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A preliminary analysis on E-commerce in Italy

A preliminary analysis on E-commerce in Italy Cristina Cecconi, Roberta Cacciaglia, Fabiana Cecconi Istat Speaker: Fabrizio Marinucci 32 nd Voorburg Group Meeting New Delhi, India 23-27 October 2017. Contents. 1. Introduction 2. Definition 3. Advantages and disadvantages

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A preliminary analysis on E-commerce in Italy

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  1. A preliminary analysis on E-commerce in Italy Cristina Cecconi, Roberta Cacciaglia, Fabiana Cecconi Istat Speaker: Fabrizio Marinucci 32ndVoorburg Group Meeting New Delhi, India 23-27 October 2017

  2. Contents • 1. Introduction • 2. Definition • 3. Advantages and disadvantages • 4. Some figures from Italy • 5. Some figures from Europe • 6. Some figures from the World • 7. Price determinants and strategies • 8. Dynamic pricing • 9. Conclusions C. Cecconi, R. Cacciaglia, F. Cecconi – 32ndVoorburg Group Meeting 2/24

  3. Introduction • This is a brief preliminary analysis on e-commerce: • a beginning to study the phenomenon and to understand which are the mechanisms that determine e-commerce market prices of services • In Italy short term surveys do not collect e-commerce yet, but interest in this topic already exists and is increasing C. Cecconi, R. Cacciaglia, F. Cecconi – 32ndVoorburg Group Meeting 3/24

  4. Definition • E-commerce stands for electronic commerce • It is a form of trade and sale of goods or services through the Internet, with different web platforms, on which the seller uploads the good/service catalog so that the buyer can consult it online, choosing the products he wants to buy and sending the order • Online distribution of digital content, electronic financial and stock exchange transactions, public procurement by electronic means and other public-sector selling procedures are included in e-commerce too C. Cecconi, R. Cacciaglia, F. Cecconi – 32ndVoorburg Group Meeting 4/24

  5. Definition • According to the object, e-commerce can be distinguished in: • (i) direct e-commerce: virtual items such as services can be provided, transferred and delivered to the client exclusively through the Internet • (ii) indirect e-commerce: physical items such as goods can be ordered on the Internet and delivered to the client through express courier or other means of transportation C. Cecconi, R. Cacciaglia, F. Cecconi – 32ndVoorburg Group Meeting 5/24

  6. Definition B2BBusiness to Business E-commerce classification according to several types of client G2C Government to Citizen B2CBusiness to Consumer TYPESOF B2G Business to Government G2B Government to Business C2CConsumer toConsumer C2B Consumer to Business C. Cecconi, R. Cacciaglia, F. Cecconi – 32ndVoorburg Group Meeting 6/24

  7. WEBSITE SHOPPING CART Definition: e-commerce buying cycle DELIVERY PAYMENT TRACKING ORDER APPROVAL SHIPMENT C. Cecconi, R. Cacciaglia, F. Cecconi – 32ndVoorburg Group Meeting 7/24

  8. Advantages and disadvantages • From an e-commerce trader point of view • Advantages are: • no geographic barriers (new customers are everywhere) • market entry barriers are low • costs are reduced • intermediaries are not needed • effective marketing and promotional strategies • Disadvantages are: • a lot of regulations and bureaucratic formalities • lack of understanding of customers behavior • lack of a competitive online scenario analysis • lack of optimization: e-c needs continuous web monitoring C. Cecconi, R. Cacciaglia, F. Cecconi – 32ndVoorburg Group Meeting 8/24

  9. Advantages and disadvantages • From an e-commerce customer point of view • Advantages are: • an unlimited number of services and goods • a quick response to the consumer need • the market is more competitive (prices are lower and supply is greater) • customers’ contractual power in the decrease of prices • Disadvantages are: • no direct contact with the good and the seller • no direct sales assistance • doubts about security (for example: payments) • lack of instantaneous gratification with online shopping C. Cecconi, R. Cacciaglia, F. Cecconi – 32ndVoorburg Group Meeting 9/24

  10. Some figures from Italy* • Last ten years are characterized by an increase of about 860% of e-commerce turnover • In 2016, the value of e-c turnover is estimated 31,7 billion Euros, with an increase of 10% respect the previous year *SOURCE:Casaleggio Associati, 2017 C. Cecconi, R. Cacciaglia, F. Cecconi – 32ndVoorburg Group Meeting 10/24

  11. Some figures from Italy* • About 42.6 million Italians are able to access to the Internet, covering 88.7% of the population aged 11-74 • 16,000 companies sell online and forecasts estimate that they will be 50,000 in 2025 • Strong and growing presence of the great international players contributes to produce the e-commerce Italian turnover *SOURCE:Casaleggio Associati, 2017 C. Cecconi, R. Cacciaglia, F. Cecconi – 32ndVoorburg Group Meeting 11/24

  12. Some figures from Italy* • Free time and tourism sectors represent the largest share of the e-commerce market, together they generate three-quarters of the total turnover (free time covers 43% due to online gambling, tourism represents 31%) • Online shopping centres represent 10% and their share is due to the dominance of the major international players • Insurance share is 6% of the total and other sectors have modest market share *SOURCE:Casaleggio Associati, 2017 C. Cecconi, R. Cacciaglia, F. Cecconi – 32ndVoorburg Group Meeting 12/24

  13. Some figures from Italy* *SOURCE:Casaleggio Associati, 2017 C. Cecconi, R. Cacciaglia, F. Cecconi – 32ndVoorburg Group Meeting 13/24

  14. Some figures from Europe* *SOURCE:Casaleggio Associati, 2017 C. Cecconi, R. Cacciaglia, F. Cecconi – 32ndVoorburg Group Meeting 14/24

  15. Some figures from the World* *SOURCE:Casaleggio Associati, 2017 C. Cecconi, R. Cacciaglia, F. Cecconi – 32ndVoorburg Group Meeting 15/24

  16. Price determinants and strategies • It is basic to understand how pricing mechanism works to choose the right price method to collect e-c prices • Nowadays more than 60% of online buyers consider price as a key criterion that influences their buying decision • In fixing prices, the most important elements are: • costs - to know the total cost of the product and decide company profit margins • price comparisons - to monitor the online market conditions (price rankings) • customers knowledge - to know customers profile and their needs C. Cecconi, R. Cacciaglia, F. Cecconi – 32ndVoorburg Group Meeting 16/24

  17. Price determinants and strategies • Some of the factors that can help to identify prices determinants are: • (i) prices ending with 9 • products whose price ends with figure 9 get an average sales rate of 24% higher than the ones with a rounded price to the nearest full digit • (ii) for expensive products customers are less sensitive to prices • when many competitors offer the same expensive product, the price variation is lower. Consumers are able to compare online products intensifying competition between traders C. Cecconi, R. Cacciaglia, F. Cecconi – 32ndVoorburg Group Meeting 17/24

  18. Price determinants and strategies • (iii) elite prices • in case of unique pieces customers’ perception of value and utility of a product is influenced by the only effect of its prohibitive price: the benefit obtained would be higher than that of a similar but economic product • (iv) anchored prices • traders fix very high prices for items and customers value them in the face of very few available pieces, only then the price is fixed considerably lower, giving the perception of a secure offer C. Cecconi, R. Cacciaglia, F. Cecconi – 32ndVoorburg Group Meeting 18/24

  19. Price determinants and strategies • (v) competitive benefits • free shipment as well as discounts and sales induce customers to decide to buy products • (vi) extra benefits • the perceived value of a purchase can be increased by extra benefits such as warranty, satisfied or reimbursed conditions, assistance, etc. Often these benefits do not represent real costs for sellers but appear to be true surpluses for the customer C. Cecconi, R. Cacciaglia, F. Cecconi – 32ndVoorburg Group Meeting 19/24

  20. Dynamic pricing • Dynamic pricing is a key feature in e-c economy because demand and supply are driven by price: if a trader is able to change prices in real time or through structured pricing strategies he is also able to gain market share • Price changes depend on subjective and objective parameters: algorithms perform adaptive controls of different factors, such as competition and demand, for a particular product on the online market • The same article is offered at different prices to different groups of customers: it is a type of price discrimination and its application may raise some legal issues and some criticisms C. Cecconi, R. Cacciaglia, F. Cecconi – 32ndVoorburg Group Meeting 20/24

  21. Dynamic pricing • Examples of online application of dynamic pricing are: • air transport: price dynamics based on clusters of customers or on customers’ needs are used. For example, airline companies change their prices according to many factors, such as time, the day of the week the search is conducted, the number of days left on departure, the type of client, etc. • Amazon: this company uses its database to create clusters of well-targeted users to increase the competitiveness of its online shop C. Cecconi, R. Cacciaglia, F. Cecconi – 32ndVoorburg Group Meeting 21/24

  22. Dynamic pricing • (iii) purchasing groups: different types of user groups pay different prices for the same product (for example: associations, nonprofit organizations, simple users, etc.). • (iv) geo-localization: some e-commerce sites are configured to recognize the origin of the IP (Internet Protocol address) to geo-localize specific customers and so discriminating prices C. Cecconi, R. Cacciaglia, F. Cecconi – 32ndVoorburg Group Meeting 22/24

  23. Conclusions • E-commerce is a wide topic, rich of new concepts, and is continuously changing, at the same rate of technological improvements • A lot of work needs to be done to go deeply into e-commerce concepts in order to apply them to services producer price indices. (For example, issues on classification, data identification, treatment and collection, bundle of services, etc.) • NSIs can’t underestimate the continuous increase of online sales if they intend to produce reliable and robust statistics C. Cecconi, R. Cacciaglia, F. Cecconi – 32ndVoorburg Group Meeting 23/24

  24. Thank you! Cristina Cecconi (cecconi@istat.it) Roberta Cacciaglia (cacciaglia@istat.it) Fabiana Cecconi (fcecconi@istat.it) C. Cecconi, R. Cacciaglia, F. Cecconi – 32ndVoorburg Group Meeting 24/24

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