Internet Studies

“…Amazon’s string of losses (which touched $1.4 billion in 2000) only turned to profits in 2003.”

Another article that mentioned amazon as a business that loses or profits example.

“All successful online sites have had to reinvent themselves continually,…”

Does that mean the business model life expectancy will be short? Yes. We have to keep change, evolve, adapt to new conditions.

“…not the sort of strategic planning that traditional boards like to hear.”

“Two features of this new business environment have been surprisingly helpful in creating value: the sheer variety of products and services that can be offered online; and the extent to which online communities help each other for free.”

Friends Reunited charges for a fee – not in Israel. Israel’s equivalent is hevre.co.il (means buddies), which is offered for free. I looked at Friends Reunited site and I couldn’t see any fee request. ???

“What might drive the next round of e-commerce business models?…mobile access to the Internet and RFID tags, which enable the non-stop monitoring of the whereabouts of goods.”

I completely agree with the first one, know nothing about the second one. A quick search on Google came up with: Radio-frequency identification. An RFID tag is an object that can be attached to or incorporated into a product, animal, or person for the purpose of identification using radio waves. There are three types of RFID: passive, semi-active and active. An interesting recent use for them is in passports – just like the new e-passport offered by Australia. RFID can also be used as a replacement for barcodes or ID badges, or are being used for building access control, airline baggage tracking, apparel item tracking and microchip implants and not only in animals. I can’t believe so many kinds of RFID have infiltrated our lives without being aware of the fact that the technology is the same.

Resources:

Business: Happy e-birthdays; Internet Businesses
The Economist. London. Jul 233, 2005. Vol.376, Iss. 8436; pg. 62

Wikipedia, Radio-frequency identification

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What is e-commerce?

A working definition of e-commerce would describe it as the conducting of business activities using the Internet platform and in particular the Web.

Two types of e-commerce

B2B and B2C

The Mercer Framework

Four factors that determine a technology’s acceptance: affordability, convenience, stable platform and platform availability. Each of these dimensions can be plotted against a four-dimensional system with the zero rating as “poor” and one as “excellent.” The bigger the perimeter, closer to the outer limits of the diamond, the more likely the technology will succeed in the marketplace.

Demographic (social) and technological drivers:

Proportion of college-educated people, percent of computers in households…
1. Increasing quality at a decreasing price
2. Computers become ubiquitous
3. High bandwidth connection
4. Compression technologies

Activities in B2C e-commerce:

Promotion - Ordering - Delivery - After-Sales Service
Limitations of the web:
1. High bandwidth - small segments of advertising
2. The web surfer is still a mouse click away
3. Advertisements effectiveness evaluation is not established for the web
Business should focus on developing a relationship with the consumer via interactivity (or available activities on the web).
Advantages of the web:
1. Interactive
2. Instantaneous
3. More client-focused - the web experience can be tailored to each user. It can be converted to a micromarketing tool. This is often done by bribing the user to part with personal information…in exchange for free goodies.
After-sales support: electronic support has been found to be a good complement to telephone-based support
Establishing e-community
The use of web-based arrangements to allow customers to support each other is not only good public relations move, but it also takes a considerable load off the company’s support staff. By providing users and developers with information and contacts, it builds loyalty to its brand name and promotes collaboration between its customers.
Establishing a popular e-community involves several formidable tasks. The challenge is to develop a meaningful community based of relationships that engender not only personal involvement but also loyalty to the hosting company and its products. Done successfully, the benefit to the company of a virtual community of users is several times the costs of hosting a web site.
Interactions:
• One-to-one - example dating sites
• One-to-many - task driven environment when users log onto to receive information from the host
• Many-to-many - discussion boards

Creating Business Value

Three types or dimensions of business values:
• Operational excellence - low costs, low overhead, quick response, streamlined processes
• Customer intimacy - establishing lifelong relationships with customers and meeting their individual needs
• Product and service leadership - continuous innovation in product and service lines and investment in research and development

B2C Models

In short, it tells the what and how of business.
Retail merchants vs. portals
Pure-play vs. brick-and-mortar businesses

Few pure-play companies have survived to this point. Their business models did not prove viable. The strategies of “getting customers at any cost” did not work. The expenses required to establish a brand name proved too high and there was no commensurate revenue stream because of the excessive number of players in any market segment.

Business models for primarily brick-and-mortar companies expanding to the web can include several goals:
1. Establish new channels - disintermediation
2. Reinforce existing promotion efforts
3. Provide an alternate channel for ordering
4. Assist in customer support

B2B e-commerce

…the potential of the Internet to dramatically reduce costs across the supply chain. It is allowing them to reshape relationships with suppliers by integrating production and shipments.

Business and Technology Drivers

1. Competition - greater choice
2. Reduce prices vs. superior service - by eliminating a step in the supply chain you eliminate the additional markup associated with it.

A typical value chain: supplier - manufacturer - wholesaler - retailer - consumer
Advances in communication and processing technologies are enabling reconfiguration of value chain.

E-Business

IBM popularized the term e-business. E-business encompasses all the activities of a company that make e-commerce possible. IBM defines e-business as the “use of Internet technologies to improve and transform key business processes.” Basically, e-commerce activities are a subset of e-business activities.

Information technology Platform for E-Business

The Internet provides a new technological platform. It is more productive than a telephone, more interactive than a television, and more current than a newspaper. Businesses are still working out new business models that this platform makes profitable…Envisaging the potential of a new platform requires a deep understanding of the technological platform, its capabilities, and its limits.

Resource

Chaudhury A., Kuiwboer J., (2002) E-Business and e-Commerce Infrastructure: Technologies Supporting the E-Business Initiative, Boston, McGraw-Hill Irwin p.3-36

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Internet company that doesn’t have a foot planted firmly in the real world—with experienced management teams, a physical presence, efficient distribution systems, and ability to make a profit—is domed to fail.

Now customers can bid on excess and overstock merchandise from its [JCPenny] stores and catalogue operations.

The species that continue to evolve and adapt to consumer-driven, technology-fortified forms will most likely survive in the future. That’s why we like to think of this era in business history as another evolutionary stage of commerce rather than a radical, revolutionary one.

Contrary to what financial types may believe, ultimately it is customers who create shareholder value, not financial analysts.

So what exactly is wrong with e-commerce today? For one thing, there is far too much emphasis placed on the “e” or technology component of the equation and not nearly enough on the “commerce” side of the equation.

…it is easy to see the potential for an alliance with Mail Boxes, Etc., with its three thousand plus stores… [or Kinko’s for Amazon or AOL].

Electricity and phones affected a company’s ability to serve its customers, not its need to do so. The need existed earlier. The technologies did not change why people buy products and services; they only changed the method of meeting those needs…

…new technologies rarely change the mission or values of the organization; they just offer new ways to carry out the strategies designed to fulfil company goals.

The concepts of customer service and profitability are constants in the game of commerce. As online pioneer Levi’s discovered, if selling your products online decreases customer satisfaction and profitability, don’t sell online.

…the Internet, though full of possibilities, is nothing more than a marketing tool—a new delivery system of ideas, information and relationships.

…strategy …that is technology-driven and customer-focused—one in which the customer shares center stage with the technology.

At the heart of any successful technology-based strategy is the motivation behind its development its development and implementation. … The best strategies are still those grounded in the principles of human behaviour…

Technology determines what can be offered; consumers determine what will be accepted.

…regardless of industry, understanding the Consumer Decision Process (CDP) model … in vital in evaluating the winner and looser applications in e-commerce.

…the Internet has as much capacity for increasing inequality as decreasing it.

The Internet and websites are not “e-commerce”; they are enablers of e-commerce.

For most firms, product categories, and consumer segments, the Internet is more important as a marketing tool and brand builder than as a sales channel. Customers will search for and evaluate products online more than they will purchase online.

It is more important for winning organizations to master the “commerce” rather than the “e” of e-commerce.

In the long run, the answer will depend on individual firms’ abilities to wed their “e” and “commerce” strategies and create a profitable union.

Resource
Blackwell, R.D. and Stephen, K. (2001), Customers rule: why e-commerce honeymoon is over and where winning businesses go from here, Chapter 1 The E-volution of Commerce. New York, Crown Business.

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