Strategy for Information Markets/e-Commerce

From Wikibooks, open books for an open world
Jump to navigation Jump to search

Electronic commerce, commonly known as e-commerce or e-comm, refers to the buying and selling of products or services over electronic systems such as the Internet and other computer networks. Electronic commerce draws on such technologies as electronic funds transfer, supply chain management, Internet marketing, online transaction processing, electronic data interchange (EDI), inventory management systems, and automated data collection systems. Modern electronic commerce typically uses the World Wide Web at least at one point in the transaction's life-cycle, although it may encompass a wider range of technologies such as e-mail, mobile devices and telephones as well.

  • Electronic commerce is generally considered to be the sales aspect of e-business. It also consists of the exchange of data to facilitate the financing and payment aspects of business transactions.

E-commerce can be divided into:

  • E-tailing or "virtual storefronts" on Web sites with online catalogs, sometimes gathered into a "virtual mall"
  • The gathering and use of demographic data through Web contacts
  • Electronic Data Interchange (EDI), the business-to-business exchange of data
  • E-mail and fax and their use as media for reaching prospects and established customers (for example, with newsletters)
  • Business-to-business buying and selling
  • The security of business transactions

History[edit | edit source]

Early development[edit | edit source]

Originally, electronic commerce was identified as the facilitation of commercial transactions electronically, using technology such as Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT). These were both introduced in the late 1970s, allowing businesses to send commercial documents like purchase orders or invoices electronically. The growth and acceptance of credit cards, automated teller machines (ATM) and telephone banking in the 1980s were also forms of electronic commerce. Another form of e-commerce was the airline reservation system typified by Sabre in the USA and Travicom in the UK.

Beginning in the 1990s, electronic commerce would include enterprise resource planning systems (ERP), data mining and data warehousing

In 1990, Tim Berners-Lee invented the WorldWideWeb web browser and transformed an academic telecommunication network into a worldwide everyman everyday communication system called internet/www. Commercial enterprise on the Internet was strictly prohibited by NSF until 1995.[1] Although the Internet became popular worldwide around 1994 with the adoption of Mosaic web browser, it took about five years to introduce security protocols (i.e. SSL encryption enabled on Netscape 1.0 Browser in late 1994) and DSL allowing continual connection to the Internet. By the end of 2000, many European and American business companies offered their services through the World Wide Web. Since then people began to associate a word "ecommerce" with the ability of purchasing various goods through the Internet using secure protocols and electronic payment services.

Timeline[edit | edit source]

The timeline for e-commerce progression is shown below.

  • 1979: Michael Aldrich invented online shopping[2]
  • 1981: Thomson Holidays, UK is first B2B online shopping[citation needed]
  • 1982: Minitel was introduced nationwide in France by France Telecom and used for online ordering.
  • 1984: Gateshead SIS/Tesco is first B2C online shopping and Mrs Snowball, 72, is the first online home shopper[3]
  • 1984: In April 1984, CompuServe launches the Electronic Mall in the USA and Canada. It is the first comprehensive electronic commerce service.[4]
  • 1985: Nissan UK sells cars and finance with credit checking to customers online from dealers' lots.[citation needed]
  • 1987: Swreg begins to provide software and shareware authors means to sell their products online through an electronic Merchant account.[citation needed]
  • 1990: Tim Berners-Lee writes the first web browser, WorldWideWeb, using a NeXT computer.
  • 1992: Terry Brownell launches first fully graphical, iconic navigated Bulletin board system online shopping using RoboBOARD/FX.
  • 1994: Netscape releases the Navigator browser in October under the code name Mozilla. Pizza Hut offers online ordering on its Web page. The first online bank opens. Attempts to offer flower delivery and magazine subscriptions online. Adult materials also become commercially available, as do cars and bikes. Netscape 1.0 is introduced in late 1994 SSL encryption that made transactions secure.
  • 1995: Thursday 27 April 1995, the purchase of a book by Paul Stanfield, Product Manager for CompuServe UK, from W H Smith’s shop within CompuServe’s UK Shopping Centre is the UK’s first national online shopping service secure transaction. The shopping service at launch featured WH Smith, Tesco, Virgin/Our Price, Great Universal Stores/GUS, Interflora, Dixons Retail, Past Times, PC World (retailer) and Innovations.[5]
  • 1995: Jeff Bezos launches and the first commercial-free 24 hour, internet-only radio stations, Radio HK and NetRadio start broadcasting. Dell and Cisco begin to aggressively use Internet for commercial transactions. eBay is founded by computer programmer Pierre Omidyar as AuctionWeb.
  • 1998: Electronic postal stamps can be purchased and downloaded for printing from the Web.
  • 1998: Alibaba Group is established in China.
  • 1999: sold for US $7.5 million to eCompanies, which was purchased in 1997 for US $149,000. The peer-to-peer filesharing software Napster launches. ATG Stores launches to sell decorative items for the home online.
  • 2000: The dot-com bust.
  • 2001: achieved profitability in December 2001.
  • 2002: eBay acquires PayPal for $1.5 billion.[6] Niche retail companies Wayfair and NetShops are founded with the concept of selling products through several targeted domains, rather than a central portal.
  • 2003: posts first yearly profit.
  • 2004:, China's first online b2b transaction platform, is established, forcing other b2b sites to move away from the "yellow pages" model.[7]
  • 2005: Yuval Tal founds Payoneer- a secure online payment distribution solution
  • 2007: acquired by R.H. Donnelley for $345 million.[8]
  • 2009: acquired by for $928 million.[9] Retail Convergence, operator of private sale website, acquired by GSI Commerce for $180 million, plus up to $170 million in earn-out payments based on performance through 2012.[10]
  • 2010: Groupon reportedly rejects a $6 billion offer from Google. Instead, the group buying websites plans to go ahead with an IPO in mid-2011.[11]
  • 2011:, parent company of, acquired by for $500 million in cash plus $45 million in debt and other obligations.[12] GSI Commerce, a company specializing in creating, developing and running online shopping sites for brick and mortar businesses, acquired by eBay for $2.4 billion.[13]
  • 2012: US eCommerce and Online Retail sales projected to reach $226 billion, an increase of 12 percent over 2011.[14]

Business applications[edit | edit source]

An example of an automated online assistant on a merchandising website.

Some common applications related to electronic commerce are the following:

Governmental regulation[edit | edit source]

In the United States, some electronic commerce activities are regulated by the Federal Trade Commission (FTC). These activities include the use of commercial e-mails, online advertising and consumer privacy. The CAN-SPAM Act of 2003 establishes national standards for direct marketing over e-mail. The Federal Trade Commission Act regulates all forms of advertising, including online advertising, and states that advertising must be truthful and non-deceptive.[15] Using its authority under Section 5 of the FTC Act, which prohibits unfair or deceptive practices, the FTC has brought a number of cases to enforce the promises in corporate privacy statements, including promises about the security of consumers’ personal information.[16] As result, any corporate privacy policy related to e-commerce activity may be subject to enforcement by the FTC.

The Ryan Haight Online Pharmacy Consumer Protection Act of 2008, which came into law in 2008, amends the Controlled Substances Act to address online pharmacies.[17]

Internationally there is the International Consumer Protection and Enforcement Network (ICPEN), which was formed in 1991 from an informal network of government customer fair trade organisations. The purpose was stated as being to find ways of co-operating on tackling consumer problems connected with cross-border transactions in both goods and services, and to help ensure exchanges of information among the participants for mutual benefit and understanding. From this came econsumer, as an initiative of ICPEN since April 2001. is a portal to report complaints about online and related transactions with foreign companies.

There is also Asia Pacific Economic Cooperation (APEC) was established in 1989 with the vision of achieving stability, security and prosperity for the region through free and open trade and investment. APEC has an Electronic Commerce Stearing Group as well as working on common privacy regulations throughout the APEC region.

In Australia, Trade is covered under Australian Treasury Guidelines for electronic commerce,[18] and the Australian Competition and Consumer Commission[19] regulates and offers advice on how to deal with businesses online,[20] and offers specific advice on what happens if things go wrong..[21]

Also Australian government ecommerce website[22] provides information on ecommerce in Australia.

Forms[edit | edit source]

Contemporary electronic commerce involves everything from ordering "digital" content for immediate online consumption, to ordering conventional goods and services, to "meta" services to facilitate other types of electronic commerce.

On the institutional level, big corporations and financial institutions use the internet to exchange financial data to facilitate domestic and international business. Data integrity and security are very hot and pressing issues for electronic commerce.

Global trends[edit | edit source]

Business models across the world also continue to change drastically with the advent of eCommerce and this change is not just restricted to USA. Other countries are also contributing to the growth of eCommerce. For example, the United Kingdom has the biggest e-commerce market in the world when measured by the amount spent per capita, even higher than the USA. The internet economy in UK is likely to grow by 10% between 2010 and 2015. This has led to changing dynamics for the advertising industry[23]

Amongst emerging economies, China's eCommerce presence continues to expand. With 384 million internet users,China's online shopping sales rose to $36.6 billion in 2009 and one of the reasons behind the huge growth has been the improved trust level for shoppers. The Chinese retailers have been able to help consumers feel more comfortable shopping online.[24] eCommerce is also expanding across the Middle East. Having recorded the world’s fastest growth in internet usage between 2000 and 2009, the region is now home to more than 60 million internet users. Retail, travel and gaming are the region’s top eCommerce segments, in spite of difficulties such as the lack of region-wide legal frameworks and logistical problems in cross-border transportation.[25] E-Commerce has become an important tool for businesses worldwide not only to sell to customers but also to engage them.[26]

Impact on markets and retailers[edit | edit source]

Economists have theorized that e-commerce ought to lead to intensified price competition, as it increases consumers' ability to gather information about products and prices. Research by four economists at the University of Chicago has found that the growth of online shopping has also affected industry structure in two areas that have seen significant growth in e-commerce, bookshops and travel agencies. Generally, larger firms have grown at the expense of smaller ones, as they are able to use economies of scale and offer lower prices. The lone exception to this pattern has been the very smallest category of bookseller, shops with between one and four employees, which appear to have withstood the trend.[27]

Distribution channels[edit | edit source]

E-commerce has grown in importance as companies have adopted Pure-Click and Brick and Click channel systems. We can distinguish between pure-click and brick and click channel system adopted by companies.

  • Pure-Click companies are those that have launched a website without any previous existence as a firm. It is imperative that such companies must set up and operate their e-commerce websites very carefully. Customer service is of paramount importance.
  • Brick and Click companies are those existing companies that have added an online site for e-commerce. Initially, Brick and Click companies were skeptical whether or not to add an online e-commerce channel for fear that selling their products might produce channel conflict with their off-line retailers, agents, or their own stores. However, they eventually added internet to their distribution channel portfolio after seeing how much business their online competitors were generating.

Forms of E-commerce[edit | edit source]

In digital age, old type marketers cleared away from consumer; instead, electronic commerce comes into our life. Email marketing is a one-to-one communication which sends offer, ads, reminder or other items to consumers. It can be personalized and flexible. Consumers can easily be reached anytime and anyplace. Although it is trashed a lot, e-mail still can be used in effective way to provide interactive links, streaming video, and a large amount of information to consumers. Kiosk marketing is now widely used by companies to dispense actual products. It serves consumers almost everywhere from hotel, airport, grocery store and campus. For example, consumers can use check-in devices rather than standing in line and waiting for personal help to get boarding passes; they can use DVD rental machine to select on a touch screen to get favorite movies. As mentioned above, online business market is the fastest-growing form of E-commerce. Widespread use of the Internet is having a large impact on both buyers and seller. In sections below, we will talk about more details of how online business affects the market.

Portals[edit | edit source]

As one of the most important online business method, portal offers a starting point for users to find, search, and access specific subjects. Portals are most generally considered to be websites that provide access to information, services, and other websites. Moreover, portals can take on many variations and offer an infinite number of specialties. There are both general portals that provide a starting point for a broad offering of topics, but there are also specific niche portals that focus just on a particular topic. The consensus general portals include Google, Yahoo, Bing, AOL, Lycos, and others. These few dominate the portal market in terms of market share, number of users, and hit count. There is no need for special access to connect with those portals but they are open to anyone. Examples of a niche portal are, which specializes in golf course tee time reservations;, which caters to fishing enthusiasts; and, which specializes in home improvement forums. In addition, the most famaous one must be At first, was only spread among college students; but shortly afterward, more and more people join it. Until now, becomes an indispensable social network in our life.There are countless more examples of specialized niche portals, but the basic premise holds true that they all serve as a starting point for users and consumers. The major advantage that portals offer users is their ability to provide a wealth of information in an organized fashion. This has always been difficult before the widespread use of the internet because information was often highly fragmented among many different providers.

Direct Marketing[edit | edit source]

There is another market structure which comprise of the product and service providers dealing directly with their customers when it ultimately comes to the business transactions. Many of the businesses that fall into this category are extensions of their brick and mortar roots. is a good example of offering the same products, and often more, that can be found at their physical locations. However, product and service providers have emerged that conduct business only over the internet and do not have any physical locations for business transaction. This has allowed for an unprecedented number of competitors to enter markets on a global level. It has also increased product offerings to fill niche markets that have been difficult to capture before the widespread use of the internet. Sometimes it is very hard for international consumers to find what they want; if companies create their websites with clear data and even make a secondary data for other countries with their domestic language, it will be benefit for both companies and consumers.

B Mahadevan. "Business Models for Internet based E-Commerce An Anatomy". California Management Review. Summer 2000. Vol 4, No. 4.

Online Business Models[edit | edit source]

There are four major types of online business. They include B2C(business-to-consumer), B2B(business-to-business), C2C(consumer-to-consumer), C2B(consumer-to-business). The most common one is business-to-consumer online business-business that selling goods and services online to consumers. With this model, consumers can get almost anything by just typing some words and clicks without going out. More importantly, online stores now influence more and more retail sales. Marketers are now hiring integrated multichannel strategies that use the Web to drive sales to other marketing channels. Other than traditional markets, online markets offer consumers more freedom and control about their time and interests. They can select which web site they want to visit, what to compare with and how much information they need.

Another popular type is business-to-business online business. Business-to-business (B2B) describes commerce transactions between businesses, such as between a manufacturer and a wholesaler, or between a wholesaler and a retailer. It uses web sites, e-mail, pictures and other online resources to target business customers, serve current customers more effectively, and obtain buying efficiencies and better prices. Besides simply selling products online, companies also can build better relationships with business consumers and partners.

More and more consumer-to-consumer online businesses are founded on the Internet, which means consumers can buy or exchange goods or services from other consumers on the Internet platform. Since this is between consumers, both buyers and sellers will have more freedom and choices such as they can discuss about price, shipping method to match their willing. The most difference with B2C model is that anything could be discussed and made a change. Moreover, a large number of people have items which are set aside for a long time and may never be used anymore; and then those people could become sellers and resell their items to people who need them with a lower than brand-new price. In this way, both sides could get benefits.

The final type is consumer-to-business online business. Consumer-to-business (C2B) is a business model in which consumers (individuals) create value, and firms consume this value. Traditional marketing method has a block between consumers and business. Even if consumers have some good suggestions and ideas, they cannot really send them to companies directly. For example, when a consumer writes reviews, or when a consumers gives a useful idea for new product development, then this individual is creating value to the firm, if the firm adopts the input. Excepted concepts are crowd sourcing and co-creation. The C2B online business provides a chance for consumers to reflect their feedbacks to companies via web sites. Rather than waiting for an invitation, consumers can reach sellers on web to get their information and provides own reviews. Consumers can even drive transactions with businesses, rather than other ways.

Online stores are thought to give consumers more choice and comparative information about companies, products and competitors. Sometimes browsing information on websites can provide more details about products, alleviating search costs for the consumer and yielding more symmetrical pricing information. For example, offers a wide range of products including clothing items, books, electronics and so on. When consumers search for their needs, the system produces many related items based on consumers previous searching so that consumers can choose the most appropriate item by comparing with different sellers and prices. Without dealing with salespeople, customers can settle their own activities and interests toward their needs and wants; and they may get more information in more useful forms than the retail salesperson can. As we all know, sometimes salespeople like to be pushy, deceitful and unorganized. Consumers do not have to worry any of these problems since they are shopping online and self selecting by own.

Business Value Creation[edit | edit source]

  • Improved access to more information
  • Lower search costs
  • Consolidation of resources
  • Lower overhead costs
  • Lower transaction costs
  • Strategic relationships
  • Value chain integration

In business, strategic relationships are an explicit asset to the firm. Utilizing web-enabled technologies can create strategic resources for e-businesses. Strategic resources are defined as resources that have increased value to a firm compared to the next best alternative. They can come in the form of network resources or resources that are unique to the firm. They are valuable in that they unite a variety of competitive advantages which individual firms each enjoy to make the process of doing business more efficient. The absence of strategic alliances makes doing business more costly, less efficient, and more susceptible to internal error, especially for smaller internet based firms. Furthermore, strategic alliances allow small market players to compete with bigger competitors by working with other companies, or even with the competitors themselves through structured contract agreements.

Online business is a powerful tool for building customer relationships. Unlike retailer store, some companies only hold online business. Therefore, by interacting with consumers online, sellers can understand individual consumer’s need and then garner a personalized relationship with them. After they have a stable relationship with consumers, they can collect consumers’ feedback by contacting with them by phone, email, or online survey. With that information, sellers can make a better marketing decisions to target more cost and high-speed platform for sellers.[28] Without a retail store, sellers do not have to invest a large amount of capital to pay for rent, utilities and too many staff. Thereby, except for storage fee, sellers can spend more on advertising and staff training. Online business also gives sellers access to buyers that they could not reach by proximity. Due to geographical limitation, it would be difficult for sellers to target consumers outside their local market without the internet. At this time, sellers can use the internet to expand their business.

Value chain integration makes the steps of the value chain more efficient. The value chain is a business’s operating processes. The traditional value chain was defined by Porter in 1985 and includes inbound logistics, operations, outbound logistics, marketing and sales, and service. These five dimensions were developed with a traditional brick and mortar business and mind, but they can be applied in varying degrees to e-business. By integrating the components of the value chain, companies can make their services easier to access, use, and operate. Many market makers and internet businesses have grown because of their value chain integration. Rather than having multiple functions operated and controlled by different sources, companies can vertically integrate themselves to capture markets of scale.

Information service providers such as Google and Yahoo add value to the large quantities of data available on the internet, specifically on open networks. This data would otherwise not have the same reach and availability without these providers. This value is achieved through integrated business operations, information searches, customer profiling, business brokerage, investment advice, purchasing tips, customer reviews, and web-enabled comparisons. Companies that operate on a smaller scale are good examples of beneficiaries of doing business with service providers. Additionally, large companies also have agreements with providers in order to gain more exposure to consumers and increase the value of their offerings.

An interesting observation that Norwegian economists Christensen and Methlie make is that those enterprises that report that e-business has led to reductions in lead times, number of intermediaries, erroneous or returned goods, and/or costs, also report some increase in sales revenues, as well as reduction in number of employees. Profitability, however, is generally unchanged in these firms. It is important to acknowledge that their research was conducted in early 2003, which makes it possible for new developments in technology and trends in e-commerce to develop that may challenge the validity of that observation for e-businesses in 2009.

Future of E-Commerce[edit | edit source]

As we mentioned earlier, e-commerce allows for many new interactions, exchanges, and markets for both consumers and suppliers that differ from traditional brick and mortar options. In order for e-commerce to work, consumers must have access to and know how to access services on the internet. Consumers need to understand how the sites work and how to use them. They also need to have reliable security when dealing with sensitive information, information that often enables a transaction to occur. In order to address these concerns, business and web designers have attempted to create and engineer platforms that simulate traditional shopping. They believe that by doing this they are able to recreate aspects of the long accustomed social interactions of shopping offline. A German e-commerce professor believes that that once IT is introduced into the shopping process, the emphasis is taken away from a social context and makes consumers more resistant to shopping online. One of the challenges that needs tackling in the near future is how to integrate the social context into the development of any user-oriented systems. Professor Schummer argues that while e-commerce applications aim at easing the process of shopping by simulating real world experiences, these applications lack the integration of social factors in their attempted simulations. In a study done by Professor Schummer and his team, he discovered that 90% of shoppers value communication and social interaction during their shopping experience. Most online shopping interfaces operate in 2D, which can make navigation, comprehension, and use difficult for many inexperienced users. Therefore, many believe that the future of e-commerce will need to incorporate more social context and increased offline shopping simulation in order to accommodate for the vast number of new online consumers.

In order to deliver the social context that shoppers are accustomed to and demand, e-commerce may incorporate 3D graphics that simulate being in a traditional shopping environment. The graphics would be comparable to what is seen and used in many 3D video games. To give an idea of what this would look like, picture a shopper being able to “walk” from store to store, window shop, and decide which stores he or she wants to enter. Once in the store, the shopper sees products organized in a similar fashion to a typical store whether by department, brand, product description, or other means. These features would be flexible with a degree of customization available to the shopper so that they can see what they want the way they want to see it. Although this vision is highly speculative, increased technology would make 3D representation easier to integrate and incorporate in e-commerce and still reach a broad consumer segment.

This is one interpretation of the future of online shopping in the large context of e-commerce. More and more people are gaining access to the internet and are learning how to maximize their utility with these new options. I do not believe that the 3D marketplace will completely eclipse the established 2D design of current commerce platforms. Yet, increased technological progress may enable providers to utilize new and innovative ways to capture the growing internet consumer population.

Maamar, Zakaria. “Commerce, E-Commerce, and M-Commerce: What Comes Next?” Communications of the ACM. Dec 2003. Vol 46. 251-258

Timmers, Paul. “Business Models for Electronic Markets”. Journal of Electronic Markets. Vol. 8 – No. 2. 1998

Christensen, Gunner and Leif B. Methlie. “Value Creation in eBusiness: Exploring the Impacts of Internet-Enabled Business Conduct”. Norweigen School of Economics and Business Administration. Norway. 2003

E-Commerce Streams[edit | edit source]

In order to conduct successful e-commerce, a company needs to focus on three main factors of business. These factors are usually referred to as “streams”. The three main streams of successful e-commerce are “value stream”, “revenue stream”, and “logistical stream”. Although each of these streams deals with a different aspect of business, all three are vital to the success of a company – internet based or not.

The first stream a company needs to focus on is the value stream. The value stream is your source for the entire process in your business plan. While this may not sound like much of a “stream” a value stream, by definition, consists of all the steps in a process that a customer is willing to pay in order to bring a product or service from the supplier to its final destination. Thus, as each step is completed along the path from raw material to finished product to the consumer, it is as if the entire process is floating down a stream. In order to track the process, companies will use what is referred to as “value stream mapping” to identify each individual process and timeline that it will take to get the product from them to their customer. These processes can consist of the factors for obtaining raw materials, taking those raw materials and creating the product, shipping the product to the supplier/warehouse/distribution center, and getting that product to the customer. Oftentimes, companies need to begin tracking all the way back at the initial manufacturer, especially for custom made products. Thus, the value stream mapping can become very large and complex. As we will discuss later, this can be very beneficial for a company attempting to save money and cut costs.

Different aspects by which to track value mapping can include any of the following:

• Information management – order processing, purchasing

• Physical Transformation – materials, logistics, production

• Intellectual Property – improvement ideas, designs, project management

By placing emphasis on these areas of value mapping, a company can help focus on the details of their business and manage the project more effectively.

While value streams may seem costly, the robustness of the value stream is valuable to the long term viability of the company and can benefit both the customer and the supplier. As a result of value mapping, the customer can experience reduced search and transaction costs. This is because when a customer purchases a product, not only are they paying for the materials that make the product, but the machines, labor, storage and transportation that are associated with making that product. A way to think of this is that the customer would have to spend more time searching for a product physically whereas it can be just a few clicks away with the help of the internet. Furthermore, the transaction costs are cut down through value mapping in e-commerce due to the fact that the product is passed through less hands between the manufacturer and the customer. This is because when a customer purchases a product, not only are they paying for the materials that make the product, but the machines, labor, storage and transportation that are associated with making that product. With e-commerce and value mapping, costs for storage and transportation from manufacturing to the customer are limited which cuts out many of the “middle man costs”. Cutting out these middle man costs is what is known as “disintermediation”. This is perhaps the biggest benefit of e-commerce.

Dis-intermediation is essentially “cutting out the middle man”. As stated earlier, there are a lot of locations a product can end up before going to the customer. In addition to cutting out transaction costs, a company is able to leave out links in the supply chain such as distributors, wholesalers, brokers and agents by using dis-intermediation. This has been seen in quite a few e-commerce markets such as computer software, travel agencies, book/music stores, as well as stock purchasing. Attempts in dis-intermediation have been made in the supermarket industry Safeway [1] has attempted to take grocery shopping online, so far to little avail), pet care [2], and even alcohol sales, and real estate. Most of these endeavors have failed (or are failing), while others are still being fine tuned to perfect the e-commerce side of the industry.

With business models designed around one stop shopping and online advertising in websites, the search costs are pretty self explanatory (all of the products available at one location on the website) while the reduced transaction costs are the result of going directly to the company in addition to the transportation contract that most websites have in place with a delivery company. Suppliers see the benefit by attracting more customers, as well as lower promotion costs that result from a reduced marketing cost to launch new products.

Much of what was discussed in value stream and value mapping is related to the logistical stream. The logistical stream accounts for anything involved in the “supply-chain management” portion of e-commerce. This involves purchasing the raw materials as well as anything involving transportation of the product or service to the customer. Examples of how logistic stream would be used in e-commerce can be identified with many of the purchasing websites we view online. Take for instance. At, a customer can purchase all of the company’s products online and submit an order with a delivery address. The company (Nike, in this case) then receives the customer’s order and begins tracking down all of the products ordered. The company will search all of their factories and warehouses for the product and allocate all of the items to a common location. From there, the items are bundled and packaged together and are prepped for shipping. The company then has to provide for the order to be shipped from the common location to the final delivery address where it will end up in the hands of the customer who placed the order.

The next stream a company needs to look into is the revenue stream. A revenue stream is how money comes to a company. These can be characterized by their volatility, predictability, risk and return. There are many examples of revenue streams. Amy Shuen does a good job of describing the types of revenue streams in her book “Web 2.0: A Strategy Guide”. Shuen goes on to identify six types of revenue streams, which are: subscription, advertisement, transaction fees, volume and unit selling, syndication and franchise, along with sponsorship and co-marketing. Revenue streams can be seen in e-commerce in each of the types that Shuen describes in her book. Subscriptions are common for internet based sites. ESPN[3]charges members to become “insiders” while you can’t buy anything off eBay without having a member account. Advertising on Webpages is very common. Many sites such as Facebook [] and even search engines like Google [] charge companies to advertise on their pages. Syndication and franchising are forms of revenue because a website will begin to charge to release their information on other sites. You can see examples of this from the Associated Press being leaked to many news sites such as CNN and Bloomberg.

B Mahadevan. "Business Models for Internet based E-Commerce An Anatomy". California Management Review. Summer 2000. Vol 4, No. 4.

Amazon[edit | edit source], Inc. (Template:NASDAQ) is an American multinational e-commerce company with headquarters in Seattle, Washington, United States. It is the world's largest online retailer.[29] The company also produces consumer electronics - notably the Amazon Kindle e-book reader - and is a major provider of cloud computing services.

Amazon has separate retail websites for the following countries: United States, Canada, United Kingdom, Germany, France, Italy, Spain, Japan and China, with international shipping to certain other countries for some of its products. It is also expected to launch its websites in Poland,[30] Netherlands and Sweden.[31]

Jeff Bezos incorporated the company (as Cadabra) in July 1994, and the site went online as in 1995.[32] started as an online bookstore, but soon diversified, selling DVDs, CDs, MP3 downloads, software, video games, electronics, apparel, furniture, food, toys, and jewelry.

In 15 years, Amazon has become one of the best-known names on the internet. is a typical business to consumer (B2C) network for people to get almost anything they want online-from books, clothing, cameras to furnitures and cars. Until June 30, 2006, typing into a browser would similarly bring up's "Toys & Games" tab; however, this relationship was terminated due to a lawsuit.[33] Amazon also hosted and managed the website for Borders bookstores but this ceased in 2008.[34] From its inception until August 2011, Amazon hosted the retail website for Target.[35] Benefit Cosmetics, another merchant partner of Amazon, has also launched a major E-Commerce platform of their own based on Hybris and arvato systems NA, in the US, EU and China.[36] operates retail web sites for Sears Canada, bebe Stores, Timex, Marks & Spencer, Mothercare, and Lacoste. For a growing number of enterprise clients, currently including the UK merchants Marks & Spencer, Benefit Cosmetics' UK entity,, and Mothercare, Amazon provides a unified multichannel platform where a customer can seamlessly interact with some people that they call the retail website, standalone in-store terminals, or phone-based customer service agents. Amazon Web Services also powers AOL's Shop@AOL.

On October 18, 2011, announced a partnership with DC Comics for the exclusive digital rights to many popular comics, including Superman, Batman, Green Lantern, The Sandman, and Watchmen. The partnership has caused well-known bookstores like Barnes & Noble to remove these titles from their shelves. These titles will be available for purchase exclusively through Amazon's new Kindle Fire tablet.[37]

Many analysts vew as the model for business in the digital age. They predict that it will one day become the Wal-Mart of the Internet. From the start, has grown explosively. Its annual sales have skyrocketed from a modest $150 million in 1997 to more than $19 billion today. In only the past five years, despite the recent shaky economy, its sales have more than tripled. Although it tool eight years to turn its first full-year profit in 2003, profits have since surged more than 18-fold. One study estimates that 52 percent of all consumers who went to the Internet to shop last year started at Fifty percent of's sales come from overseas:[38]

There are many features that are created for offering personalized communication between each consumer and For example, the Web site greets customers with their own personalized home pages. Based on products you checked lately and frequently, the site shows a "Recommended for you," which prepares personalized product recommendations and your browsing history so that even if you closed webpage unguardedly, you will not lost your favorite items. Sometimes you collect products from different sellers, and then you can choose to package all the products together and ship them to save your time and money. Amazon allows users to submit reviews to the web page of each product. Reviewers must rate the product on a rating scale from one to five stars. As with most rating scales, one star stands for the product being abysmal, five stars meaning that the item is stellar. Amazon provides a badging option for reviewers which indicate the real name of the reviewer (based on confirmation of a credit card account) or which indicate that the reviewer is one of the top reviewers by popularity. Customers may comment or vote on the reviews, indicating whether or not they found it helpful to them. If a review is given enough "helpful" hits, it appears on the front page of the product. All these features are offered to satisfy consumers. not only provides a wide range of items to choose, but also let consumers spend time to look, learn and discover. Amazon becomes a kind of online community, in which consumers can look for products, share their experiences with other people, and evaluate sellers. In this way, offers sellers a platform to sell their items, and the same time founds personalized customer relationships and satisfies their online shopping experience. is constantly developing the Web by creating more selections, enhancing its secure system, and making more convenience in order to become proper to international market.

EBay[edit | edit source]

Today, eBay is among the most popular online auction websites.

In 1994, eBay was created in San Jose, Ca., miles from the west coast financial hub of San Francisco. The young entrepreneur Pierre Omidyar, a previous software developer for Apple computers, wrote a code that would revolutionize the future of the internet world. One year later, a company by the name of eBay surfaced. eBay, an American online auction and shopping website, allows people to buy and sell anything worldwide with a click of a mouse. Over the years, eBay has developed into the pioneer web auction site, whose competition is seemingly nonexistent.

The website,, acts as a consumer to consumer (C2C) network for people to sell their products to one another. This allows people to recover some or even all of the sunk cost they paid for the product when they originally bought it. If the product is valuable enough, the seller can actually end up turning a profit from the original purchase. With this option, sellers set a time limit on the product and the bidding war begins. During this process, any user that is a member of the online community can place a bid on the product during the duration of the process.

Online payment is also very practical and convenient because most money transactions go through PayPal [4]; an e-commerce business partner adjoined with Ebay. This allows payments and money transfers to be made through the internet. Paypal can be linked with checking accounts, debit cards, and credit cards. Although many people may be nervous releasing such information, all information is said to be secure through PayPal. In the unlikely event that there is a discrepancy with any transaction, one can always a dispute his or her case. Paypal can solve problems by acting as a neutral mediator. Also, there are many counterfeit items in eBay such as designer clothes, handbags and etc. Once a buyer has found out that whatever he/she received is a counterfeit item, PayPal can be a neutral mediator and solve problems by requiring the original receipt from the seller. Sometimes, a buyer can dispute it by filing a police report, but this is only in really rare cases. Secured protection shows that eBay and PayPal are ultimate business partners for e-commerce.

In addition to the online auctions that are conducted, some sellers in eBay provide a ‘Buy It Now’ or ‘Make an Offer’ option. These options mean that one can always compare a certain price of a good with its given retail price to find the best product for the best possible value. For instance, one of the most popular retail shoe stores, FOOT LOCKER, has a large selection of shoes. While there is a wide variety of shoes, many of them can be rather costly. With eBay, a customer may be able to find the exact same pair of shoes at a cheaper price. Additionally, one does not have to pay taxes unless he or she is located in the same state as a given seller. With the ‘Make an Offer’ option, one can negotiate with a given seller on whether or not the seller can lower the price that he or she, the buyer, desires to pay for. The price can reach equilibrium when buyers and sellers can reach an agreement in price. If equilibrium is not reached, the customer can still obtain the product through the online auction method.

eBay's first sale was a broken laser pointer that was sold for fourteen dollars by Omidyar himself. He emailed the winning bidder and reassured that the winning bidder was aware of purchasing a broken laser pointer. The winner replied quote, "I'm a collector of broken laser pointers." This quote symbolizes that people everywhere are looking to buy just about anything, and eBay is the place to find it.

An important aspect that edges out competition is the ability to leave feedback about your transaction experience. Feedback consists of the following ratings: positive, neutral, or negative, along with space to make a personal comment. eBay members are able to build, a "strong reputation," so that buyers and sellers have confidence that the transaction runs smoothly, ultimately making an online customer relationship.

Getting Noticed When posting an item for sale, people are always looking for the most effective way to "get noticed" on the site, giving them more of a chance to get noticed and to get their item sold. Sellers need to understand that.

A major competitor of eBay would be Craigslist, as it provides local classifieds for pre-owned or used products. Craigslist can be a very resourceful place for overweight and/or over-sized goods. For example, if one is trying to purchase a television set on eBay, he or she may end up paying a large cost for just shipping itself. In addition, there may be damage to be television during the shipping, which may not be liable by the seller, unless insurance is bought by the seller. Craigslist can allow users to focus more locally, which is perhaps the best thing about it. One can actually check the functionality and condition at his or her discretion. Another benefit of Craigslist is that there are is not a membership required to join. Therefore, one can say that Craigslist is a great competitor and substitute for eBay.

References[edit | edit source]

  1. Kevin Kelly: We Are the Web Wired magazine, Issue 13.08, August 2005
  2. Tkacz, Ewaryst; Kapczynski, Adrian (2009). Internet - Technical Development and Applications. Springer. p. 255. ISBN 978-3642050183. Retrieved 2011-03-28. The first pilot system was installing in Tesco in the UK (first demonstrated in 1979 by Michael Aldrich).
  3. Aldrich, Michael. "Finding Mrs Snowball". Retrieved 8 March 2012.
  4. "Online Today, The Electronic Mall". CIS/CompuServe nostalgia.
  5. "IMRG Special Report - £100 bn spent online since 1995". IMRG.
  6. "eBay acquires PayPal". eBay.
  7. "Diane Wang: Rounding up the "Ant" Heroes". Sino Foreign Management. Retrieved 2011-09-03.
  8. "R.H. Donnelley Acquires for $345M". Domain Name Wire. Retrieved 2011-09-04.
  9. "Press Release". TechCrunch.
  10. "Press Release". Reuters. October 27, 2009. 
  11. "Press Release". MSNBC.
  12. "Press Release". MarketWatch.
  13. "Press Release". TechCrunch.
  14. "US Online Retail Forecast, 2011 To 2016". Forrester Research, Inc.
  15. "Advertising and Marketing on the Internet: Rules of the Road". Federal Trade Commission.
  16. "Enforcing Privacy Promises: Section 5 of the FTC Act". Federal Trade Commission.
  17. "H.R. 6353: Ryan Haight Online Pharmacy Consumer Protection Act of 2008". Govtrack.
  18. "Australian Treasury Guidelines for electronic commerce". Australian Federal Government.
  19. "Australian Competition and Consumer Commission". Australian Federal Government.
  20. "Dealing with Businesses Online in Australia". Australian Federal Government.
  21. "What to do if thing go wrong in Australia". Australian Federal Government.
  22. "Australian government ecommerce website". Australian Federal Government.
  23. Robinson, James (2010-10-28). "news". London: 
  24. Olsen, Robert (January 18, 2010). "China's migration to eCommerce". 
  25. "Now a Digital Mall Boom in the Middle East | Thomas White International". 2012-01-06.
  26. Eisingerich, Andreas B.; Kretschmer, Tobias (2008). "In E-Commerce, More is More". Harvard Business Review. 86 (March): 20–21.
  27. "Economics focus: The click and the dead". The Economist: p. 78. July 3–9, 2010. 
  28. Inbound Marketing insights:, Issue 26, May 2023
  29. Jopson, Barney (2011-07-12). "Amazon urges California referendum on online tax". Retrieved 2011-08-04.
  30. "Amazon wkrótce w Polsce". Wirtualna Polska. 2011-10-24. Retrieved January 11, 2012.
  31. "Amazon Spain launch may presage new overseas push", Reuters, Sept 14, 2011.
  32. Ann Byers (2006). Jeff Bezos: the founder of, The Rosen Publishing Group. See pg. 46-47
  33. E-Commerce Times: Toys 'R' Us wins right to end Amazon partnership., March 3, 2006
  34. Diane Oswald (27 May 2008). "Borders Returns to Online Sales, Drops Amazon". International Business Times. 
  35. "Target Launches Redesigned E-Commerce Website". Target Corporation. Retrieved 10 September 2011.
  36. "Benefit Cosmetics launches new ecommerce website in the US powered by hybris". Benefit Cosmetics. Retrieved 10 September 2011.
  37. Streitfeld, David (2011-10-18). "Bookstores Drop Comics After Amazon Deal With DC". The New York Times. 
  38. Kotler (2012). Marketing. Upper Saddle River, New Jersy: Prentice Hall. p. 443.