CO639 - eCommerce: CO639 - eCommerce Gareth Owen g.h.owen@kent.ac.uk Some bits thanks to Roger Cooley


Lecture Outline: Lecture Outline Lecture 1: Introduction Lecture 2: Fundamentals Lecture 3: Business 2 Business Lecture 4: ebXML Lecture 5: Profitability and Structure Lecture 6: Competitive Advantage and Industry Structure Lecture 7: No lecture – project week Lecture 8: Knowledge Management Lecture 9: Essay Feedback Lecture 10: Revision


Overview: Overview Example M&S Some definitions Applications Benefits and Limitations Economic significance Social significance


Example Marks & Spencer: Example Marks & Spencer M&S decline in sales ~1997 Lost loyal customers through cost-cutting Rising cost of British suppliers Lack of young person appeal Use internet to revive Not used much initially Partnership with amazon (1-click, etc)


Example Marks & Spencer: Example Marks & Spencer Selling online www.marksandspencer.com Electronic catalogue Shopping basket Online payment Integrated systems – warehouse, goods-in, purchasing, collaborative commerce “Bricks and Mortar” -> “Clicks and Mortar”


Definitions: Definitions eCommerce: Buying, selling, exchanging products. Services and information via computer networks. eBusiness: eCommerce + servicing, tendering, collaborating, internal transactions etc Generalised term for communications between organisations and their customers.


B2B and B2C: B2B and B2C Business to consumer (B2C) Businesses sell to consumers Examples: Shops, Amazon, etc Business to business (B2B) Businesses sell to businesses Example: Supplier to retailer Bigger than B2C Consumer to Consumer (C2C) Ebay! Others: G2C – Government to consumer, G2B, etc


EDI - Electronic Data Interchange: EDI - Electronic Data Interchange Normal business Purchase orders, invoices, etc Paper costly (stamps, envelopes, etc) Automate communication How we do it? E-mail, send a disk? What format will it be in? Word, PDF, Scanned? EDI – The answer – A standard.


EDI - Electronic Data Interchange: EDI - Electronic Data Interchange Standardises data format Can be sent over modem, HTTP, etc. Most traffic on Internet but some still over modems (8%). Warehouse Out of stock! Supplier EDI


eCommerce: Applications: eCommerce: Applications Marketing Job search Online banking Purchasing Auctions Digital distribution Publishing B2C B2B eGovernment eEducation M-commerce (mobile) eMarket Place


Types of product: Types of product Physical Typical retail – CDs, books, hoovers, etc High value-to-weight ratio Fit through people’s letter boxes Embarrassing products Digital eBooks, software, photos, data, etc People like hard copies of books, and actual CDs for software. People will pay a lot for the Speed Camera database. Lots of people buy make money eBooks, etc.


Types of product: Types of product Services Advertising Doubleclick, etc. Google. eBay – auctions. Payment processing – PayPal. Electoral roll searches


Products suitability: Products suitability Some products are better than others. Does user know what they want? Do they need advice of which product? Examples: Clothes/Shoes – need to test for fit. Spectacles Books – perfect! User can read summaries at own pace etc.


Amazon: Amazon An International bookseller. Buy from publishers, sell to consumers. The biggest online bookseller. Online marketplace Auction site that allows users to auction off their used books. Syndicates site out to others such as M&S Capitalised on two closely related ideas.


Benefits of eCommerce: Benefits of eCommerce Expands the market place Worldwide sales? Open 24hours a day! Improves information flow Customers can look up and see the product. More info available. Reduces printing costs, etc. Reduces clerical processing costs System mostly automated. Most human involvement in the warehouse.


Benefits of eCommerce: Benefits of eCommerce Reduces selling costs Minimal human involvement Automates customer relations Don’t have to talk to customers much. They get what they want quickly without having to talk to you! Speeds transactions Dispatched same day – mostly automatic. Print out in warehouse, they only have to package and post knowing it’s all paid for. Postage labels printed automatically


Limitations of eCommerce: Limitations of eCommerce Trust Privacy and fear of fraud Fear, Uncertainty and Doubt (FUD) SSL pretty good Reliability Order lost, card charged? Rare Returning faulty goods Customer support e.g. getting phone numbers, desire to speak to someone


Limitations of eCommerce: Limitations of eCommerce Setup and running costs Web hosting IT staff HCI problems, Lack of bandwidth Is the website intuitive? Is the website too slow? Does it stop working half way through?


Limitations: Social Aspects: Limitations: Social Aspects Social exclusion Wealth: Poorer have fewer computers Poorer have fewer computers Use less prevalent amongst non-University students/graduates Culture: Internet usage not prevalent Age Young: Internet revolution Twenty-somethings: Recent university graduates Older: Increasingly less prevalent with age.


Limitations: Social Aspects: Limitations: Social Aspects Disability Use of computer maybe harder/impossible. Develop website so it supports accessible software such as screen readers. Geography Users in remote highlands of Scotland less likely to use than Londoner. Computer literacy


GB Homes with internet access: GB Homes with internet access Access available through libraries Access at one’s work place What should we compare it to? Access to: Public transport? Postal system? Shops?


Slide22: 02 03 04 02 03 04 02 03 04 Physical Services Digital 2003-2004 Sales up 81% to £71 billion Online business up 24% to 6.7% of total business


B2B …… B2C: B2B …… B2C 02 03 04 02 03 04 To Businesses To Household


Sales via EDI, Automated telephones, e-mail fell 20 £200 billion in 03-04but they are three times the value of internet sales: Sales via EDI, Automated telephones, e-mail fell 20 £200 billion in 03-04 but they are three times the value of internet sales Employees <10 <50 <250 <1000 1000+ Total 02, 03, 04


Estimated Quarterly U.S. Retail E-commerce Sales as a Percent of Total Quarterly Retail Sales:4th Quarter 1999–2nd Quarter 2006Percent of Total: Estimated Quarterly U.S. Retail E-commerce Sales as a Percent of Total Quarterly Retail Sales: 4th Quarter 1999–2nd Quarter 2006 Percent of Total


Succeeding in eCommerce: Succeeding in eCommerce Good planning Market research – suitable products Supply and demand Could create viable book seller, but can you compete against Amazon? Good IT strategy Failure tolerance Effective dispatch and order processing


Succeeding in eCommerce: Succeeding in eCommerce Easy to navigate and attractive website. Good customer experience Community – forums. Fast response to returns and queries Good customer service


Case Study: E-bay: Case Study: E-bay Founded 1995 in San Jose, California First item sold – a broken laser printer Sold on founder’s personal web site for $14 Founder astounded to find buyer was a collector. Why not expand it? Founder became an instant billionaire when company went public in 1997.


Case Study: E-bay: Case Study: E-bay Buyers and sellers trade through auctions. Auctions run much like a real-world one. Time to end. Users place bids, although this is a maximum bid and ebay automatically bids up to this. E-bay also own PayPal Get money from auctions Get money from payments


Case Study: E-bay: Case Study: E-bay E-bay hugely popular and simple idea Problems Fraud Ebay provides limited insurance Credit cards insure higher value items (£100+) Bad publicity – causing fear of ebay. Difficult for ebay to counter.


Case Study: E-bay: Case Study: E-bay Solution: Reputations Users rate their experiences with others (Good, Neutral, Bad). Use other’s reputations when deciding whether to deal with them. Reputation fakery: Lots of accounts, fake transactions with fake reported reputations given.


Case Study: E-bay: Case Study: E-bay Result: E-bay is still big business. Many companies sell goods exclusively on ebay and make a living from it. Buying on ebay is mostly safe, although dodgy goods are not uncommon.


Failures: Failures Dot com boom … dot com crash ~1999-2001 Plenty of failures to examine Lack of planning, business plan. http://conferenceguru.com/lessonslearned.html


Conclusions: Conclusions eBusiness is not easier than a regular business. Business aspect the most important not the technical. Planning is essential. May not be the best suited means for selling a particular product.


Further Reading: Further Reading Turban, E. et al, Electronic Commerce: a managerial perspective, 2004/2006 http://www.statistics.gov.uk/downloads/theme_economy/ecommerce_report_2004.pdf www.marksandspencer.com www.census.gov/eos/www/ebusiness614.htm