ELECTRONIC COMMERCE

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
Types of Trade

• 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

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 costsif anyto 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
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SEARCH ENGINE OPTIMIZATION

• Search engines
• Search engine rankings
• Optimizing for rankings
• Content
• Reciprocal linking

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Search engines

• Search engines vs.
• Directories
• Portals
• Link sites
• Paid vs. unpaid links
• Specificity
• Content
• Intended users
• Strategy/philosophy

12
Search engines

• Use an algorithm to identify preferred links
• Algorithms may involve
• Usage of keywords
• Popularity (number of links pointing inward)
• Other criteriaoften proprietary

13
Strategy

• General search engine (e.g., Google)
• Search engine with directory structure (e.g.,
  Yahoo!)
• Aggregator sites
• Specialized search engine
• Focus
• Method (e.g., AskJeeves.com, About.com)
• User target
• Reward

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Search Engine Optimization Text

• Credible repetition of key words
• Frequently greater credit for
• Bolded words
• Words early in the document
• Identification of desirable key words
• Analysis of competing sites
• Customer interviews
• Misspellings

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Search Engine Optimization Reciprocal Linking

• Linking from highly rated web sites greatly
  increases the ranking of a site
• Linking from low rated sites does not appear to
  help much
• The weight of a link may be determined by the
  number of links at that pageone link among many
  is worth less
• Linking to spamming sites may be penalized

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Search Engine Optimization Other

• Domain names
• If the domain name features the keyword, more
  weight is given
• Google considers the underscore a spacee.g.,
  Marketing_Tips.com .
• Listing in the Open Directory Project
  (http//www.DMOZ.org) .

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Building Traffic

• Viral marketing
• Incidental contagion
• Contagion due to transaction consumption
• Consumers as recruiters
• Search engines
• Internet advertising
• Promotions/free products

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Viral Marketing

• Suitability
• Product uniqueness
• Excitement
• Simplicity
• Low trial and switching costs

• Potential problems
• Brand control
• Limited control over growth
• Measurement problems
• Spam threats

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Promotions

• Free products
• Free content/services
• Site quality
• Promotion models
• Direct
• Intermediary

20
Internet Penetration by Country, 2004
U.S.
Australia
Sweden
Brazil
Netherlands
Note accounting issues!
Japan
Source Nielsen.
21
Language Issues

• Prior to 2000, 96 of web sites were estimated to
  be in English, the first language of 6 of the
  World population
• 40.2 of online users are estimated to speak
  English to some extent
• 2000 Non-English speakers became majority of
  Internet users

• 75 of Europeans are multi-lingual 90 of these
  include English
• Dangers of U.S. English
• British English is international standard
• American often perceived as misspelled
• Use of slang
• Lesser distance to British English than to other
  European languages

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Language Display

• Single-byte (Latin-based) vs. double-byte
  languages (Cyrillic, Arabic, Chinese, Japanese,
  Korean)
• Characters may not be displayed correctly (????
  in Internet Explorer)
• Conversion software
• Brower adaptation may not be backwards
  compatible with other software

23
Cultural Issues

• Color
• Black as background
• Stylish in U.S.
• Unlucky in Asia, Europe, Latin America
• Red as a lucky color in China but can be
  over-used
• White and green are unlucky in Cina

• Symbolism
• Dogs as pets
• Numbers
• Unlucky numbers
• 4, 9, 13 (Japan)
• 4, 14 (China)
• Lucky numbers
• 1, 8 (China)
• Formality of communication

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More Cultural Issues

• Measurement issues
• Metric vs. U.S., British systems
• Clothing sizes
• Representation of numbers
• 1,000.00 vs. 1.000,00
• Dates

• Offensive content
• Specific body parts
• Revealing content
• Gestures