Why e-commerce Problems solutions and Terminology

1. © University of Glamorgan 1 Why e-commerce?Problems solutions and Terminology

2. © University of Glamorgan 2 E-commerce introduction “within several years there won’t be any internet companies. All companies will be internet companies or they will be dead” Andy Grove, Intel In this lecture we shall Look at what e-commerce covers Look at some issues involved in e-commerce

3. © University of Glamorgan 3 One Assessment worth 50% One Exam also 50% ! Main themes Why? Problems and solutions What? Sales and customers Who? Customers – access statistics How? Technology and avenues Watch out! Security and crime Module Details

4. © University of Glamorgan 4 Lecture Objectives “Electronic Commerce is the buying and selling of goods and services electronically involving transactions using the internet, networks and other digital technologies.” (Loudon & Loudon, Management Information Systems Sixth Edition) In this lecture we will; Examine the ways businesses can use E-commerce Look at the reasons for using e-commerce. Examine the some issues affecting e-commerce. Security & Consumer Confidence. Later lectures will address issues like ; Security and Supply Chain Management

5. © University of Glamorgan 5 Who is your customer? Internet rapid, low cost, worldwide exchanges of information - In addition to companies there are lot of potential customers on the web. Percentages of Households with a PC and Internet Connections USA 80% 2001 New Zealand 43% 2000 Australia 50% 2000 UK 40% 2001 IDC (US Based international research organisation) suggests the value of US e-commerce be $600 billion in 2001 and $1.1 trillion 2002. [Sourced from InterForum White Paper no 7]

6. © University of Glamorgan 6 E-Commerce Applications Wide variety of activities, each having its own particular style and requiring a range of supporting technology. In total the E-Commerce market is thought to be currently worth $3 Trillion worldwide. (Loudon & Loudon, Management Information Systems Sixth Edition)

7. © University of Glamorgan 7 Examples of E-Commerce Amazon.co.uk (www.amazon.co.uk) Virtual Storefront offering more than 3 million book titles, now also offers CD’s etc. Customers log and have purchases shipped anywhere in the world. (But has only recently made a profit!) Travelocity (www.travelcity.com) A website that can be used to create travel and holiday plans offering flights and hotels and packages deals . Users can book the hotels and flights over the web. Mobil Corporation (www.mobil.com) Mobil have private network using internet technology that allows its distributors to purchase on line. They also have an internet store for anything from tiger hats to travel guides.

8. © University of Glamorgan 8 Advantages of E-Commerce Business (aim to) make changes to increase the profitability of a company: E-commerce enables the replacement of the more tradition paper based approach with the electronic alternatives and to use new and dynamic information flows. Electronic commerce can accelerate ordering, delivery and payment for good and services while reducing company operating and inventory costs. This can be tied up with ‘Electronic Business’ – the managing and coordination of business processes – the development of an intranet to manage the business environment E-commerce can effectively provide a global market for any company e.g. www.amazon.com

9. © University of Glamorgan 9 Problems and solutions Benefits Global reach Large customer base Economies of scale Ease of access Possible to personalise Allows you to target deals and offers to particular users Problems International trade Techies only How do customers know you exist? Navigation, mere on-line catalogues Security Seller: on-line systems Customer: payments Needs 24/7 availability

10. © University of Glamorgan 10 Supply chain Traditionally most products and services go via a middle-man… or many middle-persons Example: Insurance brokers Benefits Economies of scale, expertise, single point of contact Problems Cost, possibility of monopoly Intermediation etc.

11. © University of Glamorgan 11 Direct sales, cut out the middle-man person Disintermediation Example: Direct sales insurance So how do you get the best price? Do you have to hunt around every insurer? Reintermediation Example: Insurance brokers coming back into favour (But maybe online!) Disintermediation, reintermediation

12. © University of Glamorgan 12 Sales Advertisements Loss leaders Not planning on making any income from e-commerce, but to gain customers for other income streams Revenue streams

13. © University of Glamorgan 13 The collapse During 2000/2001 - 537 Internet companies of all kinds shut down or declared bankruptcy. A large number of these were e-tailers.   Due to a number of issues including – Lack of funding – it takes a number of years to get a large enough customer base – investors wanted ‘rich quick’ schemes then pulled the plug when nothing happened e.g. eToys Incorrect revenue model – business model – spend as mush as possible on customer acquisition and advertising will rush in – this did not happen big expense + no / little revenue = bankruptcy Even a number of big firms ‘pulled the plug’ to prevent further heavy losses e.g.. Toys R US, Disney’s go.com

14. © University of Glamorgan 14 The Vultures Descend… Established companies spent a total of $39.7 billion in 2001 to increase their online assets by scoop up 1,289 Internet companies after a brutal market downturn forced scores of Web start-ups into bankruptcy sales. Large companies (including IBM and Microsoft) spent about $19.9 billion for 575 companies that provide software, network tools and other infrastructure technology allowing commerce over the Internet. "They were buying the building blocks that future Internet applications will be built upon. That tells me there is something left to build, so we're just seeing the tip of the iceberg of what the Internet will be used for in the future," Tim Miller, President of Webmergers.com. [From The dot-bomb buying binge of 2001 By Reuters January 9, 2002]

15. © University of Glamorgan 15 Useem (2000) uncovered 12 truths about how the Internet really works, by analysing the dotcom crash. The truths are: 1. The Internet is not as disruptive to business as we thought. 2. If it doesn't make cents, it doesn't make sense.   3. Time favours incumbents. 4. Making a market is harder than it looks.   5. There is no such thing as "Internet time."   6. "Branding" is not a strategy.   Twelve truths (first six)

16. © University of Glamorgan 16 Twelve truths (last six) 7. Entrepreneurship cannot be systematized. 8. Investors are not your customers. 9. The Internet still changes everything. 10.The Internet changes your job.. 11. The distinction between Internet companies and non-Internet companies is fading fast. 12. The real wealth creation is yet to come. [modified from Electronic Commerce – A managerial perspective. ]

17. © University of Glamorgan 17 Lessons Learned E-commerce has two sides one is business and any venture requires a sound business approach and strategy if it is to succeed. A company needs to; Consider the strategic value of e-commerce Consider the benefits and risks Integration with business procedures

18. © University of Glamorgan 18 “The first mover wins” Few dot.coms still exist Dominating e-commerce sites are clicks-and-mortar Channel confluence Limited number of major players (Amazon, eBay) “E-commerce projects must be short” Remains the need for quality, 24/7 resilience Other e-commerce myths

19. © University of Glamorgan 19 Getting Businesses on the Internet UK Government has sponsored /recommended e-commerce sites to encourage companies to enter the e-commerce arena. www.ukonlineforbusinness.gov.uk website www.ecommerce-awards.co.uk www.interforum.org Governments are major players in the market for goods and services - public purchasing amounts to 11% of European GDP. This provide extra pressure for companies to consider e-commerce. The European Commission has set a target of 25% of public procurement transactions to take place electronically by 2003. (White paper 7 electronic signatures signing up to the digital economy, Interforum White Paper No7, www.interforum.org)

20. © University of Glamorgan 20 E-Commerce in the UK One steering group in UK is InterForum InterForum is a not-for-profit organization set up to aid British businesses to trade electronically. Publishes white papers containing best practices on (www.interforum.org) InterForum acts as a lobby to government. Influences technology, legislation to help British businesses profit from the digital economy.

21. © University of Glamorgan 21 Types of E-Commerce E-commerce can be divided in to three main areas Business to Consumer commerce The business needs to develop attractive market places to sell products and services to consumers – virtual stores etc. Business to Business applications Both electronic business link via web and direct transfer of documents between businesses (Electronic Data Interchange) Internal business processes (Electronic business) Data from e-commerce activities is made available over the intranets for developing and marketing, products programs , services and strategies.

22. © University of Glamorgan 22 E-commerce Challenges Once a business case for e-commerce has been decided e-commerce involves a number of core activities Transmission security User identification Product selection Payment validation Order confirmation All of these are connected to the significant technical issue – security. It is essential that commerce related data of buyers and sellers is kept secret. It is also important that a site is perceived as being safe. The consumer must have confidence in the site. E.g. www.amazon.co.uk has a Security Guarantee

23. © University of Glamorgan 23 Stock Fraud

24. © University of Glamorgan 24 International Issues There are a number of issues that can prove problematic in a multinational environment Legal & political - Trans-border data flows (TBDF) can cause problems Illegal to encrypt data in France European privacy laws tighter than in USA problem when shipping private data between offices Some countries wish to tax data transfer –as it is used for profit Governments in less stable areas can change often, risk of terrorist activity. Cultural – Cultural issues can cause problems as the work habits and practices can vary from nation to nation It can be difficult to obtain personnel on a 24hr basis Collecting certain data can be culturally difficult (age etc) Connections between supplier and customer can be culturally defined – difficult for outside firms to enter this market.

25. © University of Glamorgan 25 CASE STUDY Lands' End: How a Mail Order Company Moved Online Some of the most successful B2C e-tailers are mail order companies that used paper catalogs or TV before. One reason for this success is the logistic system they had in place and the experience in virtual stores. Here we look at Lands' End, a successful direct marketing company that served over 6.2 million customers in 2000. The company is well known for its quality products, styled casual clothing and gifts, and customer service. Internet sales in 2000 were 10 percent of the 1.3 billion total, doubling the 5 percent Internet sales of 1999. Projected Internet sales are 20 percent in 2003. Landsend,corn offers all catalog products (in 1995, it offered only 100). The Web site allows women to build and store a 3-D model of themselves (Personal Model). The model then recommends outfits that flatter body profiles and suggest sizes based upon customers' measurements. Using its "Oxford Express," customers can sort through hundreds of fabrics, styles, collar and cuff options, and sizes within seconds, to find just the dress shirt that fits them. Personalized shopping accounts are also available on the Web site. In addition, customers can track their order status online and request catalogs using the Internet. By using the Internet, Land's End extends its presence globally by having localized sites in Japan, Germany, and the United Kingdom. Because 88 percent of the company's customers are college graduates, mostly with computers, the company expects its online business to continue to grow rapidly during the next few years.  [From Turban - Source: Compiled from landsend.com.]

26. © University of Glamorgan 26 Bibliography Turban, E et al (2002) Electronic Commerce – A managerial perspective. International Edition, Prentice Hall.   Whiteley, D. P (2000) E-Commerce – Strategy , Technology and Applications Mc Graw-Hill

27. © University of Glamorgan 27 Web Resources Web and e-commerce statistics http://www.emarketer.com/ An example of e-commerce http://www.gfits.com/ Government site advising on e-commerce www.ukonlineforbusinness.gov.uk website E-commerce awards (DTI lead Industry / government partnership) www.ecommerce-awards.co.uk Mansell-Lewis, E. How to dot.com your company: e-business made simple, Miller Freeman and InterForum. Available at www.interforum.org Interforum, Electronic signatures; signing up to the digital economy, White Paper No7, www.interforum.org