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.

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

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

Pure verses Partial EC

Degree of digitizationDimension 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 I (1995-2000)

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