Introduction to Electronic Commerce

Electronic Commerce (EC)

• Refers to buying, selling, transporting, or trading data, goods, or services via the Internet and other networks.
• E-business encompasses a broader scope, including online customer service, partner collaboration, learning, and electronic transactions within organizations.
• EC can be pure (all activities digital) or partial (at least one digital dimension) based on ordering, payment, fulfillment, and delivery activities.
• There are eight possible Physical/Digital combinations for activities

Organizational Types in EC

• "Brick-and-mortar" organizations: purely physical.
• "Virtual" or "pure-play" organizations: engaged only in EC.
• "Click-and-mortar" organizations: conduct some EC activities as an additional channel.

Key Components of EC

• Cyberspace: the nonphysical environment where EC takes place using computers and networks.
• Key mechanisms: web, electronic marketplaces, social networks, and communication tools.
• Electronic market (e-marketplace): online platform for commercial transactions between buyers and sellers.

Electronic Market Characteristics

• Open to any individual for selling products or services.
• Typically owned by independent entities.
• Connected via the Internet, either through:
• Intranets: corporate or government internal networks.
• Extranets: networks linking intranets of several organizations securely.

Types of Electronic Commerce

• Business-to-Business (B2B): Transactions between organizations; accounts for 85% of EC volume.
• Business-to-Consumer (B2C): Retail transactions from businesses to individual shoppers (e.g., Amazon).
• Consumer-to-Business (C2B): Individuals selling products or services to organizations.
• Intrabusiness: Transactions within an organization's departments and individuals.
• Business-to-Employees (B2E): Delivery of services/information from organizations to employees, including mobile employees (B2ME).
• Drop-shipping: Seller collects payment, then transfers the order to a supplier who ships the product.
• Consumer-to-Consumer (C2C): Transactions between individual consumers (e.g., eBay, Craigslist).
• Collaborative commerce (c-commerce): Online activities and communication to achieve a common goal.
• E-government: Government agencies buying/providing goods, services, or information to businesses (G2B), citizens (G2C), or other governments (G2G).

History and Evolution

• Early EC (1970s): Primarily Electronic Funds Transfer (EFT) by financial institutions.
• Electronic Data Interchange (EDI): Enabled digital transfer of routine documents.
• Internet & World Wide Web (early 1990s): Triggered a major shift and milestone in e-commerce.

Trends and Influences

• Globalization: E-commerce operates globally through companies like Alibaba.
• Interdisciplinary nature: E-commerce draws from marketing, finance, computer science, and law.
• Google's Impact: Significant influence since 2001, shaping EC with innovative models and ventures.
• Online Shopping Milestones: Events like Cyber Monday, Singles' Day, and Amazon's Prime Day drive growth.
• Social Commerce: Emerged with social media and Web 2.0 tools, integrating social interaction into online shopping.

Challenges and Successes

• EC Failures (late 1990s): Due to poor financial skills, marketing, and operational challenges.
• Industry consolidation: Failures led to smarter business models.
• EC Successes: Achieved by companies like Amazon, Netflix, eBay, and traditional companies integrating EC.

Drivers and Benefits of EC

• Driven by various factors: benefits to consumers/organizations, innovative models, competition, and technological advancements.

From EC 1.0 to EC 2.0

• EC 1.0: Focused on trading, e-services, and corporate collaboration.
• EC 2.0: Leverages Web 2.0 technologies, social media, social networks, and virtual worlds.

Social Media

• Involves user-generated text, images, audio, and video content through Web 2.0 platforms.

Social Computing

• Systems supporting social interaction and user-generated content via blogs, wikis, and marketplaces.
• Emphasizes collaboration and community engagement.

Web 2.0

• Defined by O'Reilly Media in 2004, shifts to user-driven content and online collaboration.
• Characterized by the five Cs: creativity, connectivity, collaboration, convergence, and community.
• Tools include blogs, RSS, Twitter, and wikis.

Social Media vs Web 2.0

• Social media is a product of Web 2.0, focusing on user-generated content and interactions.
• Web 2.0 broadly refers to technologies enabling these activities.

Social Networks and Services

• Complex systems connecting individuals with shared interests.
• Platforms like Facebook, LinkedIn, Instagram and YouTube host these networks.

Enterprise Social Networks

• Can be public (LinkedIn) or private, operating within companies for collaboration and customer engagement.

Social Networking

• Encompasses all Web 2.0 activities: blogging, content sharing, and maintaining a social media presence.

Social Commerce (SC)

• A subset of e-commerce utilizing social media platforms for transactions.
• Blends e-commerce, e-marketing, and social interaction, creating community-driven buying experiences.

Web 2.0 Tools

• Wikis, RSS feeds, blogs, and microblogs (e.g., Twitter); microblogging enables short message transmission.

The Digital Economy

• Based on online transactions, mainly e-commerce.
• Includes digital networks, computers, software, and information technologies.
• Its characteristics:
  • Delivery of digital content (books, databases) globally.
  • Information as a commodity.
  • Digitized financial transactions with embedded chips.
  • Innovative organization of work and business processes.
  • Disruptive innovation across industries.

Sharing Economy

• An economic system based on sharing goods and services.
• Known as "collaborative consumption", utilizes information technologies.
• Examples: ride sharing (Uber), money lending (Lending Club), and accommodation sharing (Airbnb).
• Benefits: cost reduction for buyers, increased sales for sellers, reduced carbon footprint, increased recycling, and enhanced social interactions.

Social Impact

• Improved communication and collaboration tools offered by social media leading to digital revolution.
• Smartphones reducing the digital divide.

The Digital Enterprise

• Automates business processes using computers and information systems (e.g., Amazon, Google).
• New model using IT for competitive advantage by increasing productivity and improving interactivity.
• Refers to any organization type using digital networks.
  • Reaches partners through the Internet/extranets.
  • Uses intranets for internal communication.
• Corporate portal: A gateway for stakeholders to access information and communicate with the company.

Social Business

• Organizations engage employees, customers, and partners in value co-creation. (e.g. IBM)
• Combines social tools, collaborative culture, and business process improvements.

Social Enterprise

• Focuses on addressing social issues and reinvests profits for positive change.

Digital Revolution and Society

• Transformation of life aspects: communication, shopping, healthcare, and transportation.
• Examples: self-driving cars, social shopping (Facebook), e-hailing apps (Uber), digital entertainment and AI-powered systems.

Disruptive Technologies

• E-commerce, mobile commerce, and social commerce reshape industries and consumer behavior.

The Social Customer

• Social customers actively engage online; empowered by digital tools, making them a central economic force.

E-commerce Business Models

• Describes how a business generates revenue and creates value.

Business Model Components

• Description of customers and value proposition.
• Description of products/services and differentiating aspects.
• Company growth strategies.
• Required business processes and distribution infrastructure.
• Resource list, cost, and availability.
• Organization’s supply chains and other business partners.
• Value chain structure.
• Relevant markets, competitors, and market share.
• Competitive advantages.
• Anticipated organizational changes.
• Revenue model, funding sources, and financial viability.

Revenue Models

• Specifies how an organization generates revenue.

Sales Revenue Model

• Revenue from selling products/services on websites (e.g., Amazon, Starbucks).

Transaction Fee Revenue Model

• Commissions based on transaction volumes.

Subscription Fee Revenue Model

• Customers pay a fixed amount for services (e.g., Internet access providers).

Advertising Fee Revenue Model

• Companies charge for banner placement on their sites.

Affiliate Fee Revenue Model

• Commissions from referring customers to websites.

Licensing Fee Revenue Model

• Assessed as an annual or per-usage fee.

Other Revenue Source Revenue Model

• Fees for games or sports events (e.g., espn.go.com).

Value Proposition Definition

• The benefits a company hopes to derive from its business model.
• Customer value proposition: Defines how a product/service fulfills customer needs.

Business Model Functions

• Describes supply and value chains.
• Formulates competitive strategy.
• Presents customer value proposition.
• Specifies technology usage and revenue generation.
• Estimates cost structure and amount and profit potential

Classification of Business Models

• Brokerage: Charge a fee for making the market
• Advertising: Revenue via advertisments
• Informediary: Provide data for buyers or sellers and charge a fee
• Merchant: Retailers selling products
• Direct: Sells without intermediaries
• Affiliate: website owners get paid to place banners
• Community: Utilizes web 2.0 tools and social networks