E Commerce 1 History of e commerce First wave Commercialization of the Internet in the early 1990s o Internet was previously used for scientific and education purposes Relationships changed Disintermediation business that could directly contact their customers in ways they couldn t do it before Suppliers of products directly selling to customers Ex travel agents before you HAD to go through travel agent now you can go directly to the source Direct relationships between manufacturers and end customers Friction free commerce emerged Transaction costs decreased because you have fewer people touching the product supplier can sell directly to the customer instead of going through an intermediary retailer First movers had the advantage Capture market share Create switching costs any costs time effort money that in the mind of the consumer keeps the consumer from switching to another competitor Create network effects Ex telephone first telephone not very valuable more people using telephones the more valuable it becomes Who were the successes and the failures o AOL o EBAY o AMAZON 2 How the Internet Web changed commerce Does the internet change everything about business If you think yes you are in a dangerous position o The fundamental things about business and strategy always remain the same Triggered rampant experimentation o So many people trying to sell things on the internet Complement not substitute resources Makes strategy more important than ever o Companies who realized this were more successful 3 The role of strategy o Staples had real stores and online stores operating as two separate businesses Strategy plays a major role in ecommerce Take a look at Kozmo com they lacked a strategy and therefore their business started to fail 4 Why did many early dot coms fail In the world of ecommerce you must constantly strive to stay ahead of the competition You have to determine innovative ways in which to offer products and services that your customers will perceive add value And you must constantly reevaluate traditional business models such as Black Friday Black Friday still has its place in the brick and mortar world but Cyber Monday is now the big shopping day in the virtual world If your organization doesn t act on this information you may be out of business 5 How e commerce has changed the way we shop It has created everything through the internet People shop now on the internet KEY IDEAS THE INTERNET S IMPACT Not necessarily a blessing for some companies o Alters industry structure to lower overall profitability o Made it harder to make a profit The great leveler leveled the playing field made it easier for smaller companies o Like Citibank s ATMs o Mass replicated best practices help no one Companies would try to copy each other Not enough to be successful o Speeds competitive leveling Small business can compete just as well as a big business Internet and industry structure o Created some new industries People selling to other people EBAY o Reconfigured some existing industries 6 Difference between e commerce and e business Ecommerce the process of buying selling or exchanging products services and information via computer networks subset of E business E business a broader definition that also includes how your business interacts with customers and partners how it conducts internal business an interactive business providing a central market space where multiple buyers and suppliers can engage in ecommerce and or other ecommerce business activities o Servicing customers o Collaborating with business partners o Conducting electronic transactions within an organization 7 What are the different e commerce business models B2C business to consumer B2B a business offering goods products service information to another business more long term C2C consumer to consumer EBAY craigslist G2C government to consumer pay your utilities order new license pay for registration on car license for hunting and fishing C2B and G2B not very common consumer offering something Back to business government to business B2G C2G G2G 8 How e commerce customers perceive value Business to Consumer B2C Convenience low priced products but something needed on a frequent basis milk paper towels gas o Keep price low but at the same time will make you money Specialty higher priced ordered less frequently often require customization the ability of an organization to give its customers the opportunity to tailor its product or service to the customer s specifications o Can get something they need that might be more challenging to find and get it customized computers Nike shoes cars Commoditylike the same no matter where you buy it o Refrigerators Digital the best of all because of low cost of inventory and shipping o Music buy which songs you like individually o Books textbooks Business to Business B2B Maintenance repair and operations MRO materials necessary items that do not relate directly to the company s primary business activities o All types of items that support production but are not the raw materials that go into actually producing o Boxes copier Direct materials materials used in production in a manufacturing company or placed on the shelf for sale in a retail environment Extra Vocabulary Path to profitability P2P a formal business plan that outlines key business issues such as customer targets by demographic industry etc making strategies operations strategies production transportation and logistics and projected targets for income statement and balance sheet items Demand aggregation the combining of purchase requests from multiple buyers into a single large order which justifies a discount from the business Reverse auction the process in which a buyer posts its interest in buying a certain quantity of items with notations concerning quality specification and delivery timing and sellers compete for the business by submitting successively lower bids until there is only one seller left create power for buyers Marketing mix the set of marketing tools that your organization will use to pursue its marketing objectives in reaching and attracting potential customers Online ads often called banner ads are small advertisements that appear on other sites Pop up ad a small Web page containing an advertisement that appears on your screen outside the current web site loaded into your browser Pop under ad a form of a pop up ad that you do not see until you close your current browser window Viral marketing encourages users