Concepts and Essentials of Electronic Commerce IT 361: E-Commerce Systems Chapter 1 Concepts and Essentials of Electronic Commerce Readings: Chapter 1 - The Revolution Is Just Beginning

Teaching Objectives Define e-commerce and describe how it differs from e-business. Identify and describe the unique features of e-commerce technology and discuss their business significance. Recognize and describe Web 2.0 applications. Describe the major types of e-commerce. Identify the factors that will define the next five years of e-commerce. Describe the major themes underlying the study of e-commerce. Lilac A. Al-Safadi

Pinterest: A Picture Is Worth a Thousand Words Lilac A. Al-Safadi

Pinterest Successful e-commerce co. Based on assumptions People love to collect things People love to show off their collections It has a global mission Founded in 2009 Allows: create virtual scrapbooks, pin of board, liking, commenting, follow links, find someone with shared tastes Lilac A. Al-Safadi

Pintesrest Fastest growing website in history to reach 10M users Currently has 50M users, X2+ than prev. year 3rd most visited website after Facebook & Twitter The stickest site (avrg 80min/session. 60% of users visit 1+ per week Lilac A. Al-Safadi

Pintesrest Similar to Facebook 2012 free business accounts 2013 free web analytics tool Revamp look 2013 introduced localized sites (UK, France) Who’s on Pintesrest? (brands, consumers, retailers) Developed with Django Ties to other social networks Mobile front (iphone app & HTML5) Lilac A. Al-Safadi

Pintesrest Challenges Copyright infringement Spam & scam Competition Lilac A. Al-Safadi

E-commerce Defined Internet vs. Web vs. App E-commerce involves digitally enabled commercial transactions between and among organizations and individuals Digitally enabled transactions include all transactions mediated by digital technology Commercial transactions involve the exchange of value across organizational or individual boundaries in return for products or services

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

E-commerce vs. E-business Lilac A. Al-Safadi

Why Study E-commerce? “TV Commerce” “Radio Commerce”, Direct mail Commerce” “Highway commerce” E-commerce technology is different and more powerful than any of the other technologies that we have seen in the past century. E-commerce brought shift in commerce (transform vs. shape) E-commerce has challenged much traditional business thinking (mass marketing, sales force-driven, passive trapped consumers, information asymmetry vs. price competitiveness, one national price vs. dynamic pricing, huge production vs. customization & personalization) Marketplace became highly price competitive (difficult to prevent consumer from learning cost, price discrimination, profit making) E-commerce has a number of unique features

Seven Unique Features of E-commerce Technology and Their Significance Ubiquitous (available everywhere, all the time) (market place vs. market space). Results: reduced transaction cost & cognitive energy. Offers global reach (across cultural/national boundaries). (market size & reach) Operates according to universal technical standards (low market entry for merchants, low search costs for consumers, price discovery, experience network externalities) Provides information richness (richness vs. reach) 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 Social technology

Web 2.0 The “new” Web Applications and technologies that allow users to: create, edit, and distribute content share preferences, bookmarks, and online personas participate in virtual lives M-M model Examples Twitter, YouTube, Instagram, Photobucket, Flickr MySpace, Facebook, LinkedIn Second Life Wikipedia Tumblr

Web2.0 features Reply on user to create content (consumer-generated content) Easy research capability Highly interactive Reply on broadband connectivity Marginally profitable Attract large audience Opportunities for targeted marketing and advertising, consumer rating & review of products

Types of E-commerce Classified by nature of market relationship Business-to-Consumer (B2C) Business-to-Business (B2B) Consumer-to-Consumer (C2C) Social e-commerce Mobile commerce (M-commerce) Local e-commerce

What are the benefits of apps for content owners and creators? Insight on Technology: Will Apps make the web irrelevant? Class Discussion What are the advantages and disadvantages of apps, compared with Web sites, for mobile users? What are the benefits of apps for content owners and creators? Will apps eventually make the Web irrelevant? Why or why not?

Potential Limitations on the Growth of B2C E-commerce Expensive technology Complex software interface Sophisticated skill set Persistent cultural attraction of physical markets and traditional shopping experiences Persistent global inequality limiting access to telephones and computers

Insight on Business: Start-up Boot Camp Class Discussion Why do you think investors today are still interested in investing in start-ups? What are the benefits of investing in a company that is a graduate of a Y Combinator boot camp? Is an incubator the best solution for start-ups to find funding? Why or why not?

Evolution of e-commerce 1995 – 2000 Invention 2001-2006 Consolidation 2007-present Re-invention Technology-driven Revenue growth emphasis Venture Capital financing Ungoverned Entrepreneurial Disintermediation Perfect market Pure online strategies First mover advantage Low complexity retail product Business-driven Earnings & profit emphasis Traditional financing Stronger regulation & governance Large traditional firms Strengthening intermediaries Imperfect markets, brands & network effect Mixed “bricks & clicks” strategies Strategic follower strength, complimentary assets High complexity retail products & services Mobile tech. enables social, local * m-commerce Audience & social network growth emphasis Smaller VC investment, early small form buyout by large online player Extensive government surveillance Entrepreneurial social & local firms Proliferation of small online intermediaries renting business processes of large firms Continue of imperfections, competition in select market Return of pure online strategies in new markets; extension of brocks & clicks in traditional retail markets First-mover advantages return in new markets as traditional web players catch up Retails, services, and content

Lilac A. Al-Safadi

Insight on Society: Facebook and the Age of Privacy Class Discussion Why are social network sites interested in collecting user information? What types of privacy invasion are described in the case? Which is the most privacy-invading, and why? Is e-commerce any different than traditional markets with respect to privacy? Don’t merchants always want to know their customer? How do you protect your privacy on the Web?

Key Terms e-commerce e-business information asymmetry marketplace ubiquity marketspace reach universal standards richness interactivity information density Personalization customization Web 2.0 Business-to-Consumer (B2C) e-commerce Business-to-Business (B2B) e-commerce Consumer-to-Consumer (C2C) e-commerce Social commerce mobile commerce (m-commerce) disintermediation friction-free commerce first mover network effect Lilac A. Al-Safadi