Chapter 1 - The Revolution is Just Beginning

Chapter 1
Learning Objectives
• Define e-commerce and describe how it differs from e•
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
Understand the evolution of e-commerce from its early
years to today
Identify the factors that will define the future of ecommerce
• What is e-commerce?
Some Answers
• The use of the Internet, the World Wide Web (Web), and
apps to transact business
• It can also be described as digitally enabled commercial
transactions between and among organizations and
• It is the convergence of:
• digital information technology (e), with
• exchange of value (commerce)
E-Commerce vs. E-Business
• It is important to make a working distinction between e-
commerce and e-business because they are different
• E-business refers to the digital enabling of transactions
and processes within a firm involving systems under the
control of the firm
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
Business Significance of the Eight Unique Features of
E-Commerce Technology (Table 1.2)
E-Commerce Technology Dimension
Business Significance
Ubiquity – Internet/Web 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
information quality may not improve.
Personalization and customization – Personalization of marketing messages and
the technology enables personalized
customization of products and services are based
messages to be delivered to individuals on individual characteristics.
as well as groups
Social technology – user content
generation and social networks
New Internet social and business models enable
user content creation and distribution, and
support social networks.
Web 2.0: Play My Version
• Many of the unique features of e-commerce and the
Internet come together in a set of applications and social
media technologies referred to as Web 2.0
• The Internet started out as a simple network to support email 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)
Web 2.0 Applications and Sites
• Twitter
• YouTube
• Instagram
• Wikipedia
• Tumblr
What do these Web 2.0 applications and
sites have in common?
• Rely on user (regular people) and consumer-generated
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
Types of E-Commerce
• There are a variety of 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 revenue is shown in Figures
1.3 and 1.4
Other Types of E-Commerce
• Social e-commerce
• For example, Facebook
• Mobile commerce (m-commerce)
• Transactions are initiated through mobile devices
• Local e-commerce
• 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.
Growth of the Internet, Web, and Mobile Platform
• The technology juggernauts behind e-commerce are the
Internet, Web, and increasingly, the mobile platform
• Without these technologies, e-commerce as we know it
would be impossible
• One way to measure the growth of the Internet is by
looking at the number of Internet hosts with domain
• In July 2013, there were almost 1 billion Internet hosts in
over 245 countries, up from just 70 million in 2000
Growth Patterns for Other Electronic Technologies
• The Internet has shown extraordinary growth patterns
when compared to other electronic technologies of the
• It took radio 38 years to achieve a 30% share of U.S.
• 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) 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
• 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
• Smaller VC investments; early small-firm buyouts by large
online players
Extensive government surveillance
Entrepreneurial social 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
Assessing E-Commerce: Successes,
Surprises, and Failures
• E-commerce has been a stunning technological success
• Business results have been more mixed: only about 20%
of dot-coms formed since 1995 have survived as
independent companies in 2013
• 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-andmortar 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
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
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
Predictions for the Future: More Surprises
• The technology of e-commerce will continue to propagate
through all commercial activity
US e-commerce revenues are expected to grow about 14% per
year through 2017
Size of the average online purchase will continue to grow
Number of US online shoppers will grow about 1% per year
Large experienced traditional firms will continue to play a
dominant role
Still room for new start-up ventures
Continuation of audience consolidation
The number of successful purely online companies will remain
Continued growth of regulatory activity
Rising fuel costs may influence growth in e-commerce
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