IS 495-03 Electronic Commerce

Chapter 1
The Revolution Is Just Beginning

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 Introduction – What is E-commerce
E-commerce :
The use of the Internet, the
Web, and apps to transact business. More
formally, digitally enabled commercial
transactions between and among
organizations and individuals.

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 E-Commerce
Digitally enabled transactions include all transactions
mediated by digital technology. For the most part, this means
transactions that occur over the Internet, the Web and/or via
mobile apps. Commercial transactions involve the exchange of
value (e.g., money) across organizational or individual
boundaries in return for products and services.
Exchange of value is important for understanding the limits of
e-commerce.

Without an exchange of value, no commerce occurs.

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 Origins
Although e-commerce is not very old, it already has a
tumultuous history. The history of e-commerce can be
usefully divided into three periods:
1995–2000, the period of invention;

2001–2006, the period of consolidation;

2007–present, a period of reinvention with social,

mobile, and local expansion.

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Copyright © 2013 Pearson Education, Inc. Slide 1-5
 Origins and Growth of E-commerce
 1995: Beginning of e-commerce
 beginning in 1995 with the first widespread use of the Web to advertise,
First sales of banner advertisements products
 E-commerce meant selling retail goods, usually, quite simple goods, on the
Internet. There simply was not enough bandwidth for more complex
products. Marketing was limited to unsophisticated static display ads and
not very powerful search engines.

 E-commerce fastest growing form of commerce in

United States

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 E-commerce: A Brief History
 1995–2000: Invention
 Key concepts developed
 Dot-coms; heavy venture capital investment

 2001–2006: Consolidation
 Emphasis on business-driven approach

 2006–Present: Reinvention
 Extension of technologies
 New models based on user-generated content, social
networks, services

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 Early Visions of E-commerce
 Computer scientists:
 Inexpensive, universal communications and computing
environment accessible by all

 The vision was of a universal communications and com-

putting environment that everyone on Earth could access with
cheap, inexpensive computers—a worldwide universe of
knowledge stored on HTML pages created by hundreds of
millions of individuals and thousands of libraries, governments,
and
scientific institutes.

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 Early Visions of E-commerce
 Economists:
 Nearly perfect competitive market;
friction-free commerce
 Lowered search costs, disintermediation, price transparency,
elimination of unfair competitive advantage
 the early years of e-commerce raised the prospect of a nearly
perfect competitive market: where price, cost, and quality
information are equally distributed, a nearly infinite set of
suppliers compete against one another, and customers have access
to all relevant market information worldwide.
 Entrepreneurs:
 Extraordinary opportunity to earn far above normal returns on
investment—first mover advantage

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 2001–2006: Consolidation
A period of reassessment of e-commerce occurred, with many critics doubting its long-
term prospects. Emphasis shifted to a more “business-driven” approach rather than
being technology driven.

financing shrunk as capital markets shunned start-up firms; and traditional bank
financing based on profitability returned. E-commerce changed to include not just retail
products but also more complex services such as travel and financial services.

This period was enabled by widespread adoption of broadband networks in U.S homes
and businesses, coupled with the growing power and lower prices of personal computers
that were the primary means of accessing the Internet, usually from work or home.

Marketing on the Internet increasingly meant using search engine advertising targeted to
user queries, rich media and video ads, and behavioral targeting of marketing messages
based on ad networks and auction markets.

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 2006–Present: Reinvention
 Introduction of the iPhone, to the present day, e-commerce has been
transformed by the rapid growth of online social networks, widespread
adoption of consumer mobile devices, and the expansion of e-commerce to
include local goods and services.

 characterized as the “social, mobile, local” online world. In this period,

entertainment content begins to develop as a major source of e-commerce
revenues and mobile devices become entertainment centers, and on-the-go
shopping devices for retail goods and services.

 Marketing is transformed by the increasing use of social networks, word-of-

mouth, viral marketing, and much more powerful data repositories and
analytic tools. More personal Marketing. This period is as much a
sociological phenomenon as it is a technological or business phenomenon.

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 The First 30 Seconds
 First 17 years of e-commerce
 Just the beginning
 Rapid growth and change

 Technologies continue to evolve at

exponential rates
 Disruptive business change
 New opportunities

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 E-commerce Trends 2012–2013
 Mobile platform solidifies
 Mobile e-commerce explodes
 Continued growth of social networks
 Expansion of social and local
e-commerce
 Explosive growth in “Big Data”
 E-books gain wide acceptance

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 Why Study E-commerce?
 E-commerce technology is different, more
powerful than previous technologies
 E-commerce brings fundamental changes to
commerce
 Traditional commerce:
 Consumer as passive targets
 Sales-force driven
 Fixed prices
 Information asymmetry

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 Eight Unique Features of
E-commerce Technology
1. Ubiquity -Internet/Web technology is available everywhere: at work, at
home, and elsewhere via mobile devices, anytime.
2. Global reach
3. Universal standards
4. Information richness – videos, audio and text marketing messages
5. Interactivity –works with interaction with users
6. Information density-technology reduces information cost and raises quality
7. Personalization/customization
8. Social technology-enable user content

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 Web 2.0
 User-centered applications and social
media technologies
 User-generated content and communication
 Highly interactive, social communities
 Large audiences; yet mostly unproven business
models
 e.g.: Twitter (Sina Weibo), YouTube, Facebook,
Instagram, Wikipedia, StumbleUpon, Tumblr,
Pinterest

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 Types of E-commerce
 May be classified by market relationship or technology

 Business-to-Consumer (B2C)
 Business-to-Business (B2B)
 Consumer-to-Consumer (C2C)
 Social e-commerce
 Mobile e-commerce (M-commerce)
 Local e-commerce

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Business-to-Consumer (B2C) E-commerce
The most commonly discussed type of e-commerce is
business-to-consumer (B2C)
e-commerce, in which online businesses attempt to
reach individual consumers. B2C commerce includes
purchases of retail goods, travel services, and online
content.

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 The Growth of B2C E-commerce
Figure 1.1, Page 13

SOURCE: Based on data from eMarketer, Inc., 2012; authors’ estimates.

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Business-to-business (B2B) e-commerce
In which businesses focus on selling to
other businesses, is the largest form of e-
commerce.

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 The Growth of B2B E-commerce
Figure 1.2, Page 14

SOURCE: Based on data from U.S. Census Bureau, 2012b; authors’ estimates.

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 Consumer-to-consumer (C2C)
e-commerce provides a way for consumers
to sell to each other, with the help of an
online market maker such as eBay or Etsy,
or the classifieds site Craigslist.

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 Social e-commerce
is e-commerce that is enabled by social
networks and online social relationships.
It is sometimes also referred to as
Facebook commerce, but in actuality is a
much larger phenomenon that extends
beyond just Facebook (Renren).

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 Mobile e-commerce (M-commerce)
use of mobile devices to enable
transactions on the Web

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 local e-commerce
e-commerce that is focused on engaging the consumer
based on his or her current geographic location.

Groupon offers subscribers daily deals from

local businesses in the form of “Groupons,”
discount coupons that take effect once enough
subscribers have agreed to purchase.

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 The Internet
 Worldwide network of computer networks
built on common standards
 Created in late 1960s
 Services include the Web, e-mail, file
transfers, etc.
 Can measure growth by looking at number
of Internet hosts with domain names

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 The Web
 Most popular Internet service
 Provides access to Web pages
 HTML documents that may include text,
graphics, animations, music, videos
 Web content has grown exponentially
 Google reports one trillion unique URLs; 120
billion Web pages indexed

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 Understanding E-commerce:
Organizing Themes
 Technology:
 Development and mastery of digital computing and
communications technology
 Business:
 New technologies present businesses with new ways of
organizing production and transacting business
 Society:
 Intellectual property, individual privacy, public welfare
policy

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 Fa Xian/Pinterest
Launched in March 2010, Pinterest allows you to create virtual
scrapbooks of images, video, and other content that you “pin”
to a virtual bulletin board or pin board on the Web site. Find
someone whose taste you admire or who shares your
passions? You can follow one or more of that pinner’s boards
to keep track of everything she or he pins. According to
comScore, Pinterest is one of the fastest growing Web sites it
has ever tracked, growing an astounding 4,377% from May
2011 to May 2012.

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 Fa Xian/Pinterest
A study of 25,000 online stores using the Shopify e-commerce platform found there
was as much traffic originating from Pinterest as from Twitter, and that Pinterest
users spend an average of $80 each time they make an online purchase, twice the
amount of Facebook users. It found that almost a third of online shoppers surveyed
a study of 25,000 online stores using the Shopify e-commerce platform found there
was as much traffic originating from Pinterest as from Twitter, and that Pinterest
users spend an average of $80 each time they make an online purchase, twice the
amount of Facebook users.

A third of online shoppers surveyed have made a purchase based on what they’d
seen on Pinterest and other image-sharing sites; an even higher percentage (37%)
have seen items they want to buy but have not yet purchased. As a result, savvy
retailers are starting to work Pinterest into their marketing mix.

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 Class Discussion

In Class Assignment in Groups- Pinterest:

A Picture Is Worth a Thousand Words
 Have you used Pinterest/Fa Xian or any other
content curation sites? What are your main
interests?
 Have you purchased anything based on a pin or
board on Pinterest or any other curation site?
 Why do Pinterest links drive more purchasing
than Facebook links?

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