E-Commerce 101: The concept
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Amazon.com,
Wal-Mart.com, Sears.com and Sonystyle.com all represent a relatively
new way of conducting online business known as e-commerce. Recently,
e-commerce has taken the online world by storm, withstanding the
technological slump of recent years. This article is a simple introduction
to e-commerce and examines companies and what role they have played
in the advent of the concept. Specifically, we will look at types
of e-commerce, benefits and limitations of e-commerce and basic
IT strategies, among other concepts within e-commerce.
By
the conclusion of this article, you should be able to explain:
- terms
commonly used in e-commerce
- types
of e-commerce
- successes
and failures of e-commerce
- benefits
and limitations of e-commerce to companies and
- online
E-Commerce sources and related literature
What
is E-Commerce?
E-Commerce,
also known as E-Business, is a type of business conducted 100% electronically.
Although E-Commerce is sometimes considered Internet based, purchasing
through a vending machine can also be viewed as E-Commerce. What
follows concentrates solely on Internet based E-Commerce. This type
of commerce takes on many business forms, like B2B or B2C (explained
in detail below).
A couple
examples of E-Commerce sites include Amazon.com,
eBay.com and
WalMart.com.
To meet their impressive user demands, these sites utilize highly
sophisticated and costly software to conduct online transactions.
Why
E-Commerce?
Honestly,
we all want to shop for cool looking shades at 2:00 a.m. in our
underwear. Am I right? E-Commerce allows for this in the comfort
and, most importantly, privacy, of our own homes. E-Commerce also
permits geographically specific merchandise, like Egyptian art,
to be sold internationally. It opens entirely new markets to the
smallest of retail stores and creates the competition our markets
unequivocally depend upon.
From
a business prospective, e-commerce is nothing short of a mechanism
to reduce overhead costs involved in maintaining showrooms and physical
stores. These cost reductions are then pumped back into research
and development and, idealy, result in lower product pricing. Customer
service is also improved, allowing potential customers the ability
to browse product listings, pictures and descriptions from anywhere,
at any time.
Because
e-commerce can be exceptionally lucrative with a sound IT strategy,
retailers originally known for their physical store locations may
see a need and market for E-Commerce as a new business venue, whereby
allowing E-Commerce to be viewed as a viable and attractive solution
for many retailers around the world.
What
makes E-Commerce entities successful?
As
with any business, particular elements of running a business leads
to success, and there is certainly no exception on the Internet.
Discussed below are methods that set successful online companies
apart from the rest.
Acquired
value : If the product or service is of value to the buyer,
a purchase is more likely. Although some customers are willing to
pay higher prices for particular product types and qualities, price
is often the determining factor.
Company
credibility : It is logical to assume that customers feel safer
when ordering from a company like Amazon.com or Wal-Mart.com than
another online retailer who's name may not be as well-known. Since
credibility takes time, television and radio commercials often assist
in establishing a successful reputation with buyers.
Convenience
: As any customer can attest, convenience is paramount. Designing
the site intuitively and easy to browse will increase sales and
referral possibilities. One convenience I take advantage of is shopping
at 11:00 at night while drinking some grape juice and watching re-runs
on TV. Can't get any better than that :)
Customer
experiences : Customers will return to those retailers where
their purchases went smoothy, packages arrived on-time and adaquate
customer service was provided after the sale. Providing good after-purchase
support and customer service is an essential technique for generating
repeat business.
Customer
service : Like all buyers, I love customer service, especially
online when no face-to-face communication is initiated. When ordering
online, I look for those companies offering tracking numbers for
packages and an online order status system.
Personal
interaction : Companies that treat each customer as a person
will out-sell others who fail to privide a personal touch to each
order. For example, instead of treating the customer like a number,
treat them like a person, with a first and last name.
Learning
the lingo
As
with any discipline, learning terminology is fundamental to a good,
solid understanding of the concepts. Many e-commerce terms overlap
with general business and marketing, so those familiar with either
related field will likely pick these terms up quickly. Since we
cannot possibly cover all terms here, we will look at 7 well-used
terms below.
E-Marketplace:
an E-Marketplace is the environment under which e-commerce is performed.
More specifically, an E-Marketplace is a relationship where information,
like products, pricing or payments, are exchanged.
Business-to-Business
(B2B): Instead of selling to you and me, B2B exists when e-commerce
retailers sell directly to other businesses. A plastics company,
for example, may sell their products to manufacturers of bottles.
Business-to-Customer
(B2C): E-Commerce retailers engage in B2C sales when you or
I visit a business web site and subsequently make a purchase. For
example, each time you buy through Amazon.com, or any other business
site, you have just satisfied the 'C' in a B2C transaction.
Customer-to-Business
(C2B): When a customer sells a product to a business, a C2B
transaction has just taken place. Recently, I completed a web design
job for a local business here in town. Since I do web design on
a freelance basis, I engaged in a C2B business transaction.
Referral
sales: Referral sales is a result of a predetermined arrangement
where the business offers a commission, usually less than 15%, to
a customer for bringing in business. Amazon.com has a large and
especially successful referral system. If you look closely at the
URL of referral links, it contains the name of the customer so Amazon.com
can determine how much business that particular customer has referred.
Digital
economy: Refers to the interaction of technology in the economy,
including the Internet and networks, computers and software and
other information technologies.
Mobile
commerce: Mobile commerce, or M-Commerce, refers to commerce
by the way of mobile devices, like hand-held PDAs, for example.
Stock gurus who receive stock information via mobile devices are
engaging in m-commerce.
Benefits
and limitations of E-Commerce
Few
technologies have the many benefits e-commerce does, whether taking
a small business to never before seen global preportions or opening
up millions of new customer markets. E-Commerce has given many companies
the right to cheer, and here are a few of the reasons why:
- Expands
markets from local to global
- Reduces
costs with telecommunications and physical maintenance
- Minimizes
resources used for storing physical receipts
- Instant
product updates, including descriptions and pricing
- 24-hour
store visibility to anyone with an Internet connection
- Large
portals enable large product bases, manufacturers and prices
- 24-hour
store visibility to anyone with an Internet connection
- Search
utilities far surpasses the speed used to find products through
catalogs
- Encourages
competition between small and large online retailers
With
benefits comes limitations. A few are detailed below.
- Credit
Card security is a serious issue if vulnerable
- Costs
involved with bandwidth and other computer and server costs
- Extensive
database and technical knowledge and experience required
- Customer
apprehension about online Credit Card orders
- Constantly
changing technology may leave slow businesses behind
- Some
customers need instant gratification, and shipment times interrupt
that
- 24-hour
store visibility to anyone with an Internet connection
- Search
utilities far surpasses the speed used to find products through
catalogs
- Encourages
competition between small and large online retailers
The
limitations of e-commerce are often conquered by implementing an
effective Information Technology strategy. Compelling IT strategies
include an analysis of the feasibility of e-commerce for the company's
product line, the level of risk involved and the cost involved in
maintaining the system and hiring appropriate skill to implement
such an endeavor.
Who
wins with e-commerce? Clearly, Internet Service Providers and web
hosting companies benefit greatly, along with small retail art or
photography shops and bookstores. Also in the list are larger entities,
including manufacturing companies and large technology suppliers
(computers, hardware, software, etc). This list is certainly not
all-inclusive; in fact, far from it. With the right IT strategy,
almost any company can make a splash with e-commerce.
A
few online resources
These
online resources help in the decision making process of purchasing
products. All links are off-site, and none are affiliated in any
way with Stevesdomain.net.
AllBookstores.com
- price comparison service for online book retailers
Bizrate.com - product and company reviews
Carpoint.com - helps car shoppers locate
the 'perfect' car
Epinions.com - customer reviews and
auction prices for many products
Gomez.com - analysis of online retailers
MySimon.com - price comparison service
for many products
Pricegrabber.com - price comparison
service for many products
Priceline.com - helps locate airline
tickets, hotels, rental cars, etc
Shopper.cnet.com - price comparison
service for electronic equipment
Related
literature
E-Commerce
101 - The Concept is a very introductory article on E-Commerce.
For those interested in further reading, listed below are a few
books straight from Amazon.com.
The
Perfect Store: Inside eBay
e-Business 2.0: Roadmap for Success (2nd Edition)
The Complete E-Commerce Book: Design, Build & Maintain a Successful
...
Okay,
so what's the bottom line?
The
bottom line, as with anything in business, is money. With an appropriate
IT strategy implementation, many brick-and-mortor retailers can
transform their business and take themselves online, opening up
entirely new markets and enables the business to enjoy additional
profit channels. |