Tutorial – E-Commerce
1.
What
is E-Commerce?
2.
Benefits and Challenges of E-Commerce.
3.
How to implement an E-Commerce Initiative.
1. What is
E-Commerce?
Electronic Commerce, or
E-Commerce, involves the buying,
selling, and
trading of goods on the internet.
The Internet
Many of us take the
internet for granted – we use email, we seek information about products we are
interested in buying, we do our banking, we read the news, and perform many
other regular day-to-day activities. The
internet, however, has only been around for a short time – really only about
ten years, with the last five showing the greatest amount of growth.
History
The internet began as
a 1960s cold-war American military initiative to spread communication
technology around the country in order to avoid having one nuclear bomb destroy
all command capabilities. To help
accomplish this mission, the military enlisted top scientists at several major
universities, who realized that the inter-connected computers of the internet
would also be a great way for university researchers to communicate data and
ideas with each other.
Up until the late
1980s the main use of the internet involved these military and university
researcher applications, because the computer code and technical know-how was
simply too complex for other businesses or citizens to be able to participate.
That changed in 1989 when an Englishman, Tim
Berners-Lee, developed a computer code that allowed others to more easily write
content for the internet. This language
was called hypertext markup language, or
HTML.
HTML is a “protocol”
or set of rules about how pages of text and graphics are displayed as web pages
by internet browser programs such as Internet Explorer and Netscape
Navigator. When these uniform rules were
put in place, use of the internet began to grow rapidly. This rapid growth was helped immensely by the
arrival of HTML “editor” programs, such as Microsoft’s FrontPage and Macromedia’s
Dreaweaver, programs that allowed users to design web pages in word documents
that would then be translated into HTML by the editor programs.
Use in Commerce
In its early years
the internet was considered a public property, and like public television and
public radio was not allowed to sell advertising or to allow commercial
programming. That changed, however, in
1995, when a portion of the internet was officially designated as available for
businesses to use to sell goods and services (although many companies had
already taken up cyberspace on their own).
Businesses slowly began to see the benefits of
using the internet to reach both customers and other stakeholders, such as
investors, vendors, and employees. Soon
products were being offered for sale, and such major internet pioneers as Amazon and eBay
were growing rapidly. Others soon
followed, and the rest, as they say, is history.
There are some interesting
sites on the web that detail the history of the internet. Look at http://www.walthowe.com/navnet/history.html
for a narrative history. I am especially
fond of http://www.howstuffworks.com/internet-infrastructure.htm
which explains the “infrastructure” or architecture of the internet.
2. Benefits and Challenges of E-Commerce.
Disintermediation
The early and still major use of the internet is for email (electronic
mail). Email is such a part of our lives that it is difficult to comprehend a
world without it, but I, however, am old enough to recall what it was
like. To communicate in business we used
the telephone – no, cell phones had not been invented, we used the
wired-to-the-wall telephones like many of us still have at home.
More often than not when we called someone on business they were not
there, and the person who answered, a secretary or
receptionist, would take a message for us to return the call. After this “telephone tag” back-and-forth, we
would make contact and discuss the issue, hang up, do research, then play
telephone tag again in order to pass along our findings. Not very efficient, though it was faster than
the earlier technology – writing letters – that it replaced.
Email allowed us to write a full description of the issue, send it to
the recipient who would research and reply and send results to us faster and
without the involvement of that middle person – the receptionist or
secretary. This removing of the
“middleman” is one of the biggest benefits of using internet technology, and is
referred to as “disintermediation”
– removing the “intermediate” layer in the chain of communication.
Disintermediation in E-Commerce
Disintermediation is the goal of many e-commerce strategies. Producers would like us to buy directly from
their factory so that the middleman – the retail store – can be
eliminated. This works well in some
cases – lego.com and Dell are good examples. Nike has also launched a web site where users
can go and personally design and buy shoes without having to visit a store – Nike
.
A disintermediation strategy can also consist of the retailers
themselves eliminating the expensive facilities previously needed to sell
products – the stores – and inducing customers to buy online instead. Amazon is a great example of this, but others
are also utilizing this strategy – visit 1-800-flowers
and drugstore.com .
Will everyone buy
online? Does every product lend itself to being sold on the web? No, and no.
Many people still want to touch and feel, and it continues to be
difficult to sell large goods and perishables on the web. Because of this many companies have adopted a
“bricks and clicks” strategy; there are good-old-retail stores, but also web
stores for those customers who like researching and perhaps buying products
online. Bricks and clicks examples are Target , Barnes and Noble , and even Safeway .
Review of Benefits
Some people argue
that disintermediation is really not taking place in “bricks and clicks”, but
even if the brick and mortar stores themselves are not eliminated, many
positions within the companies can be streamlined by using the internet. This
can create large cost savings.
In addition, new
markets can be opened and more customers reached by having an online store,
thus creating the possibility of increases in sales.
·
Improved Customer Service
By having an internet
store, companies can offer customers the convenience of shopping at home 24
hours a day, seven days a week. There is
detailed product information, and the web store can be designed to allow for
easy (shopping cart) ordering. The
customer feels in control rather than pushed by a salesperson, but can always
call or visit a local store if more information is needed. In many cases, however, orders can be taken
and processed automatically, without the need for additional staff.
·
Expanded Markets
The internet
effectively eliminates geographical boundaries, so internet businesses can
reach a greater number of potential customers.
Recently I purchased a wire fence for a dog run. I live in
·
Reduced Marketing Costs
The development of an
effective web site can be very expensive – it reportedly cost Kmart $4 million
to develop their “blue light”
online store (since renamed Kmart because not all customers linked “blue light”
with the Kmart store).
This, however, is an
exception. Developing an online store
can be much cheaper, in the long run, than publishing an ongoing catalog or
buying space every week in local newspapers.
Over time, as more customers seek information and products online, the
printed advertising pieces can be reduced in number and size, lowering overall marketing
costs.
Ecommerce Challenges
So, we can increase
sales and decrease expenses by creating an online store, even if we retain our
prior brick and mortar retail locations.
What could possibly keep e-commerce from growing spectacularly? Several
things…
·
Security and Privacy Concerns
Many consumers,
scared of identity theft or of disclosures of personal information, do not want
to divulge anything of a personal nature online. This makes it difficult to complete a
transaction!
·
Scams and Fraud
We also hear almost
every day of scams and fraud committed online.
Often these target older, less tech-savvy consumers, further reducing
the likelihood that they will become comfortable with online transactions.
·
Downtime and Poor Service
What if you went to
the mall to visit your favorite store and found a big sign on the front door
saying “currently unavailable?” Would
you go back? Have you ever tried to go
to a web site and found it to be currently unavailable? Same problem.
It is also
inconvenient and frustrating to have questions about a product or an order and
to not be able to contact a person. Many
web sites now have “bail outs” for customers – an 800 number or an email that
contacts a live person. Nordstrom even
has a “personal
shopper” chat room where questions can be asked of a live human.
·
Awkward Design and Functionality
Pot Noodles is a pretty funny
site, though it looks suspicious at first glance. How many people have been driven away
thinking they’ve reached a porn site? If
a web site is not attractive and easy to use, people will click away very
quickly. The following is an interesting
article on how to make your web site UNattractive. Hopefully we won’t take his advice! Lame Web Sites
Basic Tools that are
needed and must be easy to use are:
Ø Product Categories
Ø Product Information
Ø Customer Service
Ø Shopping Cart
Ø Payment acceptance – credit cards, PayPal
·
Lack of Retail Experience
One of my favorite
commercials shows a group of people in an office crowded around a
computer. One of them says “here we go”
and pushes the enter button, evidently to make their new e-commerce site open
for business. After a short pause, the box
on the screen labeled “orders” registers “1”.
Much cheering and clicking of champagne glasses. Then the box quickly flashes to “15”, then
“179”, then “2,583”, then “39,458”, then … You get the idea. The cheering and revelry stops as the new
business owners realize that they had no concept of – nor were they prepared
for – the huge volume of orders that were coming in. What would happen? Customers would not get their order, would
complain, would tell friends of the awful experience, maybe go to chat rooms to
share the bad experience, etc.
Successful e-commerce
requires what any business requires; good planning and preparation, and
expertise in the business being entered, not just in developing a web site.
3. How to
implement an E-Commerce Initiative.
How do companies
decide where to insert e-commerce in order to increase sales or reduce
expenses? Is it as simple as building a
web site? Maybe. Dell Computer utilized
a SWOT analysis (strengths, weaknesses, opportunities, and threats) to help
develop their business plan for selling directly to consumers without going
through retailers. They concluded that
the opportunities – increased sales and profits – were greater than the threats
-- that consumers would not want to buy online because of the inability to
touch and feel and talk to a salesperson.
Did it work?
Other ways to use
internet technology are to install an email system, and to set up an “extranet”
so customers and vendors can communicate with the company more easily without
the company having to add more people.
Many companies set up email and extranets long before they develop a web
site.
For small businesses,
there are a number of web resources for developing web presences. Visit Yahoo and watch the tutorial
on web site development. (It’s on the right – scroll down and look for “Take
the Tour”.)
Conclusion
The final comment on
this discussion about e-commerce is simple – if businesses don’t incorporate
e-commerce into their overall business strategies, they’re in trouble! Companies that utilize the internet to
increase revenues and decrease costs will quickly out-compete those who
don’t. So the question is not should the internet and e-commerce be a
part of the business plan, but where.