an up-front fee however, your class is going to ask each participating eating establishment for a small percentage of the business your website generates. Also explain that the money raised will be donated to a local charity.
Take your class to www.scoresup.com for a quick preview of the model site found there. This website will be studied in greater detail in Lesson Plan 2.
Be sure that you have already successfully set up your class site beforehand. Have some information already input to show your students. You will most likely redo everything with your students during the next lesson, however, you want to give the students a good idea of what is to come.
Generate ideas for how your class can make their ScoresUp site as popular within their community as Restaurant.com is among the general public.
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