Lecture 1-Ecommerce

Chapter 1:
An Introduction to ecommerce
By

Habib Ullah Qamar

MSCS,MBA(HRM)
@theITeducation
Learning objective

 Define e-commerce and describe how it differs from e-

business.
 Identify and describe the unique features of e-commerce
technology and discuss their business significance.
 Describe the major types of e-commerce.
 Understand the evolution of e-commerce from its early
years to today.
 Identify the factors that will define the future of e-
commerce.
 Describe the major themes underlying the study of e-
commerce.
 Identify the major academic disciplines contributing to e-
commerce.
Recommended Books /
Resources
 E-Commerce by Kenneth C.
Loudon, Carol Traver : 2014
version
 Wikipedia.org
 http://www.theITeducation.co
m/
 http://slideshare.net/habibull
ahqamar/
Lets Start
E-Commerce
Introduction
 What is social media
 What are popular social media
 Facebook
 Twitter
 Pinterest
 Success story of Pinterest (2009)
 Fastest web to get 10million
 In 2014 more than 50 millions
 Third most visited website
 In 2012 started monetize using business
 For business now it’s a communication tool
 For consumers its an inspiration and aspiration source
History of Ecommerce
 1994: it did not exist
 2013: around 155 million American consumers are
expected to spend about $419 billion, and businesses
more than $4.8 trillion, purchasing goods and services
online or via a mobile device.
 A similar story has occurred throughout the world. And
in this short period of time, e-commerce has been
reinvented not just once, but twice.
 The early years of e-commerce, during the late 1990s,
were a period of business vision, inspiration, and
experimentation.
History of Ecommerce

 There followed a period of retrenchment and

reevaluation, which led to the stock market crash of
2000–2001, with the value of e-commerce,
telecommunications, and other technology stocks
dropping.
 After the bubble burst, many people were quick to
write off e-commerce. But they were wrong. The
surviving firms refined and polished their business
models, ultimately leading to models that actually
produced profits. Between 2002–2008, retail e-
commerce grew at more than 25% per year.
History of Ecommerce

 Today, we are in the middle of yet another transition:

 A new and vibrant social, mobile, and local model of
e-commerce growing alongside the more traditional e-
commerce retail sales model exemplified by Amazon.
 Social network sites such as Facebook, Twitter,
YouTube, and Pinterest, which enable users to
distribute their own content have rocketed to
prominence.
 Encouraged by the explosive growth in smartphones
such as iPhones and Androids, tablet computers, and
ultra-lightweight laptops
What is e-commerce?

 “the use of the Internet, the World

Wide Web (Web), and mobile apps to
transact business”.
 The terms Internet and Web are actually two very
different things.
 The Internet is a worldwide network of computer networks,
and the Web is one of the Internet’s most popular services,
providing access to billions of Web pages.
 An app (short-hand for application) is a software
application. The term is typically used when referring to
mobile applications.
 The professional literature sometimes refers to e-
commerce as “digital commerce”
the difference between e-
commerce and e-business
 Some argue that e-commerce
encompasses the entire world
of electronically based
organizational activities that
support a firm’s market
exchanges—including a firm’s
entire information system’s
infrastructure.
 Others argue, on the other
hand, that e-business
encompasses the entire world
of internal and external
electronically based
activities, including e-
commerce.
eight unique Features OF e-
commerce technology
eight unique Features OF e-
commerce technology
 Ubiquity : In traditional commerce, a marketplace is a
physical place you visit in order to transact. E-
commerce, in contrast, is characterized by its ubiquity :
it is available just about everywhere, at all times. It
liberates the market from being restricted to a physical
space and makes it possible to shop from your desktop,
at home, at work, or even from your car, using mobile
e-commerce.
 A marketplace extended beyond traditional boundaries
and removed from a temporal and geographic location.
From a consumer point of view, ubiquity reduces
transaction costs.
Eight Unique Features OF e-
commerce Technology
 Global Reach : E-commerce technology permits
commercial transactions to cross cultural, regional, and
national boundaries far more conveniently and cost-
effectively than is true in traditional commerce. Now
market size for e-commerce merchants is roughly equal to
the size of the world’s online population.
 Universal standards: Technical standards of the Internet
for conducting e-commerce are universal standards and
they are shared by all nations around the world. In
contrast, most traditional commerce technologies differ
from one nation to the next. For instance, television and
radio standards differ around the world, as does cell phone
technology.
 Lower Market entry cost, price discovery is simple
eight unique Features OF e-
commerce technology
 Richness: Information richness refers to the complexity
and content of a message (Evans and Wurster, 1999).
Traditional markets, national sales forces, and small
retail stores have great richness: they are able to
provide personal, face-to-face service using aural and
visual cues when making a sale. The Internet has the
potential for offering considerably more information
richness than traditional media such as printing
presses, radio, and television because it is interactive
and can adjust the message to individual users.
 Chatting with an online sales person, for instance,
comes very close to the customer experience in small
retail shop.
eight unique Features OF e-
commerce technology
 Interactivity : Unlike any of the commercial technologies
of the twentieth century, with the possible exception of
the telephone, e-commerce technologies allow for
interactivity, meaning they enable two-way communication
between merchant and consumer and among consumers.
 Information density : E-commerce technologies vastly
increase information density—the total amount and
quality of information available to all market
participants, consumers, and merchants alike. E-
commerce technologies reduce information collection,
storage, processing, and communication costs and increase
the currency, accuracy, and timeliness of information
making information more useful and important than ever
eight unique Features OF e-
commerce technology
 Personalization/customization : the targeting of
marketing messages to specific individuals by adjusting
the message to a person’s name, interests, and past
purchases. customization—changing the delivered
product or service based on a user’s preferences or
prior behavior. Given the interactive nature of e-
commerce technology, much information about the
consumer can be gathered in the marketplace at the
moment of purchase.
 Social technology: user content generation and social
networking In a way quite different from all previous
technologies, e-commerce technologies have evolved to
be much more social by allowing users to create and
share content with a worldwide community.
Types of E-Commerce
 Business-to-Consumer (B2C)
 Business-to-Business (B2B)
 Consumer-to-Consumer(C2C)
 Business to Government (B2G)
 Social E-Commerce
 M-Commerce
 Local E-Commerce
Origins and Growth of E-
Commerce
 Based on growth of the internet, Web, and mobile
PalteForm.
 In the late 1970s, a pharmaceutical firm named Baxter
Healthcare initiated a primitive form of B2B e-commerce
by using a telephone-based modem that permitted
hospitals to reorder supplies from Baxter.
 In the B2C arena, the first truly large-scale digitally
enabled transaction system was deployed in France in
1981. The Minitel was a French videotext system that
combined a telephone with an 8-inch screen. By the mid-
1980s, more than 3 million Minitels were deployed, and
more than 13,000 different services were available (Read
more from book)
 B2C e-commerce in the United States will grow by about
14% annually
Origins and Growth of E-
Commerce
 Electronic Funds Transfer
 Electronic Data Interchange (EDI-an old name of
ecommerce) among business in computer readable
format. It started in 1096 with the invention of
computer networks
 EDI meant buying expensive computer hardware and
software and then either establishing direct network
connections (using leased telephone lines) to all trading
partners or subscribing to a value-added network. A
value-added network (VAN) is an independent firm that
offers connection and transaction forwarding services to
buyers and sellers engaged in EDI.
Origins and Growth of E-
Commerce
The Dot-Com Boom, Bust, and Rebirth
 The second wave of Ecommerce
History/ Growth of
Ecommerce
 E-commerce 1995–2000: invention
 E-commerce 2001–2006: consolidation
 E-commerce 2007—present: reinvention
History
What is the major factor of
the success of a business?

 Spending Investment and capital

 Getting more Customers
 Other
The Answer

 Read the story of Twitter, Facebook, Pintrest,

Imagebazar, hamriweb etc
 You will find minimum capital and investment
 Started with zero customer
 But
 Started with a Planned Business Model,
 That is the key to success for a business!
What is Business Model?

 A set of planned activities designed to result in a profit

in a marketplace.
 A business model is not always the same as a business
strategy, although in some cases they are very close in
so far as the business model explicitly takes into
account the competitive environment (Magretta, 2002).
 The business model is at the center of the business
plan. A business plan is a document that describes a
firm’s business model.
 An e-commerce business model aims to use and control
the unique qualities of the Internet, the Web, and the
mobile platform.
Eight key elements of a business model
Eight key elements of a
business model
 Why customers will choose to do business with the
firm instead of another company and what the firm
provides that other firms do not and cannot?
 Value proposition : defines how a company’s product or
service fulfills the needs of customers. A company’s
value proposition is at the very heart of its business
model.
 From the consumer point of view, successful e-
commerce value propositions include personalization
and customization of product offerings, reduction of
product search costs, reduction of price discovery costs,
and facilitation of transactions by managing product
delivery.
Eight key elements of a
business model
 A firm’s revenue model describes how the firm will earn revenue,
generate profits, and produce a superior return on invested
capital. We use the terms revenue model and financial model
interchangeably.
Eight key elements of a
business model
 Market opportunity refers to the company’s intended marketspace
(i.e.an area of actual or potential commercial value) and the
overall potential financial opportunities available to the firm in
that marketspace. It depends on smaller market niches.
Eight key elements of a
business model
 A firm’s competitive environment refers to the other companies
selling similar products and operating in the same marketspace.
 It also refers to the presence of substitute products and potential
new entrants to the market, as well as the power of customers
and suppliers over your business.
 How many competitors are active, how large their operations are,
what the market share of each competitor is, how profitable these
firms are, and how they price their products, all these queries
must be learned.
 Eight key elements of a
business model
 competitive advantage : achieved by a firm when it can produce a
superior product and/or bring the product to market at a lower
price than most, or all, of its competitors.
 Asymmetry : has more resources
 first-mover advantage
 Complementary resources: resources other than production i.e.
marketing and reputation
 unfair competitive advantage : factor other firm cannot (brand
name copy or imitate)
 Perfect market (no asymmetry, equal )
 Leverage : using name into other markets
Eight key elements of a
business model
 Market strategy : the plan you put together that details exactly
how you intend to enter a new market and attract new customers.
 The best business concept, or idea, will fail if it is not properly
marketed to potential customers.
 For instance, Twitter, YouTube, and Pinterest have a social network
marketing strategy that encourages users to post their content on
the sites for free, build personal profile pages, contact their
friends, and build a community. In these cases, the customer
becomes part of the marketing staff!
Eight key elements of a
business model
 Although many entrepreneurial ventures are started by one
visionary individual(FB), it is rare that one person alone can grow
an idea into a multi-million dollar company.
 Fast-growth companies ,especially e-commerce businesses, need
employees and a set of business procedures.
 In short need an organization to efficiently implement their
business plans and strategies.
 Organizational development : plan describes how the company
will organize the work that needs to be accomplished.
 eBay founder Pierre Omidyar started an online auction site,
according to some sources, to help his girlfriend trade Pez
dispensers with other collectors, but within a few months the
volume of business had far exceeded what he alone could handle.
Eight key elements of a
business model
 Management Team : employees of the company responsible for
making the business model work.
 A strong management team gives a model instant credibility to
outside investors, immediate market-specific knowledge, and
experience in implementing business plans.
 Team should be able to change the model and redefine the
business as it becomes necessary
Summary of Eight key
elements of a business model
Resources

 E-Commerce by Kenneth C. Loudon,

Carol Traver : 2014 version :
Chapter 1
 Gary P.Schneider Electronic
Commerce- chapter 1
 www.Wikipedia.org
 http://www.slideshare.net/habibull
ahqamar
 http://theITeducation.com/