E-commerce strategic considerations Flashcards
What are the three periods in the development of e-commerce?
- Invention (Retail 1995-2000)
- Consolidation (retail + services, 2000-2005)
- Reinvention (Retail + services + content, 2007-present)
relative size of different types of e-commerce in the US
B2B: $8 trillion
B2C: $1.16 trillion
C2C: $105 + billion
What are 10 main e-commerce trends in recent years?
- Covid-19 pandemic fuels the surge in demand for retail e-commerce and m-commerce.
- E-commerce growth rates have been faster in the developing countries than in North America and Europe.
- As mobile app ecosystem and social e-commerce continue to grow, so does mobile and social advertising spending by businesses (as opposed to spending on traditional media).
- Explosive growth of on-demand service firms, such as Uber, Instacart, DoorDash, and others which attract billions in capital and garner multi-billion dollar valuations.
- Flood of small businesses and entrepreneurs into an online space, often using infrastructures created by platforms such as Amazon, Facebook, Apple, Google, eBay. (barriers are much lower now)
- Continued growth in big data and data analytics which companies can utilize as a competitive advantage in identifying purchase patterns as well as consumer interests and intentions in milliseconds.
- Concerns increase about increasing market dominance of Facebook (Meta), Amazon and Google leading to calls for Government regulations.
- ->ex. book publishers cannot affored to not publish on Amazon, gives Amazon significant power - Surveillance of online communications by both repressive regimes and Western democracies grows, thus concerns over commercial and governmental privacy invasion increase.
- Governments introduced e-commerce regulations, including tax and consumer privacy laws.
- Online security represents a major concern, as security attacks on businesses are frequent, and their number is growing.
- ->making them stricter too
E-commerce impact on profitability of industries (5 forces)
Threat of substitutes
- increased –>digital substitutes
- ex. Netflix for movie theatres/DVDs, video conferencing for travel, school
Barriers to entry/threat of new entrants
- threat increased since individuals can bypass difficulties with suppliers, etc.
- barriers to entry decreased
Rivalry among existing competitors
- increased
- physical and brick and mortars are both entering other markets (competing in multiple channels)
- consumers can see prices, features, reviews, much easier
- ->asymmetric information much lower
- also increased number of competitors
Bargaining power of buyers
- increased dramatically
- can easily compare
- availability of options
- lower switching costs (don’t have to physically go there, less risk with reviews)
Bargaining power of suppliers
- could be lower due to more suppliers in the industry
- but also suppliers have potential to forward integrate –>bypass typical value chain, sell directly to consumers
- ->this would increase bargaining power
decreased profitability overall –> profitability being squeezed from every angle
e-commerce impact on value chain
manufacturers now often sell directly to consumers
- bypassing distributors, retailers –>first was challenging because didn’t want to upset them
- ->this saves cost, increases profitability
- ->disintermediation and channel conflict
Omni-channel integration definition and benefits
- def. combining multiple channels under same “roof”
- businesses are able to capitalize on presence in physical and online stores
- -> maximize revenue through synergies
omni-channel integration methods
Online order, in-store pickup
Online order, when out of stock direct customer offline to pickup in store
When out of stock offline Web order through in-store kiosk, home delivery
When out of stock offline, retail clerk places Web order, home delivery
Order online, in-store returns and adjustments
Online catalog with wider product selection than an offline store
Product manufacturers promote online to drive customers to buy offline
Gift card, loyalty program can be used online and offline
Mobile app, directs to website or in-store sales
Use of mobile geo-location technology to direct users to nearby stores or restaurants
what are the key e-commerce challenges faced by businesses
- monetization
- order fulfillment and distribution in online retail
- marketing and growing the online customer base
describe the challenge of monetization
the business creates value for customers but is it profitable for owners?
Many businesses, in particular brick and mortar retailers find it challenging to make their ecommerce divisions profitable. The size of customer base and transaction volume is not large enough to cover investments in technology and infrastructure. The same challenge applies to “pure play” online
businesses
describe the challenge of order fulfillment and distribution in online retail
E-Commerce allows businesses to reach customers all over the world but does the business have an
infrastructure in place to fulfill orders and get them to customers in a timely manner and profitably?
Invisible to customers, physical fulfillment centers and delivery infrastructure take time and a lot of capital to establish and operate smoothly
describe the challenge of marketing and growing the online customer base
- high costs
- With so many options available to customers online, it’s easy to be lost among competitors, unless the company creates a well thought-out marketing strategy to drive traffic to the website, or to get customers to adopt an online service / a mobile app.
- people don’t stumble onto websites like they could a store
