Enabling Business-to-Consumer Electronic Commerce
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E-commerce is IS fundamentally
Electronic Commerce Defined
 Exchange of goods, services, and money among firms, between firms, and
their customers and between customers, supported by communication
technologies and in particular, the internet
 There are many types of E-commerce (but only two of them are really
significant)
o B2c: Business to business
 There’s other pedantic ones like C2C and G2C
Different Types of E-Commerce
Type of EC
What it is
Business to consumer
Transactions between businesses and
their customers
Business to business
Transactions among businesses
Consumer to business
Transactions between customers and
businesses
Consumer to consumer
Transactions between people not
necessarily working together
Govt. to citizen
Transactions between government and
citizens
Govt. to business
Transactions between government and
businesses
Govt. to govt.
Transactions among governments
Where is the money…..B2B or B2C?
 Business to consumer
o It’s where the media is
 Business to business
o It’s where the big money is
Interesting Capabilities of the Web
 Disintermediation
o Cutting out the “middle man” and reaching customers more directly
and efficiently
 Ex: Airlines can sell their tickets directly to customers without
travel agents
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Info integration
o Websites can be linked to corporate databases and provide real-time
access to personalized information
 Ex: Travelocity.com can give you real time price quotes
Mass customization
o Firms can tailor their products and services to meet a customer’s
particular needs
 Ex: customers can build their own bag from timbuk2.com
Interactive Commutation
o Companies can communicate with customers, improving their image
of responsiveness
 Ex: customers can receive live help via text or video chat on
landsend.com
Transaction Support
o Clients and businesses can conduct business online without human
support
 Customers can purchase a multitude of items (pretty much any
product you could think of) on Amazon.com
Information Dissemination
o Products and services can be marketed over vast distances
o Goes beyond the local market
 Global audiences have access to the trailer for Universal
Picture’s Fast and Furious 6
Legacy Supply Chain
:
supplier
importer/distributor
wholesaler
retailers
consumer
Providing E-Commerce Solution
Supplier
Provide E-commerce
Consumer
The Internet: A network of networks
 Computers and other decides capable of communication
 The infrastructure that connect them (fiber optics, copper modems, etc.)
 The software tools and protocols that make commutation possible
o Goes beyond the World Wide Web
 Electronic Data Interchange
o The digital or electronic transmission of business documents and
related data between organizations via dedicated telecommunications
networks
 Began in the 1940s, but has been minimal within the business
world until recently (~20 yrs ago)
 Mostly used by banks and stock markets
o Ex: Bigstore.com can check whether a product is in stock at The Gap
or verify a customer’s credit card at GiantBank
 Bigstore doesn’t need to know the technology in use at Gap or
GiantBank
Business to Consumer (B2C) eCommerce
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Range from passive to active
o Ex: Amazon takes a very active approach in offering more products
when you make a purchase
o Ex: Mercedes Benz takes a more passive approach in just giving out
information on their products
Three Stages of Evolution
 E-Information
o Dissemination of marking material and product info
o Global customers can access timely information at any given time
o Reduces cost and time needed to disseminate printed materials
o No transactional capabilities however
 E-Integration
o Dynamic access to customized information (such as bank statements)
o Still no transactional capabilities
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E-Transaction
o Customers get real-time access to information about products and
services
o Customers can make purchases and conduct banking or investment
transactions
This naturally leads to electronic retail
o Benefits
 Product: unlimited number of products
 Place: Virtual storefronts are unconstrained geographically
 Price: Frictionless pricing (can easily react to product price
change)
 Ex: Macys decides to sell a product for one penny less,
Amazon can retaliate and sell a product for one penny
less than Macys
 Some argue prices are frictionless on the internet
o Drawbacks
 Delivery: Delayed
 Direct product experience: none
The Long Tail
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Recall: In information goods, MC0
Shelf space becomes infinite
Before Digitalization
o Only selling the green
 Limited shelf space= a limited capacity to be able to carry
certain goods
 High cost for having certain goods
o After digitalization
 We can offer yellow products as well
 Unlimited shelf space, no cost for having it
Physical Economy
 Two primary limitations
o Local audiences need to be found
 People need to be nearby to purchase goods
o Also constrained by the physics of the world
 The radio spectrum is not infinite
 The shelf size is not infinite
 People have varying tastes- how can we offer them everything they want?
o More products=better ability for customers to choose what they
want/need
In A Digital World
 Because MC0, we can offer as much of any good as we want
o The only limitation is physical memory
 We can offer to anyone with a modem
 We can offer as many goods as we want
How to Harness the Long Tail
 Make everything available
o Increase variety to account for varying tastes
 Reduce the price of half and lower it
o Incentivize purchases
 Help me find it
o Reduce search costs
 Is there value in the long tail?
o Ex: The Cello Suites by Johan Sebastian Bach
 More than 200 versions on iTunes
 Does it actually grow market?
o Reducing Search Costs
 Does is actually matter if the consumers don’t know the item
exists?
o Consolidating the market
 If the blockbuster us all people want to go through the effort
and spend the money to get something else?