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E-COMMERCE Business to Consumer

E-COMMERCE Business to Consumer

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E-COMMERCE Business to Consumer

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  1. E-COMMERCEBusiness to Consumer Erin Allan Hsiao-chun Chen Yuliya Pak Xiaowen Pan Wei Xu November 4, 2008 1

  2. Why E-commerce is important to General managers? “Look at growth, look at how much time people spend on the Net and look at the variety of things that they are doing. It's all really good, so I am actually encouraged by the fundamentals that underlie usage growth on the Net.” Meg Whitman, the former CEO of ebay “When I took office, only high energy physicists had ever heard of what is called the Worldwide Web.... Now even my cat has its own page....” Jeffrey Bezos, CEO of amazon 2 Source: www.afterquotes.com, viewed October 14,2008

  3. Overview 1 2 7 Definition and Description B2C E-Commerce Conclusion 6 Benefits/Pitfalls of E-Commerce 3 Statistics – Global Spread 4 Top Products. Top Engines. 5 Case Studies 3 3

  4. the online transaction of business, featuring linked computer systems of the vendor, host, and buyer involve the transfer of ownership or rights to use a good or service Concept of E-Commerce Buying and selling of goods and services on the internet 4 Source: paymentprocessing.cc/showthread.php?s=af0be6cfeb825065a06af29eca743e10&t=382,viewed Sept 4, 2008

  5. Type of E-Commerce Business to Consumer (B2C) • Commerce between companies and consumers • Example: Amazon.com, Drugstore.com Business to Business (B2B) • Deals with relationships between and among businesses • Example: Dell, Cisco Business to Employee (B2E) • The requisitioning of supplies by employees for use in their jobs • commonly known as an “Intranet” E-Commerce Consumer to Consumer (C2C) • Commerce between private individuals or consumers • Example: eBay Mobile Commerce (M-commerce) • The buying and selling of goods and services through wireless technology, such as cellular telephones Source: (1)Zorayda Ruth Andam (2003),”e-Commerce and e-Business”, e-ASEAN Task Force & UNDP-APDIP, pp.9-13(2)www.accountingsoftwareadvisor.com/ec/ectypes.htm, viewed Sept 11, 2008 5

  6. Introduction B2C Business Model

  7. B2C Business Model What is a business model? Consists of two elements: What the business does How the business makes money doing these things Source: (1)www.unibg.it/dati/corsi/16007/26896-Internet%20and%20E-commerce_diffusion%20and%20practice.pdf , viewed Sept 11, 2008 (2) Reference (15) 7 7

  8. B2C Business Model 8 Source:(1)K. Laudon, C. Guercio Traver (2004), “E-commerce “Basics of e-Business”, Pearson (2) Vatcharaporn Esichaikul, Asian Institute of Technology

  9. Users of B2C • Manufacturers: to sell and to retail the business buyers • Distributors: To take orders from the merchants they supply • Publishers: To sell subscriptions and books • Direct sales Firms: As another channel to reach the buyers • Entertainment Firms: To promote new products and sell copies • Information Providers: To take payment for downloaded materials • Insurance Firms: On-line rate quotes and premium payments 9 Source: www.isos.com.my/ecommerce/b2c.htm, viewed Sept 10, 2008

  10. Statistics Global Spread 10

  11. Global Spread of Internet Hosts Notes: Only the machine numbers with addresses on the net as reported by the name severs Source: http://www.isc.org/index.pl?/ops/ds/host-count-history.php, viewed September 9,2008 11

  12. Global Spread of Internet Users 12 Source: http://www.internetworldstats.com/emarketing.htm

  13. Internet Users Growth, (%) 13 Source: http://www.internetworldstats.com/emarketing.htm

  14. Statistics-by nation US & China

  15. US Online Retail Sales (1999-2006) In billions 15 15 Note: excludes sales of travel products, automobiles, and prescription drugs Source: www.machrotech.com/services/ecommerce-marketsize-statistics.asp, viewed September 4, 2008

  16. China B2C E-Commerce Market Size RMB: Renminbi, currency of the People's Republic of China US$1=RMB$6.84 USD189.6 RMB Million USD174.0 USD165.9 USD149.1 USD138.2 USD124.9 USD77.0 Source: (1) english.analysys.com.cn/3class/detail.php?id=210&name=report&FocusAreaTitleGB=&daohang=Internet-Media&title=China%20B2C%20E-Commerce%20Market%20Size%20Reached%20RMB%20854%20Million%20in%20Q1%202006, viewed Sept 4, 2008 (2) english.analysys.com.cn/3class/detail.php?id=887&name=news&FocusAreaTitleGB=&daohang=Internet-Media&title=China%20B2C%20Market%20Reached%20CNY%201.297%20bln%20in%20Q4%202007, viewed Oct 24, 2008 16 16

  17. Demographics of Internet Users Use the internet % Sample: 2,251 adults US China % Sample: 16,000 persons 17 17 Source: (1) www.pewinternet.org/trends/User_Demo_7.22.08.htm, viewed Sept 4, 2008 (2) “Statistical Survey Report on the Internet Development in China Abridge Edition” (July 2008), CNNIC

  18. Demographics of Internet Users Age % Use the internet % 18 18 Source: (1) www.pewinternet.org/trends/User_Demo_7.22.08.htm, viewed Sept 4, 2008 (2) “Statistical Survey Report on the Internet Development in China Abridge Edition” (July 2008), CNNIC

  19. US Demographics of Internet Users Education Use the internet % % 19 19 Source: (1) www.pewinternet.org/trends/User_Demo_7.22.08.htm, viewed Sept 4, 2008 (2) “Statistical Survey Report on the Internet Development in China Abridge Edition” (July 2008), CNNIC

  20. E-Commerce, Top Products. Top Engines. 20

  21. Global e-commerce Statistics GLOBAL INTERNET SHOPPERS Over 875 million Internet Shoppers as of Jan 1 2008 (Nielsen Global Online Survey) More than 85% of world’s online population 40% increase in online shoppers over last 2 years 21 21 Source: www.reuters.com, Viewed 09/09/2008

  22. Global e-commerce Statistics TOP 5 GLOBAL PURCHASES Sample size: 26,312 Internet users in 48 markets from Europe, Asia Pacific, North America and the Middle East 22 22 Source: Nielsen Global Online Survey, www.reuters.com, Viewed September 9,2008

  23. Global e-commerce Statistics GLOBAL PURCHASES INCREASES IN 2 YEARS TIME Sample size: 26,312 Internet users in 48 markets from Europe, Asia Pacific, North America and the Middle East 23 23 Source: Nielsen Global Online Survey, www.reuters.com, viewed 09/09/2008

  24. Global e-commerce Statistics TOP 10 ONLINE E-COMMERCE SITES 24 24 Source: Nielsen Global Online Survey, www.reuters.com, viewed October 9,2008

  25. Global e-commerce Statistics MOST COMMON PAYMENT INSTRUMENTS • 60% Credit Cards globally, 53% refers to Visa • Paypal 25 25 Source: Nielsen Global Online Survey, www.reuters.com, viewed October 9,2008

  26. Contents 1 1 Case Study I (Kazakhstan) 2 Case Study II (On-line Drug Market, USA) 3 Case Study III (China) 4 Benefits/Pitfalls of E-Commerce 5 Q&A 26 26

  27. Case Study I: Kazakhstan 27

  28. Internet penetration, Kazakhstan Number of urban Internet users ~ 10% of the total adult (min 18 years old) population Current high growth of Internet users 381 311 71 28 Source: www.stat.kz; Actis Systems Asia and BRIF Central Asia, viewed October 3,2008

  29. Internet penetration, Kz Low income level (37% of urban families and 42% of rural families of Kazakhstan can only cover basic needs) Treatment of a computer as a luxury due to its high price and low income level of the majority of population in Kazakhstan (only 19% of the total adult population have a computer at home) High price of the Internet connection in Kazakhstan (only 14% of those who have computer at home go online) Reasons for low Internet penetration 29 Source: TNS Gallup Media Asia 2006; Actis Systems Asia and BRIF Central Asia; www.kazpost.kz , http://www.profit.kzViewed September 12, 2008,

  30. Internet penetration, Kazakhstan Majority of Internet users are above middle and top level managers % % % % % % % 30 Source: www.stat.kz; Actis Systems Asia and BRIF Central Asia

  31. E-Commerce in Kazakhstan Activities in the Internet as of September 2007,% 59% E-mail 56% Information Search 28% Music Downloads 17% Dating 13% Messengers 12% Chats/forums 11% Online games 7% Personal web pages E-shopping 3% 17% Other 31 Source:provided by Philip Morris Kazakhstan

  32. Internet penetration, Kz Lack of safe and convenient payment methods Cash is accepted in most cases but the transaction cost is higher Local online sellers accept verified payments only through one local bank Special category for debit/credit cards which are available to few Logistics/shipment issues, especially in the regions Most online vendors are concentrated in one major city – Almaty (70% - Almaty, 20% Astana, the capital, 10% - other cities) Reasons for low Internet penetration 32 Source: TNS Gallup Media Asia 2006; Actis Systems Asia and BRIF Central Asia; www.kazpost.kz , http://www.profit.kzViewed September 12, 2008,

  33. E-Commerce in Kazakhstan Current Trend of Online Purchases The number of Internet users is growing and the tariffs are declining Current trend towards online buying A number of popular online stores by June 2008 is 69 Most online buyers still prefer American online stores to the local ones due to the assortment and trust in payment operations Most online buyers tend to avoid buying from China due to the long delivery process Source: : www.profit.kz 7.04 p.m. 12/09/2008, developing www.profit.kz 7.04 p.m. 12/09/2008, www.flip.kz; 12.01 p.m. 12/09/2008, www.ct.kz; 7.13 p.m. 12/09/2008, Continent , June 2008, TNS Galllup Media Asia 33 33 Source: TNS Gallup Media Asia 2006; Actis Systems Asia and BRIF Central Asia; www.kazpost.kz , http://www.profit.kzViewed September 12, 2008,

  34. Top Local Online Stores • www.pc-shop.kz Computers: hardware and software digital cameras • www.intershop.kz telephone/Internet cards • www.hit.kz Films, music, computer games, software, memory cards • www.Rm.axon.kz computer accessories • www.instore.kz Houseware Appliances • www.regina.kz Gifts, souvenirs, flowers • www.mag.kz (houseware appliances, computers and accessories, office appliances, photo and video equipment) • www.dvdvideo.kz DVD films • www.liner.kz Computers, accessories 34 34 Source: http://www.ictm.kz; viewed September 12, 2008.

  35. Top Local Online Stores www.pc-shop.kz Computers: hardware and software digital cameras 35 35

  36. Top Local Online Stores www.hit.kz Films, music, computer games, software, memory cards 36 36

  37. Top Local Online Stores www.regina.kz Gifts, souvenirs, flowers 37 37

  38. Top Local Online Stores www.dvdvideo.kz DVD films 38 38

  39. Top Foreign Online Stores • www.amazon.com • www.victoriasecret.com • www.ebay.com 39 39 Source: www.ct.kz; viewed September 12, 2008

  40. Top 3 Reasons for online shopping Availability of collectible items (A legendary CD with the best songs of Rolling Stone) Lower priced branded products Online shopping is an aspiring trendy activity 40 40 Source: www.ct.kz; viewed September 12, 2008

  41. Online Pharmacy Websites On-line Pharmaceutical DOMESTIC Sales LEGITIMATE WEBSITES • Prescriptions are Necessary • Legal • Walgreens.com ROGUE WEBSITESNo Prescription Necessary • No Prescription Necessary • Illegal 41 Source: FDA website: http://www.fda.gov/oc/buyonline/faqs.html#faqs2, viewed on September 15, 2008

  42. Rogue Websites ROGUE WEBSITES Drug Trafficking Targets • Perfect Medium for Drug Trafficking • Global Connection • Anonymity • Deploy from anywhere • Rapid means to divert large quantities of controlled substance PHARMACIES • Struggling pharmacies, providing prescriptions from above doctors DOCTORS • Target in-debt doctors, offer reassurance by allowing phone/email diagnosis or survey results Illegal sale of prescription drugs to general public • Often use a medical history survey to justify a doctor filling a prescription 42 Source: DEA website: http://www.usdoj.gov/dea/pubs/cngrtest/ct062408.html, viewed on September 15, 2008

  43. LEGALITY IS IT LEGAL??? Outdated Laws! Current laws are pre-fax machine 43 Source: DEA website: http://www.usdoj.gov/dea/pubs/cngrtest/ct062408.html, viewed September 15

  44. NEW LEGISLATION Ryan Haight Online Pharmacy Consumer Protection Act of 2008 • Amends the Controlled Substances Act with these key features: • Must have valid prescription with one in-person visit to the doctor • DEA endorsed websites • Enhanced penalties: 2-20 yrs depending on what schedule drug and number of offenses • Illegal to advertise rogue websites • October 1st– passed in Congress, now awaiting signature from the President 44 Source: http://www.usdoj.gov/dea/pubs/pressrel/pr100108p.html, viewed October 11, 2008; (8)

  45. PROS Allows people in remote areas or disabled individuals easy access Convenience for all Privacy Lower prices (sometimes) Reduce prescription errors (by using computer technology to transmit the prescription from the doctor) CONS Allows the distribution of drugs illegally and without medical consultation Mainstreaming prescription drugs as street drugs Possibility of less effective or dangerous drugs being sold in place of legitimate drugs PROS & CONS 45 Source: FDA website: http://www.fda.gov/oc/buyonline/faqs.html#faqs2, viewed September 15, 2008

  46. Canadian Online Prescriptions 46 Source (7)

  47. PROS PRICE! Canadian government monitors price making sure it is not too excessive. This is only true for brand name drugs which are reported to be around 50-70% higher in the US. Generic drugs are actually much cheaper in the US than Canada – up to 100% less expensive. American senior citizens account for 90% of sales in Canadian e-pharmacies. CONS SAFETY!! April 2008 scare from Chinese imported Heparin – causing 81 deaths in US Counterfeiting Improper packaging and labeling PROS & CONS 47 Source: http://www.nytimes.com/2008/04/22/health/policy/22fda.html?_r=1&oref=slogin, viewed October 22, 2008, (3),

  48. Politically Speaking… Obama & McCain 48

  49. IMPLICATIONS LAW/POLITICS • Laws need to be updated • Will government need to regulate prices? PHARMACIES • Open online store to stay competitive E-Commerce JOE THE PLUMBER • Weigh pros and cons of e-pharmacies • Watch out for abuse of prescription drugs (Joe’s kids) PHARMACEUTICAL COMPANIES • Compete globally, reduce prices • Lower prices = less money for R&D = drugs are slower to market 49 49

  50. Case Study III: China 50