COMP 6125 An Introduction to E-

Commerce

Session 1: E-Commerce Fundamentals

Introduction

• What is e-commerce? How can we define it?

• Who uses it? For what purposes?

• How can it be applied to Barbados? And the region in general?

• What are some of the issues that we need to look at for a successful implementation?

A Bit Of History

• Early 1970s saw introduction of Electronic Fund Transfers (EFT)– Limited to large organisations, financial

institutions, few daring small business

• EDI came next and opened up to include other transaction processes besides financial; included manufacturers, retailers, services, etc

A Bit Of History

• Between 1997 and 2000, more than 12000 Internet-related business were started (dot.com boom)

• By 2000, more than 5000 went out of business (dot.com bust)

• In 2003, e-commerce began to shows signs of new life

Why Did They Fail• Internet technologies used were slow and

expensive – consumers usually used dial-up

• E-mail was only used as relatively unstructured communications tool

• Over-reliance on simple forms of online advertising as main revenue source

• B2B relied on patchwork of communication methods that were not well integrated– Fax, e-mail, EDI

Why Did They Fail

• Companies used money from investors instead of investing their own money

• Many companies and investors believed that being the first to offer something was enough to be successful– This mentality still persists today!– Companies that were successful while following this

route tended to be large with already established reputation, with expertise in marketing, distribution and production

Points of Note

• During the bust, B2C e-commerce was still occurring; just at a slower rate than before

• B2B sales have always been higher than B2C due to previously established EDI

Actual and Estimated Online Sales in B2C and B2B Categories

Year

B2C Sales:

Actual and Estimated

$ Billions

B2B Sales:

Actual and Estimated

$ Billions

2007 240 6800

2006 190 5300

2005 150 4100

2004 130 2800

2003 100 1600

2002 80 900

2001 70 730

2000 50 600

1999 25 550

1998 10 520

1997 5 490

1996 Less than 1 460

Taken from Electronic Commerce, Seventh Annual Edition, pg 10

Case Study – Pets.com

• Pg 19

• What are some of the issues faced by Pets.com that would have caused its failure?

Issues Faced By Pets.com• The industry offered few advantages for an online

business as opposed to traditional

• Shipping costs for pet food caused significant losses for Pets.com

• Different shapes, sizes and weights of pet products caused difficulty in packaging and shipping efficiently

• The company was spending money rapidly during a time when investors were reconsidering the long-run viability of a complete e-commerce business

• Could not develop sustainable advantage over traditional pet stores!

Current Pet Stores

• Since then, several companies sell pet supplies online

• However, more careful about what was sold

• Example: foods that meet the needs of specific pet diets are easily sold at high enough prices to make online sales profitable

E-Commerce Categories• Business-to-business (B2B)

– Transactions conducted between businesses using Internet technologies

• Business-to-consumer (B2C)– Consumer shopping

• Business-to-government (B2G)– Business transactions with government agencies; e.g: paying

taxes

• Consumer-to-consumer (C2C)– Consumers selling directly to consumers

Benefits for Businesses

• Help increase profits and decrease costs; reduced overhead; facilitates “pull”-type supply chain management

• Wide base for customers – internationally; geographically scattered; areas not previously reached

• Identify new suppliers and business partners

• Ability to create highly specialized businesses

• Lower communication costs

Benefits for Consumers

• Buyers have wide range of choices of vendors and products

• Availability 24/7

• Competitive market causes decrease in prices, discounts or “freebies” thrown in

• Customers receive relevant and detailed information in seconds, as opposed to days or weeks

• Allows individuals to work from home, do less travel

Disadvantages

• Some businesses processes may not work using e-commerce– Perishable goods

• Difficult to calculate return-on-investment (ROI)

• Potential cultural and legal obstacles– Legal environment still unclear and have conflicting

laws

• No “touch-and-feel” aspect

Business Models

• Set of processes that combine to yield a profit

• Good business models expected to lead to rapid sales growth and market dominance

• One argument for e-commerce businesses is that business models do not matter!– Many online business with good business

models, or that copied good business models, failed

Revenue Models

• Specific collection of business processes used to identify customers, market to those customers, and generate sales from those customers

• Online companies and investors still use the idea of revenue model

Business Processes

• Companies should identify business processes that they can streamline, enhance, or replace with processes driven by Internet technologies

Issues Surrounding E-commerce

• Trust

• Language

• Culture

• Culture and government

• Infrastructure

Trust Issues

• How do I know who you say you are?

• How can I guarantee that you will supply me with the products you offer within the timeframe you gave?

© The New Yorker Collection 1993 Peter Steiner from cartoonbank.com. All rights reserved

Trust Issues

• Established companies, especially those with offline presence, have easy time creating trust on the Web

• New companies face difficulties due to anonymity that exists– Visitors won’t just buy from anyone, especially

if they have never heard of the company before

Language Issues• “Think globally, act locally”

• Providing local language conversions of a site– Customers more likely to buy products or services from

a site in their own language

• About 60% of content on Web is in English; more than 50% of current Internet users do not read English

• Check out Alis Technologies, Berlitz, Rubric, ScanSoft for Web translation services and software

Culture Issues

• Common language and common customs provide an easier time for consumers to determine how companies will react in situations of misrepresentation of quality, etc

• Laws and business practices vary between countries

Culture Issues

• pg 35

• Wine.com

• Baby food company

• Use of icons and terms to depict common actions– Shopping carts used in US; shopping baskets used in

Europe; shopping trolleys used in Australia– The OK symbol seen as an obscene gesture in some

countries

Activity 1.1

• Check out Bol.com (merger of number of online companies from 12 countries)

• Use the tabs on the top to browse through the various differently designed home pages for the different countries

• Why do you think this is?

• Also take a look at Nike.com

Culture and Government

• Government controls that limit forms of open online discussions that occur

• Some officials in North African and Middle East take public issue with the availability of sexually explicit, anti-Islamic content on the Web

• Some governments review ISPs and their records

Culture and Government• In 2004, Chinese government shut down a

Blogbus because it contained an essay which the government deemed to contain “forbidden content”

• French law regulates that an advertisement for a product must be in French; companies willing to sell to Frenchmen online and ship to France must have content in French

• What impacts do you see for these restrictions where e-commerce is concerned?

Infrastructure Issues

• Local connection costs in developing countries high; some countries required payment for time spent online– This could lead to people spending less time

online– Introduction of flat-rate access required

• More than half of businesses on web turn away international orders as do not have capacity or processes in place to fill them

Links

• References– Electronic Commerce, Seventh Annual Edition

by Gary Schneider– Electronic Commerce: A Managerial

Perspective by Turban, Lee, King and Chung

• Of Interest