E-Commerce Lecture 1 Summary PDF

E-Commerce ========== Lecture 1 --------- **SLIDES** What is E-Commerce? - "...the buying and selling of information, products and services via computer networks today and in the future, using any one of the myriad of networks that make up the internet." - "...business activities co...

E-Commerce ========== Lecture 1 --------- **SLIDES** What is E-Commerce? - "...the buying and selling of information, products and services via computer networks today and in the future, using any one of the myriad of networks that make up the internet." - "...business activities conducted using electronic data transmission via the internet and the world wide web." Currently, there are 8 trends in E-Commerce 1. Personalisation (e.g. custom shirt printing) 2. AR/VR (online glass fitting) 3. Mobile shopping 4. Social commerce (social media + e-com, e.g. TikTok shop) 5. Blockchain & Crypto-Assets 6. Subscriptions (e.g. Netflix) 7. Direct-to-consumer 8. Sustainability **ARTICLES** *Business Models for Electronic Markets (Timmers, 1998)* A **business model** is defined as *an architecture for product, service and information flows that describes roles of various business actors, their potential benefits and revenue sources*. A **marketing model** extends this by including a company's strategy to achieve competitive advantage. The article recognizes 11 different E-Commerce business models: 1. **E-Shop** a. Online storefronts for businesses to promote and sell products or services b. Benefits: cost savings, global reach, 24-hour availability c. Example = Zalando 2. **E-Procurement** d. Web-based tendering and procurement systems used by large companies or public authorities e. Benefits: wider supplier choice, reduced procurement costs, enhanced collaboration f. Example: SAP Ariba (functions as a "wedding planner" for suppliers and businesses. 3. **E-Auction** g. Online bidding platforms for goods and services h. Benefits: Global sourcing, time efficiency and handling small, surplus goods. i. Example: Vakantieveilingen 4. **E-Mall** j. Collection of e-shops under one umbrella, often with common branding or payment systems k. Benefits: Convenience, trust and lower costs for hosted shops l. Example: Etsy (collection of small shops) 5. **Third-Party marketplaces** m. Platforms for businesses to outsource web marketing and transactions to a third-party n. Benefits: Revenue from membership fees, transaction commissions or advertising. o. Example: Alibaba 6. **Virtual Communities** p. Online spaces where members contribute information and build customer loyalty q. Revenue: Membership fees and advertising r. Example: Reddit 7. **Value Chain Service Providers** s. Specialization in specific value chain functions (logistics, payment) t. Revenue: Fees/percentages on transactions u. Example: FedEx, Adyen 8. **Value Chain Integrators** v. Businesses that integrate multiple steps of a value chain for added efficiency 9. **Collaboration Platforms** w. Provide tools and environments for enterprise collaboration, often in design or project management x. Example: Slack 10. **Information Brokerage and Trust Services** y. Services that add value to vast online data, such as search engines or certification authorities z. Example: Google 11. **Innovative Functional Integration** a. Models that combine single and multiple functions for innovative new services *Digital Enterprise -- Business Models on the Web* The website Digital Enterprise (by Rappa) takes a slightly different approach and recognizes 9 different digital business models: 1. **Brokerage Model** a. Bringing buyers and sellers together and charging a fee/commission for each transaction. Brokerage models include: i. Marketplace Exchange (e.g. Booking.com) ii. Buy/Sell Fulfillment iii. Demand Collection System iv. Auction Broker (e.g. eBay) v. Transaction Broker (e.g. PayPal) vi. Distributor (e.g. Amazon Business) vii. Search Agent viii. Virtual Marketplace (Virtual Mall) (e.g. Amazon/Etsy) 2. **Advertising Model** b. Digital version of traditional advertising model. Different types of advertising models include: ix. Portal x. Classifieds xi. User Registration xii. Query-based Paid Placement Pay for performance (Google) xiii. Contextual Advertising xiv. Content-Targeted Advertising xv. Intromercials Full-screen ads placed at the entry of a site (Newspaper websites) xvi. Ultramercials 3. **Infomediary model** c. Selling data about consumers and their consumption habits xvii. Advertising networks xviii. Catalog Merchant xix. Click and Mortar xx. Bit Vendor 4. **Manufacturer (Direct) Model** d. Manufacturer reaching customers directly xxi. Purchase xxii. Lease xxiii. License xxiv. Brand Integrated Content 5. **Affiliate Model** e. Businesses reward affiliates for driving traffic towards their site (Amazon Affiliate) xxv. Banner Exchange xxvi. Pay-per-click xxvii. Revenue Sharing 6. **Community Model** f. Community-based businesses with a high customer loyalty, revenue is created through donations xxviii. Open Source xxix. Open Content (Wikipedia) xxx. Public Broadcasting xxxi. Social Networking Services 7. **Subscription Model** g. Users are charged periodically xxxii. Content Services (Netflix) xxxiii. Person-to-person Networking Services xxxiv. Trust Services xxxv. Internet Services Providers 8. **Utility Models** h. On-demand model, pay as you go xxxvi. Metered Usage xxxvii. Metered Subscriptions Lecture 2 --------- **ARTICLES** *A Classification for Business Model Types in E-commerce (Abdollahi & Leimstoll, 2011)* This article aims to improve the classification of e-commerce business models by addressing gaps in the current research. Abdollahi & Leimstoll propose to classify the E-commerce business model based on three **classification criteria**: 1. **Traded Items** a. Describes the type of product or service exchanged in the business model b. Categories i. **Service/immaterial**: Non-physical items like customer support or matchmaking services. ii. **Goods**: Physical or immaterial products (e.g. software) iii. **Supplementary Products**: Additional items that enhance customer experience or competitive advantage 2. **Ownership** c. Specifies the ownership structure of the product or service offered d. Categories iv. **Production**: Products or services produced by the company independently v. **Content**: Platforms where users contribute the main content (e.g. forums, social media) vi. **Intermediation**: Platforms connecting providers and demanders (e.g. marketplaces) 3. **Revenue**: e. Describes how revenue is generated f. Categories vii. **Direct**: Revenue from selling products or services viii. **Commission**: Percentage-based revenue from transactions facilitated by the company ix. **Subscription Fee**: Regular payments for access to products or services In the classification, Rappa's (2010) digital business models were used. The business models were classified using three different classification systems: 1. **One-way classification** a. Provides an overview by categorizing models based on a single criteria 2. **Two-way classification** b. Analyses interrelations between two criteria at a time c. Key findings include: i. Most business models involve service/immaterial items ii. Content ownership is critical for community and subscription models iii. Revenue generation is diverse, with direct and commission methods being the most common 3. **Three-Dimensional Classification** d. Consider all three criteria simultaneously to provide a comprehensive analysis e. Steps: iv. Select a relevant characteristic for each criterion v. Filter business models based on selected characteristics vi. Identify the final list of applicable business models *Do We Need a General Classification Scheme for e-Business Models? (Lambert, 2006)* This article explores the need for a general classification scheme (= **taxonomy**) for e-commerce business models. The article differentiates between **taxonomies** and **typologies** - **Typologies** - Derived conceptually - Based on few characteristics - Qualitative, specific and limited in generalizability - Example: Business model lists (Timmers, Rampa) - **Taxonomies** - Derived empirically - Quantative and based on numerous characteristics - Generalizable and versatile, enabling broader applications - Example: Biological classifications Current classification schemes are **typologies** and are limited by: - Lack of consistent classification criteria - Focus on few variables - Subjective and descriptive nature **Propose Framework for a Taxonomy**: 1. Comprehensive Variable Selection a. Identify a large number of variables b. Use existing typologies as a basis for variable identification 2. Empirical Data Collection c. Gather data on business model attributes across industries 3. Cluster Analysis d. Group business model attributes across industries 4. Dynamic and Self-Adjusting Taxonomy e. Incorporate new business models over time, adjusting categories as needed Lecture 3 --------- How does **blockchain** work? A blockchain transaction includes 5 steps: 1. A **transaction**: A user requests a transaction 2. A **confirmation**: Given a consensus mechanism, network nodes validate the transaction 3. A **block** is created: verified transactions are grouped into a block 4. Blocks **added**: The new block is added and hashed with the previous block, making the transaction immutable 5. An updated **ledger**: the ledger with all blocks and all transactions is distributed among nodes and easily readable. Blockchain can be a potential solution for a number of problems in E-Commerce 1. **Security**: E-Commerce systems are prone to data breaches and fraud, leading to financial losses. a. Solution: Blockchain provides secure digital ledgers 2. **Transparency issues**: Lack of transparency in transactions can erode consumer trust b. Solution: Transactions recorded on a blockchain are immutable and publicly verifiable 3. **Inefficiency**: Traditional payment systems often involve delays and high fees c. Solution: Smart contracts automate processes, reducing payment time and costs **Applications of Blockchain in E-Commerce**: 1. **Security & Fraud Prevention** a. Data Encryption: advanced cryptography secures transactions b. Distributed Ledgers: no single point of failure ensures resilience c. Smart Contracts: automates protocols to reduce human error 2. **Supply Chain Management** d. Traceability: Track products end-to-end (like Walmart) e. Authenticity: Verify product origin (for luxury goods) f. Efficiency: Automate processes with smart contracts g. Cost Reduction: Reduce intermediaries and fraud-related costs 3. **Payment Processing** h. Lower Costs: Eliminate transaction fees i. Faster Settlements: Transactions are almost instantaneous j. Cross-Border Transactions: Simplified international payments k. Micropayments: Low-cost transactions enable new business models There are three main **architecture types** of blockchain: 1. **Public Blockchain** a. Anyone can participate in the network, view transactions or validate them b. Decentralized & Transparent c. Example: Bitcoin 2. **Private Blockchain** d. Used for internal purposes e. Centralized (control) & private f. Example: IBM Food Trust (from the Walmart example) 3. **Consortium Blockchain** g. Hybrid between public/private, used by a select group of entities h. Shared control and balance (combines privacy with decentralization) i. Example: R3 Corda (Used by banks for secure trading) There are a few challenges when it comes to implementing blockchain in E-commerce: 1. **Technical Complexity**: The concepts of blockchain are difficult to understand for non-technical users 2. **Regulatory Uncertainty**: Legal frameworks for blockchain and cryptocurrencies are still evolving 3. **Scalability Issues**: Many blockchains struggle to handle large transaction volumes efficiently 4. **Integration with existing systems**: Implementing blockchain often requires substantial modifications to legacy IT systems Blockchain also introduces opportunities for new Business Models: - **Decentralized Marketplaces**: peer-to-peer marketplaces without intermediaries - Lower seller fees, greater privacy for buyers - **Tokenized Loyalty Programs**: token-based systems where customers earn digital tokens as rewards - Automated reward distribution, tokens can be traded/transferred - **Fractional Ownership**: Tokenization of assets allows customers to purchase fractions of high-value items - Broader accessibility to luxury items - **Supply Chain Finance**: Blockchain-based real-time visibility in supply chains - Access to short-term financing Lecture 5 --------- **SLIDES** The growth and convenience of E-Commerce comes with **environmental consequences.** One of the main environmental challenges which occurs is the **increased carbon foodprint** due to: - Logistics - Packaging - Short Product Lifecycles Businesses need to make trade-offs between **economic**, **environmental** and **social** objectives. The three pillars of sustainability: - **P**eople - **P**lanet - **P**rofit For three industries, their environmental challenges are analysed: Three types of production: 1. **Traditional production** a. Raw materials/resources landfill b. No recycling or reusing 2. **Sustainable production** c. Limited raw materials & resources limited landfill d. Recycling & repair at selected steps 3. **Circular production** e. Limited natural resources Zero landfill f. Recycling, refurbishing, reusing, repair at every step of the production **The Waste Hierarchy** (from most favoured option to least favoured option) 1. Prevention 2. Minimalisation 3. Reuse 4. Recycling 5. Energy recovery 6. Disposal - **3R** = **Reduce** before **reuse** & **recycle** **Food Industry** - Challenges: - Growing importance of online sales (e-grocery) - Flexible delivery solutions required - Seasonal effects: fluctuating supply - Logistics of perishables: limited shelf life - Cold chain: temperature-controlled supply chain - Increasingly environmentally conscious consumer market - Food waste: (EU) 20% of food is wasted due to **overproduction**, **product expiration**, **deterioration**, but also due to: - Overstocked displays - Expectation of cosmetic perfection (B-stock) - Misunderstanding of peak freshness - Measures against food waste: - Awareness - Fridge temperature - Donations instead of waste - Reselling B-stock **Textile Industry** - Challenges - Fast fashion - High return rates - Empty trips - Different Business Model Strategies: - 1\. Extending product value - Exploiting residual value of products: from manufacturing to consumers and back - Take-back systems - Clothing return initiatives - 2\. Encourage sufficiency - Actively seek to **reduce end-user consumption** (durability, upgradability, service, warrantees) - Slower sales, long-lasting products - Challenge **unsustainability** **Electronics Industry** - Challenges: - High Carbon Footprint - Solution: - Fairphone - Transparent - Conflict-free materials Lecture 6 --------- **ARTICLES** *What is Disruptive Innovation? -- Harvard Business Review (Christensen et al., 2015)* This article revisits the definition of **disruptive innovation** and wonders whether the term used widely today has lost its meaning with regards to its original definition. The original definition of a **disruptive innovation** is explained as "a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses". Specifically, when incumbent businesses focus on improving their already existing products for the high end of the market (most profitable) and neglect the needs of the lower parts of the market. The article looks at the case of Uber, and aims to find out whether Uber really is disruptive. They conclude that Uber is not a disruptive innovation because of two reasons: 1. **Disruptive innovations originate in low-end or new-market footholds**. Disruptive innovations are made possible because they get started in two types of markets that incumbents overlook. Uber did not start off by serving lower parts of the market overlooked by the taxi industry. 2. **Disruptive innovations don't catch on with mainstream customers until quality catches up to their standards**: Disruptive innovations start off initially being considered inferior by most of an incumbent customer. Uber was perceived as *as good as* if not *better than* the original taxi service. There are four important points which often get overlooked when it comes to disruptive innovation: 1. **Disruption is a process** 2. **Disrupters often build business models that are very different from those of incumbents** 3. **Some disruptive innovations succeed; some don't.** 4. **The mantra "Disrupt or be disrupted" can misguide us.** *Evolution and Revolution as Organizations Grow* This article outlines a model describing how businesses progress through distinct phases of growth, each characterized by periods of steady development (**evolution**), followed by turbulent times of organizational upheaval (**revolution**). The five phases of Organizational Growth: 1. **Creativity** a. *Evolutionary Period* The organization is young, driven by creative & entrepreneurial spirit b. *Crisis* As the company grows, informal communication becomes inadequate, leading to **Leadership Crisis**. 2. **Direction** c. *Evolutionary Period* Introduction of formal management structures and clearer direction d. *Crisis* Lower-level employees seek more autonomy, resulting in an **autonomy crisis** 3. **Delegation** e. *Evolutionary period* Decentralization occurs, with greater responsibility delegated to managers of lower levels f. *Crisis* Top management feels a loss of control, leading to a **control crisis** 4. **Coordination** g. *Evolutionary period* Formal systems are implemented to achieve better coordination across departments h. *Crisis* The organization becomes too bogged down by bureaucratic processes, leading to a **Red Tape Crisis** (where innovation & efficiency suffer) 5. **Collaboration** i. *Evolutionary Period*: A more flexible and participative approach is adopted, emphasizing teamwork and collaboration j. *Crisis* Whilst not originally defined, it's suggested that this phase may lead to a **crisis of internal growth**, where partnerships are necessary to grow further