E-COMMERCE

Adapted from Christopher Muir, UWI

OBJECTIVES
What is Electronic Commerce (e-commerce)?
Define and differentiate between the types of e-commerce

Discuss the development and growth of e-commerce

Discuss the pros and cons of e-commerce

WHAT IS E-COMMERCE?
The buying and selling of products or services over electronic
systems. Eg. The Internet
Formal Definitions include:
The use of the internet to facilitate, execute and process business
transactions. Business transactions involve a buyer, a seller and the
exchange of goods or services for money. (Delone & Mclean 2004)
Digitally enabled commercial transactions between and among
organizations and individuals. (Laudon & Traver 2009)
WHY E-COMMERCE?
The technology involved in E-Commerce has dramatically changed
how commerce is done.
E-Commerce and the Digital Economy total contribution to GDP is
bigger than the GDP of Canada
It accounts for over 3.4% GDP in the G8 and the five other high
performers in this arena (Brazil, India, China, S. Korea and
Sweden)
Internets contribution to GDP has doubled in last 5 years to 21%
so it is still growing
UNIQUE FEATURES OF E-COMMERCE
1. Ubiquity (24/7 availability from everywhere connectivity exists).
Currently over 2 billion people (40% world pop.) have access to the
internet worldwide.
2. Global reach (crosses cultural/national/linguistic boundaries)
3. Based on standards eg. TCP/IP, HTML, RSA (defacto standard for
industrialized encryption)
4. Information availability (about markets, environment, customers,
competitors)
5. Interactivity (ability to simulate face-to-face experience from/to
anywhere)
6. Social Networking (connectivity to daily life and behaviour)
FIGURE 1-2 Electronic commerce categories
TYPES OF E-COMMERCE: MARKET
Category
Business-to-consumer (B2C)
Business-to-business (B2B)
Business processes that support buying and
selling activities
Consumer-to-consumer (C2C)
Business-to-government (B2G)
Description
Businesses sell products or services to
individual consumers.
Businesses sell products or services to
other businesses.
Businesses and other organizations
maintain and use information to identify
and evaluate customers, suppliers, and
employees.
Increasingly, businesses share this
information in carefully managed ways
with their customers, suppliers,
employees, and business partners.
Participants in an online marketplace
can buy and sell goods to each other.
Because one party is selling, and thus
acting as a business, it can be treated as
part of B2C electronic commerce.
Businesses sell goods or services to
governments and government agencies.
Can be treated as part of B2C electronic
commerce.
Example
Walmart.com sells merchandise to consumers
through its Web site.
Grainger.com sells industrial supplies to large and
small businesses through its Web site.
Dell Computer uses secure Internet
connections to share current sales and sales
forecast information with suppliers. The
suppliers can use this information to plan their
own production and deliver component parts to
Dell in the right quantities at the right time.
Consumers and businesses trade with each
other in the eBay.com online marketplace.
CA.gov procurement site allows businesses to sell
online to the state of California.
TYPES OF E-COMMERCE: TECHNOLOGY
Client/Server
Users connect to a server (typically over an HTTPS connection) to
conduct the transaction
Cloud
Scalable provision of E-Commerce services and infrastructure through 3rd
parties or via internal data centres
Peer-to-Peer (P2P)
Users share files/resources with each other and without central control
Mobile commerce (M-commerce)
Use of mobile networks as the electronic medium for transactions
Largest growing sector
BUSINESS-TO-CONSUMER
Consumer accesses merchant website
Modeled on traditional shopping

Shopping cart used to hold goods until checkout

Checkout is defined as order and payment processing

Post-sale communication to confirm order, payment, shipping

information and delivery
BUSINESS-TO-BUSINESS
Manages transactions between firms for services and goods
Services include logistics, procurement, hosting

Sale of goods between organizations such as raw materials for

manufacturing and finished products for resale
Often uses extranets: shared intranets hosting vendors,
contractors, suppliers and key customers
CONSUMER-TO-CONSUMER
Allows consumers to sell to each other.
Can be done through listings or auctions

Consumer:
Prepares product for market
Places product for auction or sale
Market maker provides catalogue, search, transaction processing
BUSINESS-TO-GOVERNMENT
Shares similarities with both B2B and B2C
Organizations can pay taxes, file papers, etc

Government can procure goods and services

Uses a combination of extranets and the internet

Huge potential for savings through efficiencies, decreases in

administration overhead, etc
THE DEVELOPMENT AND GROWTH OF E-COMMERCE
Technology and drugs have always existed in an easy symbiosis: the
first thing ever bought and sold across the Internet was a bag of
marijuana. In 1971 or 1972, students at Stanford Universitys Artificial
Intelligence Laboratory used ARPANETthe earliest iteration of the
Internetto arrange a marijuana deal with their counterparts at the
Massachusetts Institute of Technology.
(https://medium.com/matter/19f753fb15e0)
Electronic Funds Transfers (EFTs)
Wire transfers
Transfer of account exchange information over private communication networks
Electronic Data Interchange (EDI)
Transfer of computer-readable data in a standard format to another organization
Organizations that engage in EDI with each other as Trading Partners
Value-added network (VAN)
Independent firm that offers connection and transaction-forwarding services to
buyers and sellers engaged in EDI
E-COMMERCE: THE 1ST WAVE AND THE BUBBLE
Characteristics of the 1st wave
Dominance U.S. businesses
English was primary language
Capitalization through outside investors
Over-reliance on advertising for revenue
Over-reliance on first-mover advantages
DOT.COM BUBBLE BURST

Between 1997 and 2000 over 12,000 internet-related businesses

were started with over 100 billion in investments
More than 5000 went out of business in the downturn that started
in 2000
Why?
Bad ideas given good money

Policy of growth over profit expending too much on market

dominance
Over-value of stocks due to hype

9/11

Outsourcing (from US)

E-COMMERCE: THE 2ND WAVE
Global enterprises from multiple countries participating
Established companies fund e-commerce with own capital

E-commerce sites available in multiple languages

More complex advertising and better integration with existing

business processes and strategies
Not as reliant on first-mover advantage
GROWTH OF E-COMMERCE
Second Wave
B2C sales estimated at USD1.2 Trillion internationally in 2013

Sales have been growing by ~ 20% annually

In US, B2B sales (559 Billion) account for double that of B2C (252
Billion)
M-COMMERCE: THE NEXT EVOLUTION
Sales of PC devices have dropped with a dramatic increase
in mobile device sales such as smartphones and tablets
http://www.gartner.com/newsroom/id/2610015
Mobile website traffic has been increasing while traditional
connections decreasing

T-commerce????
E-COMMERCE ADVANTAGES (MERCHANT)
Decreased information costs
Extended reach

Just in time operations

Addition Business Process Re-engineering (BPR) options

Decreased transaction costs

Increased efficiencies

Decreased service costs

E-COMMERCE ADVANTAGES (CONSUMER)
Greater access to information
Comparative shopping

Price

Convenience

Time savings

Customization

Virtual Auctions

Interactions with other consumers (Virtual communities)

E-COMMERCE ISSUES
Critical mass
Attracting consumer attention

Personal contact

Trust

Security

Privacy

Legal

Taxes

Infrastructure

Certain types of goods (perishables) those with low value-to-weight

ratios are more difficult to sell over the internet
SUMMARY
E-commerce
The buying and selling of products or services over electronic systems.
Eg. The Internet
E-business
internet technologies are used to enhance processes within the firm.
1st Wave of E-Commerce
Ended in 2000
2nd Wave of E-Commerce
New approaches to integrating Internet technologies into business
processes
SUMMARY
Different types of E-commerce
B2B, B2C, B2G, C2C
The nature of E-commerce has led to many opportunities and
challenges for both Merchants and Consumers