By: Zeeshan A. Bhatti
Intro to E-Commerce
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E-Commerce is connecting producers, sellers, and customers via technology
– most probably Internet
Companies that ignore the impact of Internet on their market run the risk of
becoming as relevant to customers as rotary-dial telephone

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New innovative ways of connecting with suppliers, buyers, and serving the
customers

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The Dot –Com Bubble (1997-2000)
E.g., FreshDirect, SimonDelivers allow online grocery shopping
Not only time saving, but customers say groceries online are fresher and of
higher quality
Business basics still apply – taking care of customers and earning profit
What are digital goods?

Digital goods are goods that can be delivered
over a digital network.
 Music
tracks, video, Hollywood movies, software,
newspapers, magazines, and books can all be
expressed, stored, delivered, and sold as purely digital
products
 The
marginal cost of producing another unit is about
zero (it costs nothing to make a copy of a music file)
Digital Markets and Digital Goods

Internet reduces Information Asymmetry
 An
information asymmetry exists when one party in a
transaction has more information that is important for
the transaction than the other party

Reduced Search and Transaction Costs

Disintermediation
E-Commerce functions

Most visible changes – World of retailing
Although E-commerce wont replace traditional retailing –
still no retailer not even Wal-Mart, can ignore impact of
Internet on its business model
 Take orders anywhere, anytime
 Collect information on customers easily – easy marketing
 Link: TESCO Virtual Subway Store

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Entrepreneurs on the web will most likely never meet
their customers face to face

Yet, those customers, living anywhere in the world, will visit
their shops online, and expect to receive individual attention

New business models – Pricing, for example, is no
longer as simple as it was


Global reach – customers comparing prices across the globe
– global competition
Digital economy – Customer Powered Web

More informed customers


85% of Internet users research products & services online before
buying them in stores or by telephone
E-Commerce Infographics
Benefits of Selling on the Web

First E-Commerce transaction: Aug 11, 1994
 Daniel
Kohn: Sting CD “First Summoner’s Tales” to a
student of Swarthmore College for $12.48 + Shipping

The opportunity to increase revenues and profits
 New
sales channel – generate additional sales
 Survey
by IPSOS & PayPal: 72% of small businesses
say they have increased their sales
 65%
says it has increases their profits as well

Ability to expand reach into global markets
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Remain open 24/7

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Tapping into global markets could be very expensive traditionally
Time difference
More than half of the retail sales occur after 6 p.m.
Extending the hours of brick-and-mortar stores
Increase in dual career couples – amount of available leisure time shrinks – New
opportunities
Capacity of Web’s interactive nature for customer service
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Selling on web can be highly impersonal – lack of human interaction
Properly designed websites – create exciting, interactive experience for online visitors
Customers can contact the company anytime
“Personalize” to suit specific tastes and preferences
E.g., Lillion Vernon’s Website customize itself based on individual customer’s past buying
behavior by tracking the purchase patterns

Power to educate and inform

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Most informative marketing media – specially to Women and Gen Y since they
crave for info.
E.g., a travel company advertising a European tour

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A newspaper ad could include brief description of tour, a photo or two, price and
telephone number
A web ad can include all this + dozens of photos, accommodation information, itinerary,
seating configurations, info on optional side trips and links to other informative websites
Lower cost of doing business

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Lower administrative costs by reducing sales cycle
Savings on Customer support, distributing marketing materials
E.g., Brady Corporation – makers of signs, identification tags etc., faced problems
from its outdated order processing and quality control system


Used Web-to-Workbench system that sends customer order directly to factory floor
and customers can design the signs themselves and preview the final order
Reduced processing cost upt o 88% from $16 to $2

Power to track Web Results
 Track
activities on your website
 No.
of visitors – click through rates on their banner ads
 E.g.,
BuyTelco Inc., a company that helps individuals to select
best high-speed internet plans realized the conversion rate
was 0.7% -- Not even 1 out of 100 people would buy

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Used Web Analytics S/W to see how customers were navigating
and where they were abandoning it – the Checkout Process
required info on 5 pages
Conversion rate increased to 3% by reducing the no. of pages

Web Analytics tools that measure a Website’s ability to attract
customers, generate sales – helps entrepreneurs to know what works
and what doesn’t

You can collect data and analyze them
Make adjustments to website accordingly
Video Google Analytics

Commerce Metrics:
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Basic Analytics such as sales revenue generated, no. of items sold, which
products are selling best etc.
Visitor Segmentation Measurements:

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Return customers or new customers?
How customers have reached the website (via search engine or pay-per-clickad)
Which search terms they’ve used? – Google Adwords (Pay per Click)
 Content
Reports:
 Which
products customers are looking for and which are the
most viewed web pages
 Where do the customers exit your website?
 Process
 How
measurements:
do websites attract visitors and convert them into
customers?
 Does the check out process run smoothly?
 How often do shoppers abandon their carts? At what point?

In early days of E-Commerce, entrepreneurs strived to
create sticky and viral sites

Sticky Site:
Acts like electronic flypaper – capturing visitors’ attention and
offering them interesting info. to make them stay online
 The premise of stickiness – the longer the stay, more likely is the
purchase or revisit


Viral Site:
A website that visitors are willing to share with their friends
 Word of mouse advertising is the most effective way of attracting
traffic – recommendations


Other common measures of the Web site performance are:
1.
Click-through Rate

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The proportion of people who see a company’s online ad and actually click on it to reach its
website
CTR = Number of Sales / Number of Impressions
E.g., If company’s ad is displayed 500 times in one day and 12 people clicked on it, then
CTR = 12 /500 = 2.4%
Cost per acquisition (CPA)
2.
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The cost a company incurs to generate each new customer
CPA = Total cost of acquiring new customer / No. of new
customers
E.g., A company purchases an ad in an e-magazine for $200 and it yields 15 new customers,
then
CPA = 200/15 = $13.33
3.
The conversion ratio (Browse-to-buy)
 Proportion
of visitors to site who actually make a
purchase
 CR = No. of customers who made a purchase/ No. of
visitors to the site
 E.g., If 1000 people visits the website and 23 people
actually purchase, then
CR = 23 /1000 = 2.3%
Factors to be considered before
launching into E-Commerce

In U.S 77% of the small businesses say that their products are not suitable
for sale on the Web

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The key barriers:
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Another 37% say they do not see the advantage of selling online
Not knowing where and how to start an e-commerce effort
Cost and Time
However, business owners should consider

Developing a plan for integrating the Web into the overall firm’s strategy

Developing deep lasting relationships with customers

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Attracting customers costs money and they should be retained
Customer’s tastes are always changing – analyze the trends

What exactly do you expect a Website to do for your company?
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Info only? Reach new customers? Increase sales to existing customers?
Improve communication? Will customers be able to place orders on
your website, or should they call you?
How much can you afford to invest in e-commerce?
How long can you wait for the ROI?
How well suited are your products and services for selling on the
Web?
Will you be tied into your company’s inventory system?
How will handle order fulfillment? Can you handle increased
sales?
Payment Methods?
Is there a privacy policy for your website?
The Myths of E-Commerce

Setting up a shop on Web is no guarantee of success

Successful models are very famous e.g., Amazon but those who fail are not talked
abt.

Make sure you do not fall into following myths:

Setting up a business on the Web is easy and Inexpensive

Although, anyone with the right s/w can post a static website – creating an effective,
professional website can be expensive and time consuming

Most small businesses owners set up simple “electronic flyers” – not truly commerce
oriented but provides a new way to connect to new and existing customers

Small businesses outsource e-commerce activities – focus on core competencies and hire
other companies with competencies in e-commerce (pick, pack and ship)

Setting up site is the first step – follow up investments (Updating, Revising, Buying H/W)

If I launch a website, customers will flock to it

Once the site is setup, the expenses don’t end up there

More than 8.32 billion pages – getting a site noticed in the crowd is
very difficult

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Setting up a website and then failing to drive customers is like setting up
a physical store in the back alley
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Even listing with search engines does not guarantee that
Promote your website offline (print URL on everything)
Buying ads in traditional media (banner ads, banner exchange etc.)
Convincing other sites to establish links to your website can boost ranking
e.g., Selling products on Ebay

SEO – Search Engine Optimization: the process of improving
the visibility of a website on search engines

Blogs, SNS, FAQs etc.

Natural or Organic

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Paid Listings:
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Listings: result of “spiders” – programs search engines use to crawl the
web
short text advertisements on search engines with links to the sponsoring
company’s website
Paid inclusion: Search engine company charges fees related to
inclusion of websites in their search index

No need to wait for search engine to find the site

Privacy is not an important issue on the Web

Access to unbelievable amounts of info abt customers

Offering “freebies” in exchange of info.

Companies are responsible for securing this info.

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E.g., EU laws and regulations abt. unauthorized use – the right of customers to exclude info.
Most important part of E-Commerce is Technology

Although understanding technology of e-commerce is important part of the formula – not
the most crucial part

Most successful entrepreneurs in e-commerce are those that understand their industry and
business model

They can hire webmasters and technologists but there is no substitute of their industry
based skills

Internet Customer Service is not as important as it is in Traditional Retail Store

Sites that are difficult to navigate, slow to load or confusing are turn offs

Higher expectations with sites where people shop frequently

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The most common reasons for leaving websites are:
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E.g., 80% of online shopper said they are unwilling to accept lower levels of online customer service
Shipping & handling charges were too high
Delivery times were too long
The checkout process required too much info and took time
Insufficient product information
Types of Customer Services that can be offered:
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Responding customer emails (avg time 29 hours)
Virtual chat with CSRs
Order confirmation emails can enhance satisfaction levels
Keeping track of customer database for customized services

Flash makes a website better
 Trap:
Designing a flashy website with “bells and
whistles”
 “more”
 Keep
is not necessarily “better” – adequate info
a simple design – easy to load
 Fancy
graphics, bright colors, playful music can attract
attention but can be distracting
 Perception varies across regions – visual aid required!

It’s what’s up from front that counts

Website is imp – but back office design is of much more
importance

If behind-the-scene support is not in place, company’s ecommerce effort will come crashing down

Web-based entrepreneurs discover that greatest challenge
is not to attract customer but workable order fulfilling

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Specially in rush days e.g., Eid, Christmas etc.
Contracts with shipping companies

E.g., FedEx, UPS etc. (builds trust as well)

It’s too late to get on the Web
A
common myth, especially in small businesses
 E-Commerce
 E.g.,
A
is still developing: new innovative ways
www.threadless.com
major mistake: waiting to build a perfect website
with time – very few get it “right” the 1st time
 “try it, learn from it, fix it”… Delay is your biggest enemy
– if you delay, someone else will do it
 Evolves
Strategies for E-Success

Develop a community

Need to offer more than just quality products – develop community of customers
with similar interests

Give them the chance of interacting with other like-minded customers

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The virtual community
Email lists, chat rooms, customer polls, blogs etc.
Attract visitors by giving away freebies

One of the most attractive word on internet is “free”

A freebie is something that customers value but it doesn’t have to be attractive

Most common giveaway on web is “Information”

E.g., Newsletter

Make creative use of Email
 Don’t
 E.g.,
spam – Well constructed permission email
deals, offers, new stuff etc.
 According
 Catalogs
to Symantec, 67% of email is spam
are very expensive – email costs nothing –
but it can cost a lot if you don’t send it wisely

Make sure your Web Site says “Credibility”

Online shoppers are wary – due to prevalence of online fraud

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Visitors began evaluating as soon as they arrive on your site
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They wont shop unless a company builds trust in its web site
Does the site look professional?
Are there misspelled words and typographical errors?
Source of info should be legitimate!!
Are there any dead links on your website?
Are your privacy and merchandise policy posted in prominent place?
Ways to establish credibility
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Simplest way is to establish credibility is to use brand names
Online seal programs e.g., TRUSTe or BBBOnLine
Payment Methods e.g., PayPal, VeriSign
Mention CSR activities , if any

Make the most out of Web’s Global Reach
 When
designing: Keep the foreign customers in mind
 Include
language buttons: local language increases sales
 Link: Beware of translation errors
 Color Schemes are important

E.g., Africans prefer bold colors but flag colors must be
alternatively preferred or disallowed
 Overseas
price considerations, taxes
 Embargos and sanctions (Strategically imp products)

Select an intuitive domain name

A domain name that is consistent with your image

E.g., www.toys.com

Short: easy to remember

Memorable: short might not always be memorable

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E.g., don’t use initials (e.g., www.sbfo.com for Stanley Brothers
Furniture Outlet)
Be specially careful with domain names – blunders might
occur

E.g., Worst domain names ever

Make it easy-to-navigate

Conduct pilot test with users

Watch them cruise on the website – Observe where they get
stuck

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Are they stuck? Are they confused?
Make product search easy
Build Loyalty

Give customers a reason to return on your website (e.g.,
Frequent Buyer Programs/Offers etc.)

Include an email option and telephone number

Customers appreciate the opportunity to communicate with
your company
Be sure to respond quickly
 Preferably add a toll free number

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Option to track orders
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Send confirmation emails to keep them happy
Keep them informed about delivery
Online Tracking Mechanisms
Don’t hide shipping charges
E-Commerce 2.0

What is Web 2.0 and E-Commerce 2.0?

A new way of Payment: Google Wallet

Customer Reviews

Reviews attract customers to your site

9% higher customer satisfaction levels, were 9% more likely to make a purchase and
8% more likely to purchase on the next visit

Reviews educate customers, positive reviews can motivate people to buy

Consumers are willing to pay between 20 to 99% more for a 5-star rated
product than for a 4-star rated product

Customer reviews can be photos, videos, blogs or 140 character Twitter updates

Shopping Widgets
 Shopping
widgets refer to portable content that can be
displayed (almost) anywhere on the Web
 Zazzle
 The
Myspace Widgets
Alvenda shopping widget allows retailers like 1800-Flowers to “open up shop” on any other website.
Shoppers don’t have to leave the publisher’s site (great
for the publisher and customer), and the order is
processed through the retailer’s regular order system.

Questions & Answers (FAQs)
 You’re
likely to get a better answer from someone who
owns the product than from a customer service rep who
hasn’t seen or used the product

Twitter
 Users
can get nearly instant answers to questions
(provided they’re under 140 characters) directed at a
retailer or the general Twitter universe
 Word of Mouth – alternative to email marketing

User Generated Cross Sells and Photos
 E.g.,
www.threadless.com
 User created lists like Amazon’s Listmania and the
iTunes Store’s iMixes
 User created lists on IMDB
 Wetseal customers can also browse by outfits that other
visitors have created, or build their own.

Facebook Pages
 The
best Facebook Pages have taken advantage of the
platform to create a social network for their most
raving fans that live where they play, not on the
retailer’s website
Some retailer offer promotions to get people sign up on their page

Co Browsing
 Products
like ShopTogether and PurchLive add a social
component to a retail site by offering the ability to
invite a friend to co-browse an online store in real-time
 For
example, Charlotte Russe gives the option to invite
friends through Twitter and Facebook. It updates your
status with a shortlink for anyone who wants to join you
on your visit

Social Login
 Social
login, also known as social sign-in, is a form
of single sign-on using existing login information from
a social networking service such
as Facebook or Twitter to sign into a third
party website in lieu of creating a new login account
specifically for that website
 Easy
check out