ECommerce Introduction

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E-CommerceIntroduction

• Daniel J. McFarland, Ph.D.

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Definitions (no prevailing definitions)

• E-Commerce
• Use of the Internet/Web to conduct business
  transactions and support business processes
• E-Business
• There is no standardized distinction between
  e-commerce and e-business
• However, some authors define E-business is an
  objective and e-commerce as a means by which to
  accomplish the objective

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Traditional Commerce

• A marketing paradox
• Customers are passive, often unwilling, targets
  of advertising campaigns
• Customers actively initiate most transactions
• With traditional commerce customers are largely
• Restricted to certain geographical and social
  boundaries
• Have limited search capabilities
• Traditional commerce selling is conducted through
  well insulated channels
• Large information dissymmetry exists between
  buyer and seller

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The Seven Features of E-Commerce

• ? Ubiquity
• ? Global Reach
• ? Universal Standards
• ? Media Richness
• ? Interactivity
• ? Information Density
• ? Personalization/Customization

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? Ubiquity

• E-commerce is not bound by the traditional limits
  of time location
• Now able to non-verbally transact from home,
  work, school, cell phone, or PDA
• Now able to non-verbally transact to small and
  large companies anywhere on the globe
• Now able to complete a transaction without having
  to coordinate buyer seller schedules a buyer
  may conduct business at anytime without regard to
  the sellers normal operating hours

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Benefits of Ubiquity

• Ubiquity promises to reduce the buyers
  transaction costs
• The costs of participating in the market
• Travel time/expense
• Coordination effort

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? Global Reach

• E-commerce is not bound by the geographic,
  social, or cultural boundaries
• A merchants potential market exposure equals the
  worlds on-line population (over 400 million in
  2001 and growing)
• Non-verbal transactions partially address
  language issues
• Always available transactions partially address
  time zone issues

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? Universal Standards

• Most traditional commerce technologies differ
  throughout the globe
• TV
• Radio
• Telecommunications
• Mobile Technologies
• E-Commerce is a global standard

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Benefits of Universal Standards

• Universal standards promise to reduce
• Market entry costs
• The costs to bring goods to market
• Consumer search costs
• The effort required to find suitable products
• First time in history a consumer is able to
  easily search for suppliers, prices, and delivery
  terms for a specific good throughout the world
• Reduces consumer/supplier information dissymmetry

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? Information Richness

• Richness is the complexity content of the
  message
• Rank-order of media richness for communications
• Face-to-face
• Telephone
• E-mail
• Letter (single addressee)
• Memo (multiple addressees)
• Flyer/bulletin

• Traditional trade-off with media is richness
  versus reach
• Rank-order of media richness for commerce
• Face-to-face
• Internet
• Catalog
• Telephone
• Fax

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? Interactivity

• 2-way communications
• Transaction has the ability to change based on
  the interactions (multiple future states)
• With the exception of the telephone, traditional
  commerce traditions

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? Information Density

• Information density describes the entirety of
  available information (for all market
  participants)
• Quantity
• Quality
• Traditionally, information density was extremely
  costly
• Print costs, face-to-face/telephone time,
• Storage and processing inadequacies
• Recipient of information may not be a willing
  participant (telemarketing)
• E-commerce can cheaply provide a massive amount
  of quality information in a non-invasive way

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? Personalization/Customization

• Personalization alters an otherwise generic
  (typically marketing) message to reflect the
  personal preferences and/or behaviors of each
  individual recipient
• Customization alters a product/service to reflect
  personal preferences and/or behaviors for each
  individual consumer

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Types of E-Commerce

• Business-to-Consumer (B2C)
• Business-to-Business (B2B)
• Business-to-Employee (B2E)
• Consumer-to-Consumer (C2C)
• Peer-to-Peer (P2P)
• Mobile Commerce (M-Commerce)

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B2C

• A business provides goods/services directly to
  consumers
• e.g., Amazon.com

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B2B

• A business provides goods/services to another
  business
• e.g., eSteel.com

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B2E

• A business provides internal information/resources
  to its employees
• e.g., internal job postings, production data,
  quality data, health plan information

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C2C

• A forum whereby consumers may transact with other
  consumers (like a yard sale)
• e.g., eBay.com

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P2P

• Consumers share files with each other directly
  without having to meet in a forum (as required
  by C2C)
• Similar to Napster.com and Kazaa.com without
  having to go through the host site
• e.g., Gnutella

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M-Commerce

• Providing Internet accessibility and e-commerce
  capabilities to wireless devices such as cell
  phones personal data assistants (PDA)

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The Future of E-Commerce

• Understanding Internet Usage
• Where do search engines look?
• Limiting factors for consumers
• Costs
• Complexity
• Culture
• Infrastructure
• That was then, this is now

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Internet UsageA Spiders Web?

• Early conceptualization of Internet usage
• Everything is interconnected
• A web site can get to any other web site in 19
  clicks

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Internet Usage Bow Tie
SCC Strongly connected components Finding of
Internet usage studies conducted by IBM, Compaq,
AltaVista
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Limiting Factors for Consumers

• Home PC penetration has stabilized at _at_48 of
  households
• Expense min 500 hardware, 20/month
• Skills
• Setup complexity
• Operational complexity
• Troubleshooting complexity
• Culture
• The shopping experience is a social event
• Infrastructure
• Many countries do not provide an adequate
  infrastructure to support e-commerce (clean,
  reliable power and telecommunications)

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That was then, this is now

• Early E-Commerce
• Technology-driven
• Revenue growth emphasis
• VC financing
• Ungoverned
• Entrepreneurial
• Disintermediation
• Perfect markets
• Pure on-line strategies
• First mover advantages

• Future of E-Commerce
• Business-driven
• Earning/Profit emphasis
• Traditional financing
• Regulation/governance
• Large, traditional firms
• Strengthen intermediaries
• Brands, network effects
• Mixed (clicks bricks)
• Strategic follower strength

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Predictions

• Annual e-commerce sales will grow 45 each year
  for at least the next 3 years
• E-commerce traffic is increasing at the rate of
  60 annually
• Product/Service offerings creativity will match
  the growth in e-commerce sales traffic
• Top few sites will continue to garner the vast
  majority of audience share