E-COMMERCE: DIGITAL MARKET, DIGITAL GOODS

WHY E-COMMERCE IS DIFFERENT

Internet and e-commerce technologies are much more rich and powerful than previous technology revolutions like radio, television, and the telephone.  

8 Unique features of Internet and Web as commercial

• Ubiquity 

Internet/Web technology is available everywhere: at work, at home, and elsewhere via desktop and mobile devices. Mobile devices extend service to local areas and merchants. 

Effect:

1. Marketplace removed from temporal, geographic locations to become "marketspace"
2. Enhanced customer convenienceand reduced shopping costs

• Global Reach

The technology reaches across national boundaries, around the earth. 

Effect:

1. Commerce is enabled across cultural and national boundaries seamlessly and without modification. 
2. The marketspace includes, potentially, billions of consumers and millions of businesses worldwide.

• Universal Standarts

There is one set of technology standards, namely Internet standards.

Effect: 

1. Disparate computer systems can easily communicate with each other. 
2. Lower market entry costs—costs merchants must pay to bring goods to market
3. Lower consumers’ search costs—effort required to find suitable products

• Interactivity

The technology works through interaction with the user. 

Effect:

1. Consumers engaged in dialog that dynamically adjusts experience to the individual
2. Consumer becomes co-participant in process of delivering goods to market.

• Richness

Video, audio, and text messages are possible.

Effect:

1. Possible to deliver rich messages with text, audio, and video simultaneously to large numbers of people.
2. Video, audio, and text marketing messages can be integrated into single marketing message and consumer experience.

• Information Density

The technology reduces information costs and raises quality.

Effect:

1. Greater price transparency
2. Greater cost transparency
3. Enables merchants to engage in price discrimination

• Personalization / Costumization

The technology allows personalized messages to be delivered to individuals as well as groups.

Effect:

1. Personalization of marketing messages and customization of products and services are based on individual characteristics. 

• Social Technology

The technology supports content generation and social networking.

Effect:

1. New Internet social and business models enable user content creation and distribution, and support social networks.
2. Many-to-many model

KEY CONCEPTS IN E-COMMERCE: DIGITAL MARKETS AND DIGITAL GOODS IN A GLOBAL MARKETPLACE 

• Digital Market

Digital markets are very flexible and efficient because they operate with reduced search and transaction costs, lower menu costs (merchants’ costs of changing prices), greater price discrimination, and the ability to change prices dynamically based on market conditions. 

• Digital Goods

Digital goods are goods that can be delivered over a digital network.

TYPES OF E-COMMERCE 

The three major electronic commerce 

• Business-to-consumer (B2C) e-commerce

Electronic commerce involves retailing products and services to individual shoppers. 

Example: BarnesandNoble.com 

• Business-to-business (B2B) e-commerce

Electronic commerce involves sales of goods and services among businesses. 

Example: ChemConnect’s 

• Consumer-to-consumer (C2C) e-commerce

Electronic commerce involves consumers selling directly to consumers. 

Example: eBay 

INTERNET BUSINESS MODEL

E-COMMERCE REVENUE MODELS

• Advertising Revenue Model

A Web site generates revenue by attracting a large audience of visitors who can then be exposed to advertisements. 

• Sales Revenue Model

Companies derive revenue by selling goods, information, or services to customers. 

• Subscription Revenue Model

A Web site offering content or services charges a subscription fee for access to some or all of its offerings on an ongoing basis. 

• Free / Freemium Revenue Model

Firms offer basic services or content for free, while charging a premium for advanced or special features.  

• Transaction Fee Revenue Model

A company receives a fee for enabling or executing a transaction. 

• Affiliate Revenue Model

Web sites (called “affiliate Web sites”) send visitors to other Web sites in return for a referral fee or percentage of the revenue from any resulting sales.  

B2B E-COMMERCE: NEW EFFICIENCIES AND RELATIONSHIPS 

Procurement requires significant overhead costs, which Internet and networking helps automate.

Variety of different Internet-enabled technologies used in B2B

• Electronic data interchange (EDI)

Electronic data interchange enables the computer to computer exchange between two organizations of standard transactions such as invoices, bills of lading, shipment schedules, or purchase orders. For example, procurement involves not only purchasing goods and materials but also sourcing, negotiating with suppliers, paying for goods, and making delivery arrangements. 

• Private industrial networks (private exchanges)

Private industrial networks typically consist of a large firm using a secure Web site to link to its suppliers and other key business partners. Another term for a private industrial network is a private exchange. An example is VW Group Supply, which links the Volkswagen Group and its suppliers. 

• Net marketplaces

Net marketplaces, which are sometimes called e-hubs, provide a single, digital marketplace based on Internet technology for many different buyers and sellers. Net marketplaces sell direct goods and some sell indirect goods. Direct goods are goods used in a production process, such as sheet steel for auto body production. Indirect goods are all other goods not directly involved in the production process, such as office supplies or products for maintenance and repair.  

  

• Exchanges

Exchanges are independently owned third-party Net marketplaces that connect thousands of suppliers and buyers for spot purchasing. For example, Go2Paper enables a spot market for paper, board, and kraft among buyers and sellers in the paper industries from over 75 countries.

THE MOBILE DIGITAL PLATFORM AND MOBILE E-COMMERCE 

M-commerce

• In 2012 is 10% of all e-commerce
• Fastest growing form of e-commerce, with some areas expanding at a rate of 50 percent or more per year 
• There were an estimated 4 billion cell phone users worldwide 
• The main areas of growth in mobile e-commerce are retail sales at the top Mobile 400 companies (Amazon and eBay), sales of digital content (music, TV shows and movies), local search for restaurants, museums, stores. 

LOCATION-BASED SERVICES AND APPLICATIONS 

Location-based services 

• Geosocial services

Can tell you where your friends are meeting. 

• Geoadvertising

Can tell you where to find the nearest Italian restaurant 

• Geoinformation services 

Can tell you the price of a house you are looking at, or about special exhibits at a museum you are passing. 

OTHER MOBILE COMMERCE SERVICES 

• Banks and credit card companies are rolling out services that let customers manage their accounts from their mobile devices. 
• Mobile display advertising are Apple’s iAd platform and Google’s AdMob platform 
• Games and entertainment, smartphones like the iPhone and Android-based devices offer downloadable and streaming digital games, movies, TV shows, music, and ring tones. 

BUILDING AN E-COMMERCE WEBSITE 

Pieces of the Site-Building Puzzle

Assembling a team with the skills required to make decisions about:

1. Technology
2. Site design
3. Social and information policies 
4. Hardware, software, and telecommunications infrastructure

Customer’s demands should drive the site’s technology and design

Business Objectives

The capabilities the site should have

• Business decisions should drive technology. Example: execute a transaction payment

System Functionality

Technology needed to achieve objective. Example: a shopping cart or other payment system

Information Requirements

Specific data and processes needed. Example: secure credit card clearing, multiple payment options

Alternatives in building the Web site

• Completely in-house
• Mixed responsibility
• Completely outsourced (Co-location)

Web site budgets

• Several thousand to millions per year
• 50% of budget is system maintenance and content creation