E-Commerce

E-Commerce vs. E-Business We use the term e-business to refer primarily to the digital enablement of transactions and processes within a firm, involving information systems under the control of the firm E-business does not include commercial transactions involving an exchange of value across organizational boundaries

Features of E-commerce Is ubiquitous (available everywhere, all the time) Offers global reach (across cultural/national boundaries) Operates according to universal standards (lowers market entry for merchants and search costs for consumers) Provides information richness (more powerful selling environment) Is interactive (can simulate face-to-face experience, but on a global scale) Increases information density (amount and quality of information available to all market participants) Permits personalization/customization

Types of E-Commerce Classified by nature of market relationship Business-to-Consumer (B2C) Business-to-Business (B2B) Consumer-to-Consumer (C2C) Classified by type of technology used Peer-to-Peer (P2P) Mobile commerce (M-commerce)

Growth of the Internet A worldwide network of computer networks built on common standards Was created in late 1960s Services include the Web, e-mail, file transfers, etc. Can measure growth of Internet by looking at number of Internet hosts with domain names

The Growth of the Internet, Measured by Number of Internet Hosts with Domain Names SOURCE: Internet Systems Consortium, Inc. (www.isoc.org), 2005.

Growth of the Web The most popular service on the Internet Developed in early 1990s Provides access to Web pages (documents created with HTML) Can include text, graphics, animations, music, videos Web content in form of Web pages has grown exponentially, from over 2 billion pages in 2000 to over 1 billion pages in 2015

Origin of E-Commerce Precursors to e-commerce include Baxter Healthcare Electronic Data Interchange (EDI) French Minitel (1980s videotext system; still in use today) None of these precursor systems had the functionality of the Internet For our purposes, we date the beginning of e- commerce to 1995 Since then, has been fastest growing form of commerce in United States Figure: EDI (Electronic Data Interchange) Figure: 1980 Alcatel Minitel terminal with non-AZERTY keyboard

The Growth of B2C E-commerce SOURCE: Based on data from eMarketer, Inc., 2005a; Shop.org and Forrester Research, 2005; Forrester Research, 2004.

Need to reach to customers… Demand risk – started in 1888 - 90% of film sales and 85% of camera sales in the U.S. by 1976 - 1st digital camera in 1976 – again No. 1 in US in 2005 with $5.7 billion sales.

Need to reach to customers… Innovation risk Consumers are always looking for something new and different itunes Failure to meet the need for change may make business obsolete Typewriter Stay in touch with new ideas Emails, online catalogue, messaging, feedbacks

Need to reach to customers Inefficiency risk Always in need to reduce cost More emails, messaging or web portals than call centers or postage AirLines Cost of handling service requests than using online interactive forms FAQs Disintermediation Reformulate traditional business model Eliminate brokers, dealers, agents or offices Budget AirLines Physical inputs and outputs Car dealers

B2C Business Models: Web Portals A medium to increase growth by focusing product or market Tesco A way to create new market of existing products HATIL A customized interaction between a vendor and a supplier Internet banking An adaptive approach to focus on individuals Firefly A way to reach to consumers exceeding the location and size of business A way to diversify the market by new product in a new market bKash

Reaching to customers… Classifying customer segment Single Channel ING Direct Multi Channel Characteristics & reason for focus Efficiency Niche Players Traffic Drivers Triple Plays

Staples online presence turned a profit ahead of schedule (rare) Staples hires BC grads (recruiter, Jeff Warmenhover, is a former MBA student of mine) Kiosks to offer online only business services. Staples recently introduced kiosks in all 954 stores , shoppers can browse & buy anything in the inventory– idea is that if it's not in stock, allow someone to order it & have it delivered so that you don't lose a sale before someone walks out. It's the same software 'guts' as a web site, but don't allow them to surf. Staples online exceeded $450 million in 2000. In store kiosks allow stores to carry many more products than the average store. Unlimited room via kiosk. Show only some furniture, but have all of it in a kiosk Loyalty programs integrated across platforms. Look at consistency across site – it looks like a store & like a flyer. You can access the flyer online. It’s a truly integrated experience – (up top) find a store, shop by catalog. As your other article pointed out, this channel is cheaper, but allow them to buy anywhere. Barnes & Nobel: initially screwed it up: Prices were different – looked it up online, went into store, it was more expensive. How did you feel? You were pissed? Online couldn’t return offline (tax issue) Finally synchronized businesses under same brand with common loyalty program & pricing strategy. Office Depot already had a ship-to-one infrastructure from the catalog business. 20 warehouses and 2,500 delivery trucks. Online sales Q2 2000 were up 161% to $184 million. Stores sales increased just 8%. Office Depot expected to sell about $800 million of goods online in 2000. The company estimates that online transaction costs 35 cents vs. 90 cents for a faxed order and $2.50 for a phone call.

Reaching to customers… Success in a multi-channel environment “Right Channeling” / “Re-Routing” Success factors & technologies

Mitigating Risk in ‘Re-Routing’ Understand channel economics ‘true cost’ beyond raw margins: loyalty, frequency, acquisition costs, freight, returns, service Incentives to guide customers to the right channel “carrots & sticks” Communication program for internal & external constituencies

True Cross-Channel Design Customer clicks “Save Application” from any application page Banker in store retrieves all saved application data and can Complete the application. Source: Watson, Latinbanking.com

Right channeling Messages & Results

Messaging & alerts

B2C Business Models: E-tailer Online version of traditional retailer Types include: Virtual merchants Bricks-and-cricks Catalog merchants Manufacturer-direct

B2C Business Models: Content Provider Information and entertainment companies that provide digital content over the Web Typically utilizes a subscription, pay for download, or advertising revenue model

B2C Business Models: Transaction Broker Processes online transactions for consumers Primary value proposition—saving of time and money Typical revenue model—transaction fee Industries using this model include: Financial services Travel services Job placement services

B2C Business Models: Market Creator Uses Internet technology to create markets that bring buyers and sellers together Examples: Priceline.com eBay.com Typically uses a transaction fee revenue model

B2C Business Models: Service Provider Offers services online Value proposition: valuable, convenient, time-saving, low-cost alternatives to traditional service providers Revenue models: subscription fees or one-time payment

B2C Business Models: Community Provider Sites that create a digital online environment where people with similar interests can transact, communicate, and receive interest- related information. Typically rely on a hybrid revenue model

The future … Infrastructure Platform Software Social media, community, market place Platform Google analytics, Google AdWords Software Cloud computing Customer relationship management (CRM) for Salesforce sales, service, marketing, analytics, community, and mobile apps Business analytics Sisense for Target, Samsung Predictive analysis

Class Discussion How many of you use Google, Yahoo, or Microsoft’s Bing? Does the class differ from the overall Web population? Why do you use a particular search engine? Why is Google moving beyond search and advertising into applications? How is Bing trying to distinguish itself from Google? Do you think this strategy will work?

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