E-Commerce ?

Use of Internet to transact business including Web, mobile

browsers and apps
More formally: Digitally enabled commercial transactions
between and among organizations and individuals

The Difference between E-Commerce and E-Business

Digital enabling of transactions and processes
within a firm, involving information systems under
firm’s control
Does not include commercial transactions
Why E-Commerce ?
Rapid growth
The retail e-commerce market
is still just a small part of the
Technologies evolve at exponential rates overall global retail market,
but with much room to grow Types of

Disruptive business change (new normal: COVID-19) in the future.

FIGURE 1.6 ROOM TO GROW: WORLDWIDE RETAIL E-COMMERCE, 2019

Why study e-commerce

- Analyze e-commerce ideas, models, issues

- Understand opportunities and risks

- New Opportunity

The retail e-commerce market is still just a small part of the overall global retail market, but with much

Internet ?
Internet is the global system of interconnected computer networks that
uses the Internet protocol (TCP/IP) to communicate between networks
and devices.

Internet Applications
•World Wide Web
•E-mail
•FTP (File Transfer Protocol)
•Gopher (as WWW before WWW)
•Telnet (Peer-to-Peer)
•Usenet …
UNIQUE FEATURES OF E-COMMERCE TECHNOLOGY
Major Trends in E-Commerce 2019 - 2020
 TABLE 1.4 EVOLUTION OF E-COMMERCE

1995–2000 2001–2006 2007–PRESENT

INVENTION CONSOLIDATION REINVENTION
Technology driven Business driven Mobile technology enables social, local,
and mobile e-commerce
Revenue growth Earnings and profits Audience and social network
Evolution of emphasis
Venture capital
emphasis
Traditional financing
connections emphasis
Return of venture capital financing;

E-Commerce financing buy-outs of startups by large firms

Ungoverned Stronger regulation and Extensive government surveillance

governance
Entrepreneurial Large traditional firms
Disintermediation Strengthening
intermediaries
Perfect markets Imperfect markets, brands,
and network effects
Pure online strategies Mixed “bricks-and-clicks”
strategies
First-mover Strategic-follower strength;
advantages complementary assets
Low-complexity retail High-complexity retail
products products and services
Entrepreneurial social, mobile, and local
firms
Proliferation of small online
intermediaries renting business
processes of larger firms
Continuation of online market
imperfections; commodity competition
in select markets
Return of pure online strategies in new
markets; extension of bricks-and-clicks
in traditional retail markets
First-mover advantages return in new
markets as traditional web players
catch up
Retail, services, and content
New Economy
• An economy based on digital technologies, including digital
communication networks, computers, software, and other related
information technologies;
• also called the Internet economy, the Information or Digital
economy, or the Web economy.
•

So, What’s New?

Understanding New Economy in Demand Side

1. Network Effects or Economies of Network

There is a central difference between the old and new economies: the old industrial
economy was driven by economies of scale; the new information economy is driven
by economics of networks by Hal Varian

•Network Effect: the value of goods or service depends on number of users

•A good or service becomes more valuable when more people use it
•Examples:
•Telephone
•MS-Excel vs Lotus 123, Quattro Pro
Demand and Supply Curves
with Network Effect

Product Growth
with Network Effect
•One reason Facebook is so valuable, we're told, is because of its huge network

effects which make it unstoppable and undefeatable.

•Google search gets better the more people use it because it gives Google more

data about what people search for and how.

•Apple product ecosystem

•Groupon, and the second-comers LivingSocial and BuyWithMe

 Everything on Demand:
The “Uberization” of E-commerce

I f you were asked to pick iconic

examples of e-commerce in the
25 years since it began in 1995, it
is likely that companies such as Amazon,
Google, Apple, and Facebook would be
high on your list. But over the last few
years, a different breed of e-commerce
company has muscled its way to the fore-
2. Demand Driven from front. Uber and other firms with similar
business models, such as Taxify (a ride
supply-driven service similar to Uber’s), Airbnb (rooms
for rent), Takeaway and JustEat (food
delivery), Movinga (movers), and Zipjet
(laundry service), are the pioneers of an
on-demand service e-commerce business
model that has swept up billions of invest- © Lenscap/Alamy
ment dollars and disrupted major industries, from transportation to hotels, real estate, house
cleaning, maintenance, and grocery shopping.
Uber is perhaps the most well-known, as well as the most controversial, company that
uses the on-demand service model. Uber offers a variety of different services. The two most
common are UberX, which uses compact sedans and is the least expensive, and UberBlack,
which provides a higher-priced town car service. UberPool is a ride-sharing service that
allows users to share a ride with another person who happens to be going to the same place.
Uber is also attempting to leverage its business model by expanding into several related areas
with UberRush, a same-day delivery service; UberCargo, a trucking service; and UberEats,
a food delivery service. Page 39
Uber, headquartered in San Francisco, was founded in 2009 by Travis Kalanick and
Garrett Camp, and has grown explosively since then to over 700 cities in 69 countries. Uber
Even governments find Uber to be a disruptive threat. Governments do not want to give up
regulatory control over passenger safety, driver training, nor the healthy revenue stream
generated by charging taxi firms for a taxi license and sales taxes.
Uber’s business model differs from traditional retail e-commerce. Uber doesn’t sell
goods. Instead it has created a smartphone-based platform that enables people who want
a service—like a taxi—to find a provider with the resources, such as a personal automobile
and a driver with available time, to fill the demand. It’s important to understand that although
Uber and similar firms are often called “sharing economy” companies, this is a misnomer.
Uber drivers are selling their services as drivers and the temporary use of their car. Uber
itself is not in the sharing business either: it charges a 25% commission on every transaction
on its platform. Uber is not an example of true “peer-to-peer” e-commerce because Uber
transactions involve an online intermediary: a third party that provides a platform for, and
takes a cut of, all transactions.
Uber has disrupted the traditional taxi business model because it offers a superior,
fast, convenient taxi-hailing service when compared to traditional taxi companies. With a
traditional taxi service, there is no guarantee you will find a cab. Uber significantly reduces
that uncertainty. Uber’s business model is also much more efficient than a traditional taxi
firm. Uber does not own taxis and has no maintenance and financing costs. Uber calls its
drivers “independent contractors,” not employees. Doing so enables Uber to avoid costs
for workers’ compensation, minimum wage requirements, driver training, health insurance,
and commercial licensing.
Quality control should be a nightmare with almost 4 million contract drivers. But Uber
Page 40
relies on user reviews to identify problematic drivers and driver reviews to identify problem-
atic passengers. Drivers are evaluated by riders on a 5-point scale. Drivers that fall below
3. Lock-in or Switching Costs

Switching Costs

•Costly switch to different system, not free

•Explicit and implicit opportunity costs of using one product as an alternative to another

Lock-in

•Switching costs are higher than the perceived benefit from using an alternative products

•Windows vs MacOS / EIU vs other universities

 Understanding New Economy in Supply Side

1. Cost Structure
•Expensive to Produce but cheap to re-produce
•High Fixed Cost but Low Variable Cost
•No Significant capacity constraints
2. Market Structure: Monopoly

3. For a rm, product differentiation / price discrimination

4. System Competition

5. Right Management
fi