ECommerce: Digital Markets, Digital Goods Essay
Did any of them not involve using the Internet in one way or another? Perhaps you imply used the Internet to research the cost of products without actually purchasing a product or service online. Perhaps you emailed a company to get an answer too question you had about a product after you purchased it at a regular brick-and- mortar store. If you did any of these you are among the growing legions that rely on the Internet as a new way of conducting business and commerce. Or, maybe you compared prices between two businesses to get the best deal.
E-commerce Today The text provides useful statistics to demonstrate the solid growth In e-commerce. Many companies that failed during the “dot. Com” bust did so because they didn’t eave solid business plans, not because e-commerce as a whole wasn’t a good Idea. The Internet has proved to be the perfect vehicle for e-commerce because of its open standards and structure. No other methodology or technology has proven to work as well as the Internet for distributing information and bringing people together.
It’s cheap and relatively easy to use It as a conduit for connecting customers, suppliers, and employees off firm. No other mechanism has been created that allow organizations to reach out to anyone and everyone like the Internet. The Internet allows big businesses to act like small ones and small businesses to act gig. The challenge to businesses is to make transactions not Just cheaper and easier for themselves but also easier and more convenient for customers and suppliers.
It’s more than Just posting a nice looking Web site with lots of cute animations and expecting customers and suppliers to figure It out from there. Web-based solutions must be easier to use and more convenient than traditional methods, not to mention competitors. If a company hopes to attract and keep customers. Customers and suppliers are learning how to use the new technologies to gather information about the firm’s products or services and compare them to the o stay ahead of the game needs to appreciate that fact and change their processes and methodologies.
If they don’t, they may not be in business much longer. Why E-commerce is Different Most of us have become so used to the Internet that we take it for granted. Let’s look at the factors that make e-commerce so different from anything we’ve seen before. Ubiquity: 2417 365 days a year, anytime, anywhere. New marketplaces change the balance of power from being business-centric to customer-centric. Transactions costs for both businesses and customers are reduced. Global Reach: The Internet opens markets to new customers.
If you live in New York City and yearn for fresh Montana-grown beef, you can order it from a Web site and receive it the next day. You benefit from new markets previously not available, and the Montana rancher benefits from new customers previously too expensive to reach. Universal standards: One of the primary reasons e-commerce has grown so quickly and has become so wide-spread is due to the universal standards upon which the technology is built. Businesses don’t have to build proprietary hardware, software, or networks in order to reach customers thereby keeping market entry costs to a minimum.
Customers can use the universally accepted Internet tools to find new products and services quickly and easily thereby keeping search costs to a minimum. It truly is a win-win situation for both sides. Richness: The richness of information available to customers, coupled with information that merchants are able to collect about them, is opening up new opportunities for both businesses and consumers. Consumers can access more information than was previously available and businesses collect more information than they were previously able to.
Now, instead of trying to gather information about genuineness or consumers from multiple sources, both parties can use the Internet to cobble together more information than ever. And do it much easier and faster than ever before. Interactivity: E-commerce originally presented simple, static Web sites to customers with limited possibilities of interactivity between the two. Now, most major retailers and even small shops, use a variety of ways to communicate with customers and create new relationships around the globe.
Information Density: While many people complain about having too much information pouring from the Internet, it provides information density like no other tedium. Consumers enjoy price transparency allowing them to comparison shop quickly and easily. Cost transparency is another benefit consumers enjoy that they’ve never had available as readily as what they can find on the Internet. On the other discrimination. Personalization/Customization: The neighborhood merchant probably knows most customers by name and remembers their personal preferences.
That same cozy relationship can now be extended to the Internet through a variety of personalization and customization technologies. Interactivity, richness, information density, and universal standards help make it possible. Social Technology: User Content Generation and Social Networking: Social networks are no longer limited to those people living in your immediate, physical neighborhood or even the same town or city. Your social network can now extend to all four corners of the world. More and more content is being generated by users like video, audio, graphics, and pictures.
Interactive Session: Organizations: Turner Sports New Media Marries TV and the Internet (see p 381 of the text) discusses how a new business is using eight unique features of e-commerce technology to expand and create new opportunities. Key Concepts in E-commerce: Digital Markets and Digital Goods in a Global Marketplace Let’s say you’re getting ready to buy a new car. You’ve already checked out the prices and information on the various Web sites and have managed to get a pretty good deal because of the information you gathered.
But now you need a loan and insurance for the new car. Your bank will give you a loan with a 7. 5 percent interest rate. You think that’s a little high. You call your insurance agent and she tells you the going rate is $1,500 a year. You get a sinking feeling that the excellent discount oh were able to wrangle on the car itself will be quickly eaten up by the insurance and loan fees. But wait. You check out the Web sites offering loans and find out you can get 5 percent. You then discover you can get insurance for only $1,200 a year.
Even if you don’t use the Web sites to procure the loan or insurance, you can still take the information to your bank and insurance agent and perhaps get them to renegotiate. Because you were able to gather information from the Internet rather than physically traveling from bank to bank, or insurance company to insurance company, your search costs were much lower. Because of the information you’ve gathered from the Web, the bank and insurance company no longer have the advantage of information asymmetry.
That is, the bank and insurance company thought they had more information about the transaction than you did, therefore they had the upper-hand. But once you gained more information about the transaction than you previously had, you were able to get better rates. The demise of information asymmetry is a phenomenon that is the Internet. On the other hand, the Internet allows insurance companies and banks to quickly and easily adjust the information provided to you thus lowering their menu costs. They can Just as easily engage in dynamic pricing based on information they gather from and about you.
Disintermediation, removing the middleman, has allowed many companies to improve their profits while reducing prices. In our example, insurance companies are using disintermediation to remove the local agent from the transaction between itself and the customer. Airlines have steadily removed the travel agent from transactions with customers thereby reducing their costs. Other industries are following in their footsteps slowly but surely. Digital Goods If products can be digitized, they can be sold and distributed on the Internet.
Music and books have been the forerunner. Now we’re seeing movies and television shows taking the same path. Digital goods are much cheaper to produce in the long run with little or no distribution costs compared to traditional channels. Digital goods marketplaces also provide relatively cheap and efficient channels for merchants who otherwise could not afford to reach customers on a global scale. Independent musicians and moviegoers are finding tremendous opportunities for reaching new audiences through the Internet that they couldn’t reach before.
Advertising dollars are moving from traditional outlets to Internet-based outlets at alarming rates. That puts tremendous pressure on traditional mediums such as television channels and newspapers to get in on the paradigm shift. Businesses must now find new ways to chase the consumer instead of the consumer chasing the business. Table 10-4 shows how the Internet changes the costs of digital goods versus traditional goods. Internet Business Models Table 10-5 in the text shows some of the new business models the Internet has enabled digital firms to undertake.
Many of these businesses simply would not be possible without the technologies offered by the Internet. Communication and Social Networking The Internet has also allowed businesses and consumers to establish new types of opportunity to store birthdays, anniversaries, and other special occasions on their computer. A few days before the event, FED. Com will send you an e-mail reminder to order flowers. You simply click on the Web site URL in the e-mail, select the flowers you want sent, and enter your credit card information.
The whole transaction takes less than ten minutes and the recipient will love you for being so thoughtful. That’s richness and reach that neither the consumer nor the business was ever able to establish before the Internet. Just as magazines and newspapers can’t exist without advertising, so too with many Web sites. But unlike traditional print media, banner ads allow more targeted advertising. However, many companies are realizing that banner ads are not as effective as they once were because most Web users have learned to ignore them.
Pop-up ads are now being used, although they too are often ignored by consumers. Pop-up ads are displayed over a Web page as you’re perusing the site; pop-under ads are displayed in a separate browser window beneath your main browser window and remain there until you close them. What we’re seeing now is a whole new line of nonuser software products that help prevent this type of advertising from reaching your computer screen. People are very social beings so it’s not surprising to find they are using the Internet to fulfill their need to connect with other people socially and professionally.
Social networking sites such as Namespace. Com and Backbone. Com let people make new friends, find new Jobs, and exchange information easily and quickly with a larger circle of people than through any other medium. Other sites allow users to engage in social shopping – a twist on traditional trips to the mall with friends. While some of hose sites pose slight personal danger if misused, they fulfill the basic need people have to communicate with others. Just as important, businesses are finding new ways to incorporate aspects of social networking into their work processes.
Corporations increasingly are “exploring and experimenting” in the use of social networks to improve business operations, says Gina Benching, CEO of Inning, a social- networking site for businesses and consumers. It makes revenue from Google Deceased and premium services. “There’s been a definite shift the last two months,” she says. “There is a genuine interest now rather than a casual curiosity before. “The spread of the workforce has put a premium on tech tools that let people collaborate, learn and share info from different parts of the world,” says Ross Mayflies, co-founder of business-software maker Socialites.
He cites studies that show 85% of all employees work on projects with colleagues in other offices. The employee-only sites are an excellent format for large, geographically dispersed organizations to communicate internally and elicit ideas from workers, says Tom Béchamel, chief information officer at Hot Topic, a retail chain of 690 stores for teens in all 50 states. (Saturdays. Mom, Social Networking Sites Help Companies Boost We mentioned before if it can be digitized, it can be bought, sold, and distributed through the Internet.
Many television-based and radio newscasts have companion Web sites. It’s not unusual for a broadcaster to give the audience a brief synopsis of a news article with the reminder to “visit our Web site for more information. ” That way, they can reach a larger audience through several different outlets instead of Just one. Bedposts are becoming a popular way for content providers to reach new audiences. You are no longer tethered to a computer if you want to hear an audio broadcast of USIA, commentary, how-to instructions, or Just about anything else you can imagine.
Many universities now offer bedposts of professors’ lectures so students can download the content and take it with them on their portable audio devices. Many textbook publishers, including the one for this text, offer companion bedposts of individual chapters to provide students more ways to engage the course content. If you use a portal Web site such as Yahoo. Com as the first site up on your browser, it tracks your preferences through software and determines that you much prefer music sites instead of gardening sites. Therefore, ads appearing on the pages will usually direct you to the latest offerings of music and not maple trees.
Some sites gather information from various sources and offer it to you in a consolidated format. These online syndication relieve you from having to access many different sites to get the information you want. E-Bay is called the “biggest garage sale in the world. ” It would be impossible for this type of dynamic pricing business to exist without the Internet. Interesting to note is the fact that e-Bay is one of a handful of pure-play Internet companies to consistently show a profit. As we found out through the dot. Com bust, profits are still an important part of a business’s success.
The Internet allows pure-play or clicks-and- mortar business models to offer richness and reach in ways never before possible. It’s up to the business to adapt to the new technologies and methodologies offered to remain competitive and profitable. Interactive Session: Technology: Can J&R Electronics Grow with E-commerce? (See p 389 of the text) describes how a small local business expanded its market via the Internet by finding ways to make its Web site as popular a destination as its bricks- and-mortar store. Bottom Line: E-commerce firms now have more opportunities to reach customers, suppliers, and partners through Internet channels.
The Internet has also given digital firms the opportunity to create new business models or reshape their current model by using one or more of the unique features of e-commerce: ubiquity, global personalization/customization, and social technology. 10. 2 Electronic Commerce When you think of Internet-based business, you probably think of businesses selling to individual customers. It may surprise you to learn that business-to-business e- commerce is the fastest growing area of e-commerce and outpaces consumer detailing by millions of dollars.
The fact of the matter is e-commerce is growing by leaps and bounds because of the new opportunities offered by Internet-based applications that simply weren’t possible 10 or 15 years ago. Types of Electronic Commerce E-commerce is divided into three major categories to make it easier to distinguish between the types of transactions that take place. Business-to-consumer (BBC): Most visible Business-to-business (BIB): Greatest dollar amount of transactions Consumer-to- consumer (ICC): Greater geographic reach As you know, there are many products and services offered through traditional Web sites.
But as we continue to expand the reach of the Internet to wireless devices, businesses are figuring out how to offer more products and services through new channels dubbed mobile commerce or m-commerce. Not only can you purchase your airline ticket through a traditional Web site but you can instantly find out about flight delays or cancellations through your cell phone or hand-held computer as you travel to the airport. Using your hand-held computer you can purchase and download an electronic book to read while you wait for the airplane to take off.
Retailers are continually finding ways to expand m-commerce and find new ways to attract customers. “Amazon. Com has launched on the Apple App Store an phone application that makes it possible to take a picture of a product and then send it to the online retailer, which will try to match it with products in its inventory. The software is meant to simplify shopping on the phone and the pod Touch, which can access the Web through a Wi- If hot spot. The experimental feature called Amazon Remembers helps users keep track of items they see while away from home.
The feature tries to match photos of products taken with the phone with what’s in Amazon’s inventory. When users receive the results, they can purchase items immediately or store them for later in their Amazon accounts. ” (Information’s. Com, Amazon Launches Experimental Mobile Shopping Feature, Intone Gonzales, Deck 3, 2008) Achieving Customer Intimacy: Interactive Marketing, Personalization, and Self-Service available to customers and merchants. We tend to think off great deal of disassociation between buyers and sellers when we think of doing business in cyberspace though.
Actually the opposite is true. Let’s look at how the Internet closes the gap between customers and businesses. Interactive Marketing and Personalization E-tailing (electronic retailing) Web sites must offer more than Just 2417 shopping if they want to be leaders. Companies are finding that the Web offers excellent customer service tools, which save them money in personnel costs and gives customers what they want, when they want it. UPS offers online package status checking by updating its computers within minutes every time a package passes each checkpoint.
The sender and recipient can track the package through the Web and know its whereabouts instantaneously. Now that’s fast, customer-oriented, information service. Kodak has remade its business model over the years in response to changing markets. Now it offers personalization and customization of products through its Stakeholder Web site. Upload your own photos and have them placed on individual products like coffee cups, t-shirts, blankets, you name it. Web personalization allows companies to create one-to-one relationships with customers and suppliers that simply aren’t possible outside Internet-enabled transactions.
The cost of gathering marketing information in traditional channels is extremely high and the data gathered may not yield as much information as a company would hope. But with the Internet, companies can gather information that gives them a truer picture of what the customer is actually purchasing or looking for by using slipstream tracking tools. The information is more comprehensive, coherent, and current than data gathered in traditional methods. Amazon. Com, probably the most talked-about consumer retail Web site, doesn’t Just sell books and CDC.
It also offers book reviews from other customers, links to other books related to the one they’re purchasing, and the opportunity to purchase gifts for friends and relatives that are then gift-wrapped and sent out for them. Amazon. Com s moving into other markets like online auctions and offers many different services, such as travel through a partnership with Expedite. Com and a baby registry through Babies-R-Us. This is Just one example of how the Internet allows companies to use collaborative filtering software to offer customer personalization that simply isn’t available through any other channel.
Blobs and Wise Blobs, short for Wobble, have burst onto the scene during the last two presidential elections in 2004 and 2008. While you may have become familiar with this feature Businesses use them to communicate with customers and suppliers to announce ewe products or services and to garner feedback about company services. An excellent example of effective business uses of blobs is the one by Sun Microsystems, Inc. President and Chief Operating Officer Jonathan Schwartz [http://blobs. Sun. Mom/ roller/page/]Nathan ] who uses his blob to communicate with employees, vendors, outside software developers, and others interested in the company. He discusses policies and procedures with customers and users of the company’s products and services. More valuable than that, he receives feedback from those outside the company and can use the information to help improve how the company meets its customer demands. Companies use the philosopher to mine data about consumer trends making it easier than ever to shape advertising and marketing campaigns.
Mining all of the available data is unobtrusive and gives businesses a clearer picture of what people want. Blobs help companies build customer loyalty and intimacy never before possible. Mobiles (mobile phone-based blobs) and oblongs (video-based blobs) are important outlets for advertising and product placement. Companies can pitch their products through blobs and make marketing less intrusive or banal for customers. A useful feature that has been coupled with blobs is that of Real Simple Syndication or IRS for short.
The process allows you to place a small program on your computing device that alerts you to new information posted to Web sites you’ve marked. When a flogger posts a new entry to your favorite site, you receive an alert and can immediately click on the IRS feed to review the posting. IRS can also be used on a variety of news-related Web sites to help you keep current on breaking headlines. Customer Self-Service If you’re having trouble using a new software program, your first thought may be to all the company that produced the program.
You first have to find the number, and then are put on hold for a long time. When you finally get through too customer service technician, he directs you to the company’s Web site containing FAQ (Frequently Asked Questions) about the software. You find the answer to your question plus more information about other features you didn’t even know about. You could have saved yourself a lot of time and effort by first accessing the company’s Web site. The Lands’ End Web site is an excellent example of how businesses are adapting their call centers with Internet technologies.
If you can’t find what you want on the site, you can call Lands’ End and a customer service technician will help guide you through the site. She will even post pictures right on your computer of products you may be interested in. Your flight so you can bypass long lines at the airport. It also allows you to add email addresses to its site so those interested in your travel plans are instantly notified of your flight situation. Many companies now provide self-service Web sites in order to save money for them and time for the customer. So before you pick up the phone next time, log on to the Web and see what’s available.
You may be pleasantly surprised. Business-to-Business Electronic Commerce: New Efficiencies and Relationships Before the Internet, transactions between businesses were based on long-term relationships and geographic restrictions. It wasn’t practical or cost efficient to search out buyers or suppliers nationwide. That’s all changed thanks to new technologies made available through electronic data interchanges (DEED’) and the Internet. EDI processes allow companies to connect their information systems to each other and make transactions flow seamlessly between the systems. It’s faster, heaper, and less error-prone.
The Internet is slowly replacing EDI as the preferred method of procurement between businesses. EDI systems usually required proprietary systems while the Internet provides an open standard, universally accepted method of exchanging data for processes such as procurement and BBC commerce. It’s also cheaper and easier through online private industrial networks, also known as private exchanges for the buyer to find the cheapest prices and the seller to find new customers. Neither buyers nor sellers are restricted to doing business with one or two partners in a particular geographic area.