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ELECTRONIC COMMERCE

ELECTRONIC COMMERCE. Potential roles of e-commerce Obstacles to growth Legal issues Web site design and problems Consumer cyber behavior. Potential Roles of e-commerce. Trade: B2C [business to consumer] B2B C2C (e.g., eBay) C2B Advertising/promotion Customer service/support

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ELECTRONIC COMMERCE

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  1. ELECTRONIC COMMERCE • Potential roles of e-commerce • Obstacles to growth • Legal issues • Web site design and problems • Consumer cyber behavior

  2. Potential Roles of e-commerce • Trade: • B2C [business to consumer] • B2B • C2C (e.g., eBay) • C2B • Advertising/promotion • Customer service/support • Market research

  3. Object of sale Goods Services Traditional Information Entertainment Distribution Shipping by operator Shipping from manufacturer/client Download Methods of sale Direct to customer Online retailer Auction facilitator Referral Business model Retail sale margin Commission Subscription/content Advertising/market research revenue Support of brands/other channels Mixed Types of Trade

  4. Considerations in Evaluating E-Commerce Potential • Value-to-bulk ratio • Ability of consumer to evaluate quality and fit through online description • Extent of customization needed • Geographic dispersal of consumers

  5. How Suitable For Internet Commerce? Are There Differences Among Segments?

  6. Internet User/Shopper Segments Source: Krishnamurthy 2003 (from Media Metrix and McKinsey)

  7. Bursting the Internet Bubble • Internet sales may not actually save money • Still very labor intensive • High costs of packaging and shipping • Even if online sales do save money, e-merchants are likely to compete with other e-merchants • Very easy entry

  8. Reality of Online Competition • Intense competition for large demand products (large quantity demanded attracts many sellers) • Use of large demand products as loss leaders (e.g., Amazon.com bestsellers) • Competition will force reduced costs—if any—to be passed on to customers • Competition makes charging for shipping and handling difficult. This is often more expensive than traditional distribution. • Less competition on specialty products • Established “brick-and-mortar” firms have large cash reserves

  9. Reasons Many Internet Businesses Failed • Focusing on market share rather than profits • Overestimating the value of databases • Underestimating power of established, “entrenched” traditional competitors • Underestimating the time required to change managerial and consumer behavior. Source: Krishnamurthy 2003

  10. Limited reach U.S. (access vs. use) Foreign (per minute access charges) Concerns about privacy security Reputational issues Slow entry of firms into actual order processing Transshipment across countries Technical Limitations and “glitches” Slow access Costs Efficiency Absolute margins Language Non-English U.S. vs. British English Government regulations Cultural Obstacles to Growth of Electronic Commerce

  11. Cultural Obstacles • Preference for face-to-face transactions • Preference for secrecy • Reluctance to use credit cards--80% of Chinese consumers completed the transaction off-line

  12. Incompatibility of browsers Managing the site Updating Response (it is much easier to complain online!) Implementing electronic shopping Getting traffic to your firm (and not to someone else) Ownership of domain name Indexing in search engines listing of site deliberate “false positives” for competitors (misleading meta tags) Web Site Problems

  13. Legal Issues • Jurisdiction--applying local laws to a global medium • Inter-country sales tax/duty collection • Reach of the Internet: whose laws apply? • Advertising messages • Product assortment • Privacy laws--restrictions on data that can be collected on customers • Tax collection: is the sender or recipient liable? (High shipment volumes allow only for random customs searches)

  14. Language Issues • Increasing proportion of non-English speaking Net users • “Drawing” of Asian pictorals--download time • Language variations • Taiwanese vs. mainland Chinese • British vs. American English--is the word “color” an Americanization or misspelling? • Regional variations in word meanings--less opportunity for tuning advertising to local meanings At least pronoun- ciation is not so much of an issue on the Web!

  15. Optimal Web Site Design • Speed vs. aesthetics (may be temporary problem) • Keeping customers on your site--beware of links • Cookies--advantages and disadvantages

  16. Easy comparison shopping—but do consumers actually compare? Between merchants Between countries Online purchases vs. information gathering Premature departure from site Consumer Cyber Behavior

  17. Perceived Risks • Financial • Product performance • Psychological • Time/convenience loss

  18. Consumer Privacy Concerns • Risks of fraud • Identity theft • Dynamic pricing • Appeal to potential “switchers” rather than loyal ones • Disclosure of private information (emotional and philosophical concern)

  19. Search Engine Optimization • “Cat and mouse game” between webmasters and search engines • Some placement strategies • Paid rankings • Massive amounts of text • Reciprocal or paid links

  20. E-Mail Marketing • Opt-in vs. spamming • Spamming • Intensely disliked by the vast majority of customers • Potential state and Federal bans • Filtering software and attempts to circumvent it • Only small response rates are needed for success

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