E-Commerce: The Revolution is Just Beginning

Topic Objectives At the end of this topic, you should be able to do the following: Define e-commerce and describe how it differs from e-business Describe the unique features of e-commerce technology and how they are relevant to business Describe the major types of e-commerce and explain how they differ from each other

What is E-Commerce Definition of E-Commerce Key words The use of the Internet and the Web to carry out business transactions digitally Key words “digitally enabled transactions” Business transactions carried out digitally “commercial transactions” Involve the exchange of value (such as money) across organizational boundaries in return for products and/or services Note: without exchange of value, commerce do not occur

What is E-Business E-Business Digitally enablement of transactions and processes within a firm, involving information systems under the control of the firm E-business turns into e-commerce when an exchange of value occurs Example: Online inventory management system Key word “within a firm” Does not involve commercial transactions outside businesses or consumers

Degree of digitization Pure verses Partial EC Degree of digitization Dimension Digital Physical Product sold Software, music, electronic Magazine Books, flowers Delivery Process Through the internet Courier, postal, truck Agent Non-significant physical presence, location Brick and mortar, physical retail outlet Choi, et al., 1997

Paradigm Shift Traditional brick and mortar Mass-marketing Sales force driven process Customers as passive targets of advertisement campaigns and branding blitz Customers trapped by social and geographical boundaries Businesses create profits through information asymmetry information asymmetry occurs when the seller has more relevant market information than the buyer in a transaction. This will allow the seller to take advantage of the buyer.

Unique Features of E-Commerce The seven unique features of e-commerce technology Ubiquity (ubiquitous) Global reach Universal standards Richness Interactivity Information density Personalization / customization

Unique Features of E-Commerce Ubiquity Commerce is available just about everywhere, at all times It liberates the market from being restricted to a physical space (e.g. m-commerce) Marketspace (instead of marketplace) Reduces limitations of temporal (time) and geographical locations (place) Reduces transaction costs Examples of transaction costs are telephone calls, filling up forms, filing, searching for information, recording relevant information of transactions Reduces cognitive energy (mental effort) to transact

Unique Features of E-Commerce Global reach Permits commercial transactions to cross cultural and national boundaries far more convenient and cost effectively than in the past Increases the potential market size Reach A measure of the number of users or potential customers an e-business can obtain Television and newspapers can reach a specific region, and at best one whole country

Unique Features of E-Commerce Universal standards Strength of e-commerce technologies is that it employ universal standards Easily and readily adopted by most countries in the world Not true with telephones, radio and television Television signals, for example, are different between some countries

Unique Features of E-Commerce Richness Richness refers to the complexity and content of a message Traditional markets Provide personal, face-to-face services using aural and visual cues Challenge of e-commerce is to find ways to overcome lack of richness when communicating with customers The Web, multimedia technology and interactive nature of web sites have improved the richness of communication in business transactions What it lacks in richness is compensated with reach

Unique Features of E-Commerce Interactivity Technology allows for two-way communication between seller and consumer Television, radio and newspaper do not offer interactivity like the Web

Unique Features of E-Commerce Information density Reduce cost of Information collection, storage, processing and communications Increases the currency, accuracy and timeliness of information Prices and costs become more transparent Price transparency refers to the ability of customers to find out the variety of prices in the market Cost transparency refers to the ability of customers to find out the cost sellers pay for products

Unique Features of E-Commerce Information density The more sellers know about customers, the better able for them to implement price discrimination Price discrimination takes place when a seller sells products or services at different prices to different buyers (depending on the buyers’ willingness to pay)

Unique Features of E-Commerce Personalization Target their marketing messages to specific individuals by adjusting the message to a person’s name, interests, and past purchases Customization Design and produce the delivered products or services based on the buyer’s preferences or prior behaviour

Types of E-Commerce Type Name Description B-2-C Business to Consumers Online businesses selling to individual consumers B-2-B Business to Business Online businesses selling to other businesses C-2-C Consumer-to-consumer Consumers selling to other consumers P-2-P Peer-to-peer Use of peer to peer technology, which enables Internet users to share files M-Commerce Mobile commerce Use of wireless digital devices to enable transactions on the Web

Comparing E-Commerce I and II E-Commerce II (2000 onwards) Technology driven Business driven Revenue growth emphasis Earnings and profits emphasis Venture capital financing Traditional financing Ungoverned Stronger regulation and governance Entrepreneurial Large traditional firms Disintermediation Strengthening intermediaries Perfect markets Imperfect markets, brands, network effects Pure online strategies Mixed “click and bricks” strategies First movers strategies Strategic follower strength