ECT 250: Survey of ECommerce Technology

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ECT 250 Survey of E-Commerce Technology

• Introduction to e-commerce

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Introduction to the course

• What is e-commerce?
• What infrastructures are needed?
• E-commerce I vs e-commerce II
• Business and marketing issues
• Legal and security aspects
• Web sites design (Front Page)

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Things I have done on the Web

• Got information
• Bought/sold things
• Paid parking tickets lt
• Compared prices
• Made international phone calls
• Communicated with people
• Filled prescriptions
• Submitted grades
• Managed my investments and bank accounts
• Checked out my kids at daycare

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Electronic commerce

• Often the term electronic commerce is equivalent
  to shopping on the web.
• The term electronic business refers to the
  digital enablement of transactions within a firm
  that do not directly generate revenues from
  outside.
• In this course we will use the term e-commerce
  in its broadest sense.

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E-commerce

• We define e-commerce as the use of electronic
  data transmission to implement or enhance any
  business activity.
• Using the Internet and the Web to carry on
  commercial transactions
• A firms online inventory and other information
  systems

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Traditional commerce

• Marketing and selling driven by mass-marketing
  and an army of sales(wo)men
• Consumers passive targets of advertising
  campaign and branding tricks.
• Target audience categorized by strict
  geographical and social boundaries
• Information asymmetry info about prices, costs
  and fees could be easily kept hidden

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Types of e-commerce

• Business-to-consumer 65 billion (Amazon.com)
• merchandiser sells products to consumer
• Business-to-business 700 billion (eSteel.com)
• Inter-business exchanges, e-distributors,
  infomediaries
• Consumer-to-consumer 5 billion (Ebay.com)
• Consumers sell to each other via an online market
  maker
• Peer-to-peer Gnutella.com
• Users share files and applications (no central
  Web server)
• Government-to-consumer (IRS)
• Mobile commerce Japan and Europe
• Use of wireless digital devices to enable
  transactions on the Web

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Whats behind e-commerce?

• The Internet (late 60s) a worldwide network of
  computer networks built on common standards (350
  million computers).
• The World Wide Web (early 90s) the killer
  application that runs on the Internet
  infrastructure. (over 1-2 billion pages). With
  the invention of GUI, color, voice and video were
  added to the Internet.

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The growth of the Internet

• Internet hosts are growing at a rate of 45 per
  year.
• Time to reach 30 of US households
• Radio 38 years
• Television 17 years
• Internet/Web 8 years (1993)

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Growth of the Internet
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Growth of Web content
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Growth of B2C E-commerce
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Growth of B2B E-commerce
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E-commerce is not new

• Baxter Healthcare
• Early 1970s Primitive form of B2B using
  telephone-based modem to permit hospitals to
  reorder supplies
• 1980s PC-based remote order entry system
• 1980s Electronic Data Interchange (EDI) Permitted
  firms to exchange commercial documents and
  conduct digital commercial transactions across
  private networks
• 1981 French Minitel videotext system
• First B2C arena, 15 million in use throughout
  France

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E-commerce is not old

• 1991 The World Wide Web is created
• 1995 First advertising banners appear on
  Hotwired.com Modern e-commerce is born
• 1995 2000 E-commerce I phase (The dot com
  boom)
• 2000 Tech stock crash (The dot com bomb)
• 2000 - now E-commerce II phase ( Im still
  standing)

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E-commerce in perspective

• Although e-commerce has grown explosively, there
  is no guarantee it will continue to grow at these
  rates
• Confront own fundamental limitations
• B2C only about 1 of overall retail market
• With current growth rates, B2C will roughly equal
  the annual revenue of Wal-Mart in 2005
• EX in 1915 there were 250 US car manufacturer
• by1940 there were only 5

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E-commerce I and II

• E-Commerce I
• Explosive growth starting in 1995
• Widespread use of Web to advertise products
• Ended in 2000 when dot.com began to collapse
• E-Commerce II
• Began in January 2001
• Reassessment of e-commerce companies
• From clicks to bricks and clicks

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E-commerce I (1995-200)

• For computer scientist and information
  technologists
• Vindication of a set of information technologies
  developed over 40 years
• Extending from the early Internet to the PC and
  local area networks
• The vision of universal communications

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E-commerce I ( 1995-2000)

• For economists
• Prospect of a perfect Bertrand Market
• where price, cost, and quality information is
  equally distributed
• where a nearly infinite set of suppliers compete
  against one another
• where customers have access to all relevant
  market information worldwide
• Merchants have equal direct access to hundreds of
  millions of customers

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E-commerce I ( 1995-2000)

• Disintermediation
• displacement of market middlemen who
  traditionally are intermediaries between
  producers and consumers by a new direct
  relationship between manufacturers and content
  originators with their customers

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E-commerce I ( 1995-2000)

• Friction-free commerce
• information is equally distributed
• transaction costs are low
• prices can be dynamically adjusted to reflect
  actual demand
• intermediaries decline
• unfair competitive advantages are eliminated

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E-commerce I ( 1995-2000)

• First mover
• a firm that is first to market in a particular
  area and that moves quickly to gather market
  share
• Network effect
• occurs where users receive value from the fact
  that everyone else uses the same tool or product

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Amounts Raised by Venture-Backed Internet
Companies in 1996-2000
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The dot.com bomb

• Crash in stock market values of E-commerce I
  companies throughout 2000 marks the end to
  E-commerce I
• Led to a sobering reassessment of the prospects
  of e-commerce and the methods of achieving
  business success.
• E-commerce II begins in 2001

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Some reasons behind the crash

• Run-up in technology stocks due to enormous IT
  capital expenditure of firms rebuilding their
  internal business systems to withstand Y2K
• Telecommunications industry had built excess
  capacity in high-speed fiber optic networks
• 1999 e-commerce Christmas season provided less
  sales growth that anticipated and demonstrated
  e-commerce was not easy (eToys.com)
• Some tech companies had stock values 400 times
  their earnings, while traditional companies were
  selling for 10/15 times their earnings

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E-commerce I and II compared
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A short history of IPOs

• Between 1998 and 2000 venture capitalists poured
  an estimated 120 billion into approximately
  12,450 dot.com start-up ventures
• Investment bankers took 1,262 of these companies
  public in IPOS
• IPO shares were targeted to open around 15 per
  share, and it was not uncommon for them to be
  trading at 45 a share or more later the same
  trading day

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E-commerce organizing themes

• Technology Infrastructure
• development and mastery of digital computing and
  communications technology
• Business Basic Concepts
• new technologies present businesses and
  entrepreneurs with new ways of organizing
  production and transacting business
• Society Taming the Juggernaught
• global nature of e-commerce poses public policy
  issues of equity, equal access, content
  regulation, and taxation

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Some conclusions

• Although B2C e-commerce gets most of the
  (popular)
• press, B2B e-commerce is larger and has strong
• potential for growth.
• E-commerce is a rapidly changing area.
• Example Webvan.com
• IPO 34/share Now?
• Certain businesses are better suited than others
• for e-commerce

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