E-COMMERCE Top Topics in IT
Outline • What is E-commerce • History of E-commerce • Categories of E-commerce • E-commerce marketing strategies • Benefits of E-commerce • Strategy Formulation
Commerce • Need a Product or service to sell • Place from which to sell the products • Figure out a way to get people to come to your place. • A way to accept orders. • A way to accept money. • A way to deliver the product or service, often known as fulfillment. • A way to accept returns. • Customer service • Technical support department to assist customers with products.
E-Commerce • E-Commerce consists of the buying and selling of products or services over electronic systems such as the Internet and other computer network, consists of: Buyers - these are people with money who want to purchase a good or service. Sellers - these are the people who offer goods and services to buyers. Producers - these are the people who create the products and services that sellers offer to buyers.
History of E-Commerce • Late 1970s and early 1980s Electronic Data Interchange (EDI) for e-commerce to transmit data from one business to another within companies. • 1990: Tim Berners-Lee writes the first web browser, using NeXT computer. • 1994: Pizza Hut offers pizza ordering on its web site. The first online bank opens. Attempts to offer flower delivery and magazine subscriptions online. • 1995:Jeff Bezons launches amazon.com and the first commercial free 24 hour e-Bay is founded. • 1998: Electronic postal stamps can be purchased from the web. • 2008: E-commerce sales projected to reach $204 billion, an increase of 17 percent over 2007.
E-Commerce (cont.) • Distributing, buying, selling and marketing products and services over electronic systems • E-business for commercial transactions • Involves supply chain management, e-marketing, online marketing, EDI • Uses electronic technology such as: - Internet - Extranet/Intranet - Protocols
E-Commerce (cont.) • The Internet is the perfect vehicle for e-commerce because of its open standards and structure. • No other methodology or technology has proven to work as well as the Internet for distributing information and bringing people together. • It’s cheap and relatively easy to use it as a medium for connecting customers, suppliers, and employees of a firm. • No other mechanism has been created that allow organizations to reach out to anyone and everyone like the Internet.
Key Drivers of E-commerce • Technological – degree of advancement of telecommunications infrastructure • Political – role of government, creating legislation, funding and support • Social – IT skills, education and training of users • Economic – general wealth and commercial health of the nation
Examples • Selling physical goods using websites flowers, shoes, electronic items, etc. • Reserving a hotel room or transportation ticket over the Internet • A manufacturing plant orders electronic components from another plant within the company using the company’s intranet.
Data networks Intense competition Globalization Information age Technologies Automation Low cost high quality products/services DIGITAL Digitally enabled commercial transactions
E-Business • Business that uses the WWW to fulfill it’s business process • Four basic business processes: - information dissemination - data capture - promotions and marketing - transacting with stakeholders • Business objectives interact with web based applications
E-Business Organizational Responses • Strategic systems - Provide organizations with strategic advantages, enabling them to: • Increase their market share • Better negotiate with their suppliers • Prevent competitors from entering into their territory • Continuous improvement efforts - Many companies continuously conduct programs to improve: • Productivity • Quality • Customer service • Business process reengineering (BPR) - Strong business pressures may require a radical change - Such an effort is referred to as business process reengineering (BPR)
E-Business Organizational Responses • Business alliances - Alliances with other companies, even competitors, can be beneficial - Virtual corporation—electronically supported temporary joint venture • Special organization for a specific • Time-limited mission • Electronic markets - Optimize trading efficiency - Enable their members to compete globally - Require the collaboration of the different companies and competitors
E-Business Organizational Responses • Reduction in cycle time and time to market - Cycle time reduction—shortening the time it takes for a business to complete a productive activity from its beginning to end - Extremely important for increasing productivity and competitiveness - Extranet-based applications expedite steps in the process of product or service development, testing, and implementation
Transaction costs • Cost of providing some good or service through the market • Effects of e-commerce and the internet that impacts the business model • Searching for an obtaining information • Participating in a market • Policing and enforcing transactions • Bargaining and decision costs • Actual cost of buying or selling the product
Key Success Factors of E-Commerce Mission Goals Internal (Company) Analysis External Analysis • Strategy • Formulation • Corporate • Business-unit • Functional • Operating Implementation Control and Monitoring
How E-Commerce Sites Work E-businessinvolves business processes spanning the entire value chain: electronic purchasing and supply chain management, processing orders electronically, handling customer service, and co-operating with business partners. Special Technical Standards (EDI) for e-business facilitate the exchange of data between companies. E-business software solutions allow the integration of intra (WITH IN) and inter (B/W) firm business processes. E-business can be conducted using the Web, the Internet, intranets, extranets, or some combination of these.
How E-Commerce Sites Work • Create value largely through gathering, synthesizing and distribution of information • Formulate strategies that make management of the enterprise and technology convergent • Compete in real time rather than in “cycle time” • Operate in a world characterized by low barriers to entry, near-zero variable costs of operation and shifting competition • Organize resources around the demand side rather than supply side • Manage better relationships with customers through technology
Problem - Recognition Information Search PRE-PURCHASE Evaluation of Alternatives Purchase Decision PURCHASE Satisfaction POST-PURCHASE Loyalty Disposal Consumer Decision Process
Problem - Recognition Information Search Pre-Purchase Evaluation of Alternatives Purchase Decision Purchase Satisfaction Post-Purchase Loyalty Disposal Consumer Decision Process — Flower Example Flowers • Need recognition, potentially triggered by a holiday, anniversary or everyday events • Search for ideas and offerings, including: • Available on-line and off-line stores • Gift ideas and recommendations • Advice on selection style and match • Evaluation of alternatives along a number of dimensions, such as price, appeal, availability, etc. • Purchase decision • Message selection (medium and content) • Post-sales support • Order tracking • Customer service • Education on flowers and decoration • Post sales perks
Business Models in E-commerce • Method of doing business • Well-planned model gives a competitive advantage • Impacts on sustainability and growth • Three areas: - value stream - revenue stream - logistical stream
Value Stream • Create long-term sustainability • Benefit for business stakeholders • Can be achieved in four ways: - creation/participation in an e-marketplace - creation/participation of virtual communities - additional value offers - exploitation of offers
Creation/participation in an e-marketplace • Reduce transaction costs directly/indirectly • Economics of e-market similar to traditional market • Can be setup by supplier/buyer or run independently • Buyer value: - reduced costs - improved service - convenience • Supplier value: - reduced costs - differentiation - reduced lead time
Creation/participation of virtual communities • Bringing together members of a community • Larger communities mean larger sources • Improves customer service
Additional value offers • Value is added by improving product mix • Through association or partnership • Can be achieved with minimum costs • Can be integrated into the host sites
Exploitation of offers • E-commerce/Internet economy founded on information • Value can be added by using this information • Target customers demographically • Can bridge the uncertainty gap • Can post Request for Proposal (RFP’s)
Revenue Stream • Short-term realization of value proposition • Direct: - cost reduction - free offerings of service/products - pricing strategies • Indirect: - internet advertising - selling customer information - joining affiliate programs
Logistical stream • Examines organization restructure to deliver value added and revenue streams • Issues such as: - organizational culture - pre/post restructuring - implementing information - communication and training - reward systems for motivation
Different types of E-Commerce Business (organization) Customer (individual) Business (organization) B2B (e.g TPN) B2C (e.g Amazon) Customer (individual) C2B (e.g Priceline) C2C (e.g eBay)
Type of E-Commerce • Business to Business (B2B) refers to the full spectrum of e-commerce that can occur between two organizations. This includes purchasing and procurement, supplier management, inventory management, channel management, sales activities, payment management &service and support.Pricing is based on quantity of order and is often negotiable. Examples: FreeMarkets, Dell and General Electric • Business to Consumer (B2C) refers to exchanges between business and consumers, activities tracked are consumer search, frequently asked questions and service and support. Examples: Amazon, Yahoo and Charles Schwab & Co
Type of E-Commerce • Peer to Peer (C2C) exchanges involve transactions between and among consumers. These can include third party involvement offering free classifieds, auctions and forums where individuals can buy and sell thanks to online payment systems since 1995. Examples: Owners.com, Craiglist, Monster,ebay • Consumer to Business (C2B) involves when consumers band together to present themselves as a buyer in group. The consumer reviews the bids and selects the company that will complete transactions. Example: www.planetfeedback.com
Component of E-Commerce • e-CRM • e-marketing • e-services • e-marketplace • e-auction • e-SCM • e-ERP
The 7’ C of E-Commerce Context Site’s layout and design Content Text, pictures, sound and video that web pages contain Community The ways sites enable user-to-user communication Commerce Site’s capabilities to enable commercial transactions E-COMMERCE Customization Site’s ability to self-tailor to different users or to allow users to personalize the site Connection Degree site is linked to other sites Communication The ways sites enable site-to-user communication or two-way communication
Metrics • Metrics: If it moves, measure it! • Response times • Site availability • Download times • Timeliness • Security and privacy • On-time order fulfillment • Return policy • Navigability • Measures of performance; may be quantitative or qualitative
Benefits and Challenges of E-commerce Benefits Challenges • Persistent connection with customers • New value for customers • Access to new customers • Scalability • Cannibalization • Channel conflict • Customer confusion • Investor confusion
Benefits of E-commerce • To consumers: 24/7 access, more choices, price comparisons, improved delivery, competition • To organizations: International marketplace (global reach), cost savings, customization, reduced inventories, digitization of products/services • To society: flexible working practices, connects people, delivery of public services
Limitations of E-commerce • To organizations: lack of security, reliability, standards, changing technology, pressure to innovate, competition, old vs. new technology • To consumers: equipment costs, access costs, knowledge, lack of privacy for personal data, relationship replacement • To society: less human interaction, social division, reliance on technology, wasted resources, JIT manufacturing
Benefits to Consumers Convenience Buying is easy and private Provides greater product access and selection Provides access to comparative information Buying is interactive and immediate
Benefits to Organizations Powerful tool for building customer relationships Can reduce costs Can increase speed and efficiency Offers greater flexibility in offers and programs Is a truly global medium
Benefits to Society More individuals can work from home Benefits less affluent people Third world countries gain access Facilitates delivery of public services