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Electronic commerce or e-commerce consists of the buying, selling, marketing, and servicing of products
or services over computer
networks. The information technology industry might
see it as an electronic business application aimed at
commercial transactions.
An alternative definition of e-commerce might view it as the conduct of business
commercial communications
and management through electronic methods, such as electronic data interchange and automated data-collection systems.
Electronic commerce may also involve the electronic transfer of information between businesses (EDI).
According to Forrester Research (as cited in Kessler, 2003),
electronic commerce generated sales worth US $12.2 billion in 2003.
Historical development
The meaning of the term "electronic commerce" has changed over time. Originally, "electronic commerce" meant the facilitation
of commercial transactions electronically, usually using technology like Electronic Data Interchange (EDI) to send commercial documents like purchase orders or invoices electronically.
Today it includes activities more precisely termed "Web commerce" -- the purchase of goods and services over the World Wide Web via secure servers (note HTTPS, a special server protocol which encrypts confidential ordering data for customer protection) with e-shopping carts and with electronic pay services, like credit
card pay authorizations.
Key success factors in e-commerce
Several factors have critical importance in the success of any e-commerce venture. They include:
- Providing value to customers. Vendors can achieve this by offering a product or product line that attracts potential
customers at a competitive price.
- Providing service and performance. Offering a fast, user-friendly purchasing experience may go some way to achieving these
goals.
- Providing an attractive site. The tasteful use of colour, graphics, animation, photographs, fonts, and white-space percentage
may aid success.
- Providing an incentive to buy and to return. Sales promotions can involve coupons, special offers, and discounts.
Cross-linked web sites, and advertising affiliate programs
can also help.
- Providing personal attention. Personalized web sites, purchase suggestions, and personalized special offers may go some of
the way to substituting for the face-to-face human interaction found at a traditional point of sale.
- Providing a sense of community. Chat rooms, discussion boards, soliciting customer input, loyalty
schemes and affinity programs can help in this respect.
- Providing reliability and security. Parallel servers, fail-safe technology, information encryption, and firewalls can enhance
this requirement.
- Providing a 360-degree view of the customer relationship, defined as ensuring that all employees, suppliers, and partners
have a complete view, and the same view, of the customer.
- Owning the customer’s total experience. E-tailers foster this by treating any contacts with a customer as part of a
total experience, an experience that becomes synonymous with the brand.
- Streamlining business processes, possibly through
re-engineering and information technologies.
- Letting customers help themselves. Provision of a self-serve site, easy to use without assistance, can help in this
respect.
- Helping customers do their job. E-tailers can provide such help through ample
comparative information and good search facilities. Provision of
component information and safety and health comments may assist e-tailers to define the customers' job.
- Constructing a sound business model. If this key success factor had
appeared in textbooks in 2000, many of the dot.coms might not have gone bust.
- Engineering an electronic value chain in which one focuses on a "limited" number of core competencies.
- Operating on or near the cutting edge of technology and staying there as technology changes.
- Setting up an organization of sufficient alertness and agility to respond quickly to any changes in the environment.
E-commerce problems
Even if these sixteen key factors are used to devise an exemplary e-commerce strategy, problems can still arise. Sources of
such problems include:
- Failure to understand the customer, why they buy, and how they buy. Even a product with a sound value proposition can fail if
producers and retailers do not understand customer habits, expectations, and motivations. E-commerce could potentially mitigate
this potential problem with proactive and focused marketing research, just as traditional retailers may do.
- Failure to consider the competitive situation. One may have the
capability to construct a viable book e-tailing business model, but
lack the will to compete with Amazon.com.
- Inability to predict environmental reaction. What will competitors do? Will they introduce competitive brands or competitive web sites. Will they supplement their service offering? Will they try to sabotage a
competitor's site? Will price wars break out? What will the government do? Research into competitors, industries and markets may mitigate some
consequences here.
- Over-estimation of resource competence. Can staff, hardware, software, and processes handle the new strategy? Have e-tailers
failed to develop new employee and management skills? These issues may call for thorough
resource planning and employee training.
- Failure to coordinate. If reporting and control relationships do not suffice, one can move towards a flat, accountable, and
flexible organizational structure, which may or may not aid coordination.
- Failure to obtain senior management commitment. This often results in a failure to obtain sufficient company resources to
accomplish the task. It may help to get top management involved right from the start.
- Failure to obtain employee commitment. If planners do not explain the strategy well to employees, or fail to give employees
the whole picture, then training and setting up incentives for workers to embrace the strategy may assist.
- Under-estimation of time requirements. Setting up an e-commerce venture could take considerable time and money, and failure
to understand the timing and sequencing of tasks can lead to significant cost overruns. Critical path, critical chain, or PERT analysis may mitigate such failings.
- Failure to follow a plan. Poor follow-through after the initial planning, and insufficient tracking of progress against a
plan can result in problems. One may mitigate such problems with benchmarking, milestones, variance tracking, penalties for
negative variances, rewards for positive variances, and remedial realignments.
Product suitability
Certain products/services appear more suitable for online sales and others remain more suitable for offline sales. The most
successful purely virtual companies deal with digital products, including information storage, retrieval, and modification,
music, movies, education, communication, software, photography, and financial transactions. Examples of this type of company
include: Schwab, Google, eBay, Paypal, Egghead, and Morpheus.
Virtual marketers can sell some non-digital products/services successfully. Such products have a high value-to-weight ratio,
and/or involve embarrassing purchases, and/or typically go to people in remote locations, and/or have shut-ins as their typical
purchasers.
Products such as spare parts, both for consumer items like washing machines and for industrial equipment like centrifugal
pumps, also seem good candidates for selling online. Retailers often need to order spare parts specially, since they typically do
not stock them at consumer outlets -- this means that e-commerce solutions in this area do not compete with retail stores, only
with other ordering systems. A key element for success in this niche consists of providing customers with exact, reliable
information about which part number their particular version of a product needs, for example by providing parts lists keyed by
serial number.
Purchases of pornography and of other sex-related products and services
fulfil the requirements of both virtuality (or if non-virtual, generally high-value) and potential embarrassment; unsurprisingly,
provision of such services has become the most profitable segment of e-commerce.
Products unsuitable for e-commerce include products that have a low value-to-weight ratio, products that have a smell, taste,
or touch component, products that need trial fittings, and products where colour integrity appears important.
Acceptance of e-commerce
Consumers have accepted the e-commerce business model less readily than its proponents originally expected. Even in product
categories suitable for e-commerce, electronic shopping has developed only slowly. Several reasons might account for the slow
uptake, including:
- Concerns about security. Many people will not use credit cards over the
Internet due to concerns about theft and fraud.
- Lack of instant gratification with most e-purchases (non-digital purchases). Much of a consumer's reward for purchasing a
product lies in the instant gratification of using, and being seen to use the product. This reward does not exist when one's
purchase does not arrive for days or weeks.
- The problem of access, particularly for poor families and poor countries. Low penetration rates of Internet access in some sectors greatly reduces the potential for
e-commerce.
- The social aspect of shopping. Some people enjoy talking to sales staff, to other shoppers, or to their cohorts: this social
reward does not exist in online shopping.
Suppliers offering services to electronic commerce practitioners
Entities using electronic commerce
See also
Finding related topics
External links
- MerchantPicks.com
- Resource and Directory of E-Commerce marketplace, how
to establish online store, payment processor, fraud prevention, accept credit cards on line.
- Online Shopping Directory
- Directory of E-Commerce, online shopping, marketing, and
advertising resources.
- Security
Further reading
- Customers.com by Pat Seybold (2001), Crown Business Books (Random House), ISBN 0-609-60772-3
References
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