Ecommerce

Session 1

Agenda

• The rise and fall of the dot.com economy• e-Business vs e-Commerce vs Internet• What makes e-Business different from business?• Successful business models for e-Business• The drivers of benefit for e-Business applications• E-commerce

History of the Internet

Understanding E-commerce: Organizing Themes

Technology: – Development and mastery of digital computing and

communications technology

Business: – New technologies present businesses with new ways of

organizing production and transacting business

Society: – Intellectual property, individual privacy, public welfare

policy

Amazon: A Picture Is Worth a Thousand Words

Have you used Amazon or any other websites? What are your main interests?

Have you purchased anything based on a recommandation?

Why do Amazon links drive more purchasing than Facebook links?

What Is E-commerce?

Use of Internet and Web to transact business

More formally:– Digitally enabled commercial transactions

between and among organizations and individuals

“When history is written, the creation of the Internet may be ranked alongside Johann Gutenberg’s printing press and Marconi’s radio as among the major advancements in human communication.”

Roanoke Times, March 1, 1997

Johann Gutenberg’s printing press

Marconi’s radio

Origins and Growth of E-commerce

Precursors:– Baxter Healthcare – Electronic Data Interchange (EDI) – French Minitel (1980s videotex system)– None had functionality of Internet

1995: Beginning of e-commerce– First sales of banner advertisements

E-commerce fastest growing form of commerce in United States

The Internet World Wide Web

– A worldwide public network that connects private networks

– Originated in the late 1960s as ARPANET

– Managed by the National Science Foundation in the 1980s and early 1990s as NSFnet

– Connected colleges, universities, and research centers

– Commercial activity was prohibited until 1991

E-services

Commercial History of the Internet

Internet … DISRUPTIVE TECHNOLOGY ?

• How can a company like Polaroid go bankrupt?

• Digital Darwinism – implies that organizations which cannot adapt to the new demands placed on them for surviving in the information age are doomed to extinction

1997-1999 - e-Business Mania Strikes!

• E-Business becomes a major economic force

– NASDAQ hits 5,000

• Venture capital in abundance

• Focus on new economy, new business models, growth potential

– no attention to traditional fundamentals

– bricks and mortar viewed as liability

• Traditional businesses shake in their boots at the threat of new non-traditional nimble bold competitors

• Dot.Com start-ups in every field

• Dot.Com multi-millionaires made over night

2000 - The Dot.Com Bubble Bursts!

• The Demise of Dot Com Retailers. Weak financials, intense competition, and investor flight will drive many of today's online retailers out of business in 2000. Those that survive must refocus funding on building hard assets to achieve scale, service, and speed.

• Wall Street will run out of patience. Financial markets exasperated with non-existent online profits will turn a deaf ear to persistent "investment mode" rhetoric and soundly punish merchants who bleed red ink. Recent stock disasters like Value America and eToys -- whose market caps as of January 11, 2000, are down $3.1 billion and $7.7 billion respectively from 1999 highs -- serve as bad omens for online stores that lack a unique approach or technology.

• The revenge of the brick-and-mortars will begin. The narrowing of the playing field in 2000 will rationalize but not resolve online retail competition. It will usher in a new era characterized by a few large players that exploit deep customer relationships and a presence across multiple channels to entrench themselves. To measure their success, these firms will ditch new economy platitudes in favor of unfashionable old metrics like margins, profits, and customer retention costs.

Valuations PlummetAmazon.com - AMZN

Priceline.com - PCLN

Pets.com - IPET

eBay.com - eBay

Lessons Learned

• Fundamentals important, bottom line important

• Traditional bricks and mortar assets can represent significant competitive strengths

– logistics, inventory, distribution

– choice in terms of customer access

– strength and brand

• e-Business becomes an element of overall business strategy - not the total business strategy

• e-Business still widely seen as a way of transforming business operations and thinking

‘Bricks and Clicks’ - A Hybrid Model

Traditional

“Bricks and Mortar”

Pure Web - Dot.com

“Clicks”

Combines strengths from traditional and

pure Web approaches

Emergence of the Hybrid Strategy

E-commerce: A Brief History (cont.)

• 2001–2006: ConsolidationEmphasis on business-driven approachTraditional large firms expand presenceStart-up financing shrinks upMore complex products and services soldGrowth of search engine advertisingBusiness Web presences expand to include e-

mail, display and search advertising, and limited community feedback features

E-commerce: A Brief History (cont.)

• 2007–Present: ReinventionRapid growth of:

• Online social networks• Mobile platform• Local commerce

Entertainment content develops as source of revenues

Transformation of marketing• Coordinated marketing on social, mobile, local platforms• Analytic technologies

E-commerce Trends 2013–2014• Expansion of social, local, and mobile e-commerce • Mobile platform begins to rival PC platform• Continued growth of cloud computing• Explosive growth in “Big Data”• E-books gain wide acceptance• Continued growth of user-generated content

Why Study E-commerce?

E-commerce technology is different, more powerful than previous technologies

E-commerce brings fundamental changes to commerce

Traditional commerce:– Consumer as passive targets– Mass-marketing driven– Sales-force driven– Fixed prices– Information asymmetry

Eight Unique Features of E-commerce Technology

1. Ubiquity 2. Global reach 3. Universal standards 4. Information richness 5. Interactivity 6. Information density7. Personalization/customization8. Social technology

Web 2.0

User-centered applications and social media technologies– User-generated content and communication– Highly interactive, social communities– Large audiences; yet mostly unproven business

models– Examples: Twitter, YouTube, Instagram,

Wikipedia, Tumblr

Types of E-commerceMay be classified by market relationship or

technology

Business-to-Consumer (B2C)Business-to-Business (B2B)Consumer-to-Consumer (C2C)Social e-commerceMobile e-commerce (M-commerce)Local e-commerce

The Growth of B2C E-commerceFigure 1.3, Page 20

The Growth of B2B E-commerceFigure 1.4, Page 21

SOURCE: Based on data from U.S. Census Bureau, 2013; authors’ estimates.

The Mobile Platform

Most recent development in Internet infrastructure

Enables access to the Internet via wireless networks or cell-phone service

Mobile devices include– Tablets– Smartphones– Ultra-lightweight laptops

The Internet and the Evolution of Corporate Computing

Figure 1.11, Page 41

Slide 1-32

e-Commerce vs eBusiness

Figure 1.4 Three definitions of the relationship between e-commerce and e-business

e-Business vs e-Commerce

E-Business: E-Business:

Improving businessImproving businessperformance through low cost and performance through low cost and open connectivity: open connectivity: • New technologies in the value chainNew technologies in the value chain• Connecting value chains across Connecting value chains across

businessesbusinessesin order to :in order to :• Improve service/reduce costsImprove service/reduce costs• Open new channelsOpen new channels• Transform competitive Transform competitive

landscapeslandscapes

E-CommerceE-Commerce:• marketing• selling• buying of

products and services on the Internet

E-CommerceE-Commerce:• marketing• selling• buying of

products and services on the Internet

e-Business vs e-Commerce

e-Business is more than selling and marketing online!

E-Business Basics

• E-commerce – Process of buying or selling goods or services across a telecommunications network

• E-business – Widest spectrum of business activities using Internet and Web technologies

• Many technologies facilitate e-business– Electronic funds transfer (EFT)

– Electronic data interchange (EDI)

– Internet / World Wide Web

e-Business vs e MKTG

• EB=EC+BI+CRM+SCM+ERP+ HER+KM– EB = E-Business– EC = E-Commerce (transactions, e-tailing)– BI = Business Intelligence– CRM = Customer Relationship Mgmt - uses digital

processes and integrates customer information gathered at each touch point.

– SCM = Supply Chain Management– ERP = Enterprise Resource Planning (SAP)– HER = Virtual HR– KM = Knowledge Management

Phases of e-Business Development

Four stage model in E-Business maturity relates business value to e-business leverage

E-Business Leverage

Bus

ines

s V

alue

Enabler

Driver

Convergence

Transformation

Channel

Over 50% are in the channel phase of

E-Business development with a web presence but no

infrastructure tie-in.

Over 50% are in the channel phase of

E-Business development with a web presence but no

infrastructure tie-in.

Just under 15% are in the integration phase.

Connections to suppliers and customers are fully E-

Business enabled.

Just under 15% are in the integration phase.

Connections to suppliers and customers are fully E-

Business enabled.

Brochurewareand buying /selling

Integrate with customers

and suppliers

Industry transformation, achieve competitive

advantage

Cross-Industry Supplier/Customer

convergence

Integration

Source: PricewaterhouseCoopers

Phases of e-Business Development

eBusiness vs Business

The Benefits of e-Business

• Generate additional Revenues• New markets• New products• New customers

• Reduce Costs (Integration and ‘Collaboration’)• Process efficiency• Reduce IT variety and -complexity• Synergies with other initiatives

• Customer Retention (‘Added Services’ and ‘Virtual Community’)• Know more about your customers• Integrated channel management• Proactive and personalized offerings

• Improve Image / Position Brand• Applying innovative technologies• Leadership enterprise• Address younger customer segments

• Not to miss the boat• Keeping options open• Acquire know-how• Focused investments

ImplementImplement

Opportunity Opportunity AnalysisAnalysis

Re-Re-AssessAssess

Understand BusinessUnderstand Business

ImplementationImplementationPlanningPlanning

‘‘Traditional’:Traditional’: ImplementImplement

Opportunity Opportunity AnalysisAnalysis

Re-Re-AssessAssess

Understand Electronic BusinessUnderstand Electronic Business

ImplementationImplementationPlanningPlanning

‘‘E-Business’:E-Business’:

Definitions of the future are ‘fuzzy’Permanent and unpredictable change in the

business and technology environmentTime to market and speed are major competitive factorsContinuous learning & fast adaptation is required

Characteristics of an “Electronic Business journey”:

Definitions are clearNo change in the business and technology

environmentHigh time pressureContinuous learning

Traditional business organization‘develop step by step’:

Business vs e-Business

E-Business is not a project - but rather a journey that requires vision and non-linear procedures

Experimentation and Learning

Supplier network Customer network

Customer service

Outboundlogistics

Sales

Marketing

Productdevelopment

Inboundlogistics

Production

Procurement

Being a Connected Enterprise

Being a Connected EnterpriseEmerging e-StrategyEmerging e-Strategy

Short Strategy Formulation loopsShort Strategy Formulation loops

Continuous experimentation through specific Solutions PrototypingContinuous experimentation through specific Solutions Prototyping

awar

enes

saw

aren

ess

lear

ning

lear

ning

lear

ning

lear

ning

Types of Business model

E-business types:

CONSUMERS

C2C

BUSINESS

B2B

GOVERNMENT

C2G

B2C

B2G

G2C

G2B

C2B

G2G

Figure 1.2 Summary and examples of transaction alternatives between businesses, consumers and governmental organizations

E-Commerce

E-CommerceManagement issues

• How does e-commerce strategy differ from traditional business strategy?

• How should we integrate e-commerce strategy with existing business and IS strategy?

E-commerce and the Internet

THE GROWTH OF E-COMMERCE

Retail e-commerce revenues grew 15–25 percent per year until the recession of 2008–2009, when they slowed measurably. In 2010, e-commerce revenues are growing again at an estimated 12 percent annually.

FIGURE 10-1

© Pearson Education 201249

Relationship between e-commerce strategy and other strategies

Sell-side e-commerce strategy

• E-commerce is a channel strategy• Objectives for online contribution percentage

should drive our strategy• Our e-commerce strategy defines how we should

• Hit our channel leads and sales targets– Acquisition, Conversion, Retention, Service, Profitability

• Communicate benefits of using this channel• Prioritize products available through channel• Prioritize audiences targeted through channel• Select partners for this channel

• Channel strategy thrives on differentials• BUT, need to manage channel integration

Buy-side e-commerce strategy or e-supply chain management strategy

• Buy-side e-commerce strategy is about maximizing operational efficiencies while improving customer service quality

• Operational efficiency KPIs should drive our strategy• Our buy-side e-commerce strategy defines how we

should• Automate internal processes• Link internal resource management systems with

external purchasing systems • Prioritize suppliers / partners collaborating using this

channel• Prioritize applications for e-SCM – create a roadmap

• Involves selection of appropriate strategic partners

Case study

OPENING CASE

QUESTIONS

1. What is Amazon’s e-business model?

2. How can Amazon use m-commerce to influence its business?

3. What are some of the business challenges facing Amazon?

OPENING CASE QUESTIONSAmazon

• http://www.youtube.com/watch?v=YlgkfOr_GLY

• http://www.youtube.com/watch?v=zknLfU7GJIw

Figure Matrix for evaluating e-business strategy alternativesSource: Econsultancy (2008a)