E-COMMERCE: DIGITAL MARKETS,
DIGITAL GOODS
Part-I
Chapter Objectives
•
Describe the unique features of e-commerce, digital markets, and digital goods.
•
Analyze how Internet technology has changed value propositions and business
models.
•
Describe the various types of e-commerce and how e-commerce has changed
consumer retailing and business-to-business transactions.
•
Evaluate the role of m-commerce in business and describe the most important mcommerce applications.
•
Compare the principal payment systems for electronic commerce.
Electronic Commerce and the Internet
•
E-commerce:
• Digitally enabled commercial transactions between and among organizations
and individuals, primarily over Internet
• Began in 1995 and growing exponentially at 25% growth rate annually
• Rapid growth led to dot-com bubble (burst in 2001)
• Today e-commerce revenues picture is very positive
• E.g. Global annual revenue from ecommerce amounted to $1.3 trillion in
2014.
THE GROWTH OF E-COMMERCE
Eight unique features of e-commerce
1.
Ubiquity
•
Internet technology available anytime and everywhere: work, home,
mobile devices
•
Business significance:
•
Marketplace is extended beyond traditional boundaries.
•
Marketspace,
marketplace
extended
geographical boundaries, is being created
•
Shopping can take place anywhere - customer convenience is
enhanced, shopping costs are reduced
beyond
traditional
Eight unique features of e-commerce
2.
Global reach
•
Technology reaches across national boundaries, around Earth
•
Business significance:
•
Commerce enabled across cultural and national boundaries seamlessly,
without modification
•
Marketspace includes potentially billions of consumers and millions of
businesses worldwide
Eight unique features of e-commerce
3.
Universal standards
• One set of technology standards: Internet standards
•
Business significance:
– Disparate computer systems easily communicate with each other
– Lower market entry costs—costs merchants must pay to bring goods
to market
– Lower consumers’ search costs—effort required to find suitable
products
Eight unique features of e-commerce
4.
Richness
• Supports video, audio, and text messages
•
Business significance:
– Possible to deliver rich messages with text, audio, and video
simultaneously to large numbers of people
– Video, audio, and text marketing messages can be integrated into
single marketing message and consumer experience
Eight unique features of e-commerce
5.
Interactivity
• The technology works through interaction with the user
•
Business significance:
– Consumers engaged in dialog that dynamically adjusts experience to
the individual
– Consumer becomes co-participant in process of delivering goods to
market
Eight unique features of e-commerce
6.
Information density
•
Technology reduces information costs and raises quality
•
Business significance:
•
Information becomes plentiful, cheap, and more accurate
•
Increases price transparency and cost transparency
•
Enables price discrimination
Eight unique features of e-commerce
7.
Personalization/customization
•
Technology allows personalized messages to be delivered to individuals
as well as groups
•
Permits customization—changing delivered product or service based on
user’s preferences or prior behavior
•
Business significance
•
Personalization of marketing messages and customization of
products and services are based on individual characteristics
Eight unique features of e-commerce
8.
Social technology
• The technology promotes user content generation and social networking
•
Business significance
– New Internet social and business models enable user content
creation and distribution, and support social networks
Key concepts in e-commerce
•
Digital markets and digital goods
• Internet shrinks information asymmetry
• Information asymmetry: when one party has more information important
for transaction
• E.g. Information asymmetry between auto dealers and customers
• Digital markets more flexible and efficient
• Reduced search and transaction costs
• Lower menu costs (cost of changing prices)
• Dynamic pricing
Key concepts in e-commerce
• Internet enables disintermediation
• Disintermediation:
• Removal of organizations or business process layers responsible for
intermediary steps in value chain
• Enables selling direct to consumer
Key concepts in e-commerce
•
Digital goods
• Goods that can be delivered over network
• E.g. Music tracks, video, e-books, software
• Cost for producing first unit is nearly total cost of product: Cost for producing
additional units very low
• Industries with digital goods are undergoing revolutionary changes
• Video rental services
• Record label companies
• Newspapers and magazines
E-commerce Business Models
Virtual storefront
Internet business models
Online marketplace
Portal
Virtual community
Online service provider
Transaction broker
Information broker
Content provider
E-commerce Revenue Models
Advertising
Free/Freemium
Sales
Subscription
Affiliate
Transaction Fee
Thank You
End of Part-I