E- Commerce

Chapter-1
E-commerce
➢ E-commerce (short for electronic commerce) refers specifically to the buying and
selling of goods and services over electronic networks.
➢ This includes online shopping, online banking, electronic payments, and other online
transactions.
➢ E-commerce typically involves the use of websites or mobile apps.
-may also involve other electronic means of communication such as,
-email,
-social media,
-or messaging apps.
E-business
➢ E-business (short for electronic business) refers more broadly to the use of electronic
technologies to support business processes.
- including,
- production,
-management,
-and customer service.
➢ E-business encompasses a wide range of activitie.
- including e-commerce, but also includes other aspects such as,
- online marketing,
-supply chain management,
- and online customer support.
➢ E-business may also involve the use of other technologies such as ,
-cloud computing,
-big data analytics,
- and artificial intelligence.
e-commerce and e-business are related but distinct concepts.
E-commerce specifically refers to online buying and selling, while e-business refers to a
broader range of electronic technologies and applications used to support business processes.

1.Electronic Commerce, is it real?

Ans: Yes, electronic commerce (e-commerce) is very real and has become an integral part of
modern business.
✓ E-commerce refers to the buying and selling of goods and services over the internet or
other electronic networks.
✓ It has become a preferred method of purchasing for many consumers due to its
convenience, accessibility, and cost-effectiveness.
 ✓ The growth of e-commerce has been significant in recent years, and its impact on
traditional brick-and-mortar stores is undeniable.
✓ Many businesses have shifted their focus to online sales.
-some have even moved entirely to e-commerce,
- resulting in a rise in the number of online marketplaces and platforms.
✓ The COVID-19 pandemic has also accelerated the growth of e-commerce,
-with more consumers opting for online shopping due to restrictions on in-person
shopping and concerns over health and safety.
✓ The pandemic has highlighted the importance of having a strong online presence for
businesses of all sizes.

Overall, e-commerce is a real and rapidly growing industry that has transformed the way
businesses operate and consumers shop.

2. What are the unique features of e-commerce?

Ans:
Unique Features of E-commerce
1. Ubiquity
2. Global reach
3. Universal standards
4. Richness
5. Interactivity
6. Information density
7. Personalization/customization
8. Social technology
1.Ubiquity
 Internet/Web technology available everywhere: work, home, and so on, anytime
 Effect:
– Marketplace removed from temporal, geographic locations to become ―marketspace‖
– Enhanced customer convenience and reduced shopping costs
 Reduces transaction costs.
– Costs of participating in market.
2.Global reach
 The technology reaches across national boundaries, around Earth.
 Effect:
✓ Commerce enabled across cultural and national boundaries seamlessly and
without modification.
 -Marketspace includes, potentially, billions of consumers and millions of businesses
worldwide.
3.Universal standards
 One set of technology standards: Internet standards
 Effect:
✓ Disparate computer systems easily communicate with one another.
✓ Lower market entry costs—costs merchants must pay to bring goods to market.
✓ Lower consumers’ search costs—effort required to find suitable products.#
4. Richness
 Supports video, audio, and text messages
 Effect:
✓ Possible to deliver rich messages with text, audio, and video simultaneously to large
numbers of people.
✓ Video, audio, and text marketing messages can be integrated into single marketing
message and consumer experience
5. Interactivity
 The technology works through interaction with the user.
 Effect:
• Consumers engaged in dialog that dynamically adjusts experience to the individual.
• Consumer becomes co-participant in process of delivering goods to market.
6.Information density
 Large increases in information density—the total amount and quality of information
available to all market participants
 Effect:
✓ Greater price transparency
✓ Greater cost transparency
✓ Enables merchants to engage in price discrimination.
7.Personalization/Customization
 Technology permits modification of messages, goods.
 Effect:
✓ Personalized messages can be sent to individuals as well as groups.
✓ Products and services can be customized to individual preferences.
 8.Social technology
 The technology promotes user content generation and social networking.
 Effect:
✓ New Internet social and business models enable user content creation and
distribution, support social networks.
✓ Many-to-many model.
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Effect of the Internet on the marketplace
✓ Reduces information asymmetry
✓ Offers greater flexibility and efficiency because of:
 Reduced search costs and transaction costs
 Lower menu costs
 Greater price discrimination
 Dynamic pricing
✓ May reduce or increase switching costs.
✓ May delay gratification: effects dependent on product.
✓ Increased market segmentation
✓ Stronger network effects
✓ More disintermediation
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The Benefits of Disintermediation to the Consumer

Disintermediation
- refers to the removal of intermediaries in a supply chain or distribution channel.
In the context of business, this usually means removing intermediaries such as-
-distributors,
-wholesalers,
-or retailers and dealing directly with the end consumer.
There are several benefits of disintermediation to the consumer:
1. Lower prices:
✓ Disintermediation can lead to lower prices for consumers .
-because it eliminates the markup that intermediaries add to the price of goods or
services.
✓ When businesses sell directly to consumers,
- they can offer lower prices .
-because they don't have to pay fees or commissions to intermediaries.
2.Better product selection:
✓ When consumers buy directly from businesses,
- they have access to a wider range of products and services.
✓ This is because businesses can offer products and services .
-that may not be available through intermediaries.
3.Improved customer service:
✓ Direct sales allow businesses to have more control over the customer experience.
✓ This can result in better customer service.
-because businesses can directly address customer needs and concerns.
4.Increased transparency:
✓ Disintermediation can increase transparency in the supply chain.
-because consumers can see exactly where their products are coming from and how
they are being produced.
✓ This can be particularly important for consumers.
-who are concerned about the environmental or ethical impact of the products they
buy.
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The major types of EC transactions/Classification of EC by the Nature of the
Transactions and the Relationships Among Participants
1) Business-to-Business (B2B)
2) Business-to- Consumer (B2C)
3) Consumer-to-Consumer (C2C)
4) Business-to-Business-to-Consumer (B2B2C)
5) Consumer-to- Business (C2B)
6) Business-to-Employees (B2E)
7) Intra-Business Electronic Commerce
8) Collaborative Commerce
9) E-Learning
10) E-Government

1) Business-to-Business (B2B)
✓ Business-to-Business (B2B) transactions involve the exchange of goods or services
between two or more businesses.
✓ This type of transaction is common in supply chain management.
-where businesses purchase raw materials or finished goods from other businesses.
✓ Example: ChemConnect
2)Business-to-Consumer (B2C
✓ Business-to-Consumer (B2C) transactions involve the sale of goods or services from a
business to individual consumers.
✓ Examples include online shopping, banking, and travel booking.
✓ Example: BarnesandNoble.com
3)Consumer-to-Consumer (C2C)
✓ Consumer-to-Consumer (C2C) transactions involve the exchange of goods or services
between individual consumers.
✓ Online marketplaces such as eBay and Craigslist are examples of C2C transactions.
4)Business-to-Business-to-Consumer (B2B2C)
✓ Business-to-Business-to-Consumer (B2B2C) transactions involve the collaboration of
two or more businesses to sell products or services to end consumers.
✓ An example of B2B2C is a manufacturer selling its products through a retailer.
5)Consumer-to-Business (C2B)
✓ Consumer-to-Business (C2B) transactions involve individual consumers selling
products or services to businesses.
✓ An example of C2B is a freelance writer selling their writing services to a business.
6) Business-to-Employees (B2E)
✓ Business-to-Employees (B2E) transactions involve a business providing goods or
services to its employees.
✓ Examples include employee discounts, wellness programs, and training programs.
7) Intra-Business Electronic
✓ Intra-Business Electronic Commerce involves the exchange of goods or services
within a single business.
✓ Examples include procurement and inventory management.
8) Collaborative Commerce
✓ Collaborative Commerce involves the collaboration of multiple businesses to achieve
common goals.
✓ An example of collaborative commerce is supply chain management, where
businesses work together to manage the flow of goods and services.
9) E-Learning
✓ E-Learning involves the delivery of educational or training materials through
electronic means, such as the internet or computer-based training software.

10) E-Government
E-Government involves the use of electronic means to provide government services to
citizens, such as
- online tax filing,
- online voting,
-and online access to govt.
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EC Business Models
• Online Direct Marketing Electronic Tendering Systems
• Name-your-own-price Supply Chain Improvers
• Affiliate Marketing Finding the best price.
• Viral Marketing Value-Chain Integration
• Group Purchasing Value-Chain Providers
• Online Auctions Information Brokers
• Mass Customization (Make-to Order) Deep Discounting and
• Bartering Membership

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Elements of E-Business Models/ The Structure and Properties of Business Models/
(4.What should be my business model?)
A comprehensive business model (for a proposal company) may include some or all of the following
components illustrated in the following Figure:

1. Revenue Models

 Sales

 Transaction fees

 Subscription fees

 Advertising fees

 Affiliate fees

 Licensing fees

 Other revenue sources

2.Value Proposition

• A description of the customers to be served and their value proposition .

-Also, how these customers can be reached and supported.
• A description of all products and services the business plans to deliver.
-Also, what the differentiating aspects of the products are.
• The company’s growth strategies.
 • A description of the required business process and the distribution infrastructure (including
human resources).
• A list of the resources required, their cost and availability (including human resources).
• A description of the organization’s supply chains , including suppliers and other business
partners • The value chain structure.
• The relevant markets with a list of the major competitors and their market share.
-Also, market strategies and strengths/weaknesses of the company.
• The competitive advantage offered by the business model including pricing and selling
strategies.
• The anticipated organizational changes and any resistance to change.
• A description of the revenues expected (revenue model ), sources of funding, and the
financial viability .

1. Revenue Models
✓ A revenue model specifies how the organization, or the EC project, will
generate revenue.
✓ For example, the revenue model for Net-a-Porter shows revenue from online
sales of luxury dresses.
✓ The major revenue models are:
-A company uses its revenue model to describe how it will generate revenue
and its business model to describe the process it will use to do so.

▪ Innovative Revenue Models for Individuals

The Internet allows for innovative revenue models, some of which can be utilized
even by individuals, as demonstrated by the following example:
• Sales
✓ Companies generate revenue from selling products or services on their
websites.
✓ An example is when Net-a-Porter, Starbucks, Amazon.com, or Godiva
sells a product online.
• Transaction Fees.
✓ Commissions are based on the volume of transactions made.
✓ For example, when a homeowner sells a house, he or she typically pays
a transaction fee to the broker.
✓ The higher the value of the sale, the higher the total transaction fee.
✓ Alternatively, transaction fees can be levied per transaction .
✓ With online stock trades, for example, there is usually a fixed fee per
trade, regardless of the volume.
• Subscription Fees.
✓ Customers pay a fi xed amount, usually monthly, to get some type of
service.
✓ An example would be the fee you pay to an Internet access provider
(fixed monthly payments).
• Advertising Fees .
✓ Companies charge others for allowing them to place a banner on their sites .
• Affiliate Fees .
✓ Companies receive commissions for referring customers to certain websites.
✓ A good program is available at Amazon.com.

• Licensing Fees.
✓ Another revenue source is licensing fees (e.g., see datadirect
technologies.com ).
✓ Licensing fees can be assessed as an annual fee or a per usage fee.
✓ Microsoft receives fees from each workstation that uses Windows NT, for
example.
• Other Revenue Sources .
✓ Some companies allow people to play games for a fee or to watch a sports
competition in real time for a fee.
2. Value Proposition
✓ Business models also include a value-proposition statement.
✓ A value proposition refers to the benefits, including the intangible ones that a
company hopes to derive from using its business model.
✓ In B2C EC, for example, the customer value proposition defines how a
company’s product or service fulfils the needs of customers.
✓ In other words, it describes the total benefits to the customer.
 ✓ The value proposition is an important part of the marketing plan of any
product or service.
___________************___________

Functions of a Business Model

Business models have the following major functions or objectives:

• Describe the supply and value chains.

• Formulate the venture’s competitive strategy and its long-range plans.
• Present the customer value proposition.
• Identify who will use the technology for what purpose
; specify the revenue generation process
- where the company will operate.
• Estimate the cost structure and amount and profit potential.
______________************________________

Internet Marketing and E-Tailing

• A retailer is a sales intermediary, a seller that operates between
manufacturers and customers.
• Electronic retailing means retailing conducted online, over the internet.
• E-tailers means retailers who sell over the internet.
• For example, Amazon.com sells books mostly to individuals (B2C),
but it also sells to corporations (B2B).
• Barnes & Noble (barnesandnoble.com), has a special division that
caters only to business customers.
• Wal-Mart (walmart.com) sells to both individuals and businesses (via
Sam’s Club). Dell sells its computers to both consumers and businesses
from dell.com
• Staples sells to both markets at staples.com and insurance sites sell to
both individuals and corporations.
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Benefits of E-Commerce
1. Benefits to Organizations
• Global reach
• Cost reduction
• Fewer permits and less tax
• Facilitate problem-solving
• Up-to-date company material
• Supply chain improvements
• Help SME to compete.
• Business always open
• Lower inventories
• Customization/Personalization
• Lower cost of distributing
• Seller’s Specialization (Niche Market)
digitizable product
• Ability to innovate, and use new business
• Provide competitive advantage.
models.
 • Rapid time-to-market and increased speed • Improved Customer
• Lower communication costs service and relationship
• Efficient procurement

2. Benefits of E-Commerce 3. Benefits to Society

– Enable telecommuting
o Ubiquity
o More products/Services – More public services
o Customized
products/services – Improved homeland security
o Cheaper – Increased standard of living
products/services
o Instant delivery – Close the digital divide
o Information availability
o Convenient auction
participation
o No sales tax
o Enable telecommuting.
o Electronic socialization
o Find unique items

_______********__________
Limitations of Electronic Commerce
• Technological Limitations
✓ Lack of universal standards for quality, security and reliability.
✓ The telecommunications bandwidth is insufficient, especially for mcommerce, videos
and graphics. Software development tools are still evolving.
✓ It is difficult to integrate Internet and EC software with some existing (especially
legacy) applications and databases.
✓ Special Web servers are needed in addition to the network servers, which add to the
cost of EC. Internet accessibility is still expensive and/or inconvenient.
✓ Order fulfilment of large-scale B2C requires special automated warehouses.

• Non-technological Limitations
✓ Security and privacy concerns deter customers from buying.
✓ Lack of trust in EC and in unknown sellers hinders buying.
✓ People do not yet sufficiently trust paperless, faceless transactions.
✓ Many legal and public policy issues, including taxation, have not yet been resolved or are
not clear.
✓ National and international government regulations sometimes get in the way.
✓ It is difficult to measure some of the benefits of EC, such as online advertising. Mature
measurement methodologies are not yet available.
✓ Some customers like to feel and touch products. Also, customers are resistant to the
change from shopping at a brick-and-mortar store to a virtual store.
✓ In many cases, the number of sellers and buyers that are needed for profitable EC
operations is insufficient.
✓ Online fraud is increasing.
✓ It is difficult to obtain venture capital due to the failure of many dot-coms.
_____________********______________

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 ____________***********______________

Challenges to e-Commerce in Bangladesh

1. Inadequate delivery mechanisms;
2. A relatively low internet penetration rate;
3. The lack of a robust online transaction system;
4. Prevalence of online fraud; Undeveloped online marketing practices;
5. and The lack of a robust privacy policy
1.Inadequate delivery mechanisms:
✓ One of the challenges to e-commerce in Bangladesh is the inadequate delivery
mechanism.
- Despite the increasing number of online retailers, there is still a lack of reliable and
efficient delivery services.
✓ This can be attributed to poor transportation infrastructure, limited logistics services,
and a lack of trained personnel.
✓ As a result, e-commerce businesses face difficulties in delivering products to
customers in a timely and cost-effective manner.
2.Relatively low internet penetration rate:
✓ Another challenge is the relatively low internet penetration rate in Bangladesh.
✓ While internet usage has been growing in recent years, it still lags behind many other
countries in the region.
✓ This limits the potential customer base for e-commerce businesses, as a significant
portion of the population may not have access to the internet.

3.Lack of a robust online transaction system:

✓ E-commerce businesses in Bangladesh face a challenge in the lack of a robust online
transaction system.
✓ While there are a few payment gateway providers in the country, the options are
limited, and many customers may not trust online payment systems.
✓ This can lead to a low conversion rate and limit the growth of e-commerce businesses.

4.Prevalence of online fraud

✓ E-commerce businesses in Bangladesh also face the challenge of online fraud.
✓ This can include fraudulent transactions, fake orders, and identity theft.
✓ The lack of a robust online security system and customer authentication procedures
can make it difficult for e-commerce businesses.
-to protect themselves and their customers from fraudulent activities.
5.Undeveloped online marketing practices:
✓ E-commerce businesses in Bangladesh also face the challenge of undeveloped online
marketing practices.
✓ Many businesses lack the necessary skills and knowledge to effectively market their
products online,
-which can limit their ability to attract customers.
✓ This can include a lack of understanding of digital marketing tools and techniques,
limited access to market research, and a lack of skilled marketing professionals.
6.lack of a robust privacy policy:
✓ E-commerce businesses in Bangladesh also struggle with undeveloped online
marketing practices and the lack of a robust privacy policy.
✓ Many businesses lack the necessary skills and knowledge to effectively market their
products online.
-which can limit their ability to attract customers.
✓ Additionally, customers may be hesitant to share personal information online due to
the lack of a comprehensive privacy policy,
- which can further limit the growth of e-commerce businesses.
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 How do we transform our organization into a digital one?

The concept of digital transformation,

- which involves leveraging digital technologies to fundamentally change the way an
organization operates.
- There are few steps that organizations can take to transform themselves into a digital
one:
1. Define a digital strategy
2. Develop digital capabilities
3. Create a digital culture
4. Build digital ecosystem

1. Define a digital strategy:

⚫ An organization needs to develop a clear and comprehensive strategy for how it will use
digital technologies to achieve its goals.
⚫ This strategy should take into account the organization's unique strengths, weaknesses,
opportunities, and threats.

2. Develop digital capabilities:

⚫ The organization needs to develop the necessary digital capabilities to execute its digital
strategy.
⚫ This may involve:
✓ hiring new talent with the necessary skills,
✓ partnering with technology companies,
✓ or investing in training programs for existing employees.

3. Create a digital culture:

⚫ The organization needs to foster a digital culture .
-that encourages innovation, experimentation, and risk-taking.
⚫ This may involve:
✓ changing the organization's structure, processes,
✓ and reward systems to better support digital transformation.

4. Build digital ecosystems:

⚫ The organization needs to build a network of partners, suppliers, and customers that can
collaborate to create value through digital technologies.
⚫ This may involve :
✓ developing new business models,
✓ creating new products and services,
✓ or redefining existing relationships.

_________________End__________
Why is B2B e-commerce so essential?

Business-to-Business (B2B)
✓ Business-to-Business (B2B) transactions involve the exchange of goods or services
between two or more businesses.
✓ This type of transaction is common in supply chain management.
-where businesses purchase raw materials or finished goods from other businesses.
✓ Example: ChemConnect
B2B e-commerce is essential for several reasons:

⚫ Increased efficiency:
 B2B e-commerce can help streamline business processes,
 reduce transactional costs,
 and enable companies to purchase goods and services more efficiently.

⚫ Enhanced customer experience: B2B e-commerce provides a seamless and convenient

way for customers to interact with suppliers, place orders, and track deliveries.

⚫ Greater reach: B2B e-commerce can enable companies to expand their reach beyond
their local markets and connect with suppliers and customers from around the world.

⚫ Improved data management: B2B e-commerce provides a digital platform for

companies to manage their data, inventory, and supply chain more effectively.

⚫ Increased competitiveness: B2B e-commerce can provide companies with a

competitive edge by enabling them to offer more efficient, personalized, and cost-
effective services to their customers.

___________________End____________

5. How should we evaluate the magnitude of business pressures and

technological advancement?/
how the business environment (left) creates pressures, problems, and
opportunities that drive what organizations are doing in their business processes
➢ In Figure 1.6 illustrates how the business environment (left) creates pressures,
problems, and opportunities .
-that drive what organizations are doing in their business processes (the “Our
Company” circle).
➢ Other drivers are the organization’s mission, goals, strategy, and plans.
➢ Business processes include competencies, activities, and responses to the
environmental pressures.
-that we call critical response activities or solutions.
 ➢ The business processes and activities result in measurable performance, which
provides solutions to problems/opportunities, as well as feedback to the attainment
of the mission, strategy, goals, and plans.
➢ Notice that in Figure 1.6 EC and IT provide support to organizational activities and to
the resultant performance, countering the business pressures.
In order to evaluate the magnitude of business pressures and technological advancements, it
is important to have a clear understanding of the factors driving digital transformation and
their potential impact on the organization.
The framework includes the following steps:
1. Identify the relevant business pressures
2. Evaluate the impact of business pressures
3. Identify the relevant technological advancements
4. Evaluate the impact of technological advancements
5. Assess the organization's readiness for digital transformation:

1.Identify the relevant business pressures: The first step in evaluating the magnitude of
business pressures and technological advancements is to identify the relevant business
pressures that are driving digital transformation.
➢ These may include :
- changes in the competitive landscape,
- shifts in customer needs and preferences,
- regulatory changes,
- and technological advancements.
➢ It is important to consider both internal and external pressures, as well as short-term and
long-term pressures.

2.Evaluate the impact of business pressures: Once the relevant business pressures have
been identified, it is important to evaluate their impact on the organization.
➢ This involves :
-considering the magnitude of the pressure (i.e., how significant it is),
-the speed at which it is changing, and the degree of uncertainty surrounding
it.
➢ For example, a new regulatory requirement may have a high magnitude and be changing
quickly, but may also be relatively certain in terms of its requirements and implications.

3. Identify the relevant technological advancements: The next step is to identify the
technological advancements that are driving digital transformation.
➢ These may include new hardware and software technologies, as well as new business
models and processes.
➢ It is important to consider both emerging technologies and those that are already widely
adopted.

4. Evaluate the impact of technological advancements: Once the relevant technological

advancements have been identified, it is important to evaluate their impact on the
organization.
➢ This involves:
 -considering the magnitude of the technology (i.e., how significant it is),
- the speed at which it is changing,
- and the degree of uncertainty surrounding it.
➢ For example, a new software platform may have a high magnitude and be changing
quickly.
-but may also be relatively certain in terms of its features and capabilities.

5. Assess the organization's readiness for digital transformation: The final step is to
assess the organization's readiness for digital transformation.
➢ This involves considering the organization's current capabilities, resources, and culture,
as well as its strategic goals and priorities.
➢ It is important to identify any gaps between the organization's current state and its
desired state, and to develop a plan for addressing these gaps.

Overall, evaluating the magnitude of business pressures and technological advancements

requires a comprehensive and analytical approach, which takes into account a range of factors
and perspectives.
By following a structured framework, organizations can more effectively assess their
readiness for digital transformation and develop strategies for adapting to the changing
business environment.
____________End___________

What are the Major drivers of EC?

_________________End____________
How can we exploit social/business networking?
Social Networking
We defi ne social networking as the execution of any Web 2.0 activity, such as blogging or
having a presence in a social network. It also includes all activities conducted in social
networks.
Social Networking Services
➢ Social networking services (SNSs) , such as LinkedIn and Facebook, provide and host
a Web space for people to build their homepages for free.
➢ SNSs also provide basic support tools for conducting different activities and allow
many vendors to provide apps.
➢ Social networks are people oriented.
➢ The following are examples of representative social network services:
• Facebook.com : The most visited social network website.
• YouTube.com and metacafe.com : Users can upload and view video clips.
• Flickr.com : Users share and comment on photos.
• LinkedIn.com : The major enterprise-oriented social network.
• Hi5.com : A popular global social network.
• Cyworld.nate.com : Asia’s largest social networking website.
• Habbo.com : Entertaining country-specific sites for kids and adults.
• Pinterest.com : Provides a platform for organizing and sharing images (see the opening case
in Chapter 2).
• Google+ : A business-oriented social network.
• MySpace.com : Facilitates socialization and entertainment for people of all ages.

Enterprise Social Networks

➢ Business-oriented social networks can be public, such as LinkedIn.com.
➢ As such, they are owned and managed by an independent company.
➢ Another type of business-oriented social network is private, owned by corporations
and operated inside them.
➢ These are known as enterprise social networks (e.g., MyStarbucks Idea).
➢ These can be directed toward customers or company employees.
Exploit social / business networking
There are major possibilities here.
➢ Some companies even open their own social networks.
➢ Advertising is probably the first thing to consider.
➢ Recruiting can be a promising avenue as well.
➢ Offering discounted products and services should also be considered.
➢ Providing customer services and conducting market research can be a useful activity
as well.
➢ Finally, the ultimate goal is associating the social network with commerce so that
revenue is created.
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What should be my business strategy toward EC?

OPENING CASE: HOW STARBUCKS IS CHANGING TO A DIGITAL AND SOCIAL ENTERPRISE Starbucks is
the world’s largest coffee house chain, with about 20,800 stores in 63 countries (see Loeb 2013 ).
Many people view Starbucks as a traditional store where customers drop in, enter 1 Overview of
Electronic Commerce Electronic supplementary material The online version of this chapter (doi:
10.1007/978-3-319-10091-3_1) contains supplementary material, which is available to authorized
users 4 an order, pay cash or by credit card for coffee or other products, consume their choices in the
store, and go on about their business. The last thing many people think about is the utilization of
computers in this business. The opposite is actually true. Starbucks is turning itself into a digital and
social company (Van Grove 2012 ). For a long time Starbucks was known as appealing to young
people because the free WiFi Internet access provided in its U.S. and Canada stores. But lately the
company embarked on several digital initiatives to become a truly technology- savvy company. THE
PROBLEM Starting in 2007, the company’s operating income declined sharply (from over $1 billion in
2007 to $504 million in 2008 and $560 million in 2009). This decline was caused by not only the
economic slowdown, but also by the increased competition (e.g., from Green Mountain Coffee
Roasters), which intensifi ed even during the recession. Excellent coffee and service helped but only
in the short run. A better solution was needed. Starbucks realized that better interaction with its
customers is necessary and decided to solve the problem via digitization. THE SOLUTION: GOING
DIGITAL AND SOCIAL In addition to traditional measures to improve its operation and margin, the
company resorted to electronic commerce , meaning the use of computerized systems to conduct
and support its business. The company appointed a Senior Executive with the title of Chief Digital Offi
cer to oversee its digital activities. It also created the Digital Venture Group to conduct the technical
implementation. The Electronic Commerce Initiatives Starbucks deployed several e-commerce
projects, the major ones are follow. Online Store Starbucks sells a small number of products online at
starbucksstore.com . These offerings include coffee, tea, and Starbucks equipment and
merchandise. The store was in operation for years, using typical shopping cart (called My Bag), but
the company completely redesigned the webstore to make shopping more convenient and easy in
August 2011. In addition, customers (individual or companies) can schedule deliveries of standard
and special items. Customers can order rare and exquisite coffee that is available only in some U.S.
stores. Now customers around the U.S. and the world can enjoy it too. Finally, online customers get
exclusive promotions. The eGift Card Program Customers can buy Starbucks customized gift cards
digitally (e.g., a gift card for a friend’s birthday is auto delivered on the desired date). Payments can
be made with a credit card or PayPal. The gift card is sent to the recipient via e-mail or Facebook. The
recipients can print the card and go sping at a Starbucks physical store, transfer the gift amount to
their Starbucks’ payment card, or to Starbuck Card Mobile. Loyalty Program Like airlines and other
vendors, the company offers a Loyalty Program (My Starbucks Rewards). Those who reach the gold
level receive extra benefi ts. The program is managed electronically. Mobile Payments Customers
can pay at Starbucks stores with prepaid (stored value) cards, similar to those used in
transportation, or conduct smartphone payments. Paying from Smartphones Starbucks customers
can also pay for purchases in physical stores with their mobile devices. Payments can be made by
each of two technologies: • Using Starbucks mobile card. Shoppers have an app on their mobile
device. Payment is made by selecting “touch to pay” and holding up the barcode on the device
screen to a scanner at the registrar. The system is connected 1 Overview of Electronic Commerce 5
automatically to a debit or credit card. The system works only in the company-owned store. • Using
Square mobile payment. The Square revolutionary system (Chapter 11) allows merchants to accept
credit or debit card payments by attaching a small device (a card reader) to their Internet-enabled
mobile device (e.g., iPad, iPhone). The merchant then swipes the customer’s credit (or debit) card to
get immediate approval. The cost to the Starbucks stores is signifi cantly lower than when the
company uses traditional credit card services. For details see Magid ( 2012 ). The Social Media
Projects Starbucks realized the importance of social media that uses Internet-based systems to
support social interactions and user involvement and engagement (Chapter 7). Thus, it started
several initiatives to foster customer relationships based on the needs, wants, and preferences of its
existing and future customers. The following are some representative activities. Exploiting Collective
Intelligence Mystarbucksidea.com is a platform in which a community of over 300,000 consumers
and employees can make improvement suggestions, vote for the suggestions, ask questions,
collaborate on projects, and express their complaints and frustrations. The community generated
70,000 ideas in its fi rst year, ranging from thoughts on the company’s rewards cards and
elimination of paper cups to ways to improve customer service. The site also provides statistics on
the ideas generated, by category, as well as their status (under review, reviewed, in the works, and
launched). The company may provide incentives for certain generated ideas. For example, in June
2010, Starbucks offered $20,000 for the best idea concerning the reuse of its used coffee cups. This
initiative is based on the technology of collective intelligence also known as crowdsourcing (see
Chapters 2 and 8) and it is supported by the following blog. Starbucks Idea in Action Blog This blog is
written by employees who discuss what the company is doing about ideas submitted to
MyStarbucksIdea site. Starbucks’ Activities on Facebook Fully integrated into Facebook, Starbucks
practices several social commerce activities there. The site was built with input from Starbucks
customers. The company uploads videos, blog posts, photos, promotions, product highlights, and
special deals. The millions of people who like Starbucks on Facebook verify that it is one of the most
popular companies on Facebook with about 36 million followers (February 2014), see current
statistics at starcount.com/chart/wiki/Starbucks/today and at facebook.com/starbucks . Starbucks
offers one of the best online marketing communication experiences on Facebook to date as well as
mobile commerce engagements. Starbucks posts information on its Facebook “wall” whether it is
content, questions, or updates. The company is also advertising on its Facebook homepage. Note
that Starbucks is assessing the cost-benefi t of such advertising. Starbucks’ Presence in LinkedIn and
Google+ Starbucks has a profi le on the LinkedIn site with over 50,000 followers (July 2012). It
provides business data about the company, lists new hires in managerial positions, and advertises
available managerial jobs. Starbucks is also active on Google+. Starbucks Actions on Twitter In
February 2014, Starbucks had over 2.2 million followers (Follow@starbucks) on Twitter organized in
18,025 lists (e.g., @starbucks/friends). Each ‘list’ has its own followers and tweets. Whenever the
company has some new update or marketing campaign, the company encourages conversation on
Twitter. By October 2013, Starbucks was the number one retailer to follow Twitter. As of November
2013, Starbucks sends $5 gift cards to Twitter friends and followers. Starbucks’ Activities on YouTube,
Flickr, and Instagram Starbucks has a presence on both YouTube ( youtube. com/starbucks and Flickr (
fl ickr.com/starbucks , with a selection of videos and photos for view. It also runs advertising
campaigns there. Finally, Starbucks has about 250,000 followers on the photo-sharing company-
Instagram ( instagram.com ). Opening Case: How Starbucks Is Changing to a Digital and Social
Enterprise 6 Starbucks Digital Network To support its digital activities the company offers online
content using Starbucks Digital Network in partnership with major media providers (e.g., New York
Times , iTunes). It is designed for all major mobile devices including tablets (e.g., iPad) and
smartphones. The network’s content features news, entertainment, business, health, and local
neighborhood information channels. Early Adoption of Foursquare: A Failure Not all Starbucks social
media projects were successes. For example, the company decided to be an early adopter of
geolocation by working with Foursquare (Chapter 7). The initiative simply did not work, and the
project ended in mid-2010 (see Teicher 2010 for an analysis of the reasons). The company
experimented in the UK with a similar location company called Placecast. As of fall 2011, Starbucks
had a better understanding of the opportunities and the limitations, so it may decide to try
geolocation again with Facebook’s Places, or it may revive the Foursquare project. THE RESULTS
According to Bryson-York ( 2010 ), Starbucks turned around sales by effectively integrating the digital
and the physical worlds. In 2010, its operating income almost tripled ($1.437 billion versus $560
million in 2009) and so did its stock price. In 2011, the operating income reached $1.7 billion. Since
then the operating income is increasing rapidly. The company’s social media initiatives are widely
recognized. In 2012 it was listed by Fortune Magazine as one of top social media stars (Fortune 2012
), and in 2008 it was awarded the 2008 Groundswell Award by Forrester Research. The site is very
popular on Facebook where it has millions of fans, (sometimes more popular than pop icon Lady
Gaga). Starbucks attributes its success to 10 philosophical guidelines that drive its social media
efforts (see Belicove 2010 for details). Sources: Based on Belicove ( 2010 ), Bryson- York ( 2010 ),
Callari ( 2010 ), Van Grove ( 2012 ), Loeb ( 2013 ), Gembarski ( 2012 ), Marsden ( 2010 ),Teicher ( 2010
), Walsh ( 2010 ), mystarbucks.force.com , and blogs.starbucks. com (both accessed May 2014).
LESSONS LEARNED FROM THE CASE

The Starbucks case illustrates the story of a large retailer that is converting to be a digital and social
enterprise. Doing business electronically is one of the major activities of e-commerce, the subject of
this book. The case demonstrates several of the topics you will learn about in this chapter and
throughout the book.

These are:

1. There are multiple activities in EC including selling online, customer service, and collaborative
intelligence.

2. The case shows major benefits both to buyers and sellers. This is typical in EC.

3. The EC capabilities include the ability to offer products and services in many locations, including
overseas to many customers, individuals, and businesses. You can do so because online your
customer base is huge, and people can buy from anywhere at any time.

4. In a regular store you pay and pick up the merchandise or service. In Starbucks and other
webstores you order, pay, and the product is shipped to you. Therefore, order fulfillment needs to be
very efficient and timely.

5. Being a digital enterprise can be very useful, but a greater benefit can be achieved by extending it
to be socially oriented enterprise. Both approaches constitute the backbone of electronic commerce,
the subject of this book.

Team Assignments and Projects

1. Read the opening case and answer the following questions:

(a) In what ways you think Starbucks increases its brand recognition with its EC initiatives?

(b) Some criticize My Starbucks Idea as an ineffective “show off.” Find information about the pros and
cons of the program. (See Starbucks Ideas in Action Blog).

(c) Starbucks initiates discussions on Facebook about non-business topics such as the marriage
equality bill, Why?

(d) How customers are being kept involved and engaged in the various EC initiatives.
(e) Starbucks believes that its digital and social initiatives are “highly innovative and cause dramatic
changes in consumer behavior.” Discuss.

(f) View the video available at Stelzner ( 2010 ), (8 minutes) and answer the following:

1. How does Starbucks uses video marketing in social media?

2. How does the company listen to their customers?

3. What are some tips for success and for things to avoid?

4. Enter facebook.com/starbucsk . Summarize your impressions with the site.

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CASE 1.1: NET-A-PORTER: DRESS FOR SUCCESS

Will a woman buy a $2,000 dress online without trying it on? Net-a-Porter (a UK online retailer,
known as “the Net”) bet on it and proved that today’s women will purchase their dresses (for
success) online, especially if the luxury clothing and accessories are international brands such as
Jimmy Choo or Calvin Klein. Case 1.1: Net-a-Porter: Dress for Success 14 The Opportunity When
talking about e-commerce (EC), most people think about buying online books, vitamins, CDs, or
other commodity items. And this indeed was what people bought in the mid-1990s, when EC began.
But in 2000, Natalie Massenet, a fashion journalist, saw an opportunity because of the success of
luxury online stores such as Blue Nile (see Chapter 2) and the fact that professional women are very
busy and willing to do more purchasing online. The Solution Natalie decided to open a online
business for luxury fashion. She created a comprehensive, sociallyoriented e-tailing site, naming it
Net-a-Porter. According to net-a-porter.com , Brodie ( 2009 ), and Rowe ( 2010 ), the company: In
2010, the company started taking advantage of the social media environment that is changing the
fashion industry (Rowe 2010 ). THE RESULTS Customers now come from over 170 countries and
revenue and profi ts are increasing rapidly. Several million visitors come to the site every week. The
‘Net’ become profi table after 1 year, a very rare case in e-tailing. During the economic crisis of 2009,
the Net’s total sales were up 45%, versus a 14% decrease for one of its major competitors (Neiman
Marcus; Web and paper catalog sales). The company was so successful that luxury goods company
Richemont Corp. purchased a 93% stake in the business. (Since the company is now part of
Richemont, there are no separate fi nancial data for the Net.) In June 2010 when the company
celebrated its 10th anniversary, it opened a new website dedicated to menswear. With success
comes competition, and the Net’s competitors include Bluefl y (low prices), Shopbop (an
Amazon.com company, • Opened an e-tailing store • Offered merchandise from over 350 top
designers; most offl ine stores offer few dozen • Offered its own designs in addition to others •
Arranged global distribution systems to over 170 countries • Opened physical stores in London and
New York to support the online business • Arranged same day delivery (Chapter 3) in London and
New York and overnight delivery elsewhere • Organized very fast cycle time for producing and
introducing new clothes and other products that match customers’ preference • Devised prediction
methods of fashion trends based on customer feedback through social media • Ran online fashion
shows • Developed superb inventory and sales tracking systems based on dashboards (see Chapter
13) • Offered an online fashion magazine • Discovered what customers really want via social
networks (Chapters 7 and 8) and fulfi lled their needs • Offered large discounts • Developed a
presence on Facebook and app for iPhone • Has 630,000 followers on Google + (February 2014) •
Has fi ve million visitors each month (February 2014) • Experiences 750,000 downloads per month
on iPhones • Started augmented reality shopping windows in several global cities as of 2012 (see
digitalbuzzblog.com/net-a-porteraugmented-reality- shopping-windows ). At this same site you can
watch the video “Window Shop” and download the Net-aPorter iPhone/iPad app. 1 Overview of
Electronic Commerce 15 but it lacks the Net’s prestige), and high- end department stores with their
own online stores (Nordstrom, Neiman Marcus). But the Net has the highest prestige and growth
rate. A major threat may come from eBay, which has been reaching out to high-end designers about
creating their own virtual stores (hosted by eBay) where they can sell at fi xed prices and also use
auctions. Finally, note that in late 2010, Google entered the fashion fi eld of e-commerce with its
Boutiques. com, and Amazon.com created MYHABIT that offers designer brands at discount. To stay
on top of the competition, the Net is planning new ventures and expanding its business model to
include children’s clothes. Net-a-Porter is an example of the revolution that is occurring in the
fashion industry. Another example is Polyvore whose case is presented in Chapter 7. For details on
these new business models see businessofffashion. com/2012/01/e-commerce-week-the-rise-
ofnew-business-models. Sources : Based on Brodie ( 2009 ), Rowe ( 2010 ),
en.wikipedia.org/wiki/Net-a-Porter , and net-a-porter.com (both accessed February 2014).

Questions

1. Why would you buy (or not buy) from Net-a-Porter?

2. Watch the video “The Future of Shopping” ( youtube.com/watch?v=_Te-NCAC3a4 ). How would

you integrate this development with Net-a-Porter?

3. List both the advantages and disadvantages of the Net’s physical stores?

4. It is said that the Net is playing a significant role in transforming how designers reach customers.
Explain why.

5. Read the benefi ts of EC to customers (Section 1.3 ). Which ones are most relevant here?

6. What EC capabilities are helping the Net and its designers?

7. Analyze the competition in the high-end fashion market.

8. What is the importance of globalization in this case?

9. Imitators are springing up on all sides. Even eBay and Amazon.com are expanding their fashion e-
tailing efforts. What strategy do you suggest for the Net? (Hint: Read Brodie 2009 to get some ideas.)

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CLOSING CASE: E-COMMERCE AT THE NATIONAL FOOTBALL LEAGUE (NFL) Professional sports are
multibillion-dollar businesses in the United States and they are growing rapidly in many other
countries. The National Football League (NFL), which consists of 32 teams, is a premier brand of the
most popular sport in the United States – football. The NFL uses e-commerce and other information
technologies extensively to run its business efficiently. The following are some examples of e-
commerce activities the NFL conducts both at the corporate level and the individual team level.
Selling Online In addition to the offi cial store ( nfl shop.com ) and the individual team stores, (e.g.,
the Atlanta Falcons), there are dozens of independent stores that sell authentic as well as replicas of
jerseys, hats, shirts, and other team merchandise. Most of these sales are done online, which
enables you to buy your favorite team’s items from anywhere; you can also save with coupons. It is
basically a multibillion-dollar B2C business, supported by search and shopping tools (see Chapter 2),
including price comparisons (e.g., compare prices at bizrate.com/ electronics-cases-
bags/5518586225.html ). Several online stores sell tickets for NFL events, including resale tickets. For
example, see ticketsnow.com/nfl -tickets . Selling in China In October 2013, the NFL opened its offi
cial online store in China ( nfl chinashop.com ). To embark on this venture the NFL used two partners:
Export Now to handle all the administration of the transactions, and Tmall.com (China’s leading EC
seller with over 500 million registered members). Information, News, and Social Networks The NFL is
on Facebook where there is a company description and many posts by its fans. It is also on Twitter
where you can fi nd information on upcoming NFL events, and be one of its 2,000,000+ followers.
You can also get local news including real-time sports scores texted to your smartphone (e.g., see
textme.azcentral.com ). The popularity of social media used by players created a need for a policy
regarding the use of social networks before and after (but not during) games. For the policy, see the
article titled “Social Media Before, After Games” at sports.espn.go.com/nfl /news/ story?id=
4435401 . Videos and Fantasy Games Madden NFL 11 is a video game available across all major
consoles with an adaptation for iPhone and iPad versions of the game. For details see en.
wikipedia.org/wiki/Madden_NFL_11 . Related to these games are the NFL fantasy games that are
available for free at fantasy.nfl .com . Smartphone Experience Smartphones, and especially iPhones,
now allow users to go online to view games in real time (some are costly). You can also use the
iPhone to view photos in the stadium that are projected on TV, and much more (e.g., for many
applications see McCafferty 2008 ). Closing Case: E-Commerce at the National Football League (NFL)
44 Wireless Applications in Stadiums Several stadiums are equipped with state-of-theart wireless
systems. One example is the University of Phoenix Stadium, which is the home of the Arizona
Cardinals. Fans can access many high-defi nition TVs in real time. Fans with smartphones can get real-
time scores or purchase food and other merchandise. The system also enables employees to
process ticket sales quickly. Also, fans can watch the game while buying food in the stadium. The
Cardinal’s marketing department can advertise the forthcoming games and other events on the
system. It also delivers data to coaches as needed during games. A similar system (used in Sun Life
Stadium, home of the Miami Dolphins) enable personalized replay during games (see the video
about a special portable device titled “Miami Dolphins Transform Sun Life Stadium into
Entertainment Destination for Fans” at youtube.com/ watch?v=t2qErS7f17Y ). Also, you can order
food online, have it delivered to your seat, and pay for it electronically. Finally, you can play fantasy
games while in the stadium. These EC applications are designed to make fans happy and to generate
revenue. Other Applications The NFL uses many other EC applications for the management of
transportation to the Super Bowl, security implementation, procurement (B2B), providing e-CRM,
and much more. Sources: Based on McCafferty ( 2008 ), Hickins ( 2009 ), and material collected on
Facebook, and Twitter (accessed February 2014).

Questions

1. Identify all applications related to B2C in online stores.

2. Identify all B2C applications inside the stadium.

3. Identify all B2E applications inside the stadium.

4. Relate online game playing to EC in NFL.

5. Compare the NFL information available on Facebook and on Twitter.

6. Find additional NFL-related applications not cited in this case.

7. Enter ignify.com/Atlanta_Falcons_eCommerce_Case_Study.html . Read the case “Atlanta Falcons
E-Commerce Case Study,” then go to the Falcons’ online store and describe all major EC models that
are used there.

8. Find information on ball tracking technology that can be used by the NFL.

9. Compare Madden NFL 11 with NFL fantasy games.

___________END_____________