Introduction E-Commerce Applications What is E-Commerce? What is the difference between E-Commerce and E-Business? How does EC differ from a normal high street store/business? What are your experiences of EC? Good/Bad? Session 1 1
E-Commerce vs. E-Business E-Commerce: The process of buying, selling, or exchanging products, services, or information over computer networks. E-Business: A broader definition of E-Commerce that includes not just the buying and selling of goods and services, but also servicing customers, collaborating with business partners, and conducting electronic transactions within an organization. Terms often used interchangeably. Adapted from: Electronic Commerce A Managerial Perspective, Turban, Prentice Hall, 2009. See also: http://en.wikipedia.org/wiki/electronic_business and http://en.wikipedia.org/wiki/electronic_commerce Session 1 2
E-Business: What is it? E-Business: to conduct business electronically. bank customer Product or Service Inventory e-business supplier Fulfilment Customer Service Marketing carrier Payment Measuring success Session 1 3
E-Commerce: What is it? E-Commerce: Buying and selling of goods and services over the Internet. Internet ISP customer carrier bank www e-shop site ASP business payment service bank Product/Service Currency Tax models Shipping Exceptions, returns, charge back Plus: Inventory, Fulfilment, Customer Service, Marketing, Finance, Measuring success Session 1 4
Forms of E-Commerce Different Forms of EC, depending on degree of digitisation of: Product or service (physical or digital) Process involved (ordering, payment, delivery) Two main forms of EC, pure or partial: Pure: product, ordering, payment and delivery are all digital, e.g. music (mp3) or book (PDF) downloads. Online banking, bill payment. Partial: at least one part of the transaction is digital, e.g. shopping online/buying groceries. Product selection, ordering and payment process is digital, but delivery is physical. Adapted from: Electronic Commerce A Managerial Perspective, Turban, Prentice Hall, 2009. Session 1 5
Classifications of E-Commerce Different types of EC, depending on nature of transactions and parties involved: Business-to to-business (B2B): involves transactions between businesses or other organisations. Business-to-Consumer (B2C): involves businesses selling products or services to individual customers. Consumer-to-Consumer (C2C): involves individual consumers selling things to other individual customers, e.g. ebay, amazon market. Consumer-to-Business (C2B): involves individual consumers selling things to businesses, e.g. freelance training, services. Adapted from: Electronic Commerce A Managerial Perspective, Turban, Prentice Hall, 2009. Session 1 6
Market places - Traditional Where buyers and sellers meet there is an opportunity for an online market place Manufacture Business to Consumer (B2C B2C) Wholesale Customer Value added resell Business to Business (B2B) Retail Session 1 7
Online Market Places Where buyers and sellers meet there is an opportunity for an online market place Manufacture Market Place Wholesale Business to Consumer (B2C B2C) Customer Market Place Value added resell Market Place Business to Business (B2B) Market Place Retail Session 1 8
Disintermediation: Online Market Places Disintermediation: removal of intermediaries in supply chain: cutting out the middleman Manufacture Market Place Wholesale Market Place Value added resell Business to Consumer (B2C B2C) Market Place Market Place Market Place Market Place Customer Business to Business (B2B) Market Place Retail http://en.wikipedia.org/wiki/disintermediation http://tutor2u.net/ebusiness/ebusiness-strategy-business-models.html Session 1 9
Types of Organisations Different types of organisation: o Brick-and-Mortar: organisations that have physical stores in which they sell or provides services. o Click-and-Mortar: organisations that sell products and services online as well as via a physical store. http://en.wikipedia.org/wiki/online_shopping http://en.wikipedia.org/wiki/bricks_and_clicks_business_model http://www.informationweek.com/791/retail.htm htm Session 1 10
Consumer-to-Consumer C (C2C) -ebay Consumer-to-Consumer (C2C): involves individual consumers selling things to other consumers. For example, ebay brings buyers and sellers together to conduct deals (via online auctions, or pay now options). o o o Both the seller and the buyer need to register with ebay. Also need to create paypal account. Seller pays a fixed fee to the online site/auction house to sell their products. Buyer doesn t pay any fee. Easiest and quickest way to sell online way is to use marketplace such as ebay See How ebay works: http://computer.howstuffworks.com/ebay.htm t h t / Session 1 11
ebay ebay is The World's Online Marketplace, enabling trade on a local, national and international basis. With a diverse and passionate community of individuals id and small businesses, ebay offers an online platform where millions of items are traded each day: http://pages.ebay.co.uk/aboutebay.html Session 1 12
Starting an ebay business EXERCISE: 1. Working in pairs 2. What do you need to do to start t selling on ebay? 3. Map out the process. 4. How easy is it? 5. What do you need to do to create an ebay store? 6. What costs are involved? http://www.ebay.co.uk and http://pages.ebay.co.uk/sell/basics/start.html http://www.work.com/starting-an-ebay-business-1015/ http://pages.ebay.co.uk/businesscentre/index.html?_trksid=m38 http://www.bytestart.co.uk/content/24/24_3/ebay-business-essentials.shtml http://www.bytestart.co.uk/content/24/24_3/starting-ebay-uk-1.shtml Session 1 13
E-Commerce: How it Works 1. Review How E-commerce Works: http://communication.howstuffworks.com/ecommerce.htm 2. Think about the basic process involved: o o o o o o Find product or service Read information, compare prices Select product Add to basket Purchase Delivery 3. Review the example sites - how easy is it? Session 1 14
www.asos.com www.amazon.com* www.hmv.com www.asda.com www.justgiving.com E-Commerce: Example sites www.moneysupermarket.com www.lloydstsb.com www.flickr.com www.bbk.ac.uk www.hillingdon.gov.uk gov EXERCISE: 1. Working in pairs, review at least 4 of the sites opposite and didentify: 2. Five Strengths/Positives? 3. Five Weaknesses/Negatives? 4. Does anything stand out? Session 1 15
www.asos.com Session 1 16
www.amazon.co.uk Session 1 17
www.hmv.com Session 1 18
www.asda.com Session 1 19
www.moneysupermarket.com Session 1 20
www.lloydstsb.com Session 1 21
www.flickr.com com Session 1 22
www.bbk.ac.uk Session 1 23
Historical Context: EC is Not New Electronic Commerce is not new: EFT (Electronic Funds Transfer) The electronic transfer of funds between organisations (1970s) http://en.wikipedia.org/wiki/electronic_funds_transfer EDI (Electronic Data Interchange) The electronic transfer of standard business documents, such as bills, orders and confirmations, between business partners. http://en.wikipedia.org/wiki/electronic_data_interchange http://www.edibasics.co.uk/index.htm SET Protocol (Secure Electronic Transaction) A standard protocol for securing credit card transactions over insecure networks, specifically, the Internet. http://ecommerce.hostip.info/pages/925/secure-electronic-transaction-set.html http://en.wikipedia.org/wiki/secure_electronic_transaction / iki/s t i ti Session 1 24
E-Business Evolution E-Business Evolution 2009 PricewaterhouseCoopers, J.P. Morgan, John Lewis Direct, Linden Lab (Second Life) and Cancer Research UK teamed up with Echo E-Business, to examine the evolution and future of business on the web. White paper features articles written by senior figures in finance, professional services, retail, charity and technology, as well as independent analysis from Echo E- Business. It explores the future of e-business and how it will help companies survive the recession See: http://www.echoebusiness.com/ebusiness_evolution_2009.html h / b i ti l Session 1 25
Why now? Context: Why E-Commerce? Global internet market continues to grow rapidly. Between 2000-2010 internet usage increased by: 146% in North America (penetration = 77%) 352% in Europe (penetration = 58%) 621% in Asia (penetration = 22%) See: http://www.internetworldstats.com/stats.htm Opportunities for reaching new and existing customers Technological Developments: Affordable security: SSL/https Secure Socket Layer, Stronger encryption Interactive services, e.g. forums, database enabling, advertising Session 1 26
Context: Why E-Commerce? UK online sales rose 25% to 408bn in 2009: o o o The value of UK ecommerce transactions hit 408bn in 2009, excluding non-financial transactions. Up almost 25% on 2008 and represented 16.7% of all sales outside the financial sector. Sales from websites rose 23.6% to 115bn, while the value of non-web online transactions (e.g. EDI) reached 293bn, equivalent to 12% of all non-financial sales. (Source: ONS: http://www.statistics.gov.uk/pdfdir/ecom1110.pdf) Session 1 27
Context: Why E-Commerce? Survey of E-Commerce & ICT activity in 2009: 91% of companies had internet access and 88% connected through a broadband link. Although 76% of companies with more than 10 staff had a website, only 14.9% sold goods through it. Almost 52% of companies (2008: 33%) used online networks to buy goods and services worth 466.3bn. Two-thirds of public authorities and over 90% of large enterprises used the internet to interact with people. Only 29% of businesses had a formal IT security policy that was reviewed regularly. (Source: ONS: http://www.statistics.gov.uk/pdfdir/ecom1110.pdf) Session 1 28
Context: Why E-Commerce? From a small business perspective: Potentially a global market. Internet doesn t differentiate between large and small organisations Low start-up costs: Presence: Can operate from home, no requirement for shop, office, etc Technology: Server hosting, shopping cart, payment system Opening Hours: 24/7, depending on nature of product/service offered Scale: start small and scaled to meet demand or suit the business Testing: able to gauge demand for different products/services linked to marketing effort Session 1 29
Your Task To Identify an opportunity for a new EC business Remember: anyone can start an online business and get it up and running quickly and cheaply, so: Potential competitors are unlimited Need to research your idea Ensure it is designed and developed effectively Remainder of module will examine how to do this Need an IDEA! To help us in this process, let s: 1. Deconstruct the experience of being an online customer, and think about how we might carry out a competitor analysis. 2. Consider what organisations are? Why do they exist? Purpose? Activities? Session 1 30
E-Commerce Undercover Customer Session 1 31
What are Organisations? Series of activities to produce goods or services and sell to the customer. bank customer Product or Service Inventory business supplier Fulfilment Customer Service Marketing carrier Payment Measuring success Session 1 32
Organisations Business Processes All organisations exist to produce goods or services, e.g. supermarkets, breweries, universities, hospitals, etc. All organisations are made up of a series of activities (or business processes) that are performed to design, produce, market, deliver and support its products or services. http://en.wikipedia.org/wiki/business p _process http://www.businessballs.com/business-process-modelling.htm Session 1 33
Organisations - Factors of Production Session 1 34
Factors of Production - Traditional Economic View Factors of Production Land Labour Capital Entrepreneurship Production of Goods and Services CUSTOMERS Session 1 35
Business Processes - Porter s Value Chain Michael Porter suggests that competitive advantage grows out of the value an organisation is able to create for its customers. Considers organisations to be made up of two types of activities: o Primary activities. o Support activities True whether organisations are large or small: http://www.isc.hbs.edu/ hbs http://en.wikipedia.org/wiki/value_chain http://www.netmba.com/strategy/value-chain/ http://www.informationvaluechain.com/information-value-chain/business-strategy/ http://tutor2u.net/ebusiness/ebusiness-strategy-business-models.html strategy Session 1 36
Porter s Value Chain Support Activities Technology development Procurement Pi Primary Activities Inbound logistics Operations Outbound logistics Marketing and sales After sales service MARGIN Support Activities Employee management Firm s infrastructure http://tutor2u.net/ebusiness/ebusiness-strategy-business-models.html t t/ / b i t t b i l http://www.mindtools.com/pages/article/newstr_66.htm Session 1 37
Business Drivers Sales of Products or Services = Profit Motive! Profit = Sales Income Cost of Sales Sales = Demand Side (Market, Customers) Costs = Supply Side (Producer, Suppliers) Breakeven when sales just cover costs Included in finance part of business plan See: http://www.businesslink.gov.uk/ uk/ (the official government website for businesses of all sizes) http://www.bized.co.uk/educators/level2/finance/activity/breakeven21.htm Session 1 38
Drivers of Profitability Margin = Value less Costs Profit Margin = Total Revenue less Total Costs Profit = Sales less Cost of Sales Profits equal Sales less Costs = = Quantity Sold Quantity Sold Unit Price x - x Unit Costs (Volume) (Volume) Supply Market Size Efficiency Demand Market Share Input Prices Competitors' Economies Market Growth Prices of Scale Customer Perceptions d(mkt Share) Technology Session 1 39
E-Commerce: Similarities Business objectives Systems Integration New clients and revenues Saving money, reducing overheads and increasing efficiency End to end customer care Payment systems Quality of customer information (database) Fulfilment system and stock database Logistics Session 1 40
E-Commerce: Differences Disintermediation Personalisation Bundling Automation Value-added Discounts/ loyalty schemes Flexible store fronts Membership More choice Session 1 41
Your Task To Develop an E-Shop E-Commerce: Buying and selling of goods and services over the Internet. ISP customer carrier bank WWW e-shop site ASP business payment service bank Product/Service Currency Tax models Shipping Exceptions, returns, charge back Plus: Inventory, Fulfilment, Customer Service, Marketing, Finance, Measuring success Session 1 42
Operational Excellence Transformation of critical processes, product features, ease of use Key issues: o What % of orders clean? o Are we reducing returns and credits from customers? o What % of customer problems resolved on 1 st contact? o How much customer information is visible (one screen). o Is inventory visibility increasing across the supply chain? Creating new forms of customer value: o Increase in market share and gross margin o Increase in new customer acquisition o Better retention of customers Session 1 43
Example of Early Mover Traditional Book Shop Value Chain Author Publisher Distributor Bookshop Customer Session 1 44
Example of Early Mover Publisher Advantage catalogue Author Networks Catalogue Market place Customer Info Payment Shipping Associates Bookshop Community Distributor Session 1 45
Example of Early Mover Author Publisher Advantage catalogue Catalogue Market Customer place Info. Payment Networks Shipping Community Associates Bookshop Record of previous transactions: purchases, credit card info, shipping info Targeted selling on entry 1 click for subsequent orders Account maintenance Imaginative credits Customer reviews Distributor Value added services Session 1 46
AMAZON An Example of an Early Mover http://money.howstuffworks.com/amazon.htm http://www.davechaffey.com/e-commerce-internet-marketing-case-studies/amazon-case-study h /E t t ti t di /A t d Session 1 47
Your Task Develop an Online Business Identify an opportunity IDEAS! As part of this module, develop: o o o A Summary Business Plan Prototype website: Home Page, building on XHMTL/CSS skills Prototype e-shop: Shopcreator Use prototype website/e-shop to explore other aspects, e.g. marketing and promotion, SEO, web analytics, payment process, etc Session 1 48
http://www.shopcreator.com/ com/ Session 1 49
http://www.hi-techbargains.com/ hi techbargains com/ Session 1 50
http://www.tinytotshop.co.uk/ tinytotshop Session 1 51
E-Commerce Benefits of Planning Strategic t planning and the right approach can: Launch the company image. Attract t and retain customers, via better customer information (low cost of capture). Increase efficiency and cut costs (and improve profit margins). Improve communication with suppliers and reduce time to market. Provide opportunity for targeted special offers and promotions. Cut transaction costs Session 1 52
E-Commerce: Planning your Business Planning your Business: 1. What will you sell? Product or service? 2. What is your market? Local? Global? Consumers or Businesses? How will it appeal? 3. Competitors? Size and scope? GAP in the market? Differentiation? 4. What image do you want to project? Appearance? 5. How big? Sales Targets? Single product? Range of Products? 6. Suppliers? Source of products? 7. Legal Issues: licensing, copyright, Insurance and liability? Session 1 53
E-Commerce: Defining your Market What is your Target Market: 1. What is your Market? Broad? Niche? 2. Who are your Customers? Professional? Tourists? Young Adults? Parents/children? 3. What influences their buying decisions? 4. Why will they buy from you? 5. What is special about your business? Strengths? Competences? Uniqueness? Session 1 54
E-Commerce: Defining your Market How will you differentiate your product or service: 1. Quality? 2. Price? 3. Level of Service? 4. Value for money? 5. Reliability/Consistency? y 6. Convenience? 7. Customisation? 8. Specialisation? 9. Range of products? 10. Other criteria? Your experience? Session 1 55
E-Commerce: Choosing a Name Choosing a name for your Business: 1. Try to keep the name simple and descriptive, don t confuse the customer! 2. Make the name distinctive. 3. Avoid humorous names dangerous! 4. Brainstorm and generate a list of ideas based around your theme/business concept. 5. Needs to reflect your vision for the business. 6. Get feedback on your idea friends, colleagues. Session 1 56
Get the right website for your business Use the Business Link interactive tool to investigate what kind of website is best for your business http://www.businesslink.gov.uk/bdotg/action/layer?lang=en&r.l1=1073861197&r.s=tl&topicid=1074453 672&r.l1=1073861197&r.s=tl&topicId=1074453672 Session 1 57
E-Commerce: Benefits Virtual expansion is less costly than physical Easier publishing of detailed product information: o GM food information, health and diet tips, menu planning, special nutritional support Opportunity to diversify: o Tesco sells CDs, videos, books and DVDs Partnership opportunities: o Organic foods, shop at work Session 1 58
E-Commerce: Business Risks Integration Chasm o Web orders and payment details o Customer details o Customer enquiries WEB SYSTEM o Order Management System o Payments and Accounts System o Fulfilment and Distribution System BACK-END BUSINESS SYSTEM Session 1 59
E-Commerce: Barriers Business issues, NOT technology problems: Limited range of products Prices not competitive Difficult to navigate Not enough information to buy No receipt or confirmation report Files too large download problems Products out of stock Not delivered on time Session 1 60
E-Commerce: Key Issues There is no total solution E-commerce is constantly evolving, organic, in the process of becoming There is a real frontier for explorers Analysis is the key Pay attention to the details Remember the customer is king! Session 1 61
EC and SMALL BUSINESS GUIDES Useful links re. setting up an EC business: http://www.businesslink.gov.uk/ http://www.businesslink.gov.uk/bdotg/action/layer?lang=en&r.s=tl&topicid=1073861197 http://www.businesslink.gov.uk/bdotg/action/layer?lang=en&r.l1=1073861197&r.l2=107386 g g 6263&r.s=tl&topicId=1075383789 http://www.businesslink.gov.uk/bdotg/action/contentbankbytheme?bank=case_studies &lang=en&r.l1=1073861197&theme=itandecommerce&topicid=1073861197 http://www.startupebusiness.co.uk/ http://www.bytestart.co.uk/ http://www.spear-bournemouth.co.uk/pdf_files/dtibestpracticeebusiness.pdf http://www.entrepreneur.com/ebusiness/index.html html http://webtranz.com/ecommerce-tips/ten-simple-steps-to-starting-an-ecommerce-business http://iweb.tntech.edu/richardrand/startupguide.pdf http://www.davidhurst.co.uk/2007/03/14/starting-an-e-business-a-beginners-guide/ uk/2007/03/14/starting an a beginners guide/ http://www.va-interactive.com/inbusiness/editorial/biztech/ibt/ecommerc.html Session 1 62