Electronic Commerce School of Library and Information Science History and development of Ecommerce I. What is ecommerce? II. Where did it come from? III.

Electronic Commerce

School of Library and Information Science

History and development of Ecommerce

I. What is ecommerce?

II. Where did it come from?

III. What’s happening now?

IV. Where is it going?

Electronic Commerce




Our goals:

We would like to understand where ecommerce came from

What are the antecedents of ecommerce?

It also involves identifying key characteristics of the infrastructure required to support it

What are the economic, political, organizational, social and technological factors that help and hinder the spread of ecommerce?

Electronic Commerce


A variety of definitions

It is:

sharing business information,

maintaining business relationships,

conducting business transactions,

by means of telecommunications networks

Zwass, (1996) http://www.cba.bgsu.edu/ijec/v1n1/p003full.html

Electronic Commerce


It is

A commercial activity dealing directly with the trading of goods and services and with other related business activities

Electronic communication media play a central role

These activities include

The communication of information

The management of payment

The negotiating and trading of financial instruments

The management of transportHeng, M.S. (2003). Understanding Electronic Commerce from a Historical Perspective 12 Article 6. Communications of the Association for Information Systems 104-118.

Electronic Commerce


It is

Digitally enabled commercial transactions between and among organizations and individuals

All transactions are mediated by digital technology

Commercial transactions involve the exchange of value across organizational or individual boundaries

Value can be money or goods and services

E-business is the digital enablement of transactions and processes within a firm

Laudon, K.C. and Traver, C.G. (2001). E-commerce: Business, Technology, Society. Boston,: Addison Wesley. 6.

Electronic Commerce


It also refers to the procedures, policies and strategies required to support the incorporation of electronic interaction into the business environment

Information Policy Council (1997) http://www.wa.gov.au/IPC/strategies/ecsexov/ecsexov7.html

Electronic Commerce


Electronic commerce denotes the seamless application of information and communication technology from its point of origin to its end point along the entire value chain of business processes conducted electronically and designed to enable the accomplishment of a business goal

These processes may be partial or complete and may encompass business-to-business, as well as business-to-consumer and consumer-to-business transactions. Wigand, R.T. (1997). Electronic Commerce: Definition, Theory, and Context. The Information Society, 13 (1-16).

Electronic Commerce


A working definition of ecommerce focuses on :

The exchange of goods and services across an interactive digital network

A computer-mediated and virtual market with new relationships among businesses and consumers

A digital means of exchange (digital money, secure credit card transactions)

New business strategies, models, and processes to gain a competitive edge in the digital marketplace

Technologies for privacy and to protect IP

A supportive legislative and regulatory environment

Electronic Commerce


http://www.intranetjournal.com/features/Ecommercetut.html

Geller, D.P. (2000). Finding Your Way Around E-commerce

Infrastructure

Backend

Customer apps

Electronic Commerce


Ecommerce involves online activity supporting the “virtual value chain”

Inbound logistics

Production processes

Outbound logistics Sales

Customer supportMarketing

Internal activity

External activity

Electronic Commerce


Ecommerce:

Directly connects buyers and sellers

Supports fully digital information exchange between producers, suppliers, sellers, buyers

Allows global activity 24-7-365

Allows interactivity and adaptation to customer behaviors

Encourages real time updating

Electronic Commerce


It enables companies to

Be more efficient and flexible in their internal operations

Work more closely with their suppliers,

Be more responsive to the needs and expectations of their customers

Select the best suppliers regardless of their geographical location and

Sell to a global market

Electronic Commerce


Ecommerce can be divided into five distinct categories:

Business business

Network-based ordering from suppliers, invoicing, making payments ($700B 2001)

Business consumer

Web based electronic retailing ($65B 2001)

Business government

Transactions such bidding for government contracts

Consumer government

Epayment of taxes, receiving govt. services

Consumer consumer

Peer-to-peer, bartering, auctions ($5B 2001)

Electronic Commerce


CorporateISP/VAN

Dist

Manufacturing

SuppliersGovernment

Banks

Credit CardCompanies

Retail

Consumers

Internet ServiceProviders

The major players

Electronic Commerce


The core ofecommerce

Ecommerceareas

Traditionalcommerce

Virtual players

Physical process

Digital process

Physicalproduct

Digitalproduct

Physicalagent

Digitalagent

Choi et al. (1997) The Economics of Electronic Commerce. p. 18

The ecommerce marketspace

Electronic Commerce



I What is ecommerce?




Electronic Commerce



Taking a broad historical perspective (Heng 2003)

Commerce in 13th century Europe saw the rise of intermediaries

Traders conducted business to make a profit by buying and selling goods and services

The effect was to promote efficiency between production and consumption

It indirectly promotes utilization of resources

It created specific markets for specific products

And commercial institutions (banks) and practices (insurance) and raised the level of human capital

Electronic Commerce


More recently, the globalization of commerce paved the way for ecommerce

The development of a global telecommunications infrastructure

The rise and pervasiveness of computing in daily life and work

The rapid diffusion of ICTs

The emergence of the networked organization

Supply chain management, just-in-time inventory, sophisticated IT

Shift to knowledge/information economy

Electronic Commerce


More immediately, there were several precipitating conditions

Business to business use of EDI

The continued decrease in the costs of computer hardware and software

The disappearance of the NSF AUP prohibiting commercial activities on the net

The rapid growth of the web (the third wave)

The rise of the profitable ISP

Electronic Commerce


Definitions of EDI

The transmission of unambiguous business information in standard syntax between computers of independent organizations

The interchange of standard formatted data between computer application systems of trading partners with minimal manual intervention

The electronic transfer, from computer to computer, of commercial and administrative data using an agreed-upon standard to structure the data

Electronic Commerce


An example of an EDI transaction for purchase, shipping, and payment taking place between computer systems

1. Buyer --> Purchase order --> Seller

2. Seller --> Purchase order confirmation --> Buyer

3. Seller --> Booking request --> Transport company

4. Transport company --> Booking confirmation --> Seller

5. Seller --> Advance ship notice --> Buyer

6. Transport company --> Status --> Seller

7. Seller --> Invoice --> Buyer

8. Buyer --> Payment --> Seller

Electronic Commerce


Costs

Large initial investment in proprietary hardware and software

Changes in routine business practices

Only machine-to-machine communication

Investing in training and education

Costs of maintenance and upgrading

Adjusting to changing standards

Actual use has fallen far short of expectations

Electronic Commerce


However, the use of EDI has been important in preparing businesses for ecommerce

They understand

The exchange of digital information over a computer network

The exchange of digital goods and services among businesses and

Electronic funds transfer for payments

Electronic Commerce







Electronic Commerce



Technical: The infrastructure necessary to support ecommerce is almost in place

The hardware and software is becoming morepowerful and is dropping in price

Connectivity, including broadband and wireless, is spreading rapidly, but the last mile is a “pot of gold”

Telcos, ISPs, the cable company, and satellite/wireless services are competing for the home

The pipes on the net are high pressure fire hoses

The line that goes into your home is a straw

Who will connect to the home and how will they do it?

Copper wire Fiber optics TV cable Wireless Satellite Wall plug

Electronic Commerce


Unique features of ecommerce technology

Ubiquity of ICTs and the growth of wireless broadband

Lowering costs and extending the marketspace

Global reach of the net across national boundaries

Universal standards allowing interconnection

Richness and interactivity of digital media

Information density allows us to store more bits

Personalization and customization allows refined marketing

Electronic Commerce


Social: The net is redefining the marketplace

It is becoming interactive and information routinely flows both ways

The conventional distinction between buyer and seller is blurring on the web

People are not passive and see themselves as content providers (broadcasters)

Legal: The legal and regulatory environment is in flux

One current policy battle is over taxation and the definition of the “nexus” of business

Another is over privacy

Electronic Commerce


Economic: We are beginning to understand the economics of networking and ecommerce

There are many experiments underway, in all forms of ecommerce

Product promotion and customization through the direct connection to consumers

Developing and exploiting new sales channels (products, information, advertising, transactions)

Reduced costs of business transactions through a public shared infrastructure

Reducing time to market for certain types of products

Electronic Commerce


And:

Improving customer relationships with intelligent systems for service and support

Improving marketing and targeted advertising through the collection of detailed customer information

New corporate branding and image creation

Using the net for R&D and product development Developing of new business models based on characteristics of the new marketplace

Electronic Commerce







Electronic Commerce


IV. Where is it going?:

Global ecommerce revenues are expected to total USD2.7 trillion in 2004 (>50% in the US) (eMarketer 2003)

Business-to-business ecommerce generates 2-3X the revenues of business-to-consumer ecommerce

Global B2B ecommerce will surpass $1.4 trillion by the end of 2003

B2B ecommerce revenues in the US will total $721 billion (eMarketer 2003)

B2B sales may have accounted for 90% of all USecommerce in 1999 (US Census Bureau, 2001)

Mid sized companies using online procurement can reduce purchasing costs by over 70%, saving almost $2 million annually (Aberdeen Group, 2001)

Electronic Commerce


US mobile phone users will spend more time on the wireless Web than making phone calls by 2010

US cable (4.3M) and DSL (2.1M) providers added a 6.4 million subscribers during 2002 (Leichtman Research Group 2002)

The leaders had ~17.4 million subscribers in 2002

Cable has 11.25 million broadband subscribers, a 65% share of the market

US broadband cable and DSL subscribers will surpass dial-up in 2005 and will grow to nearly 49 million by the end of 2007

Over 41 million European households will have high-speed broadband connections by 2006 (Datamonitor 2003)

Electronic Commerce


Online retail spending in the US will grow by 28% in 2003 to $52 billion

It will reach $105 billion and 5% of US retail spending by 2007 (Jupiter Research 2003)

The worldwide corporate elearning market will exceed t$23 billion by 2004 (IDC, 2001)

95% of US local governments have a website or will have one within a year (International City/Council Management Association, 2001)

Most physicians use the net daily and 42% work in practices that have websites (Harris Interactive, 2001)

The number of US companies billing online will increase to 35% (2004) (Gartner Group, 2001)

Electronic Commerce


From: Emarketer.com http://www.emediaworx.com.au/images/marketing/b2bstats.gif

Electronic Commerce


Hecker, D. (2002). Employment impact of electronic business. Monthly Review of Labor. May. 3-17.

Electronic Commerce


From: Pew Internet Project. America's Online Pursuits: The changing picture of who's online and what they do http://www.pewinternet.org/reports/chart.asp?img=107_growth.jpg

We discover more to do online as we gain experience and as new apps become available

This increases reliance on the net in daily life and raises expectations about the way the it can be used

Electronic Commerce


From: Pew Internet Project. America's Online Pursuits: The changing picture of who's online and what they do http://www.pewinternet.org/reports/chart.asp?img=107_dailygrowth.jpg

And we use the net more frequently on a daily basis

Electronic Commerce


A potential reordering of the global economy

Competitive advantage to companies that are successful early adopters of ecommerce

This will be true in nations with government economic and regulatory support for ecommerce

Nations with highly trained labor forces will benefit from distributed value chain

Electronic Commerce


Businesses have to place ecommerce in a larger context than traditional commerce

How can they exploit the digital product marketplace?

Dell claims that the efficiencies of web based marketing give them a 6% profit advantage

Redesign business processes to take advantage of the rapid and real time information and data exchange on the net

Develop a secure and widely acceptable framework for digital business contracts

Electronic Commerce


Consumers will develop new behaviors and will:

Routinely check prices globally

Engage in real-time negotiation with multiple sellers creating a more dynamic and fast moving marketplace for certain products

Make more considered purchasing decisions based on more and better information

Publicly share experiences with others about products, customer support, and companies

Electronic Commerce


There will be a shift towards an “economy of attention”

Basic assumption: attention is an intrinsically scarce resource

Information <--> Attention (a two way flow)

There is competition for attention

Capturing attention can lead to action

The problem is how to capture and keep it

Obtaining attention is a source of wealth

Portal advertising costs bear this out

Electronic Commerce


The components of a virtual economy

Virtual players

Virtual processes

Virtual products

The net

Electronic Commerce


Virtual players

People, organizations, or automated agents with an online presence

Virtual products

Digitized objects/services: currency, text, multimedia, tickets, reservations, electric usage, pay-for-view, smart houses

Virtual processes

Participants interact digitally, interactively, and in real time (online ordering/payment; JIT inventory control; customized advertising)

Electronic Commerce


Virtual intermediaries

Provide essential services: certification, authentication, quality assurance, copyright clearance, distribution

Education brokers: bringing instructors and students together online

Market organizers: establish meeting places for buyers and sellers (auctions...)

Personalized service providers: shoppers, information filtering, travel agent, financial services

Electronic Commerce


The evolution of the virtual firm

Assumes that they exist in an environment where transaction costs are low

They do not have to be based in a single geographic location

Business processes can be distributed globally and take place on the net

The value chain is digital

Electronic Commerce


Also:

Products can be delivered through a digital web of business relationships with producers, financiers, distributors, consumers

Producers, suppliers, warehouses, managers, administrator, subcontractors are all linked through an extranet

Many functions can be easily outsourced (accounting, personnel management, training, public relations)

Electronic Commerce


Convergence in ecommerce

Products, processes, and infrastructure all converge in the global digital marketplace

Product: audio, video, still images, text are all in the same digital format

Process: multiple uses from a virtual process make other processes redundant

Consumer feedback is used for product change, marketing, sales, pricing, and service

Electronic Commerce


Things to do

Overcome the limitations and asymmetries of the infrastructure

Implement hardware and software to fully exploit bandwidth, especially to the last mile

Provide “universal access” at reasonable cost

Provide secure frameworks for B-to-B and B-toC transactions

Integrate electronic payment into the buying process

Electronic Commerce


And:

Develop a secure and reliable system for electronic banking: emoney exchange and transfer

Develop a system for microtransactions

Build a consumer marketplace

Convert browsers into buyers

Develop new approaches to web site design that encourage purchasing

Develop new business models for this CME

Electronic Commerce School of Library and Information Science History and development of Ecommerce I. What is ecommerce? II. Where did it come from? III.

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