Electronic Commerce
School of Library and Information Science
History and development of Ecommerce
I. What is ecommerce?
II. Where did it come from?
III. What’s happening now?
IV. Where is it going?
Electronic Commerce
School of Library and Information Science
History and development of Ecommerce
I. What is ecommerce?
Our goals:
We would like to understand where ecommerce came from
What are the antecedents of ecommerce?
It also involves identifying key characteristics of the infrastructure required to support it
What are the economic, political, organizational, social and technological factors that help and hinder the spread of ecommerce?
Electronic Commerce
School of Library and Information Science
A variety of definitions
It is:
sharing business information,
maintaining business relationships,
conducting business transactions,
by means of telecommunications networks
Zwass, (1996) http://www.cba.bgsu.edu/ijec/v1n1/p003full.html
Electronic Commerce
School of Library and Information Science
It is
A commercial activity dealing directly with the trading of goods and services and with other related business activities
Electronic communication media play a central role
These activities include
The communication of information
The management of payment
The negotiating and trading of financial instruments
The management of transportHeng, M.S. (2003). Understanding Electronic Commerce from a Historical Perspective 12 Article 6. Communications of the Association for Information Systems 104-118.
Electronic Commerce
School of Library and Information Science
It is
Digitally enabled commercial transactions between and among organizations and individuals
All transactions are mediated by digital technology
Commercial transactions involve the exchange of value across organizational or individual boundaries
Value can be money or goods and services
E-business is the digital enablement of transactions and processes within a firm
Laudon, K.C. and Traver, C.G. (2001). E-commerce: Business, Technology, Society. Boston,: Addison Wesley. 6.
Electronic Commerce
School of Library and Information Science
It also refers to the procedures, policies and strategies required to support the incorporation of electronic interaction into the business environment
Information Policy Council (1997) http://www.wa.gov.au/IPC/strategies/ecsexov/ecsexov7.html
Electronic Commerce
School of Library and Information Science
Electronic commerce denotes the seamless application of information and communication technology from its point of origin to its end point along the entire value chain of business processes conducted electronically and designed to enable the accomplishment of a business goal
These processes may be partial or complete and may encompass business-to-business, as well as business-to-consumer and consumer-to-business transactions. Wigand, R.T. (1997). Electronic Commerce: Definition, Theory, and Context. The Information Society, 13 (1-16).
Electronic Commerce
School of Library and Information Science
A working definition of ecommerce focuses on :
The exchange of goods and services across an interactive digital network
A computer-mediated and virtual market with new relationships among businesses and consumers
A digital means of exchange (digital money, secure credit card transactions)
New business strategies, models, and processes to gain a competitive edge in the digital marketplace
Technologies for privacy and to protect IP
A supportive legislative and regulatory environment
Electronic Commerce
School of Library and Information Science
http://www.intranetjournal.com/features/Ecommercetut.html
Geller, D.P. (2000). Finding Your Way Around E-commerce
Infrastructure
Backend
Customer apps
Electronic Commerce
School of Library and Information Science
Ecommerce involves online activity supporting the “virtual value chain”
Inbound logistics
Production processes
Outbound logistics Sales
Customer supportMarketing
Internal activity
External activity
Electronic Commerce
School of Library and Information Science
Ecommerce:
Directly connects buyers and sellers
Supports fully digital information exchange between producers, suppliers, sellers, buyers
Allows global activity 24-7-365
Allows interactivity and adaptation to customer behaviors
Encourages real time updating
Electronic Commerce
School of Library and Information Science
It enables companies to
Be more efficient and flexible in their internal operations
Work more closely with their suppliers,
Be more responsive to the needs and expectations of their customers
Select the best suppliers regardless of their geographical location and
Sell to a global market
Electronic Commerce
School of Library and Information Science
Ecommerce can be divided into five distinct categories:
Business business
Network-based ordering from suppliers, invoicing, making payments ($700B 2001)
Business consumer
Web based electronic retailing ($65B 2001)
Business government
Transactions such bidding for government contracts
Consumer government
Epayment of taxes, receiving govt. services
Consumer consumer
Peer-to-peer, bartering, auctions ($5B 2001)
Electronic Commerce
School of Library and Information Science
CorporateISP/VAN
Dist
Manufacturing
SuppliersGovernment
Banks
Credit CardCompanies
Retail
Consumers
Internet ServiceProviders
The major players
Electronic Commerce
School of Library and Information Science
The core ofecommerce
Ecommerceareas
Traditionalcommerce
Virtual players
Physical process
Digital process
Physicalproduct
Digitalproduct
Physicalagent
Digitalagent
Choi et al. (1997) The Economics of Electronic Commerce. p. 18
The ecommerce marketspace
Electronic Commerce
School of Library and Information Science
History and development of Ecommerce
I What is ecommerce?
II. Where did it come from?
III. What’s happening now?
IV. Where is it going?
Electronic Commerce
School of Library and Information Science
II. Where did it come from?
Taking a broad historical perspective (Heng 2003)
Commerce in 13th century Europe saw the rise of intermediaries
Traders conducted business to make a profit by buying and selling goods and services
The effect was to promote efficiency between production and consumption
It indirectly promotes utilization of resources
It created specific markets for specific products
And commercial institutions (banks) and practices (insurance) and raised the level of human capital
Electronic Commerce
School of Library and Information Science
More recently, the globalization of commerce paved the way for ecommerce
The development of a global telecommunications infrastructure
The rise and pervasiveness of computing in daily life and work
The rapid diffusion of ICTs
The emergence of the networked organization
Supply chain management, just-in-time inventory, sophisticated IT
Shift to knowledge/information economy
Electronic Commerce
School of Library and Information Science
More immediately, there were several precipitating conditions
Business to business use of EDI
The continued decrease in the costs of computer hardware and software
The disappearance of the NSF AUP prohibiting commercial activities on the net
The rapid growth of the web (the third wave)
The rise of the profitable ISP
Electronic Commerce
School of Library and Information Science
Definitions of EDI
The transmission of unambiguous business information in standard syntax between computers of independent organizations
The interchange of standard formatted data between computer application systems of trading partners with minimal manual intervention
The electronic transfer, from computer to computer, of commercial and administrative data using an agreed-upon standard to structure the data
Electronic Commerce
School of Library and Information Science
An example of an EDI transaction for purchase, shipping, and payment taking place between computer systems
1. Buyer --> Purchase order --> Seller
2. Seller --> Purchase order confirmation --> Buyer
3. Seller --> Booking request --> Transport company
4. Transport company --> Booking confirmation --> Seller
5. Seller --> Advance ship notice --> Buyer
6. Transport company --> Status --> Seller
7. Seller --> Invoice --> Buyer
8. Buyer --> Payment --> Seller
Electronic Commerce
School of Library and Information Science
Costs
Large initial investment in proprietary hardware and software
Changes in routine business practices
Only machine-to-machine communication
Investing in training and education
Costs of maintenance and upgrading
Adjusting to changing standards
Actual use has fallen far short of expectations
Electronic Commerce
School of Library and Information Science
However, the use of EDI has been important in preparing businesses for ecommerce
They understand
The exchange of digital information over a computer network
The exchange of digital goods and services among businesses and
Electronic funds transfer for payments
Electronic Commerce
School of Library and Information Science
History and development of Ecommerce
I. What is ecommerce?
II. Where did it come from?
III. What’s happening now?
IV. Where is it going?
Electronic Commerce
School of Library and Information Science
III. What’s happening now?
Technical: The infrastructure necessary to support ecommerce is almost in place
The hardware and software is becoming morepowerful and is dropping in price
Connectivity, including broadband and wireless, is spreading rapidly, but the last mile is a “pot of gold”
Telcos, ISPs, the cable company, and satellite/wireless services are competing for the home
The pipes on the net are high pressure fire hoses
The line that goes into your home is a straw
Who will connect to the home and how will they do it?
Copper wire Fiber optics TV cable Wireless Satellite Wall plug
Electronic Commerce
School of Library and Information Science
Unique features of ecommerce technology
Ubiquity of ICTs and the growth of wireless broadband
Lowering costs and extending the marketspace
Global reach of the net across national boundaries
Universal standards allowing interconnection
Richness and interactivity of digital media
Information density allows us to store more bits
Personalization and customization allows refined marketing
Electronic Commerce
School of Library and Information Science
Social: The net is redefining the marketplace
It is becoming interactive and information routinely flows both ways
The conventional distinction between buyer and seller is blurring on the web
People are not passive and see themselves as content providers (broadcasters)
Legal: The legal and regulatory environment is in flux
One current policy battle is over taxation and the definition of the “nexus” of business
Another is over privacy
Electronic Commerce
School of Library and Information Science
Economic: We are beginning to understand the economics of networking and ecommerce
There are many experiments underway, in all forms of ecommerce
Product promotion and customization through the direct connection to consumers
Developing and exploiting new sales channels (products, information, advertising, transactions)
Reduced costs of business transactions through a public shared infrastructure
Reducing time to market for certain types of products
Electronic Commerce
School of Library and Information Science
And:
Improving customer relationships with intelligent systems for service and support
Improving marketing and targeted advertising through the collection of detailed customer information
New corporate branding and image creation
Using the net for R&D and product development Developing of new business models based on characteristics of the new marketplace
Electronic Commerce
School of Library and Information Science
History and development of Ecommerce
I. What is ecommerce?
II. Where did it come from?
III. What’s happening now?
IV. Where is it going?
Electronic Commerce
School of Library and Information Science
IV. Where is it going?:
Global ecommerce revenues are expected to total USD2.7 trillion in 2004 (>50% in the US) (eMarketer 2003)
Business-to-business ecommerce generates 2-3X the revenues of business-to-consumer ecommerce
Global B2B ecommerce will surpass $1.4 trillion by the end of 2003
B2B ecommerce revenues in the US will total $721 billion (eMarketer 2003)
B2B sales may have accounted for 90% of all USecommerce in 1999 (US Census Bureau, 2001)
Mid sized companies using online procurement can reduce purchasing costs by over 70%, saving almost $2 million annually (Aberdeen Group, 2001)
Electronic Commerce
School of Library and Information Science
US mobile phone users will spend more time on the wireless Web than making phone calls by 2010
US cable (4.3M) and DSL (2.1M) providers added a 6.4 million subscribers during 2002 (Leichtman Research Group 2002)
The leaders had ~17.4 million subscribers in 2002
Cable has 11.25 million broadband subscribers, a 65% share of the market
US broadband cable and DSL subscribers will surpass dial-up in 2005 and will grow to nearly 49 million by the end of 2007
Over 41 million European households will have high-speed broadband connections by 2006 (Datamonitor 2003)
Electronic Commerce
School of Library and Information Science
Online retail spending in the US will grow by 28% in 2003 to $52 billion
It will reach $105 billion and 5% of US retail spending by 2007 (Jupiter Research 2003)
The worldwide corporate elearning market will exceed t$23 billion by 2004 (IDC, 2001)
95% of US local governments have a website or will have one within a year (International City/Council Management Association, 2001)
Most physicians use the net daily and 42% work in practices that have websites (Harris Interactive, 2001)
The number of US companies billing online will increase to 35% (2004) (Gartner Group, 2001)
Electronic Commerce
School of Library and Information Science
From: Emarketer.com http://www.emediaworx.com.au/images/marketing/b2bstats.gif
Electronic Commerce
School of Library and Information Science
Hecker, D. (2002). Employment impact of electronic business. Monthly Review of Labor. May. 3-17.
Electronic Commerce
School of Library and Information Science
From: Pew Internet Project. America's Online Pursuits: The changing picture of who's online and what they do http://www.pewinternet.org/reports/chart.asp?img=107_growth.jpg
We discover more to do online as we gain experience and as new apps become available
This increases reliance on the net in daily life and raises expectations about the way the it can be used
Electronic Commerce
School of Library and Information Science
From: Pew Internet Project. America's Online Pursuits: The changing picture of who's online and what they do http://www.pewinternet.org/reports/chart.asp?img=107_dailygrowth.jpg
And we use the net more frequently on a daily basis
Electronic Commerce
School of Library and Information Science
A potential reordering of the global economy
Competitive advantage to companies that are successful early adopters of ecommerce
This will be true in nations with government economic and regulatory support for ecommerce
Nations with highly trained labor forces will benefit from distributed value chain
Electronic Commerce
School of Library and Information Science
Businesses have to place ecommerce in a larger context than traditional commerce
How can they exploit the digital product marketplace?
Dell claims that the efficiencies of web based marketing give them a 6% profit advantage
Redesign business processes to take advantage of the rapid and real time information and data exchange on the net
Develop a secure and widely acceptable framework for digital business contracts
Electronic Commerce
School of Library and Information Science
Consumers will develop new behaviors and will:
Routinely check prices globally
Engage in real-time negotiation with multiple sellers creating a more dynamic and fast moving marketplace for certain products
Make more considered purchasing decisions based on more and better information
Publicly share experiences with others about products, customer support, and companies
Electronic Commerce
School of Library and Information Science
There will be a shift towards an “economy of attention”
Basic assumption: attention is an intrinsically scarce resource
Information <--> Attention (a two way flow)
There is competition for attention
Capturing attention can lead to action
The problem is how to capture and keep it
Obtaining attention is a source of wealth
Portal advertising costs bear this out
Electronic Commerce
School of Library and Information Science
The components of a virtual economy
Virtual players
Virtual processes
Virtual products
The net
Electronic Commerce
School of Library and Information Science
Virtual players
People, organizations, or automated agents with an online presence
Virtual products
Digitized objects/services: currency, text, multimedia, tickets, reservations, electric usage, pay-for-view, smart houses
Virtual processes
Participants interact digitally, interactively, and in real time (online ordering/payment; JIT inventory control; customized advertising)
Electronic Commerce
School of Library and Information Science
Virtual intermediaries
Provide essential services: certification, authentication, quality assurance, copyright clearance, distribution
Education brokers: bringing instructors and students together online
Market organizers: establish meeting places for buyers and sellers (auctions...)
Personalized service providers: shoppers, information filtering, travel agent, financial services
Electronic Commerce
School of Library and Information Science
The evolution of the virtual firm
Assumes that they exist in an environment where transaction costs are low
They do not have to be based in a single geographic location
Business processes can be distributed globally and take place on the net
The value chain is digital
Electronic Commerce
School of Library and Information Science
Also:
Products can be delivered through a digital web of business relationships with producers, financiers, distributors, consumers
Producers, suppliers, warehouses, managers, administrator, subcontractors are all linked through an extranet
Many functions can be easily outsourced (accounting, personnel management, training, public relations)
Electronic Commerce
School of Library and Information Science
Convergence in ecommerce
Products, processes, and infrastructure all converge in the global digital marketplace
Product: audio, video, still images, text are all in the same digital format
Process: multiple uses from a virtual process make other processes redundant
Consumer feedback is used for product change, marketing, sales, pricing, and service
Electronic Commerce
School of Library and Information Science
Things to do
Overcome the limitations and asymmetries of the infrastructure
Implement hardware and software to fully exploit bandwidth, especially to the last mile
Provide “universal access” at reasonable cost
Provide secure frameworks for B-to-B and B-toC transactions
Integrate electronic payment into the buying process
Electronic Commerce
School of Library and Information Science
And:
Develop a secure and reliable system for electronic banking: emoney exchange and transfer
Develop a system for microtransactions
Build a consumer marketplace
Convert browsers into buyers
Develop new approaches to web site design that encourage purchasing
Develop new business models for this CME
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