I am a young entrepreneur thinking of developing an e-wallet like PayPal or wepay in China, but in a different philosophy... I want it to be an e-wallet, as well as a bridge for payments, where stores only need to integrate our e-wallet payment system to be able to accept all kinds of credit cards and cash services which we integrate into the system. I would hire expert developers when it comes to programming, but I would appreciate any insight or advise when approaching ecommerce business.
I will talk about E-commerce one by one so that you better understand what the structure and parts of e-commerce properly.
E-commerce: “Electronic commerce, commonly written as E-Commerce, is the trading in products or services using computer networks, such as the Internet. Electronic commerce draws on technologies such as mobile commerce, electronic funds transfer, supply chain management, Internet marketing, online transaction processing, electronic data interchange (EDI), inventory management systems, and automated data collection systems. Modern electronic commerce typically uses the World Wide Web for at least one part of the transaction’s life cycle, although it may also use other technologies such as E-Mail.
E-Commerce businesses may employ some or all the following:
a) Digitalization of business:
b) This means a comprehensive usage of ICT (Information & Communication Technology) not only within a business organization (as it has been done during the last decades by traditional (internal) information systems), but now through a more and more seamless linking and cooperation of information and communication systems of all involved business partners.
c) The comprehensive usage of ICT has been enabled by some technologies and technical standards, which have been accepted globally (see chapter 2 of this book).
d) Focus on business processes:
e) We support business processes, of course, as we did it for the last decades, but now the total processes, running through several organizations and crossing their boundaries, are supported.
f) We automate business processes not longer only within organizations, as it was “the” traditional objective of ICT, but now the automation is related to the total process, running through all involved organizations, and not only to the sub-process within the own organization.
g) We increase the speed of business processes. Additional potentials can be realized with the coupling of processes between different organizations.
h) We increase the economic efficiency of business processes, again through coupling of business processes at the boundaries of the business partners.
i) Usage of a global network:
j) Internet plays a dominant role and has become a universal technical infrastructure. Thus, it builds a global virtual place where every organization and person being interested in making business can come together without geographical and time restrictions.
k) Global networks allow the exchange of information without any restrictions in time and independently from any geographical distances.
l) We “know” (means: assume) that the Internet is always up and running (7·24h).
m) New potentials and opportunities for cooperation:
n) More or less independent persons and/or organizations work together.
o) Business actors can come together whenever they want it or whenever there is a need.
E-Commerce with the “5-C-model”:
Another approach to define and explain, what E-Commerce is, comes from the so-called 5-C-model (Zwass 2014). It defines E-Commerce by five activity domains whose denominations start with the letter “C”:
i. In the electronic marketplaces there is a matching of customers and suppliers, an establishing of the transaction terms, and the facilitation of exchange transactions.
ii. With the broad move to the Web-enabled enterprise systems with relatively uniform capabilities as compared to the legacy systems, a universal supply-chain linkage has been created.
i. The Web is a vast nexus, or network, of relationships among firms and individuals.
ii. More or fewer formal collaborations are created or emerge on the Web to bring together individuals engaged in knowledge work in a manner that limits the constraints of space, time, national boundaries, and organizational affiliation.
i. As an interactive medium, the Web has given rise to a multiplicity of media products.
ii. This universal medium has become a forum for self-expression (as in blogs) and self-presentation.
iii. The rapidly growing M-Commerce (see below) enables connectivity in context, with location-sensitive products and advertising.
iv. In the communications domain, the Web also serves as a distribution channel for digital products.
i. Common software development platforms, many of them in the open-source domain, enable a wide spectrum of firms to avail themselves of the benefits of the already developed software, which is, moreover, compatible with that of their trading and collaborating partners.
ii. The Internet, as a network of networks that is easy to join and out of which it is relatively easy to carve out virtual private networks, is the universal telecommunications network, now widely expanding in the mobile domain.
i. Internet infrastructure enables large-scale sharing of computational and storage resources, thus leading to the implementation of the decades-old idea of utility computing.
M-Commerce (Mobile Commerce):
M-Commerce is commonly understood as the usage of mobile devices for business purposes, especially mobile phones and PDA’s (Personal Digital Assistants).
Main features of M-Commerce are:
i. Location independence of (mobile) customers,
ii. High availability of services through well-established mobile phone networks,
iii. Increasing computing power of mobile devices,
iv. Interactivity of mobile devices (voice and data transfer),
v. Security (when using mobile phone networks),
vi. Localization of customers through cell structure,
vii. Accessibility of customers,
viii. Potential of personalized services/offers.
E-Procurement (Electronic Procurement):
transactions. Each step in the procurement process is captured electronically, and all transaction data is routed automatically, reducing time and cost of procurement. Properly deployed, E-Procurement can deliver tremendous value to enterprises in different ways.
In a narrower sense E-Procurement is seen as the ordering of MRO goods (MRO = Maintenance/Repair/Operations) on the basis of Web-based application systems directly by the demand carrier to reduce process costs in the area of so-called C-articles (C-articles represent a small portion of the total financial procurement volume, but cause a significant portion of the procurement costs).
Every sales process at the same time is a procurement process or a buying process –from the point of view of the (potential) customer. Sales processes are driven by the supplier. Procurement processes are driven by the customer. However, the exchange of goods or services must be managed. Thus, we will consider E-Procurement as a specific view onto E-Commerce.
E-Government (Electronic Government):
The big encyclopaedia Wikipedia says: “E-Government (short for electronic government, also known as e-gov, Internet government, digital government, online government, or connected government) consists of the digital interactions between citizens and their government (C2G), between governments and government agencies (G2G), between government and citizens (G2C), between government and employees (G2E), and between government and businesses/commerce (G2B).
This digital interaction includes all levels of government (city, state/province, national, and international), governance, information and communication technology (ICT), and business process re-engineering (BPR).”
E-Administration (Electronic Administration): “E-administration refers to those mechanisms which convert the paper processes in a traditional office into electronic processes, with the goal to create a paperless office. Its objective is to get total transparency and accountability within any organization.”
E-Democracy (Electronic Democracy): “E-Democracy incorporates 21st-century information and communications technology to promote democracy. That means a form of government in which all adult citizens are presumed to be eligible to participate equally in the proposal, development, and creation of laws.”
Role of Internet: In the early years, E-Commerce was considered to be an aid to the business. In the meantime, it has become more or less a business enabler. Between 1998 and 2000, a substantial number of businesses in the United States and Western Europe developed rudimentary websites. In the dot-com era, E-Commerce came to include activities more precisely termed ‘‘Web commerce’’ – the purchase of goods and services over the World Wide Web, usually with secure connections with E-Shopping carts and with electronic payment services such as credit card payment authorizations. The emergence of E-Commerce also significantly lowered barriers to entry in the selling of many types of goods; many small home-based proprietors are able to use the Internet to sell goods. Established suppliers had to close their shops and to change their business model to an E-Commerce model to stay profitable and in the business (e.g. travel agencies). Often, small suppliers use online auction sites such as eBay or sell via large corporate websites, to ensure that they are seen and visited by potential customers.
Business models related to E-Commerce:
1. Access provider: The access provider ensures (technical) access to the Internet. We should have in mind, that somebody must pay the access provider so that we can get access to the Internet. Who pays? We or somebody else? In many areas of the world it is a totally privatized business, though sometimes in the political arena the access to the Internet is declared as a modern human right. Obviously, there is a similarity to telephone network(s). However, it (normally) works in this privatized form. Traditional business models, which are somehow similar to the business of an access provider, are operators of a technical infrastructure, e.g. telephone networks, car highways, or railways.
2. Search engine: Search engines are the most used software in the Internet. They are the starting step for many Internet-based activities, not only but of course, also if somebody is looking for a business opportunity. Again, we must ask: Who pays? The one, who wants to find something or someone? Or the one, who wants to be found? A traditional and similar business model is given by the so-called “yellow pages”, where firms are listed and grouped according to branches and locations.
3. Online shop: An online shop is a website, where you can buy products or services, e.g. books or office supplies. Traditional and similar business models are direct mail selling (no shop facility, offering of goods via a printed catalogue, ordering by letters or telephone calls) and factory outlets (producer has own shop facility, does not sell his products via merchants).
4. Content provider: Content providers offer content, a completely digital good, e.g. information, news, documents, music. A specific variant of a content provider is the information broker, who is a trader of information. Again, the following question must be put: Who pays? The one, who wants to have access to an information? The one, who wants to provide an information? Traditional business models in this area are newspaper publishers, magazine publishers, radio and television broadcasting services or publishing companies.
5. Portal: A portal is a website, which provides a set of services to the user so that he/she sometimes thinks that he/she is using a single but overly complex software system. Portals are often used in big organizations to control the access of employees to the different ICT systems; each employee gets a specific menu of “his”/ “her” applications. Also, content providers use portals, though in the narrow sense that they only deliver content and no application systems.
6. Online marketplace/electronic mall: An online marketplace is a website, where suppliers and potential customers can come together like on a real marketplace in a small town. An E-Mall is a set of online shops, which can be found on one website. Examples of traditional and similar business models are shopping centres, omnibus orders (One person is customer of the shop and buys for a group of people), marketplaces and buying associations.
7. Virtual community: A virtual community is a platform for communication and exchange of experience. It is like a virtual club or association. We always should ask: Who is the owner? Who is the person or organization behind the platform? Who pays? The members or the visitors? The community operator?
8. Information broker: An information broker collects, aggregates and provides information, e.g. information with respect to products, prices, availabilities or market data, economic data, technical information. Here we have to ask: Can we trust the information? Is it neutral or just a product placement? Who pays? The visitor? Some providers? Financed through advertisements? Traditional and similar business models are magazines running tests of computers, cars, consumer goods, restaurants.
9. Transaction broker: A transaction broker is a person or an organization to execute sales transactions. Sometimes those brokers are used to hide the real customer to the supplier. A transaction broker is an agent who is an expert in a specific area and can take over parts of a business. A similar traditional business model is the free salesman.
10. Online service provider/cloud service provider (CSP): An online service provider provides services, which can be run electronically, e.g. application software services or ICT infrastructure services like storage or backup services. If this organization uses so-called cloud technologies, it is called a cloud service provider (ten Hompel et al 2015; Marks & Lozano 2010). The questions, which we must put, are: Who pays? The service user? If not, who is the customer? This list describes a great variety of Internet-based business models. However, it will not be a complete compilation because with new and innovative technologies new business ideas will come up and lead to new and additional offerings.
Advantages for customer are as follows:
i. Flexible shopping hours (7∙24h)
ii. No waiting queues (if net is available and software appropriately designed)
iii. Shopping at home (we do not have to leave our apartment, refuel our car or buy a subway ticket, look for a parking place, etc.)
iv. Individual needs can be covered (if customization is offered)
v. Global offers, more competition, pressure on prices
Advantages for the providers:
i. Better customer service can be offered
ii. Fast communication with customer
iii. New customer potential through global visibility
iv. No (traditional) intermediaries, who take away margins
Disadvantages for the customer:
i. Security risks:
1) Data theft (e.g. stealing account or credit card numbers)
2) Identity theft (acting under our name or user identity)
3) Abuse (e.g. third person orders goods with our identity, gets them delivered and we have to pay for it)
1) Bogus firm (firm does not really exist)
2) Fraud (e.g. order is confirmed, invoice has to be paid, but goods are never delivered)
3) Uncertain legal status (if something goes wrong, can we accuse the provider?)
Disadvantages for Provider:
1. Higher logistics cost (goods must be sent to the customer’s location)
2. Higher logistics cost (goods have to be sent to the customer’s location)
Business net types: A more abstract categorization of digital businesses has been given 2001 by Tapscott (Meier & Stormer). He discussed the following business net types:
Business Web Agora:
1. Objective: To run a marketplace for goods and values.
2. Attributes: Market information available, negotiation processes established, dynamic pricing through negotiations between market participants.
3. Role of the customer: Market participant.
4. Benefits: Negotiable products and services.
5. Examples: eBay, auctions.yahoo.
Business Web Aggregator:
1. Objective: To run a digital super market.
2. Attributes: Presentation of a great variety of products, fixed prices and no negotiation between supplier and customer, simple fulfilment from the customer’s point of view.
3. Role of the customer: Customer.
4. Benefits: Convenient selection and fulfilment from the customer’s point of view.
5. Examples: etrade, amazon.
Business Web Integrator:
1. Objective: To establish an optimized value creation chain.
2. Attributes: Systematic supplier selection, process optimization for the total value chain,product integration along the value chain.
3. Role of the customer: Value driver.
4. Benefits: Creation and delivery of customer-specific products.
5. Examples: Cisco, Dell.
Business Web Alliance:
1. Objective: To establish a self-organizing value creation space.
2. Attributes: Innovation in products and processes, trust building between different actors,abstinence of hierarchical supervision.
3. Role of the customer: Contributor.
4. Benefits: Creative and collaborative solutions.
5. Examples: Linux, music.download.
Business Web distributor:
1. Objective: Exchange of information, goods and services.
2. Attributes: Net optimization, unlimited usage, logistics processes.
3. Role of the customer: Recipient.
4. Benefits: In-time delivery.
5. Examples: UPS, AT&T, Telekom.
Web 2.0: Web 2.0 (Chen & Vargo) describes World Wide Web sites that emphasize user-generated content, usability, and interoperability. Although Web 2.0 suggests a new version of the World Wide Web, it does not refer to an update of any technical specification, but rather to cumulative changes in the way Web pages are made and used.
Characteristic application types of Web 2.0 are
1. Blogs: A blog (a truncation of the expression weblog) is a discussion or informational site published on the World Wide Web and consisting of discrete entries (“posts”) typically displayed in reverse chronological order (the most recent post appears first). We normally see “multi-author blogs” (MABs) with posts written by large numbers of authors and professionally edited. MABs from newspapers, other media outlets, universities, think tanks, advocacy groups and similar institutions account for an increasing quantity of blog traffic. The rise of Twitter and other “micro-blogging” systems helps integrate MABs and single-author blogs into societal news streams.
2. Social networking services: A social networking service (also social networking site or SNS) is a platform to build social networks or social relations among people who share similar interests, activities, backgrounds or real-life connections. A SNS consists of a representation of each user (often a profile), his or her social links, and a variety of additional services such as career services. SNS’s are Web-based services that allow individuals to create a public profile, create a list of users with whom to share connections, and view and cross the connections within the system. Most SNS’s provide means for users to interact over the Internet, such as E-Mail and instant messaging. SNS’s incorporate new information and communication tools such as mobile connectivity, photo/video/sharing and blogging.
3. Online communities: An online community is a virtual community whose members interact with each other primarily via the Internet. Those who wish to be a part of an online community usually have to become a member via a specific site and necessarily need an Internet connection. An online community can act as an information system where members can post, comment on discussions, give advice or collaborate. Commonly, people communicate through SNS’s, chat rooms, forums, E-Mail lists and discussion boards. People may also join online communities through video games, blogs and virtual worlds.
4. Forums/Bulletin boards: An Internet forum, or message board, is an online discussion site where people can hold conversations in the form of posted messages. They differ from chat rooms in that messages are often longer than one line of text, and are at least temporarily archived. Also, depending on the access level of a user or the forum set-up, a posted message might need to be approved by a moderator before it becomes visible.
5. Content aggregators: An aggregator is a website or computer software that aggregates a specific type of information from multiple online sources.
If an enterprise wants to be successful in the Web-2.0-world it has to move from a goods focus to a service focus. How can this be managed? The following rules may help:
1. Do not produce goods but assist customers in their own value-creation processes.
2. Value is not created and sold but value is co-created with customers and other value-creation partners.
3. Do not consider customers as isolated entities, but in the context of their own networks.
4. Resources are not primarily tangible such as natural resources but usually intangible such as knowledge and skills.
5. Shift from thinking of customers as targets to thinking of customers as resources.
6. Shift from making efficiency primary to increasing efficiency through effectiveness.
Technical challenges: ICT systems have to work properly not only within the boundaries of the own organization but also in combination with ICT systems of other organizations. Interfaces between the involved systems have to be defined and documented properly. But: How heterogeneous are the involved ICT systems allowed to be? Is our IT infrastructure fit for E-Commerce? How do we have to change or extend our application systems for E-Commerce? In the digital business ICT systems are mission critical assets. How do we have to protect an ICT system so that it is not possible to destroy it, damage it or manipulate it? Are our ICT systems secure? Are unauthorized persons able to get access to our systems? Are payment procedures secure enough? Can we protect the personal data of involved people, especially customer data? Finally, we have to realize, that E-Commerce depends on people. Are the people of our IT organization qualified enough? Can we provide the necessary and significantly high technical support?
Economic challenges: E-Commerce is not only a matter of technology. It is primarily, because it is commerce, a matter of management and organization. The following questions have to be answered: Are our business processes standardized enough – at least harmonized among the participants? Who is allowed to participate? Are all participants trustworthy? Who makes the decision which person or organization is allowed to participate? How much E-Commerce do we need to keep competitive? How do we have to change our business model? What is going to happen after opening a new (electronic) sales channel? Will traditional sales channels suffer from it? How can we measure the success of our E-Commerce activities? Will costs be compensated through revenues? Will we make profit? How do we have to develop our relationship with customers, suppliers and other business partners to be able to realize the advantages of E-Commerce for our organization and avoid the disadvantages? How do we have to develop and change our business relationships? How do we have to redesign our business processes? How do the roles of our employees change? Are our employees qualified for these new roles?
I have drawn a brief picture of what e-commerce basically looks like in any country you are in, it will not only help you in understanding the e-commerce but will also help you detect the key players are. Make your strategies in accordance with it and you will surely reap benefits. Besides if you do have any questions give me a call: https://clarity.fm/joy-brotonath