eCommerce vs. Traditional Retail

In the age of globalization, e-commerce has increasingly become a necessary component of business strategy and a strong agent for economic development. The integration of information and communications technology in business has revolutionized relationships within organizations and those between and among customers and organizations. Specifically, the integration in busi-ness has enhanced simplicity, productivity, with greater customer involvement, and has been able to reduce costs.

With developments in the Internet and Web-based technologies, distinctions between traditional markets and the global electronic marketplace-such as business capital size, among others-are gradually being narrowed down. The name of the game is strategic positioning, the ability of a company to determine emerging opportunities and utilize the necessary human capital skills (such as intellectual resources) to make the most of these opportunities through an e-business strategy that is simple, workable and practicable within the context of a global information milieu and new economic environment. With its effect of leveling the playing field, e-commerce coupled with the appropriate strategy and policy approach enables small and medium scale enterprises to compete with large and capital-rich businesses.

On another plane, developing countries are given increased access to the global marketplace, where they compete with and complement the more developed economies. Most of the developing countries are already participating in e-commerce, either as sellers or buyers. However, to facilitate e-commerce growth in these countries, the relatively underdeveloped information infrastructure must be improved. Among the areas for policy intervention is:

• High Internet access costs and internet penetration
• Limited availability of credit cards and a nationwide credit card system;
• Tax Structures
• Underdeveloped transportation infrastructure resulting in slow and uncertain delivery of goods and services;
• Network security problems and insufficient security safeguards;
• Lack of skilled human resources and key technologies (i.e., inadequate professional IT workforce);
• Content restriction on national security and other public policy grounds, which greatly affect business in the field of information services, such as the media and entertainment sectors;
• Cross-border issues, such as the recognition of transactions under laws of other ASEAN member-countries, certification services, improvement of delivery methods and customs facilitation; and
• The relatively low cost of labor, which implies that a shift to a comparatively capital intensive solution (including investments on the improvement of the physical and network infrastructure) is not apparent.

Inventory model vs. Market Place Model

Inventory Model

Inventory model of eCommerce refers to the model wherein the company is in possession of the products i.e. they have the physical inventory in their warehouse and they fulfill the customer orders themselves. This enables them to provide a superior post-purchase consumer experience as they have control over the whole process.

If you have the inventory in your control and assuming the systems and the processes are robust then you have:

• Complete visibility of the stock levels
• Knowledge of the physical location of the inventory
• Control over the pick, pack and ship process

This model reduces the risk of over booking the orders for a given inventory.

The biggest advantage of this model is that you are in control of the product and it enables you to deliver faster and with higher accuracy and respond effectively to the customer inquiries about the order status. But to have this advantage the eCommerce companies compromise on the capital efficiency because they buy the product from the vendors up-front and are in the owner ship of the inventory.

Market Place model

All the big ecommerce players like Flipkart, Snapdeal, Yebhi etc have now moved towards a marketplace model. A marketplace model is one in which these ecommerce players do not hold the inventory and do not deliver the customer orders themselves but the delivery for their orders are serviced by the vendors associated with them directly, which in turn means less consistent user experience in terms of deliveries, returns and in some cases product quality.

Multi Stage model for eCommerce

• Search and Identification Stage Selection and negotiation
• Product Purchase and services electronically
• Product and service delivery
• Post purchase service

Value proposition of eCommerce

The value proposition is defined as the value the company will provide to its customers and sometimes to others as well. With a better value proposition the companies try to attract more customers by offering more benefits then the competitors.

A value proposition value proposition offered by eCommerce may include

• Reduced Price
• Convenience or Improved Service such as “one click checkout”
• Quick Delivery and assistance
• Access to a large and available inventory of products providing more number of options

To provide a value proposition to its customers an eCommerce company has to have a user friendly and functionally rich front end and a robust back end system with tight integration in order to automate the online operations of the organizations and have happy customers.

Frontend is the interface where the end customers or the buyer does all of his activities while a back end system includes all the internal support activities like Merchandising, Warehousing, Order Fulfillment, and Customer Support. The success of the operations of an eCommerce company relies on the integration of the associated systems delivering a superior experience to the end user both before and after delivery.

Front end and back end operations:

Typical eCommerce Scenario

What are the different types of eCommerce?

The major different types of e-commerce are:

• business-to-business (B2B)
• business-to-consumer (B2C)
• business-to-government (B2G)
• consumer-to-consumer (C2C)
• mobile commerce (m-commerce)

What is B2B e-commerce?

B2B e-commerce is simply defined as e-commerce between companies. This is the type of e-commerce that deals with relationships between and among businesses. About 80% of e-commerce is of this type, and most experts predict that B2B e-commerce will continue to grow faster than the B2C segment. The B2B market has two primary components: e-frastructure and e-markets. E-frastructure is the architecture of B2B, primarily consisting of the following:

• logistics – transportation, warehousing and distribution (e.g., Procter and Gamble);
• application service providers – deployment, hosting and management of packaged software from a central facility (e.g., Oracle and Linkshare);
• outsourcing of functions in the process of e-commerce, such as Web-hosting, security and customer care solutions (e.g., outsourcing providers such as eShare, NetSales, iXL Enterprises and Universal Access);
• auction solutions software for the operation and maintenance of real-time auctions in the Internet (e.g., Moai Technologies and OpenSite Technologies);
• content management software for the facilitation of Web site content management and delivery (e.g., Interwoven and ProcureNet); and
• Web-based commerce enablers (e.g., Commerce One, a browser-based, XML-enabled purchasing automation software).

E-markets are simply defined as Web sites where buyers and sellers interact with each other and conduct transactions.10

The more common B2B examples and best practice models are IBM, Hewlett Packard (HP), Cisco and Dell. Cisco, for instance, receives over 90% of its product orders over the Internet. Most B2B applications are in the areas of supplier management (especially purchase order processing), inventory management (i.e., managing order-ship-bill cycles), distribution management (especially in the transmission of shipping documents), channel management (i.e., information dissemination on changes in operational conditions), and payment management (e.g., electronic payment systems or EPS).

What is B2C e-commerce?

Business-to-consumer e-commerce, or commerce between companies and consumers, involves customers gathering information; purchasing physical goods (i.e., tangibles such as books, apparels or consumer products) or information goods (or goods of electronic material or digitized content, such as software, or e-books); and, for information goods, receiving products over an electronic network.

It is the second largest and the earliest form of e-commerce. Its origins can be traced to online retailing (or e-tailing).

Thus, the more common B2C business models are the online retailing companies such as Amazon.com, Flipkart.com, Snapdeal.com. Other B2C examples involving information goods are E-Trade and Travelocity.

The more common applications of this type of e-commerce are in the areas of purchasing products and information, and personal finance management, which pertain to the management of personal investments and finances with the use of online banking tools.

Online retailing transactions make up a significant share of this market. eMarketer also estimates that in the Asia-Pacific region, B2C revenues, while registering a modest figure compared to B2B, nonetheless went up to $8.2 billion by the end of 2001, with that figure doubling at the end of 2002-at total worldwide B2C sales below 10%.

B2C e-commerce reduces transactions costs (particularly search costs) by increasing consumer access to information and allowing consumers to find the most competitive price for a product or service. B2C e-commerce also reduces market entry barriers since the cost of putting up and maintaining a Web site is much cheaper than installing a “brick-and-mortar” structure for a firm. In the case of information goods, B2C e-commerce is even more attractive because it saves firms from factoring in the additional cost of a physical distribution network. Moreover, for countries with a growing and robust Internet population, delivering information goods becomes increasingly feasible.

What is B2G e-commerce?

Business-to-government e-commerce or B2G is generally defined as commerce between companies and the public sector. It refers to the use of the Internet for public procurement, licensing procedures, and other government-related operations. This kind of e-commerce has two features: first, the public sector assumes a pilot/leading role in establishing e-commerce; and second, it is assumed that the public sector has the greatest need for making its procurement system more effective.

Web-based purchasing policies increase the transparency of the procurement process (and reduce the risk of irregularities). To date, however, the size of the B2G e-commerce market as a component of total e-commerce is insignificant, as government e-procurement systems remain undeveloped.

What is C2C e-commerce?

Consumer-to-consumer e-commerce or C2C is simply commerce between private individuals or consumers.

This type of e-commerce is characterized by the growth of electronic marketplaces and online auctions, particularly in vertical industries where firms/businesses can bid for what they want from among multiple suppliers.16 It perhaps has the greatest potential for developing new markets.

This type of e-commerce comes in at least three forms:

• auctions facilitated at a portal, such as eBay, which allows online real-time bidding on items being sold in the Web;
• peer-to-peer systems, such as the Napster model (a protocol for sharing files between users used by chat forums similar to IRC) and other file exchange and later money exchange models; and
• Classified ads at portal sites such as Excite Classifieds and eWanted , Pakwheels.com (an interactive, online marketplace where buyers and sellers can negotiate and which features “Buyer Leads & Want Ads”).

Consumer-to-business (C2B) transactions involve reverse auctions, which empower the consumer to drive transactions. A concrete example of this when competing airlines gives a traveler best travel and ticket offers in response to the traveler’s post that she wants to fly from New York to San Francisco.

There is little information on the relative size of global C2C e-commerce. However, C2C figures of popular C2C sites such as eBay and Napster indicate that this market is quite large. These sites produce millions of dollars in sales every day.

Benefits of eCommerce

• 24×7 Access: The customers can shop or do transactions round the clock, all year round and from any location.
• More Choices: The customers have more choice at a click of a button with a whole range of products, even international products to choose from.
• Price Comparison: The customers can conduct price comparisons for the products they want to buy on different websites or go to websites that provide such comparisons for a variety of products.
• Improved Delivery: Ranging from immediate delivery of digital goods like software or e-Tickets to products like electronics, fashion accessories etc., customers get products delivered to their door steps by mail or courier.

Search Engine Optimization

Search Engine Optimization (SEO) is the process of affecting the visibility of a website in a search engine’s natural or organic results.

In general the earlier or more frequently a website appears in the search results list, the more visitors it will receive from the search engine’s users.

SEO may focus on different types of searches that may include image search, localized search based on location, video search, content search, news search, industry specific search etc.

SEO is an internet marketing strategy based on how search engines work, what people search for and the actual keywords used for searching by a your target audience.

Optimizing a website may include editing its content, HTML or associated coding to increase relevance to specific key words

Most important SEO factors for an eCommerce set up:

• Tags: Titles and headers
• Meta Data description and Key words
• Meta Key words
• Custom Page URLs
• Image alt tags
• SEO optimized themes
• Search Engine Friendly Links
• Social Media optimization

Social Media Optimization

Social Media Optimization (SMO) refers to the use of a number of Social Media Channels, Outlets and communities to generate public interest to increase product awareness, brand awareness, events, customer relationship etc.

Types of social media include RSS Feeds, Social News, Blogging Websites, social networking sites like Facebook, Twitter, Instagram, LinkedIn etc.

SMO and SEO have the same goals i.e. to generate traffic and awareness for your website. Primarily the SMO differs from SEO as it focuses more on driving traffic from sources other than search engines.

In simple terms SMO refers to optimizing your website and its content to share it across social media channels and other networking sites. SMO is gaining importance as SEO parameters now involve utilizing the recommendations of the users of social media channels to rank pages in their searches. The consequence is that when a webpage is shared or liked by users on social media it counts for webpage’s quality. This coupled with the personalized search based on location and interests have increased the importance of SMO for better SEO.

SMO is also connected to ways of Viral Marketing based on the concept of word of mouth or viral seeding is created through the use of these social media channels on video or photo sharing websites.

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