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Major Industry Trends
Electronic commerce, or e-commerce, involves the sale of goods and services via electronic means— principally over the internet, although sales via television (terrestrial, cable, and satellite) are also included. E-commerce can be further divided into the following sectors: business-to-business (B2B), business-togovernment (B2G), consumer-to-consumer (C2C), government-to-business (G2B), government-to-citizen (G2C), and business-to-consumer (B2C). Retailers that rely primarily on e-commerce to sell goods or services are often referred to as e-tailers. Retailing over the internet generally takes one of two forms: • • Cybermalls—the most famous cybermall is eBay, which offers access to products from a variety of independent retailers. Individual websites—most major retailers now have their own websites, which complement their traditional “bricks-and-mortar” outlets. Some retailers operate solely over the internet.
In terms of television sales, programs on dedicated shopping channels generally feature a presenter who demonstrates products on air. Viewers can buy these products by telephoning an order line with their credit card details, or, in the case of interactive television services, by using their remote control. Recent years have seen the development of a variety of selling techniques, including on-air auctions. E-commerce is most closely associated with the internet, and has developed in tandem with the growth of the medium. Indeed, e-commerce initially became possible with the opening up of the internet to commercial users in the early 1990s. However, it wasn’t until the latter half of the decade that companies really began to exploit the internet’s commercial potential. A number of start-up companies, such as Amazon and eBay, have exploited the power of the internet to emerge as retailing behemoths in their own right. However, e-commerce has largely been developed by established large retailers, which regard it as simply another sales channel. The gigantic grocery retailers that have expanded away from food and into a wide variety of other areas, such as clothing and electronic goods, have been particularly quick to appreciate its potential. The medium has also created opportunities for very small businesses. It is now possible to buy over the internet a wide range of specialized products that are not available in shopping malls. Thus, the internet has provided a lifeline for many small producers, and has allowed entrepreneurs to enter the retailing sector without the need to invest heavily in physical retail outlets. E-commerce has proven so successful because it offers significant advantages to both consumers and retailers. Consumers can compare a vast array of retailers in a few minutes—something that it would be impossible to do physically. Online retailers often sell products and services at a significant discount to those offered by traditional outlets, and buying online is convenient: consumers can make their purchases from the comfort of their own home, and have them delivered to their door. Furthermore, online shopping appeals to the environmentally conscious. In March 2009, researchers at Heriot-Watt University in the United Kingdom revealed that online shopping is 24 times “greener” than taking the car to the shops, and seven times “greener” than taking the bus. The researchers compared the carbon footprint of a typical delivery from a local depot with average carbon footprints for shopping trips by car and bus, and found that home deliveries involved much lower levels of carbon emissions. In June 2009, a study by the Carnegie Mellon Green Design Institute in the United States found that shopping online can reduce “our environmental impact by as much as 66%.” For businesses, the advantages of e-commerce lie mainly in the low cost of setting up and maintaining a business. Firms do not need to invest heavily in a physical presence, or in sales staff. However, they do have to organize payment systems, distribution, and returns.
Undoubtedly, some industries are more suited to e-commerce than others. This type of retailing is most applicable to goods that are fairly simple, commoditized, and do not require on-the-spot input from
E-Commerce 1 of 3 www.qfinance.com
Historically. on a face-to-face basis. etc). according to the Organization for Economic Cooperation and Development (OECD). the research firm. which publishes data on the subject (see More Info). the UK online grocery retailer Ocado launched an Android app. India. Traditionally. B2C.knowledgeable sales staff. whereas consumers generally need to try on clothing before they make a purchase. the Netherlands had the highest penetration rate for broadband.3 billion. e-tailers are now targeting the mobile phone. In June 2009. given that the United States is generally regarded as the most advanced economy in the world. However. The most rapid growth is now occurring in emerging economies. an increase of 2% on 2008. or to compete in online gaming. and allows users to search the virtual aisles by speaking into their handset. which has a population of 1. and buying goods. It was followed by Norway (34. simply by dramatically speeding up the process of accessing websites. faster connection speeds also allow users to download music files. China’s broadband access speed is far behind that in the developed economies. Statistics from the government-linked China Internet Network Information Center (CINIC) showed that China’s online trade in 2009 reached 248. at 38. reflecting the size of its economy. but the increasing availability of broadband on mobile phones has opened up another avenue for e-tailers.8). many people prefer to buy a sophisticated financial product.9 billion. However. purchasing of insurance or a loan. Market Analysis Calculating the overall size of the global e-commerce market is complicated by the relatively high levels of cross-border sales that take place.7% from 2008. sites such as Asos. E-commerce is also making increasing inroads into areas where it was thought difficult to sell goods online. and movies. Having access to broadband means that consumers are more likely to use the internet to purchase everyday items such as groceries. the penetration of e-commerce may be high in some sectors of a given market. which allows the weekly shopping to be done on a mobile phone with voice command.7 per 100 inhabitants. to 384 million. but are also spread over huge geographic distances. In financial services. and thus offer great potential for online sales. such as a pension. Generally. growing by 76 million compared to 2008. However. for example. for example. according to CINIC. E-Commerce 2 of 3 www.1 per 100 inhabitants. In April 2010. few research companies measure all the various sectors of the market (B2B. China’s online population. The United States is almost certainly the largest market. video clips. Thus. both highly commoditized products. according to the US Commerce Department. further boosting the potential revenues generated by e-commerce. according to CINIC. have shown that it is possible to successfully sell clothes online. Total e-commerce sales in the United States during 2009 were estimated at US$134. grew by 86% in 2009. which are not only benefiting from fast-rising living standards. it was thought difficult to sell clothes online because shoppers could not try on the goods. Furthermore. Equally. The number of internet users in China. The United States was in 15th place. Key Note Ltd says that use of the internet is certainly growing most rapidly in fast developing countries such as China. the world’s largest. with a penetration rate of 26. up 93. However. which targets 16 to 34-year-olds with outfits and accessories styled on those worn by celebrities.35 billion yuan (US$36. estimates from various analysts suggest the market was worth around US$500 billion in 2009.5).qfinance. its broadband penetration rates are relatively low. Technological Advances The growth of broadband internet connections around the globe has undoubtedly boosted online shopping. The CINIC said that the number of broadband users reached 346 million. for example. Certainly. individuals and businesses have ordered goods or services online via computers. and is expected to reach 1 trillion yuan in 2013. it is difficult to make online sales of sophisticated goods and services that require a large amount of advice or input from the retailer. Ocado is the United Kingdom’s first supermarket to develop an app for Google’s operating system. and Brazil. grocery retailing is ideally suited to e-commerce. Broadband is at least ten times as fast as dial-up. and South Korea (32. such as China. but low in others. However.8). was thus far greater than the entire population of the United States.38 billion).com . Switzerland (33. Surprisingly. followed by Denmark with 37. as they will almost certainly require advice before making their choice. is ideally suited to the internet. In spite of the high penetration rate of broadband.0.
was making a healthy profit.51 billion.org/sti/ict/broadband Statistical reports on internet development in China: www. The company. Tesco’s website sends orders to the store nearest to the shopper.com . it managed to survive the financial storm. Amazon’s revenue was around US$1. which are stacked. a supplier of technology market research: www. the third-largest retailer in the world. and is one of the best-known internet retailers.cn/en/index US Census Bureau—Quarterly Retail E-Commerce Sales: www.co. pickers inside the warehouse service thousands of internet orders. where the pods are slotted onto individual vans for street-level deliveries.com Key Note Ltd. which in April 2010 said that it was seeking to boost online sales outside the United States.5 billion a year. Amazon operates from vast warehouses. on Amazon’s 10th birthday. In the Ocado model. Other retailers pursue different models. The established online retailer may face a fresh competitive challenge in the coming years in the shape of Wal-Mart. which operates in 14 countries.abiresearch. By the end of the 1990s. in 2005.cnnic. provides research on a wide range of markets.qfinance. Tesco vans then take the orders out locally.uk OECD Broadband Portal: www. Bezos said that his aim was to turn Amazon into the Wal-Mart of electronic retailing.oecd. as does Ocado. and pickers visit the store’s shelves to fill the orders. by the middle of the current decade.” In the year ending December 31. 2009. and then transported all over the United Kingdom to car parks. More Info Websites: • • • • • ABI Research. hopes to beat off competitors like Amazon. but it was still making a loss—it had to borrow around US$1 billion each year just to keep afloat. please visit http://www. Indeed. including retailing: www. Amazon’s net sales increased 28% year-on-year to US$24. In April 2010. with a company mantra of “get big fast.Varying Business Models Companies have adopted differing business models for their e-commerce operations. The United Kingdom’s Tesco. a grocery retailer based in the United Kingdom.com/sector-profiles/e-commerce E-Commerce 3 of 3 www.census. the country with the highest level of broadband penetration in Latin America. However.net. it unveiled plans to launch an e-commerce business in China and Japan. Founded in 1995 by Jeff Bezos to sell books. The megastore operator was reportedly studying the best methods to promote its e-commerce initiative worldwide. bases its online shopping business at individual stores.qfinance.keynote. packed into pods that are attached to big trucks.gov/mrts/www/ecomm.html See Also Industry Profile • • Information Technology Retail To see this article on-line. and. Amazon now sells a wide range of consumer products. The retailer launched an e-commerce business in 2008 in Brazil. Amazon is regarded as one of the pioneers of e-commerce. and continues to go from strength to strength.
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