e-commerce applications 2010/11 introduction e-commerce vs. e … · · 2011-01-31e-commerce...

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E-Commerce Applications 2010/11

Introduction

E-Commerce Applications

• What is E-Commerce?• What is the difference between E-Commerce

and E-Business? • How does EC differ from a normal ‘high street’

store/business?

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• What are your experiences of EC? Good/Bad?


E-Commerce vs. E-Business

•• EE--CommerceCommerce: The process of buying, selling, or exchanging products services or information overexchanging products, services, or information over computer networks.

•• EE--BusinessBusiness: A broader definition of E-Commerce that includes not just the buying and selling of goods and services, but also servicing customers, collaborating with business partners, and conducting electronic transactions within an organization.T f d ‘i h bl ’• Terms often used ‘interchangeably’.

Adapted from: ‘Electronic Commerce – A Managerial Perspective’, Turban, Prentice Hall, 2009.See also: http://en.wikipedia.org/wiki/Electronic_business and http://en.wikipedia.org/wiki/Electronic_commerce

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E-Business: What is it?

• E-Business: to conduct business electronically.

e-business

customer

supplierbank

Product or ServiceInventoryFulfilmentCustomer Service

Session 1 3

carrier

MarketingPaymentMeasuring success


E-Commerce: What is it?

• E-Commerce: Buying and selling of goods and services over the Internet.

e-shop site

customer

Product/ServiceCurrencyTax modelsShippingExceptions, returns, charge

ISP

ASP

www

Internet

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business

bank

carrierbackPlus: Inventory, Fulfilment, Customer Service, Marketing, Finance, Measuring successpayment servicebank

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Forms of E-Commerce

• Different Forms of EC, depending on degree of digitisation of:digitisation of:

Product or service (physical or digital)Process involved (ordering, payment, delivery)

• Two main forms of EC, pure or partial:Pure: product, ordering, payment and delivery are all digital, e.g. music (mp3) or book (PDF) downloads. Online banking, bill payment.P ti l t l t t f th t ti i di it lPartial: at least one part of the transaction is digital, e.g. shopping online/buying groceries. Product selection, ordering and payment process is digital, but delivery is physical.

Adapted from: ‘Electronic Commerce – A Managerial Perspective’, Turban, Prentice Hall, 2009.

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Classifications of E-Commerce

Different types of EC, depending on nature of transactions and parties involved:

•• BusinessBusiness--toto--Business (B2B)Business (B2B): involves transactions between businesses or other organisations.

•• BusinessBusiness--toto--Consumer (B2C)Consumer (B2C): involves businesses selling products or services to individual customers.

•• ConsumerConsumer--toto--Consumer (C2C)Consumer (C2C): involves individual consumers selling things to other individual customers e g ebay amazon marketcustomers, e.g. ebay, amazon market.

•• ConsumerConsumer--toto--Business (C2B)Business (C2B): involves individual consumers selling things to businesses, e.g. freelance training, services.

Adapted from: ‘Electronic Commerce – A Managerial Perspective’, Turban, Prentice Hall, 2009.

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Market places - Traditional

Where buyers and sellers meet there is an opportunity for an online market place

Manufacture

Wholesale

Value added resell

Customer

Business to Business to Consumer (Consumer (B2CB2C))

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Value added resell

RetailBusiness to Business to Business (Business (B2B)B2B)


Online Market Places

Where buyers and sellers meet there is an opportunity for an online market place

Manufacture

Wholesale

Value added resell

Customer

Market Place


Market Place

Market Place

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Value added resell

Retail

Market Place

Business to Business to Business (Business (B2B)B2B)

Market Place

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Disintermediation: Online Market Places

Disintermediation: removal of intermediaries in supply chain: ‘cutting out the middleman’

Manufacture

Wholesale

Value added resell

Customer


Market Place

Market PlaceMarket Place

Market Place

Market Place

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Value added resell

Retail

Market Place

Business to Business to Business (Business (B2B)B2B)

Market Place

http://en.wikipedia.org/wiki/Disintermediationhttp://tutor2u.net/ebusiness/ebusiness-strategy-business-models.html


Types of OrganisationsDifferent types of organisation:

oo BrickBrick--andand--MortarMortar: organisations that have physical stores in which they sell or provides services.

oo ClickClick--andand--MortarMortar: organisations that sell products and services online as well as via a physical store.

http://en.wikipedia.org/wiki/Online_shoppinghttp://en.wikipedia.org/wiki/Bricks_and_clicks_business_modelhttp://www.informationweek.com/791/retail.htm

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Consumer-to-Consumer (C2C) - eBay•• ConsumerConsumer--toto--Consumer (C2C)Consumer (C2C): involves individual

consumers selling things to other consumers.F l B b i b d ll t th• For example, eBay brings buyers and sellers together to conduct deals (via online auctions, or pay now options).o Both the seller and the buyer need to register with eBay. Also

need to create payPal account.o Seller pays a fixed fee to the online site/auction house to sell

their products.po Buyer doesn’t pay any fee.

• Easiest and quickest way to sell online way is to use ‘marketplace’ such as eBay

• See How eBay works: http://computer.howstuffworks.com/ebay.htm

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eBay

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eBay is The World's Online Marketplace®, enabling trade on a local, national and international basis. With a diverse and passionate community of individuals and small businesses, eBay offers an online platform where millions of items are traded each day: http://pages.ebay.co.uk/aboutebay.html

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Starting an eBay business

EXERCISE:1. Working in pairs…2 Wh t d d2. What do you need

to do to start selling on eBay?

3. Map out the process.

4. How easy is it?5. What do you need

to do to create an eBay store?

• http://www.ebay.co.uk and http://pages.ebay.co.uk/sell/basics/start.html• http://www.work.com/starting-an-ebay-business-1015/• http://pages.ebay.co.uk/businesscentre/index.html?_trksid=m38• http://www.bytestart.co.uk/content/24/24_3/ebay-business-essentials.shtml• http://www.bytestart.co.uk/content/24/24_3/starting-ebay-uk-1.shtml

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eBay store?6. What costs are

involved?


E-Commerce: How it Works

1. Review How E-commerce Works: http://communication.howstuffworks.com/ecommerce.htmp

2. Think about the basic process involved:o Find product or serviceo Read information, compare priceso Select producto Add to basketo Purchaseo Delivery

3. Review the example sites - how easy is it?

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E-Commerce: Example sites• www.asos.com• www.amazon.com*

EXERCISE:1. Working in pairs, review at

l t 4 f th it it• www.hmv.com• www.asda.com• www.justgiving.com• www.moneysupermarket.com• www lloydstsb com

least 4 of the sites opposite and identify:

2. Five Strengths/Positives?3. Five Weaknesses/Negatives? 4. Does anything stand out?

www.lloydstsb.com• www.flickr.com• www.bbk.ac.uk• www.hillingdon.gov.uk

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www.asos.com

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www.amazon.co.uk

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www.hmv.com

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www.asda.com

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www.moneysupermarket.com

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www.lloydstsb.com

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www.flickr.com

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www.bbk.ac.uk

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Historical Context: EC is Not NewElectronic Commerce is not new:

• EFT (Electronic Funds Transfer)Th l i f f f d b i iThe electronic transfer of funds between organisations (1970s) http://en.wikipedia.org/wiki/Electronic_funds_transfer

• EDI (Electronic Data Interchange)The electronic transfer of standard business documents, such as bills, orders and confirmations, between business partners.http://en.wikipedia.org/wiki/Electronic_Data_Interchangehttp://www edibasics co uk/index htmhttp://www.edibasics.co.uk/index.htm

• SET Protocol (Secure Electronic Transaction)A standard protocol for securing credit card transactions over insecure networks, specifically, the Internet.http://ecommerce.hostip.info/pages/925/Secure-Electronic-Transaction-SET.htmlhttp://en.wikipedia.org/wiki/Secure_Electronic_Transaction

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E-Business Evolution

EE--Business Evolution 2009Business Evolution 2009• PricewaterhouseCoopers J P Morgan John Lewis Direct• PricewaterhouseCoopers, J.P. Morgan, John Lewis Direct,

Linden Lab (Second Life) and Cancer Research UK teamed up with Echo E-Business, to examine the evolution and future of business on the web.

• ‘White paper’ features articles written by senior figures in finance, professional services, retail, charity and technology, as well as independent analysis from Echo E-Business. It explores the future of e-business and how itBusiness. It explores the future of e business and how it will help companies survive the recession

See: http://www.echoebusiness.com/ebusiness_evolution_2009.html

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Context: Why E-Commerce?Why now?

• Global internet market continues to grow rapidly.• Between 2000-2010 internet usage increased by:

• 146% in North America (penetration = 77%)• 352% in Europe (penetration = 58%)• 621% in Asia (penetration = 22%)See: http://www.internetworldstats.com/stats.htm

• Opportunities for reaching new and existing customers• Technological Developments:

• Affordable security: SSL/https Secure Socket Layer, Stronger encryption

• Interactive services, e.g. forums, database enabling, advertising

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Context: Why E-Commerce?UK online sales rose 25% to £408bn in 2009:

o The value of UK ecommerce transactions hit £408bn in 2009, excluding non-financial transactions.

o Up almost 25% on 2008 and represented 16.7% of all sales outside the financial sector.

o Sales from websites rose 23.6% to £115bn, while the value of non-web online transactions (e.g. EDI) reached £293bn, equivalent to 12% of all non-financial sales.

(Source: ONS: http://www.statistics.gov.uk/pdfdir/ecom1110.pdf)

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Context: Why E-Commerce?Survey of E-Commerce & ICT activity in 2009:

• 91% of companies had internet access and 88% connected through a broadband link.

• Although 76% of companies with more than 10 staff had a website, only 14.9% sold goods through it.

• Almost 52% of companies (2008: 33%) used online networks to buy goods and services worth £466.3bn.

• Two-thirds of public authorities and over 90% of large enterprises used the internet to interact with peopleenterprises used the internet to interact with people.

• Only 29% of businesses had a formal IT security policy that was reviewed regularly.

(Source: ONS: http://www.statistics.gov.uk/pdfdir/ecom1110.pdf)

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Context: Why E-Commerce?From a small business perspective:

• Potentially a global market. Internet doesn’t differentiate between large and small organisationsdifferentiate between large and small organisations

• Low start-up costs:• Presence: Can operate from home, no requirement for shop,

office, etc• Technology: Server hosting, shopping cart, payment system

• Opening Hours: 24/7, depending on nature of product/service offeredS l t t ll d l d t t d d it• Scale: start small and scaled to meet demand or suit the business

• Testing: able to gauge demand for different products/services – linked to marketing effort

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Your Task• To Identify an opportunity for a new EC business• Remember: anyone can start an online business and

t it d i i kl d h lget it up and running quickly and cheaply, so:• Potential competitors are unlimited• Need to research your idea• Ensure it is designed and developed effectively

• Remainder of module will examine how to do this• Need an IDEAIDEA!• To help us in this process, let’s:

1. Deconstruct the experience of being an online customer, and think about how we might carry out a competitor analysis.

2. Consider what organisations are? Why do they exist? Purpose? Activities?

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E-Commerce – Undercover Customer

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What are Organisations?

• Series of activities to produce goods or services and sell to the customersell to the customer.

business

customer

supplierbank

Product or ServiceInventoryFulfilmentCustomer Service

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carrier

MarketingPaymentMeasuring success

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Organisations – Business Processes • All organisations exist to produce goods or

services, e.g. supermarkets, breweries, g puniversities, hospitals, etc.

• All organisations are made up of a series of activitiesactivities (or business processesbusiness processes) that are performed to design, produce, market, deliver and support its products or services.

http://en.wikipedia.org/wiki/Business_processhttp://www.businessballs.com/business-process-modelling.htm

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Organisations - Factors of Production

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Factors of Production - Traditional Economic View

L dL d L bL b C it lC it l

Factors of Production

LandLand LabourLabour CapitalCapital

EntrepreneurshipEntrepreneurship

Production of Goods and Services

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CUSTOMERS


Business Processes - Porter’s Value Chain

• Michael Porter suggests that ‘competitive advantage’ grows out of the ‘value’ an organisation is able to create for its customers.

• Considers organisations to be made up of two types of activities:o Primary activities.o Support activities

• True whether organisations are large or small:• True whether organisations are large or small:http://www.isc.hbs.edu/http://en.wikipedia.org/wiki/Value_chainhttp://www.netmba.com/strategy/value-chain/http://www.informationvaluechain.com/information-value-chain/business-strategy/http://tutor2u.net/ebusiness/ebusiness-strategy-business-models.html

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Porter’s Value Chain

Technology development

Procurement

SupportSupportActivitiesActivities Procurement

Inboundlogistics

Operations Outboundlogistics

Marketingand sales

Aftersales

service

PrimaryPrimaryActivitiesActivities

MAR

GIN

MAR

GIN

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Employee management

Firm’s infrastructureSupportSupportActivitiesActivities

http://tutor2u.net/ebusiness/ebusiness-strategy-business-models.htmlhttp://www.mindtools.com/pages/article/newSTR_66.htm


Business Drivers

• Sales of Products or Services = Profit Motive!P fit S l IP fit S l I C t f S lC t f S lProfit = Sales Income Profit = Sales Income –– Cost of SalesCost of Sales

• Sales = Demand Side (Market, Customers)• Costs = Supply Side (Producer, Suppliers)• Breakeven when sales just cover costs• Included in finance part of business planp p

See: http://www.businesslink.gov.uk/ (the official government website for businesses of all sizes)http://www.bized.co.uk/educators/level2/finance/activity/breakeven21.htm

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Drivers of ProfitabilityMargin = Value less Costs

Profit Margin = TotalR less Total CostsProfit Margin Revenue less Total Costs

Profit = Sales less Cost of Sales

Profits equalSales less Costs

= =

Unit Price x Quantity Sold(Volume) - Quantity Sold

(Volume) x Unit Costs

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Supply Market Size Efficiency

Demand Market Share Input PricesCompetitors'Prices Market Growth Economies

of ScaleCustomerPerceptions

d(Mkt Share) Technology


E-Commerce: Similarities

• Business objectives• Systems IntegrationSystems Integration• New clients and revenues• Saving money, reducing overheads and increasing

efficiency• End to end customer care• Payment systems • Quality of customer information (database)• Quality of customer information (database)• Fulfilment system and stock database• Logistics

Session 1 40

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E-Commerce: Differences

• Disintermediation• Personalisation• Personalisation• Bundling• Automation• Value-added• Discounts/ loyalty schemes• Flexible store frontsFlexible store fronts• Membership• More choice

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Your Task – To Develop an E-Shop

• E-Commerce: Buying and selling of goods and services over the Internet.

e-shop site

customer

Product/ServiceCurrencyTax modelsShippingExceptions, returns, charge

ISP

ASP

WWW

Session 1 42

business

bank

carrierbackPlus: Inventory, Fulfilment, Customer Service, Marketing, Finance, Measuring successpayment servicebank


Operational Excellence• Transformation of critical processes, product features, ease

of use• Key issues:

o What % of orders clean?o Are we reducing returns and credits from customers?o What % of customer problems resolved on 1st contact?o How much customer information is visible (one screen).o Is inventory visibility increasing across the supply chain?

• Creating new forms of customer value:o Increase in market share and gross margino Increase in new customer acquisitiono Better retention of customers

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Example of Early Mover

Author Publisher Distributor Bookshop Customer

Traditional Book Shop Value Chain

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Publisher

Market placeAuthor Bookshop

CatalogueCustomer Info

PaymentShipping

Advantage catalogue

AssociatesNetworks

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Distributor

Community



Market placeAuthor

Publisher

Bookshop

CatalogueCustomer Info.

PaymentShipping

Advantage catalogue

AssociatesNetworks

Record of previous transactions: purchases, credit card info, shipping infoTargeted selling on entry1 click for subsequent ordersAccount maintenanceImaginative credits

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Distributor

Community Imaginative creditsCustomer reviewsValue added services


AMAZON – An Example of an Early Mover

• http://money.howstuffworks.com/amazon.htm• http://www.davechaffey.com/E-commerce-Internet-marketing-case-studies/Amazon-case-study

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Your Task – Develop an Online Business

• Identify an opportunity – IDEAS!A t f thi d l d l• As part of this module, develop:o A Summary Business Plano Prototype website: Home Page, building on

XHMTL/CSS skillso Prototype e-shop: ShopcreatorShopcreator

• Use prototype website/e-shop to explore other aspects, e.g. marketing and promotion, SEO, webaspects, e.g. marketing and promotion, SEO, web analytics, payment process, etc

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http://www.shopcreator.com/

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http://www.hi-techbargains.com/

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http://www.tinytotshop.co.uk/

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E-Commerce – Benefits of Planning

Strategic planning and the right approach can:• Launch the company image• Launch the company image.• Attract and retain customers, via better customer

information (low cost of capture).• Increase efficiency and cut costs (and improve profit

margins).• Improve communication with suppliers and reduce

time to market.

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• Provide opportunity for ‘targeted’ special offers and promotions.

• Cut transaction costs

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E-Commerce: Planning your Business

Planning your Business:1 What will you sell? Product or service?1. What will you sell? Product or service?2. What is your market? Local? Global? Consumers or

Businesses? How will it appeal?3. Competitors? Size and scope? GAP in the market?

Differentiation?4. What image do you want to project? Appearance?5 How big? Sales Targets? Single product? Range of

Session 1 53

5. How big? Sales Targets? Single product? Range of Products?

6. Suppliers? Source of products?7. Legal Issues: licensing, copyright, Insurance and liability?


E-Commerce: Defining your Market

What is your Target Market:1 What is your Market? Broad? Niche?1. What is your Market? Broad? Niche?2. Who are your Customers? Professional? Tourists? Young

Adults? Parents/children?3. What influences their buying decisions?4. Why will they buy from you?5. What is special about your business? Strengths?

Competences? Uniqueness?

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Competences? Uniqueness?


E-Commerce: Defining your MarketHow will you differentiate your product or service:

1. Quality?2. Price?3. Level of Service?4. Value for money?5. Reliability/Consistency?6 Convenience?

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6. Convenience?7. Customisation?8. Specialisation?9. Range of products? 10. Other criteria? Your experience?


E-Commerce: Choosing a Name

Choosing a name for your Business:1 Try to keep the name simple and descriptive don’t1. Try to keep the name simple and descriptive, don t

confuse the customer! 2. Make the name distinctive.3. Avoid humorous names – dangerous!4. Brainstorm and generate a list of ideas based around your

theme/business concept.5 Needs to reflect your vision for the business

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5. Needs to reflect your vision for the business.6. Get feedback on your idea… friends, colleagues.

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Get the right website for your business

Use the Business Link interactive tool to investigate what kind of website is best for yourinvestigate what kind of website is best for your businesshttp://www.businesslink.gov.uk/bdotg/action/layer?lang=en&r.l1=1073861197&r.s=tl&topicId=1074453672&r.l1=1073861197&r.s=tl&topicId=1074453672

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E-Commerce: Benefits

• Virtual expansion is less costly than physical • Easier publishing of detailed product information:• Easier publishing of detailed product information:

o GM food information, health and diet tips, menu planning, special nutritional support

• Opportunity to diversify:o Tesco sells CDs, videos, books and DVDs

• Partnership opportunities:

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Partnership opportunities:o Organic foods, shop at work


E-Commerce: Business Risks

Integration ChasmWeb orders and payment details WEBo Web orders and payment details

o Customer detailso Customer enquiries

o Order Management Systemo Payments and Accounts System

WEB SYSTEM

BACK-END BUSINESS

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o Fulfilment and Distribution System SYSTEM


E-Commerce: Barriers

Business issues, NOT technology problems:Limited range of products• Limited range of products

• Prices not competitive• Difficult to navigate• Not enough information to buy• No receipt or confirmation report• Files too large – download problems

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Files too large download problems• Products out of stock• Not delivered on time

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E-Commerce: Key Issues

• There is no total solutionE i t tl l i i i• E-commerce is constantly evolving, organic, in the process of becoming

• There is a real frontier for explorers• Analysis is the key• Pay attention to the details

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• Remember the customer is king!


EC and SMALL BUSINESS GUIDESUseful links re. setting up an EC business:• http://www.businesslink.gov.uk/• http://www.businesslink.gov.uk/bdotg/action/layer?lang=en&r.s=tl&topicId=1073861197p g g y g p• http://www.businesslink.gov.uk/bdotg/action/layer?lang=en&r.l1=1073861197&r.l2=107386

6263&r.s=tl&topicId=1075383789• http://www.businesslink.gov.uk/bdotg/action/contentBankByTheme?bank=CASE_STUDIES

&lang=en&r.l1=1073861197&theme=itandecommerce&topicId=1073861197• http://www.startupebusiness.co.uk/• http://www.bytestart.co.uk/• http://www.spear-bournemouth.co.uk/pdf_files/dtibestpracticeebusiness.pdf• http://www.entrepreneur.com/ebusiness/index.html• http://webtranz com/ecommerce tips/ten simple steps to starting an ecommerce business• http://webtranz.com/ecommerce-tips/ten-simple-steps-to-starting-an-ecommerce-business• http://iweb.tntech.edu/richardrand/StartupGuide.pdf• http://www.davidhurst.co.uk/2007/03/14/starting-an-e-business-a-beginners-guide/• http://www.va-interactive.com/inbusiness/editorial/biztech/ibt/ecommerc.html

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e-commerce applications 2010/11 introduction e-commerce vs. e … · · 2011-01-31e-commerce...

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