Chapter 1

The Revolution Is Just Beginning

 E-commerce Trends 2011–2012
 Social networking continues to grow
 Expansion of social e-commerce platform
 Mobile platform begins to rival PC platform
 Localization of e-commerce (Groupon)
 Explosive growth in online video viewing
 Continued privacy and security concerns

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 The First 30 Seconds
 First 16 years of e-commerce
 Just the beginning
 Rapid growth and change

 Technologies continue to evolve at

exponential rates
 Disruptive business change
 New opportunities

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 What Is E-commerce?
 Use of Internet and Web to transact
business
 More formally:
Digitally enabled commercial transactions
between and among organizations and
individuals

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 E-commerce vs. E-business
 E-business:
 Digital enabling of transactions and processes
within a firm, involving information systems
under firm’s control
 Does not include commercial transactions
involving an exchange of value across
organizational boundaries

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 Why Study E-commerce?
 E-commerce technology is different, more
powerful than previous technologies
 E-commerce brings fundamental changes to
commerce
 Traditional commerce:
 Consumer as passive targets
 Sales-force driven
 Fixed prices
 Information asymmetry

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 Unique Features of E-commerce
Technology
1. Ubiquity
2. Global reach
3. Universal standards
4. Information richness
5. Interactivity
6. Information density
7. Personalization/customization
8. Social technology

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 Web 2.0
 User-centered applications and social
media technologies
 User-generated content and communication

 Highly interactive, social communities

 Large audiences; yet mostly unproven business

models
 e.g., Twitter, YouTube, Facebook, Second Life,
Wikipedia, Digg
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 Types of E-commerce
 Classified by market relationship
 Business-to-Consumer (B2C)

 Business-to-Business (B2B)

 Consumer-to-Consumer (C2C)

 Classified by technology used

 Peer-to-Peer (P2P)

 Mobile commerce (M-commerce)

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 The Internet
 Worldwide network of computer networks
built on common standards
 Created in late 1960s
 Services include the Web, e-mail, file
transfers, etc.
 Can measure growth by looking at number of
Internet hosts with domain names

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The Growth of the
Internet, Measured
by Number of
Internet Hosts with
Domain Names
Figure 1.2, Page 23

SOURCE: Internet Systems Consortium,

Inc., 2011.

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 The Web
 Most popular Internet service
 Developed in early 1990s
 Provides access to Web pages
 HTML documents that may include text,
graphics, animations, music, videos
 Web content has grown exponentially
 Google reports 1 trillion unique URLs; 120
billion pages indexed

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 Origins and Growth of E-commerce
 Precursors:
 Baxter Healthcare
 Electronic Data Interchange (EDI)

 French Minitel (1980s videotex system)

 None had functionality of Internet

 1995: Beginning of e-commerce

 First sales of banner advertisements

 E-commerce fastest growing form of

commerce in United States
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 The Growth of B2C E-commerce
Figure 1.3, Page 25

SOURCES: Based on data from eMarketer, Inc., 2011a; authors’ estimates.

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 The Growth of B2B E-commerce
Figure 1.4, Page 28

SOURCES: Based on data from U.S. Census Bureau, 2011b; authors’ estimates.

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 Technology and E-commerce
in Perspective
 The Internet and Web: Just two of a long list
of technologies that have greatly changed
commerce. Others:
 Automobiles

 Radio

 E-commerce growth will eventually cap as it

confronts its own fundamental limitations.

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 Potential Limitations on the Growth
of B2C E-commerce
 Expensive technology
 Sophisticated skill set
 Persistent cultural attraction of physical markets
and traditional shopping experiences
 Persistent global inequality limiting access to
telephones and computers
 Saturation and ceiling effects

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 E-commerce: A Brief History
 1995–2000: Innovation
 Key concepts developed
 Dot-coms; heavy venture capital investment

 2001–2006: Consolidation
 Emphasis on business-driven approach

 2006–Present: Reinvention
 Extension of technologies
 New models based on user-generated content, social
networks, services
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 Early Visions of E-commerce
 Computer scientists:
 Inexpensive, universal communications and computing environment
accessible by all

 Economists:
 Nearly perfect competitive market;
friction-free commerce
 Lowered search costs, disintermediation, price transparency, elimination
of unfair competitive advantage

 Entrepreneurs:
 Extraordinary opportunity to earn far above normal returns on
investment—first mover advantage

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 Assessing E-commerce
 Many early visions not fulfilled
 Friction-free commerce
 Consumers less price sensitive
 Considerable price dispersion

 Perfect competition
 Information asymmetries persist

 Intermediaries have not disappeared

 First mover advantage
 Fast-followers often overtake first movers

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 Predictions for the Future
 Technology will propagate through all commercial activity
 Prices will rise to cover the real cost of doing business
 E-commerce margins and profits will rise to levels more
typical of all retailers
 Cast of players will change
 Traditional Fortune 500 companies will play dominant role
 New startup ventures will emerge with new products, services
 Number of successful pure online stores will remain smaller
than integrated offline/online stores
 Regulatory activity worldwide will grow
 Cost of energy will have an influence

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 Understanding E-commerce:
Organizing Themes
 Technology:
 Development and mastery of digital computing and
communications technology
 Business:
 New technologies present businesses with new ways of
organizing production and transacting business
 Society:
 Intellectual property, individual privacy, public welfare
policy

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The Internet and
the Evolution
of Corporate
Computing
Figure 1.8, Page 44

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 Academic Disciplines
Concerned with E-commerce
 Technical approach  Behavioral approach
 Computer science  Information systems
 Management science  Economics
 Information systems  Marketing
 Management
 Finance/accounting
 Sociology

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