Chapter 10
E-commerce
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Learning Objectives
10.1 What are the unique features of e-commerce, digital
markets, and digital goods?
10.2 What are the principal e-commerce business and revenue
models?
10.3 How has e-commerce transformed marketing?
10.4 How has e-commerce affected B2B transactions?
10.5 What is the role of m-commerce in business, and what are
the most important m-commerce applications?
10.6 What issues must be addressed when building an e-
commerce presence?
E-Commerce Today
• E-commerce: Use of the Internet and web to transact
business
• Began in 1995 and grew exponentially; still stable even in a
recession
• Move from desktop to smartphone
• The new e-commerce: social, mobile, local
• Mobile device is used for accessing social media sites and searching
for local merchants who alert customers about special offers.
The Growth of E-Commerce
Sources: Based on data from eMarketer, “US Retail Ecommerce Sales, 2015-2021,”
Why E-Commerce is Different (1 of 2)
• Ubiquity
• Marketspace is virtual, it is available 24/7
• Transaction costs reduced
• Global reach
• Transactions cross cultural and national boundaries
• Universal standards
• One set of technology standards: Internet standards
• Richness
• Supports video, audio, and text messages
Why E-Commerce is Different (2 of 2)
• Interactivity: merchants and consumers can communicate
• Information density: the amount of available information
• Greater price and cost transparency
• Enables price discrimination: selling the same good at
different prices
• Personalization/customization
• Technology permits to send personalized messages
• Social technology
• Promotes user content generation and social networking
Key Concepts in E-Commerce – Digital Markets
and Digital Goods in a Global Marketplace
• Internet has created digital markets
• Information asymmetry reduced
• Menu costs (the cost of changing prices)
reduced
• Dynamic pricing enabled: Uber uses surge
pricing
• Disintermediation: sell directly
The Benefits of Disintermediation
to the Consumer
Digital Goods
• Goods that can be delivered over a digital network
• The marginal cost of producing additional unit of
goods is almost zero.
• Costs of delivery over the Internet very low
• Pricing highly variable
Types of E-Commerce
• Three major types
• Business-to-consumer (B2C)
• Example: ??
• Business-to-business (B2B)
• Example: ??
• Consumer-to-consumer (C2C)
• Example: haraj.com
E-Commerce Business Models
• Portal or websites
• E-tailer: online retail stores
• Content provider: digital contents like
publishers/newspapers
• Transaction broker: booking.com
• Market creator: build digital market. haraj.com
• Service provider: iCloud
• Community provider: linkedIn
E-Commerce Revenue Models
• Advertising model: sells ads
• Sales model: sells goods and services
• Subscription model: Netflix
• Free/Freemium model: Gmail
• Transaction fee model: booking
• Affiliate model: websites that send visitors to other
websites.
How Has EC Transformed Marketing?
(1 of 2)
• Internet provides new ways to identify and
communicate with customers at lower costs
• Search engine
• Data mining
• Recommender system
• Targeted email
• Long tail marketing
• Finding customers inexpensively for products with low
demand
• Internet advertising formats: search engine, display
ads, video, …..
How Has EC Transformed Marketing?
(2 of 2)
• Behavioral targeting
• Tracking online behavior of individuals and
sending ads accordingly
• Sites visited
• Pages visited
• Time spent on each page
• Purchased products
• Operating system
• Browser information
• Some location data
Social E-Commerce and Social
Network Marketing (1 of 2)
• Social e-commerce based on digital social graph
• Features of social e-commerce driving its growth
• Newsfeed
• Timelines
• Social sign-on
• Collaborative shopping
• Network notification
• Social search (recommendations)
• Social media
• Fastest growing media for branding and marketing
Social E-Commerce and Social
Network Marketing (2 of 2)
• Use of social media to reach customers
• Social network marketing
• buying behavior influences others
• Targeting a social network of people sharing interests
and advice
• Social networks have huge audiences
• Social commerce features:
• customers provide rating/ reviews/ referral/recommendations
B2B E-Commerce Transactions
• Internet and networking helps automate procurement
• Variety of Internet-enabled technologies used in B2B
1. Electronic data interchange (EDI)
• Computer-to-computer exchange invoices, bills, Pos, ….
B2B E-Commerce Transactions
• Variety of Internet-enabled technologies used in B2B
2. Private industrial networks (private exchanges)
• Private exchanges
• Large firm using a secure website to link to suppliers
and partners
B2B E-Commerce Transactions
3. Net marketplaces (e-hubs)
• Single digital marketplace for many buyers and sellers
• May focus on direct or indirect goods
• May be vertical or horizontal marketplaces
B2B E-Commerce Transactions
4. Exchanges
• Independently owned third-party Net marketplaces for spot
purchasing
• Vertical market places for specific industry like automobiles
• Horizontal marketplaces for many industries stationaries
M-Commerce in Business
• Fastest growing form of e-commerce
• Growing at 20 percent or more per year
• Main areas of growth
• Mass market retailing (Amazon, eBay, etc.)
• Sales of digital content (music, TV, etc.)
• In-app sales to mobile devices
Mobile Retail Commerce
Revenues
Sources: Data from eMarketer chart “Retail Mcommerce Sales, US, (billions) 2015-
2021,” eMarketer, 2017
Location-Based Services and
Applications
• Used by 74 percent of smartphone owners
• Based on GPS map services
• Geosocial services
• Where friends are
• Geoadvertising
• What shops are nearby
• Geoinformation services
• Price of house you are passing
Other Mobile Commerce Services
• Financial account management apps
• Banks, credit card companies
• Mobile advertising market
• Google and Facebook are largest markets
• Ads embedded in games, videos, and mobile apps
• 55 percent of online retailers have m-commerce websites
Issues in Building an E-Commerce
Presence
• Most important management challenges
• Developing clear understanding of business objectives
• Knowing how to choose the right technology to achieve
those objectives
• Develop an e-commerce presence map
• Four areas: websites, email, social media, offline media
• Develop a timeline: milestones
• Breaking a project into discrete phases
E-Commerce Presence Map
Q&A
