INTRODUCTION TO E-COMMERCE
Definition and Basic Concepts
E-Commerce: Digital transactions between organizations and individuals using internet (web,
mobile browsers, and apps)
E-Business: Digital processes within a firm (internal operations) - does NOT include external
value exchanges
Historical Evolution
1. 1994: Modern e-commerce didn't exist
2. Late 1990s: Period of business vision and experimentation
3. 2002-2007: Retail e-commerce grew >25% annually
4. 2007: iPhone introduction - marked new era in e-commerce
5. Present: Social media and mobile platforms dominate
Technological Building Blocks
1. Internet
Worldwide network of computer networks
Built on common standards
2. World Wide Web
Information system running on Internet infrastructure
Uses HTML (HyperText Markup Language)
Deep Web vs Surface Web (Deep Web 500-1000x larger)
3. Mobile Platform
Enables Internet access via smartphones/tablets
Emphasis on mobile apps
Eight Unique Features of E-commerce Technology
1. Ubiquity
Available everywhere, anytime
Reduces transaction costs
Decreases cognitive energy required
2. Global Reach
Extends market reach worldwide
Lowers market entry costs
3. Universal Standards
Common technical standards (XML, HTML)
Enables integration and information aggregation
4. Information Richness
Detailed content through text, graphics, audio, video
5. Interactivity
Two-way communication between businesses and users
6. Information Density
High amount and quality of information
Enables price transparency
Facilitates cost transparency
Allows price discrimination
7. Personalization/Customization
Based on browsing history
Tailored product recommendations
Individual-specific offerings
8. Social Technology
Social networks integration
User-Generated Content (UGC)
Types of E-commerce
1. Business-to-Consumer (B2C)
Most common type
Businesses selling to individual consumers
Examples: Online retail, travel services, financial services
2. Business-to-Business (B2B)
Largest form of e-commerce
Two main models: a) Net marketplaces (e-distributors, e-procurement) b) Private
industrial networks
3. Consumer-to-Consumer (C2C)
Platforms: eBay, Craigslist, Etsy, Amazon (third-party), Taobao
Facebook Marketplace
On-demand services (Uber, Airbnb)
4. Mobile E-commerce (M-commerce) Growth factors:
Increased mobile device usage
Larger smartphone screens
Responsive design
Enhanced mobile search
Improved checkout/payment systems
5. Social E-commerce Features:
Social network integration
Social sign-on
Network notifications
Collaborative shopping tools
Buy buttons
Shopping tabs
Marketplace groups
6. Local E-commerce
Location-based services
Focus on geographic proximity
On-demand local services
Major Trends in E-commerce
Business Trends
COVID-19 accelerated retail e-commerce
Growth in mobile, social, local commerce
Small business participation increase
Platform economies (Amazon, Google, Facebook)
Technology Trends
Mobile platform dominance
Cloud computing growth
Smart speakers (Google Home, Amazon Echo)
Internet of Things (IoT) expansion
Big data and analytics implementation
Societal Trends
Social network impact concerns
Big tech market dominance issues
Pakistan E-commerce Examples
Tajir
Bookme
Sastaticket
Dastagir
Grocer App
Dawaai.com
Cheetay
FoodPanda
Daraz.pk
SOLOMo, IoT, and Big Data in E-Commerce
1. SOLOMo (SOCIAL-LOCAL-MOBILE) COMMERCE
Definition:
Convergence of collaborative, location-based, and on-the-go technologies
Integration of social media platforms, physical location, and mobile devices
Key Features:
Push notifications to nearby potential customers
Greater local precision in search results compared to PCs
Often incorporates gamification aspects
Integrated into search engine queries
Understanding SOLOMo:
Arose from popularity of smartphones and tablets with geo-location
GPS provides more accurate results than IP mapping for PCs
Taps into large local search market
Requires accurate local business information
App-driven searches solve location accuracy issues
Consumer Perspective:
Integrates social media, location, and mobile devices
Features: • Location detection (e.g., Google Maps, Waze) • Interaction (e.g., WhatsApp, Viber) •
Information input (e.g., Facebook, Twitter, Foursquare) • Information retrieval (e.g., Click the
City, Zomato)
Business Perspective:
Micro-targeting of prospective consumers
Social media for message relay and market reach
Local focus on relevant proximity
Mobile as connection medium between brand and customers
Impact on E-Commerce:
Bridges online and offline worlds
Social drives traffic
Local drives action
Mobile drives opportunity
Potential for significant E-Commerce improvement
Effects on Society:
1. People:
Detects nearby businesses
Impacts businesses through sharing
Convenient deal-finding
2. Businesses:
Increases business and transforms consumer behaviors
Allows deal customization based on history or social media
Enables personalized recommendations
Future of SoLoMo:
Power shift to consumers
Business innovation crucial
Provides real, firsthand experiences
Bridges online-offline gap
Examples:
1. Foursquare (45 million users worldwide)
2. AroundMe (25 million searches in 200+ countries)
3. Yelp (135 million monthly visitors as of 2014)
2. INTERNET OF THINGS (IoT)
Definition:
Network of physical objects with embedded electronics, software, sensors, and network
connectivity
Enables data collection and exchange between objects
Key Features:
Often uses RFID for communication
May include other sensor technologies, wireless tech, or QR codes
Objects represent themselves digitally
Understanding IoT:
Coined by Kevin Ashton in 1999 at Auto-ID Labs
Beyond machine-to-machine (M2M) communications
Covers various protocols, domains, and applications
"Things" include diverse devices (e.g., heart monitors, biochip transponders)
Effects of IoT:
1. On People:
Improves functionality of regular items
Gives new abilities to items
Beneficial in healthcare
2. On Businesses:
Updates time-consuming methods
Impacts startups positively
Increases business quality technologically
Examples:
1. Mimo monitor (infant monitor)
2. GlowCaps (smart prescription bottle caps)
3. Proteus ingestible pill sensor
4. BiKN (wireless valuables detector)
5. Sight Machine (industrial maintenance unit)
3. BIG DATA
Definition:
Massive data volumes from various sources (social media, transactions, research)
Can be structured, semi-structured, or unstructured
Characteristics (5 V's + 1):
1. Volume: Size and amount of data
2. Value: Business benefits from insights
3. Variety: Diversity of data types
4. Velocity: Speed of data processing
5. Veracity: Data accuracy and truthfulness
6. Variability: Changing nature of data
Use in E-commerce:
1. Enhance customer satisfaction through personalization
2. Optimize marketing strategies with data-driven insights
3. Improve operations and supply chain management
4. Gain competitive advantage through analytics
BUSINESS MODELS AND E-COMMERCE FUNDAMENTALS
A. Core Definitions
1. Business Model
Set of planned activities designed to result in profit in a marketplace
Outlines how a company creates, delivers, and captures value
2. Business Plan
Formal document describing a firm's business model
Typically includes financial projections, market analysis, and operational details
3. E-commerce Business Model
Specifically leverages unique qualities of Internet, Web, and mobile platforms
Focuses on digital transactions and online presence
B. Eight Key Elements of Business Models
1. Value Proposition
Core benefit offered to customers
How product/service fulfills customer needs or solves problems
E-commerce specific propositions: a) Personalization/customization: Tailored
experiences b) Convenience: 24/7 access, home delivery c) Price competitiveness: Often
lower overhead allows better pricing d) No shipping cost: Free shipping as a selling point
e) Quick delivery: Same-day or next-day options f) Unparalleled selection: Vast online
inventories g) Product/service quality: Reputation for excellence
2. Revenue Model
Specifies how company will earn money
Major types: a) Advertising revenue model (e.g., Facebook, Google)
Income from displaying ads to users b) Subscription revenue model (e.g., Netflix,
Spotify)
Regular payments for access to content/services
Often includes freemium models c) Transaction fee revenue model (e.g., eBay,
PayPal)
Commission on facilitated transactions d) Sales revenue model (e.g., Amazon,
traditional e-commerce)
Direct sale of goods to consumers e) Affiliate revenue model (e.g., Amazon
Associates)
Commissions for referring customers to other businesses
3. Market Opportunity
Intended marketspace: Area of actual or potential commercial value
Factors to consider: a) Total addressable market (TAM) b) Serviceable available market
(SAM) c) Serviceable obtainable market (SOM)
Typically divided into smaller niches for targeted approach
4. Competitive Environment
Analysis of other players in the marketspace
Factors to consider: a) Direct competitors: Selling similar products/services b) Indirect
competitors: Offering alternatives or substitutes c) New market entrants: Potential
future competition d) Substitute products: Alternative solutions for customer needs e)
Power of consumers and suppliers
Competitive landscape influenced by: a) Number and size of active competitors b)
Market share distribution c) Competitor profitability d) Pricing strategies and trends
5. Competitive Advantage
Special advantages a firm has over competitors
Key concepts: a) Asymmetries: Unequal access to resources or capabilities b) First-
mover advantage: Benefits of being first in a market c) Unfair competitive advantage:
Hard-to-duplicate factors (e.g., patents, natural resources) d) Leverage: Using existing
strengths to enter new markets
Note: Perfect markets theoretically don't allow for competitive advantage
6. Market Strategy
Plan to promote products/services and attract target audience
Elements: a) Market entry strategy b) Customer acquisition methods c) Positioning and
branding d) Marketing mix (4Ps: Product, Price, Place, Promotion) e) Customer retention
strategies
7. Organizational Development
Internal structures necessary to execute the business plan
Considerations: a) Functional departments vs. product-based organization b) Hierarchy
and reporting structures c) Decision-making processes d) Evolution from generalists to
specialists as company grows e) Culture and values alignment
8. Management Team
Leadership required to implement the business model
Key characteristics: a) Market-specific knowledge and expertise b) Experience in
implementing business plans c) Credibility with investors and stakeholders d)
Complementary skills and backgrounds e) Ability to adapt to changing market conditions
II. FUNDING AND CAPITAL RAISING
A. Traditional Funding Sources
1. Seed Capital
Personal funds used to start the business
Often includes savings, credit cards, or loans from family/friends
2. Incubators
Provide small amount of funding
Offer services, mentorship, and resources to startups
Often take equity in exchange for support
3. Commercial Banks
Traditional business loans
Typically require collateral and solid business plan
4. Angel Investors
Wealthy individuals investing personal funds
Often provide mentorship along with capital
Usually invest in early stages for equity
5. Venture Capital Firms
Professional investors managing funds from multiple sources
Typically invest larger amounts in high-growth potential startups
Often take board seats and actively involve in company decisions
6. Strategic Partners
Established companies investing for mutual benefit
Can provide industry expertise, distribution channels, etc.
B. Crowdfunding
1. Donation-based
Individuals donate without expectation of return
Often used for personal or community projects
2. Rewards-based
Backers receive non-financial rewards based on contribution level
Common for product pre-sales or creative projects
3. Equity-based
Investors receive shares in the company
Regulated by securities laws
4. Debt-based
Lenders receive interest on their investment
Also known as peer-to-peer lending
C. Elevator Pitch
1. Purpose: Short, persuasive speech to spark interest in a project, idea, or product
2. Key Components: a) Clear objective: What you're seeking (investment, partnership, etc.) b)
Defined audience: Tailored to specific listeners c) Engaging hook: Attention-grabbing opening d)
Value proposition: Clear statement of unique benefits e) Supporting evidence: Key facts, figures,
or achievements f) Concise delivery: Typically 2-3 minutes g) Call to action: Specific next steps h)
Q&A preparation: Anticipate and prepare for likely questions
E-commerce Business Models:
The book categorizes e-commerce business models based on:
1. E-commerce sectors (B2B and B2C)
2. E-commerce technology (e.g., m-commerce)
Note: Similar business models can appear in more than one sector, and some companies use multiple
business models (e.g., eBay, Amazon)
B2C (Business-to-Consumer) Models:
1. E-tailer
Online version of traditional retailer (e.g., Walmart, Macy's)
Revenue model: Sales
Variations: a) Virtual merchant (e.g., online banks) b) Bricks-and-clicks c) Catalog
merchant (e.g., home shopping network) d) Manufacturer-direct
Low barriers to entry
2. Community Provider
Provides online environment for people with similar interests
Examples: Facebook, LinkedIn, Twitter, Pinterest
Revenue models: Typically hybrid, combining advertising, subscriptions, sales,
transaction fees
3. Content Provider
Offers digital content on the Web (news, music, video, text, artwork)
Revenue models: Subscription, pay-per-download (micropayment), advertising, affiliate
referral
Variations: a) Syndication (distributes content owned by others) b) Web aggregators
(e.g., shopping.com, Travelocity, Priceline)
4. Portal
Offers searching capability plus integrated package of content and services
Revenue models: Advertising, referral fees, transaction fees, subscriptions
Variations: a) Horizontal/general (for all internet users) b) Vertical/specialized (vortal) -
focused on specific industry or subject
5. Transaction Broker
Processes online transactions for consumers
Revenue model: Transaction fees
Industries: Financial services, travel services, job placement
6. Market Creator
Creates digital environments for buyers and sellers to transact
Examples: Priceline, eBay, E*trade
Revenue model: Transaction fees, fees for merchant access
7. Service Provider
Offers online services (e.g., Google Maps, Gmail)
Value proposition: Convenient, time-saving, low-cost alternatives to traditional services
Revenue models: Sales of services, subscription fees, advertising, sale of marketing data
B2B (Business-to-Business) Models:
1. E-distributor
Online version of retail/wholesale store for MRO goods and indirect goods
Revenue model: Sales of goods
Example: Grainger.com
2. E-procurement
Creates and sells access to digital markets for indirect goods
Revenue model: Service fees, supply-chain management, fulfillment services
Example: Ariba
3. Exchanges
Independently owned vertical digital marketplace
Revenue model: Transaction, commission fees
Creates competition between suppliers
4. Industry Consortia
Industry-owned vertical digital marketplace
More successful than exchanges
Sponsored by powerful industry players
Revenue model: Transaction, commission fees
Example: Exostar (defense industry)
5. Private Industrial Networks
Digital network for coordinating among firms in business together
Often owned by a large network firm
Example: Walmart's network for suppliers
Cost absorbed by network owner, recovered through efficiencies
Key Differences:
Exchanges: Many suppliers, few large buyers; generate revenue from commissions
Consortia: Industry-owned, serves vertical marketplace
Private Industrial Network: Coordinates communication among business partners, invitation-
only
Impact of E-commerce on Business:
1. Changes industry structure by affecting:
Rivalry among existing competitors
Barriers to entry
Threat of new substitute products
Strength of suppliers
Bargaining power of buyers
2. Affects Industry Value Chains:
Reduces cost of information and transactional costs
Leads to greater operational efficiencies, lower costs, and added value for customers
3. Impacts Firm Value Chains:
Increases operational efficiency
Enables product differentiation
Allows precise coordination of steps in the chain
4. Enables Firm Value Webs:
Networked business ecosystem using Internet technology
Coordinates value chains of business partners
Uses Internet-based supply chain management systems
