E-Commerce by Sir Aziz

What is E-Commerce?

Electronic commerce is the process of buying, selling, or exchanging products, services, and/or information via computer networks, including the Internet. E Commerce is the paperless exchange of business information using EDI, e-mail, e-bulletin boards, e fund transfer, and related technologies (Layna Fischer, 2000).

Key words: “electronically-digitally enabled transactions” (this means that electronic commerce involves some form of digitalization—product, process, agency; transactions are done electronically). A company may conduct its business from a physical shop but if they enable customers to interact with them electronically; this company is considered an e-commerce business.

 

Perspective	Definition
Communications	Delivery of information, production/services, or payments over electronic means. The Internet facilitates exchange between buyers and sellers. The Internet is a conduit (roadway; medium of transport) of information, money and digital product.
Business process	Use of ICT to automation of business transactions and work flow. Use of ICT helps reduce transaction cost and search cost; contributes towards a “friction free” market. Many routine tasks can now be automated to make business transactions faster, less costly and can be carried out from anywhere and at any time.
Service	Use of ICT to reduce service cost BUT improving quality of goods and by increasing the speed of service delivery and providing richness of information; Service to customers can be provided online; customers can enjoy service from any place and at any time without having to go to a specific location to get service.
Online	Capability of buying and selling products and services on the Internet. Business can completely be carried out without buyers and sellers meeting face to face.

Pure e-commerce verses partial e-commerce

There are varying degrees of e-commerce (depending on how much of the business makes use of information technology). The amount of information technology used in a business can be measured by three dimensions:

(1)    Product (or service)—product may be digital or physical.  Examples of digital products are e-mail service, software programs, digitized pictures, digitized music and e-books.

(2)    Agency—company may conduct its business from a physical store or from an online website

(3)    Delivery—product / services may be delivered physically or digitally (online).

For a company to be considered an e-commerce business, at least one of the dimensions has to be digital (“click and mortar” or “pure play”).

Category	Product	Agency	Delivery
Brick and Mortar	Physical	Physical	Physical
Click and Mortar	One or more is digital
Pure play	Digital	Digital	Digital

Business Strategies

As we move from the “traditional” brick and mortar business to e-commerce, business strategies may change to take advantage of the functions and capabilities of ICT.

Brick and mortar business strategy	e-commerce business strategy
Mass marketing strategy: Everyone in the market are treated the same; we assume everyone has the same tastes and preferences. Advertisements designed to target the general public (assuming everyone wants the same thing)	One-to-one marketing: Businesses treat each customer differently. Each customer is unique. We discover their uniqueness by their past purchasing records, online monitoring and feedback we get from them. We can meet the demands of each person through customization.
Sales force (“go out and sell”): To generate revenue, salespersons have to go out and physically meet and convince customers to purchase our products.	Technology enabled sales tactics: Customer profiling can be carried out using data collected via ICT. Using customer profiles and online marketing research, future product designs take into account what customers want;  and less of trying to convince customers of what they should buy. Use of push-technology and other innovative ICT enabled sales tactics such as viral marketing and location-sensitive advertisements.
Customer as passive receiver of information: Customers as passive target (one-way communication); advertisements via newspaper-TV-radio-fliers are one way communication.	Two-way communication between customer and business Communication is interactive, and times personalized (two-way communication); through the use of information technology, feedback from customers is treated as valuable input to improving future product features and services offered to customers.
Market reach: Limited by physical distance Potential customers of brick and mortar businesses usually are limited by the proximity to the physical shop. A person would not normally want to travel from Johor Bharu to Ipoh just to purchase a product from a physical shop.	Market reach: Limited by Internet access Market reach is defined by Internet access; a person can be living in Ulan Bator, Mongolia and still be a customer if she has Internet access. A person can be living next door but may not be a potential customer if she does not have Internet access.
Information asymmetry Buyers are always at a disadvantage because of lack of information about products and market conditions. Often times, customers are at the mercy of the sellers to provide pertinent information when making purchase decisions.	Reduced information asymmetry By Googling and using social networks, customers can find out much about products and sellers in the market. ICT offer customers valuable information to help them make smart decision when shopping and buying products in the market.

Unique features of E-commerce

There are seven (7) unique features of e-commerce:

Features of E-commerce
Ubiquity	E-commerce can be carried out from anywhere. With the widespread use of smart phones and digital tablets today, many people can get Internet access on-the-go (from anywhere there is signal to connect to the Internet)
Global reach	E-commerce market reach is not limited within one country; market is only limited by Internet access.
Universal standards	Technology can connect many different electronic equipment to enable them to work together to serve us as customers. For example, we can save music in our thumb drive and plug our thumb drive into our car to listen to music. After capturing pictures using our camera, we can transfer the pictures to our hand phone and then upload the pictures to Facebook.
Richness of information	Information can be delivered in many forms: pictures, words-numbers, graphics, video, color, texture, audio, animation; 2-D and 3-D; already exist 4-D; the more forms used, the richer is the information.
Interactivity	Technology allows buyers and sellers to interact in a two-way communication. Today, people make use of smart phones to chat online, to send voice mails online; instant messaging is used via WeChat, Whatsapp and a multitude of other apps available for free.
Information density	Technology can deliver large information content; data collected and captured easily; data can be combined from many sources; many people can simultaneously contribute to providing information.
Personalization / Customization	Information, services and products can be designed to suit each person; a customer can design products to suit their needs and wants. On our smart phone, we can choose our own ring tone for each of our best friends, change the theme and background on the screen.

Classification of E-Commerce

Type	Name
B-to-C	Business to consumer	Online businesses selling to individual consumers
B-to-B	Business to business	Online businesses selling to other businesses
C-to-C	Consumer to consumer	Consumers selling to other consumers
P-to-P	Peer-to-peer	Internet users sharing files
Mobile commerce		Online businesses selling to individual consumers using mobile phones

The Digital Revolution Drives EC

E-commerce companies have to face a business environment that is influenced by the following trends:

Globalization	Global marketplace; global communication and collaboration; trading not limited by national borders.
Digitization	Electronic products and contents are moving towards using digital technology.
Speed	Move towards real-time response time. Customers expect fast response time; we are living in the “now” society; they don’t like to wait to get something.
Information overload	Problem we face is having too much information to digest. We need a way to manage, filter and sort information to help us understand and use available information.
Online markets	Many markets today are participating online.
Obsolescence	Today we find more and more products having very short product life cycle; products are becoming obsolete very quickly. Products are being replaced by newer versions every few months.
Online crimes	Cyber crimes are on the rise. People are finding new ways to commit crime online.
Virtual organizations	Organizations collaborating together digitally to serve a common customer. Each organization will concentrate on what they do best.
Disintermediation	Manufacturers can sell directly to consumers without the help of wholesalers and retailers; this can be done online.
Re-intermediation	New forms of intermediation made possible with the capabilities of ICT; example—information aggregators (companies that gather information from many sellers and help compare prices and product functions to assist consumers in deciding what products to purchase.
Friction free market	Markets normally will have inefficiencies; sellers who cannot find buyers to buy their products; buyers who cannot find sellers to sell products at the right price. E-commerce can reduce “friction” (the inefficiencies) and make the market run smoother.
First mover advantage	Businesses that bring new products into the market first will capture a huge part of the market; this is called first mover advantage. Once first movers capture the market, it will difficult for competitors to gain market share. Therefore, it is important for e-commerce businesses to always be innovative and come out with new products first.
Network effect	The value of a product or service becomes more valuable when more and more people make use of it. For example, if only one person has a telephone, it will be useless. When millions of people own a phone, then telephones become very useful because we can connect ourselves to the growing number of people who have phones.

Posted by:

Sir Aziz in http://uniec.unitar.my