Download Chapter 1 - The Revolution is Just Beginning

THE REVOLUTION IS JUST
BEGINNING
CHAPTER 1
LEARNING 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
 Describe the major types of e-commerce
 Understand the evolution of e-commerce from its early years to today
QUESTION
 What is e-commerce?
SOME ANSWERS
 The use of the Internet, the World Wide Web (Web), and mobile apps and
browsers running on mobile devices to transact business
 It can also be described as digitally enabled commercial transactions between
and among organizations and individuals
 It is the convergence of:

digital information technology (e), with

exchange of value (commerce)
THE DIFFERENCE BETWEEN E-COMMERCE AND
E-BUSINESS
 It is important to make a working distinction between e-commerce and e-
business because they refer to different phenomena
 E-business refers to the digital enabling of transactions and processes within a
firm involving information systems under the control of the firm
 E-business applications turn into e-commerce precisely when an exchange of
value occurs
EIGHT UNIQUE FEATURES OF E-COMMERCE
TECHNOLOGY
 Figure 1.2 and Table 1.2 describe eight unique features of e-commerce
technology
 These unique dimensions of e-commerce technologies suggest many new
possibilities for marketing and selling
 Each of these features potentially has positive and negative implications for
organizations, individuals, and society
BUSINESS SIGNIFICANCE OF THE EIGHT UNIQUE
FEATURES OF E-COMMERCE TECHNOLOGY (TABLE 1.2)
E-Commerce Technology Dimension
Business Significance
Ubiquity – E-commerce technology is
available everywhere and anytime
The marketplace is extended beyond traditional
boundaries and is removed from a temporal and
geographic location. Shopping can take place
anywhere, convenience is enhanced, and shopping
costs are reduced.
Global reach – the technology reaches
across national boundaries
Commerce is enabled across cultural and geographic
boundaries seamlessly and without modification.
“Marketspace” includes potentially billions of
consumers and millions of businesses.
Universal standards – there is one set
of Internet technology standards
There is a common, inexpensive, global technology
foundation for businesses to use.
Richness – video, audio, text and other
multimedia are possible
Video, audio, and text marketing messages are
integrated into a single marketing message and
consuming experience.
BUSINESS SIGNIFICANCE OF THE EIGHT UNIQUE
FEATURES OF E-COMMERCE TECHNOLOGY (TABLE 1.2)
E-Commerce Technology Dimension
Business Significance
Interactivity – the technology works
through interaction with the user
Consumers are engaged in a dialog that dynamically
adjusts the experience to the individual and makes
them a co-participant in the process of delivering
goods to the market
Information density – the Internet
provides access to vast amounts of
information in one place which reduces
information costs
Information processing, storage, and communication
costs drop dramatically. Information becomes
plentiful and cheap, but overall information quality
may not improve.
Personalization and customization –
the technology enables personalized
messages to be delivered to individuals as
well as groups
Personalization of marketing messages and
customization of products and services are based on
individual characteristics.
Social technology – user-generated
content and social networks
New Internet social and business models enable user
content creation and distribution, and support social
networks.
TYPES OF E-COMMERCE
 There are several different types of e-commerce and many different ways to
characterize them
 The most common three examples, characterized by the nature of the market
relationship, include:

Business-to-consumer (B2C)

Business-to-business (B2B)

Consumer-to-consumer (C2C)
 Which of these three types of e-commerce generates the largest amount of
revenue?
 Growth in US B2C and B2B e-commerce revenue is shown in Figures 1.3 and
1.4
THE GROWTH OF B2C E-COMMERCE IN THE US
OTHER TYPES OF E-COMMERCE
 Mobile commerce (m-commerce)

Transactions are initiated through mobile devices
 Social e-commerce

E-commerce that is enabled by social networks and online social relationships
 Local e-commerce

E-commerce that is focused on engaging the consumer based on his or her geographic
location (for example, Groupon)
 Government-to-citizen (G2C)

For example, the US Internal Revenue Service
 Business-to-employee (B2E)

For example, Drake’s Blueview system used by university employees for HR information,
announcements, etc.
THE RELATIVE SIZE OF DIFFERENT TYPES OF ECOMMERCE (FIGURE 1.5)
 B2B $6.3 trillion
 B2C $531 billion
 Mobile $128 billion
 C2C $100 billion
 Local $25 billion
 Social $3.3 billion
GROWTH OF THE INTERNET, WEB, AND MOBILE
PLATFORM
 The technology juggernauts behind e-commerce are the Internet, Web, and
increasingly, the mobile platform
 One way to measure the growth of the Internet is by looking at the number of
Internet hosts with domain names
 It is impossible to say exactly how many computers and other wireless devices
are connected to the Internet at any one time, but the number is clearly more
than one billion
GROWTH PATTERNS FOR OTHER ELECTRONIC
TECHNOLOGIES
 The Internet has shown extraordinary growth patterns when compared to other
electronic technologies of the past
 It took radio 38 years to achieve a 30% share of U.S. households
 It took television 17 years to achieve a 30% share
 It took only 10 years for the Internet/Web to achieve a 53% share of U.S.
households once a graphical user interface (Mosaic browser) was invented for
the Web in 1993
E-COMMERCE: A BRIEF HISTORY
 Although e-commerce is not very old, it already has a tumultuous history
 The history of e-commerce can be divided into three periods:

Invention (1995 – 2000)

Consolidation (2001 – 2006)

Re-Invention (2007 – present)
INVENTION (1995 – 2000)
 Technology driven
 Revenue growth emphasis
 Venture capital financing
 Ungoverned
 Entrepreneurial
 Disintermediation
 Perfect markets
 Pure online strategies
 First-mover advantages
 Low-complexity retail products
CONSOLIDATION (2001 – 2006)
 Business driven
 Earnings and profits emphasis
 Traditional financing
 Stronger regulation and governance
 Large traditional firms
 Strengthening intermediaries
 Imperfect markets, brands, and network effects
 Mixed “bricks-and-clicks” strategies
 Strategic-follower strength; complementary assets
 High-complexity retail products and services
RE-INVENTION (2007 – PRESENT)

Mobile technology enables social, local, and mobile commerce

Audience and social network connections emphasis

Return of venture capital financing, buy-outs of start-ups by large firms

Extensive government surveillance

Entrepreneurial social, mobile and local firms

Proliferation of small online intermediaries renting business processes of larger firms

Continuation of online market imperfections; commodity competition in select markets

Return of pure online strategies in new markets; extension of bricks-and-clicks in traditional
retail markets

First-mover advantages in new markets as traditional Web players catch up

Retail, services, and content
WEB 2.0: PLAY MY VERSION
 Beginning in 2007 with the introduction of the iPhone, e-commerce has been
transformed once again by the rapid growth of Web 2.0
 The Internet started out as a simple network to support e-mail and file transfers
among remote computers
 The Web started out as a way to use the Internet to display simple pages and
allow the user to navigate among the pages by linking them together
electronically (Web 1.0)
 By 2007 something else was happening, the Internet and Web had evolved to the
point where users could create, edit, and distribute content to others (Web 2.0)
 Example Web 2.0 sites include online social networks, blogs, video and photo
sharing sites, and wikis)
WHAT DO THESE WEB 2.0 APPLICATIONS AND
SITES HAVE IN COMMON?
 Rely on user (regular people) and consumer-generated content
 Easy search capability is a key to their success
 Inherently highly interactive
 Rely on broadband connectivity
 Many of them are currently only marginally profitable and their business models
are unproven
 They attract large audiences compared to Web 1.0 applications (intensive, long
lasting interactions)
 The sites act as application development platforms where users can contribute
and use software applications for free
ASSESSING E-COMMERCE: SUCCESSES, SURPRISES,
AND FAILURES
 E-commerce has been a stunning technological success
 Business results have been more mixed – only about 10% of dot-coms formed
since 1995 have survived as independent companies in 2015
 Interestingly, online sales are increasingly concentrated in the top ten retailers
 Consumers have learned to use the Web as a powerful information source
 Consumers like choice – they comparison shop online and may actually purchase
through traditional bricks-and-mortar stores
ASSESSING EARLY E-COMMERCE VISIONS AND
PREDICTIONS

Prices are sometimes lower online, but it may be a function of entrepreneurs selling products below
their costs

In some cases, online prices may be higher as consumers are willing to pay for convenience

Consumers are less price sensitive then expected

The concept of one world, one market, one price has not occurred in reality

Merchants use “hit-and-run” pricing

Brands remain very important in e-commerce

Intermediaries have not disappeared

Many people still like to shop in a physical store

E-commerce has not driven existing retail chains and catalog merchants out of business

First-mover advantage only succeeded for a very small group of sites

Customer acquisition and retention costs were higher than expected

Surprising successes include mobile platforms, social networks, and on-demand e-commerce (Uber)
MAJOR TRENDS IN E-COMMERCE

US e-commerce revenues are expected to grow about 14% per year with global growth rates
even higher in Europe, China, India, and Brazil

Small businesses and entrepreneurs continue to flood into the e-commerce marketplace

A mobile computing and communications platform will rival the PC platform

Computing and networking component costs will continue to decline

Massive volumes of data will continue to be collected (Big Data) which will increase demand for
sophisticated business analytics software and analytics experts

User-generated content will continue to grow and impact existing media/content industries

Americans consume more content online requiring higher bandwidth connections

Society and the marketplace will continue to deal with issues such as privacy concerns, copyright
infringement, taxation of online sales, increasing online surveillance and regulation, and
cybercrime

On-demand services produce a flood of temporary, poorly paid jobs without benefits