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

Slide 1-1

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.

2Lilac A. Al-Safadi

Pinterest: A Picture Is Worth a Thousand Words

Lilac A. Al-Safadi 3

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 4

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 5

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 6

Pintesrest Challenges

• Copyright infringement• Spam & scam• Competition

Lilac A. Al-Safadi 7

Slide 1-8

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

Slide 1-9

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 10

Slide 1-11

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

Slide 1-12

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

13

Slide 1-14

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

15

Slide 1-16

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

Slide 1-17

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?

Slide 1-18

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

Slide 1-19

Insight on Business: Start-up Boot CampClass 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-commerce1995 – 2000

Invention2001-2006

Consolidation2007-presentRe-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

20

21Lilac A. Al-Safadi

Slide 1-22

Insight on Society: Facebook and the Age of PrivacyClass 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 23Lilac A. Al-Safadi