BSAD 113 ELECTRONIC COMMERCE Lars Perner, Instructor 1 ELECTRONIC COMMERCE Potential roles of e-...

BSAD 113 ELECTRONIC COMMERCE Lars Perner, Instructor 1

ELECTRONIC COMMERCE

Potential roles of e-commerceObstacles to growthLegal issuesWeb site design and problemsConsumer cyber behavior


Potential Roles of e-commerce

Trade:– B2C [business to consumer]– B2B– C2C (e.g., eBay)– C2B

Advertising/promotionCustomer service/supportMarket research


Types of Trade

Object of sale– Goods– Services

• Traditional• Information• Entertainment

Distribution– Shipping by operator– Shipping from manufacturer/client– Download

Methods of sale– Direct to customer– Online retailer– Auction facilitator– Referral

Business model– Retail sale margin– Commission– Subscription/content– Advertising/market research

revenue– Support of brands/other channels– Mixed


Considerations in Evaluating E-Commerce Potential

Value-to-bulk ratioAbility of consumer to evaluate quality and fit through online descriptionExtent of customization neededGeographic dispersal of consumers


How Suitable For Internet Commerce? Are There Differences Among Segments?


Internet User/Shopper SegmentsSegment % active

users% online time spent

Simplifiers—50%+ of online transactions but difficult to satisfy; main benefit sought is convenience.

29 23

Surfers—move around quickly; main challenge is to keep these people long enough to shop

8 32

Bargainers—mainly interested in price; heavy users of Ebay 8 7

Connectors—use Internet mostly for e-mail communication with others; typically have not used internet for long

38 23

Routiners—mostly looking for updated information 15 12

Sportsters—like routiners but focusing on sports and entertainment 4 3

Source: Krishnamurthy 2003 (from Media Metrix and McKinsey)


Bursting the Internet Bubble

Internet sales may not actually save money– Still very labor intensive– High costs of packaging and

shipping

Even if online sales do save money, e-merchants are likely to compete with other e-merchants– Very easy entry


Reality of Online Competition

Intense competition for large demand products (large quantity demanded attracts many sellers)Use of large demand products as loss leaders (e.g., Amazon.com bestsellers)Competition will force reduced costs—if any—to be passed on to customersCompetition makes charging for shipping and handling difficult. This is often more expensive than traditional distribution.Less competition on specialty productsEstablished “brick-and-mortar” firms have large cash reserves


Reasons Many Internet Businesses Failed

Focusing on market share rather than profitsOverestimating the value of databasesUnderestimating power of established, “entrenched” traditional competitorsUnderestimating the time required to change managerial and consumer behavior.

Source: Krishnamurthy 2003


Obstacles to Growth of Electronic Commerce

Limited reach– U.S. (access vs. use)– Foreign (per minute access

charges)

Concerns about– privacy– security

Reputational issuesSlow entry of firms into actual order processingTransshipment across countries

Technical – Limitations and “glitches”– Slow access

Costs– Efficiency– Absolute margins

Language– Non-English– U.S. vs. British English

Government regulationsCultural


Cultural Obstacles

Preference for face-to-face transactionsPreference for secrecyReluctance to use credit cards--80% of Chinese consumers completed the transaction off-line


Web Site Problems

Incompatibility of browsersManaging the site– Updating– Response (it is much easier

to complain online!)– Implementing electronic

shopping

Getting traffic to your firm (and not to someone else)– Ownership of domain

name – Indexing in search

engines• listing of site• deliberate “false positives”

for competitors (misleading meta tags)


Legal Issues

Jurisdiction--applying local laws to a global mediumInter-country sales tax/duty collectionReach of the Internet: whose laws apply?– Advertising messages– Product assortment

Privacy laws--restrictions on data that can be collected on customersTax collection: is the sender or recipient liable? (High shipment volumes allow only for random customs searches)


Language Issues

Increasing proportion of non-English speaking Net users“Drawing” of Asian pictorals--download timeLanguage variations– Taiwanese vs. mainland Chinese– British vs. American English--is the word “color”

an Americanization or misspelling?

Regional variations in word meanings--less opportunity for tuning advertising to local meanings

At least pronoun-ciation is not so much of an issue on the Web!


Optimal Web Site Design

Speed vs. aesthetics (may be temporary problem)Keeping customers on your site--beware of linksCookies--advantages and disadvantages


Consumer Cyber Behavior

Easy comparison shopping—but do consumers actually compare?– Between merchants– Between countries

Online purchases vs. information gatheringPremature departure from site


Perceived Risks

FinancialProduct performancePsychologicalTime/convenience loss


Consumer Privacy Concerns

Risks of fraud– Identity theft

Dynamic pricing– Appeal to potential “switchers” rather than loyal ones

Disclosure of private information (emotional and philosophical concern)


Search Engine Optimization

“Cat and mouse game” between webmasters and search enginesSome placement strategies– Paid rankings– Massive amounts of text– Reciprocal or paid links


E-Mail Marketing

Opt-in vs. spammingSpamming– Intensely disliked by the vast majority of customers

• Potential state and Federal bans• Filtering software and attempts to circumvent it

– Only small response rates are needed for success

BSAD 113 ELECTRONIC COMMERCE Lars Perner, Instructor 1 ELECTRONIC COMMERCE Potential roles of e-...

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