IS5600 Seminar 3

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IS5600Seminar 3

• Global Electronic Commerce

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The Buyoyo Story (www.buyoyo.com)

• Founded 1999 as DVDshelf.com, later Layoyo
• The largest Internet retailer of Chinese
  Entertainment Products in the world.
• 250,000 different products DVD, VCD, CD, Books,
  Games, Mobile Accessories, etc..
• Partners galore!
• YoYo Cash for loyalty.
• A valuable niche, with no existing major players
  but a potentially huge market.
• Hardly anyone in Hong Kong has heard of it, but
  that is irrelevant to its success!

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What is so Special?

• E-Commerce enables us to do new things in new
  ways
• Buying/Selling/Procuring
• Reduced costs easier to find cheap suppliers,
  online ordering
• Supply Chain Integration
• Increased efficiency, tighter inventory control
  (JIT)
• Reduced fragmentation of markets
• Communicating and Disseminating
• More effective and efficient
• Competing
• Middlemen must adapt to survive or be
  eliminated
• Increased market intelligence
• We know who is selling what and at what price
• Increased transparency
• For better or worse.

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For example B2C

• Buying new books from www.amazon.com
• Buying 2nd hand books via www.abebooks.com
• Buying Chinese DVDs from www.buyoyo.com
• Tracking your packages at www.fedex.com
• Performing G2C transactions at www.gov.hk
• Reading the newspaper online at www.scmp.com
• Booking your flights/vacation from www.ctrip.com
• Booking a hotel room at www.wotif.com
• Financial management at www.hsbc.com.hk

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B2C What about You?

• Who buys online?
• What? Where? How often?
• What do you see as
• the barriers, the drivers
• What opportunities are still to be enabled?
• What would you like to do but cant?

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For Example B2B

• Arranging cargo shipments at cargosmart.com
• Performing G2B transactions at tradelink.com.hk
• Searching for suppliers at bizbb.com or
  alibaba.com
• Electronic handling of routine financial/ordering
  information between
• paper suppliers and printers
• car manufacturers and parts suppliers
• health care distributors and hospitals

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What Do your Companies do With E-Commerce?
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For Example C2C

• eBay
• Both auctions and fixed price sales
• Hundreds of thousands of sellers, many full-time
• E.g. Schuh Store, a UK reseller of discounted
  shoes, sales vol 150k pairs/year
• TaoBao
• Talk to the seller, develop trust (even guanxi)
  and then negotiate prices and delivery terms.
• Financial Intermediaries to support
• PayPal and AliPay

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TaoBao

• Buyers - no registration fees/commissions
• Sellers Quite a complex charging structure
• Seller Online status is indicated
• Helping buyer awareness
• Embedded communications channel (WangWang)
• Helping buyers develop trust in sellers
• Now the major C2C auction/sales site in China
• eBay (China) opted out in December 2006
• Since April 2009, a new B2C platform as well.
• But there are also complex factors influencing
  success.
• What are the Chinese factors driving success?

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Smart Card Enabled E-Commerce

• The Octopus Card can be used for
• transport, parking, shopping, building access,
  discounts,
• Benefits for consumers, providers/operators
• Reduced cash handling, improved cash flow
• Convenience and cleanliness
• Buy 10 get 1 free offers
• Swipe now for a x discount off your next trip or
  a cup of coffee
• Disadvantages?

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Smart Card Enabled E-Government and E-Control

• We dont have a choice about the Smart ID Card!
• Functionality and Privacy Issues
• Who uses the smart functions?
• Who worries about the privacy?
• Could it be scanned or detected?
• Could someone find out where I am?
• My boss?
• My wife?!
• And would I even know?
• Note The police can locate mobile phones to
  within 50m.
• Note In China, the police keep records of all
  calls and sms.

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Consumer Loyalty Drives Competitive Advantage

• Creating a compelling online experience for
  cyber consumers is the key to attaining
  competitive advantage on the Internet
• Jeff Bezos (Amazon CEO)
• But is it the only key?
• And what does compelling online experience
  actually mean?
• Do we agree on what a compelling online
  experience feels like?

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Contributing Factors to eLoyalty? (US)

• Information content
• Safety/security
• FAQ/Answers to questions
• Visual appeal
• Download time
• Ease of Use / Navigation
• Payment options
• Reputation

More important
Less important
Devaraj et al., 2003
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Contributing Factors? (HK)

• What might persuade you to be e-loyal?

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Trust and Distrust

• Trust is seen as a critical motivator of online
  buying.
• What might lead a potential consumer to trust an
  online shop?

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A Chinese Propensity to Distrust?

• Distrust propensity
• I would like to buy online, but what I concern
  most is the e-vendors untrustworthiness.
• The first question that online customers ask is
  ?????
• Lack of EC governance
• I dont know where to complain about online
  fraud.
• Insufficient legal infrastructural support
• Counterfeiting is a major concern for
  transactions in general. It is even more serious
  online. Why should I bother myself with online
  purchases?
• In such a highly uncertain and risky virtual
  environment, distrust is a more prevalent
  mechanism than trust to help avoid potentially
  negative consequences.

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Guanxi

• Guanxi (close personal ties and social
  networking, typically operating in a dyadic and
  reciprocal fashion)
• Can guanxi be created online?
• How does guanxi differ from trust?
• Recent research suggests that guanxi is an
  intimate part of TaoBaos web-strategy.
• Such psychosocial variables must be considered by
  website managers and business leaders.

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Personalization

• Do all customers want the same interface?
• Do they all respond to the same stimuli?
• Are they all equally goal or process oriented?
• Can we use the same tactic to get their loyalty?
• Personalization is recognised as a major
  opportunity - yet also a major headache.

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Personalization

• Studies of culture tell us that stereotyping is
  dangerous.
• Some people like a simple interface, easy to use,
  quick to find what they want.
• Others appreciate a more challenging, or fun,
  interface.
• Hedonism (enjoyment/entertainment value) is a big
  turn on for some people

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Hedonism

• But are you turned on
• by colourful graphics, and visually arousing
  displays of information?
• or by distracting icons and flashing lights?
• or by a very simple interface that loads fast and
  gets you what you want?
• Also, is it safe to assume that all people in one
  cultural group will share similar characteristics?

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BUSINESS / REVENUE MODELS (1)adapted from
Michael Rappa http//digitalenterprise.org/models/

• Auctions Market makers bring buyers and
  sellers together
• Advertising Extends traditional broadcast
  model
• Infomediary Collects and sells data about
  users or products
• Merchant Online retailers

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BUSINESS / REVENUE MODELS (2)

• Community Loyal users provide
• funds and/or content
• Subscription Users pay for access
• Utility Metered usage or
• pay-as-you-go approach
• Manufacturer Web compresses distribution
  channel customers can tailor their goods
  before delivery

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BUSINESS / REVENUE MODELS (3)

• Financial Intermediaries
• Government Services
• Aggregators
• E-Ticketing
• Trading Intermediaries Market Spaces

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Which Business/Revenue Models Work Most
Effectively in HK? Can E-Commerce Work in HK
at all?Note Think very carefully about the
nature of the marketspace.
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Marketspace Themes I

• EC is changing the importance of time. 24-hour
  communication continuous buying and selling
• EC is diminishing the importance of geographical
  boundaries anytime, anyplace transactions, but
• legal issues? logistics? finance/payment?
  security/jurisdictions? culture?

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Marketspace Themes II

• EC is changing the character of intermediation
• HK has traditionally built much of its wealth out
  of intermediating trade between China and the
  outside
• Intermediation functions still exist, but they
  look different with disintermediation and
  reintermediation
• How does HK add value these days?

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Marketspace Themes III

• EC is premised on technical and philosophical
  openness
• The Internet is fundamentally open and
  non-proprietary
• Though Microsoft and Google might like to change
  that
• Supply Chain Partnerships
• Competition or Cooperation?
• Airbus considers its suppliers to be its
  strategic partners
• Major implications for Customer Relationship
  Management, political and social transformations,
  censorship, transparency and privacy

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Dis-, Re- and Inter-mediation

• New entrants can disintermediate existing
  relationships online travel agents, stock
  brokers, etc.
• Established organisations can reintermediate or
  reinvent existing markets, creating new value for
  customers
• Both practices come from the emergence of
  information as a critical strategic resource.

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Strategic Impacts of EC

• Information is a source of revenue
• Companies must be able to provide immediate
  response to requests for information
• Quality and speed of information is critical
• Extensive information is available from the
  government and commercial sources (including
  competitors)
• Web-literate (and liberated) consumers have
  access to all makes and models of a product line

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Problematic Issues with EC

• EC is not without its fair share of problems
• These involve such disparate areas as
• Taxation
• Complaints, Refunds and Returns
• Transborder Data Flows
• Domain Name Problems and Cybersquatting
• Not to mention consumer comfort with
• Security, privacy, lack of touch-and-feel

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What if

• I live in Hong Kong, and use a Canadian
  intermediary (but the servers are physically
  located in Fiji) to buy a book from an Egyptian
  bookshop, with the payment verified by a bank
  located in France, using my Hong Kong issued
  credit card, and delivery organised through the
  Cairo office of Federal Express (which is
  governed by US law).
• Where is the transaction taking place?
• Which tax law applies?
• What should I do if the book doesnt arrive?

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Transborder Data Flows 1

• EU law prohibits transfer of personal consumer
  data to countries/jurisdictions that do not
  conform to/uphold EU privacy regulations
• Hong Kong has had advanced data protection laws
  (based on the UK) since 1996
• China has relatively weak laws for the protection
  of private data
• Transferring data from the EU to HK?
• Transferring data from the EU to CN? (via HK)
• Transferring data from HK to CN?

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Transborder Data Flows 2

• Many HK banks process account data in Guangdong.
• They have told you, in the small print, and you
  have agreed (opted-in) by not closing your
  account.
• Its legal, but is it ethical?
• Does it protect the best interests of the
  customer?
• What happens if there is a data leak?

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Domain Name Problems

• Cybersquatting Typosquatting
• Registering famous brand names in the hope that
  the real companies will buy them from you for a
  lot of money
• Or using those famous names so as to give the
  real company a bad name
• These practices are now illegal in many
  jurisdictions

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Cyber- Typo- Squatting Examples

• www.checkpoint.com.hk ? www.checkpoint.com
• www.whitehouse.gov ? www.whitehouse.com .org, or
  .net
• web.archive.org/web/20030219162705/http//whitehou
  se.net/
• http//en.wikipedia.org/wiki/Whitehouse.com
• www.shkp.com ? www.sunhungkai.com
• http//www.goooogle.com/

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Email Scams

• From Donald Kaberuka revafdb_at_yahoo.com
• Subject What is going on now?
• What is going on now? For your urgent information
  since we have not heard from you the board of the
  directors of my bank has finalize to pay your
  10millionUSD in cash through diplomatic means,
  and the diplomat is leaving on Friday to deliver
  your consignment, now we need you to reconfirm to
  us this information below to avoid wrong
  delivering.
• A. Full name
• B. Home or office address where to deliver the
  consignment
• C. The name of nearest international airport
  around you
• D. Direct telephone where she will contact you as
  soon as she arrived
• E. Scan copy of your driving license or passport
  picture for identification
• Do not fail to reconfirm all this information as
  soon as you receive this mail and Call me at
• 234-70-28095675, because there is no more time.
• Yours faithfully
• Rev Kampson T. Lars,

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Privacy Consumer Protection

• Many techniques are now available to facilitate
  learning about your customers with data-mining
  technology
• And then, to create databases that can be used to
  spam email millions of people with sales
  initiatives
• Privacy has become a very sensitive area
• New anti-spam laws in HK
• Will they work?
• What will the spammers do in response?

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Unsolicited Electronic Messages Bill Key Points

• http//www.news.gov.hk/en/category/ontherecord/060
  120/html/060120en11001.htm
• Only commercial spam to be regulated
• Not personal, government, charity, religious,
  educational
• All types of electronic messages covered
• Email, sms, mms, fax, pre-recorded phone,
• Opt-in or Opt-out?
• Opt-out, but with do-not-call registers
• So you can opt-out of all at once
• Extra-territoriality also covered
• From or to or via HK

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Unsolicited Electronic Messages Bill Enforcement

• How sharp are the teeth?!
• Uncertain
• Also, it seems rather troublesome to get the TA
  to bite the spammer
• If you should feel aggrieved by such calls, the
  Unsolicited Electronic Messages Bill would
  empower you, as a victim, to seek in court
  remedies from the spammer, including compensation
  by way of damages for the pecuniary loss that you
  have suffered.

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.HongKong coming soon

• Soon we expect to see new TLDs like .NewYork,
  .ikea, .university, .school, etc.
• This will open up cybersquatting opportunities
  and it will cost businesses a lot to register
  multiple domain names
• Amazon.amazon, amazon.shopping,
  amazon.electronics, etc.
• Banks and their customers in particular are
  vulnerable phishing attacks may increase

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Lessons for EC

• The world (or a large chunk of it) should be the
  market
• Creating a compelling experience is essential
• unless you are lucky enough to have a monopoly
• Developing buyer-seller trust cannot be ignored,
  especially if no legal protection for
  transactions
• There are many business/revenue models, but which
  one is going to work?
• The Amazon look-n-feel is widely copied, but it
  doesnt always work

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Situation Analysis in Hong Kong

• What are the EC Opportunities in HK?
• Remember that B2C is only about 5 of the value
• So what are the opportunities in B2B, B2G?
• Think of web services
• What kind of digital assets can we leverage?
• How can HK intermediate so as to add value to
• Industries? Processes? Countries? People?
• Examples needed