The Past, Present and Future of E-

Commerce

Marketing 932
E-Commerce
 What is E-Commerce?
• E-Commerce can be defined as …
• The conduct of selling, buying, logistics, or other
organization-management issues via the WEB.
• OR
• Technology mediated exchanges between parties
(individuals and/or organizations) as well as the
electronically based intra- or interorganizational
activities that facilitate such exchanges.
 Growth of E-Commerce
2002
1st Q
$743.8B
2000 2001 2002est
$28.91B $35.87B $51.48B

1996
$700M
 History of E-Commerce
• Background
E-commerce actually began in the 1970s when larger
corporations started creating private networks to share
information with business partners and suppliers.
• This process, called Electronic Data Interchange (EDI),
transmitted standardized data that streamlined the
procurement process between businesses, so that paperwork
and human intervention were nearly eliminated.
• EDI is still in place, and is so effective at reducing costs and
improving efficiency that an estimated 95% of Fortune
1,000 companies use it.
 History of E-Commerce
• Prodigy was running text
ads and selling flowers in
the early '80s
• The first documented
Online sale in 1994 was
what?

A CD
 History of E-Commerce
• Early EC was pioneered by Internet companies that
didn't (and still don't) perform traditional retail.
Called Pure Plays.
– such as Amazon.com and CDNow.
• More recently click and mortar stores have moved
online
– like Barnes and Noble, Best Buy, the Gap, and Wal-Mart
 History of E-Commerce: Amazon.com

• Early in 1994, working for D.E. Shaw in New York City,

Jeff Bezos, a restless, 30-year-old hedge fund manager
began researching the commercial possibilities of the Net.
• A year later, Bezos drove west, raising venture funds for a
new small online book shop (originally called
Cadabra.com), to be launched from his garage in Bellevue,
Wash.
• Running on a Website and a warehouse, by its third year
Bezos's precocious Amazon.com toppled $150 million in
annual sales — a milestone that Wal-Mart founder Sam
Walton needed 12 years (and 78 stores) to reach.
 History of E-Commerce: Stocks
• Electronic stock trading debuted 30 years ago with Instinet,
Reuters' computer network that allowed after-hours trading.
– Charles Schwab first offered a dial-up trading service called The
Equalizer in 1985.
– E*Trade founded in 1982 as an institutional trading service began
offering consumer trading in 1992 through America Online and
CompuServe.
• True Web-based trading arrived in 1994 with Chicago-based
NET Investor, which offered 15-minute delayed quotes and
charged $35 per trade.
• Ameritrade, Datek Online, and others followed, eventually
driving commissions to as low as $8 per trade, and forcing
the implementation of free, real-time stock quotes in 1998.
 History of E-Commerce: Ads
• In 1994, the first national consumer brand site -
www.zima.com - was launched for the Coor's owned
beverage Zima.
• In October of 1994, Wired magazine's HotWired, dished
up the first banner ads from 12 advertisers, including
AT&T, Club Med, and Volvo. Sales for the entire online
ad industry were $1 million that year, and HotWired
owned 40 percent of it.
• In 1998, online ad revenues reached $2 billion, topping
the $1.6 billion spent on "outside" ads, such as billboards.
General Motors alone pumped in $12.7 million. Online ad
revenue is expected to reach $11.5 billion by 2003 that’s 5
percent of the total U.S. ad market.
 History of E-Commerce: Travel
• Booking a trip over the Web back in 1995 meant
going to a travel site and requesting a fare.
• In early 1997, Travelocity offered a paging service
to its Web customers that alerted them if their flight
was delayed.
• In the fall of 1997, Priceline.com launched its
innovative, bid-based market for discount airfares.
• Today you can bid on empty seats, name your price,
choose a seat from a diagram, and know of fare
bargains often before agents have that information.
 EC Advantages/Disadvantages
• EC Advantages
– Ability to reach new markets
– Reduces costs (for some businesses)
– Increased purchasing opportunities
– More efficient (electronic payments,
telecommuting, etc.)
 EC Advantages/Disadvantages
• EC Disadvantages
– Incompatibility for certain industries
– Limitations of the medium
– Costs!!!
– Skills required
– Cultural and legal issues
 Selling on the Web
• Selling goods and services
– Catalogs on the Web (e.g., Dell, LLBean)
– Digital content (LexisNexis, mp3 sites?)
• Advertising supported
– Make $ via advertising (like TV)
– Difficult to measure, gauge support, attract repeat
visitors
– Examples: Yahoo, news sites, other portals
 Selling on the Web
• Combined Advertising/Subscription
– Fee + advertising
– NY Times, Wall St Journal, Reuters, ESPN
• Fee for Transaction
– Travel sites
– eBay
– Stock sites? (some of ‘em…)
 Bus. To Bus. EC
• Purchasing activities
– Procurement can be a major activity
– Business/Supplier Relationships
– Purchasing commodities (MRO items)
• Delivering activities
– Logistics, shipping, warehousing
• Support activities
– HR, finance, benefits info.
 Future of E-Commerce
• eMarketer, an Internet technology (IT) research and
reporting firm, estimates that the dollar figure for e-
commerce will rise from approximately
– U.S. $18 billion in 1998 to
– U.S. $294 billion in 2002. US
– Or maybe $184 billion by 2004.
(Forrester, Business 2.0 Jan 2000)
• In Europe, consumers' internet purchases will jump from:
– US $2.9 billion in 1999 to
– US $174 billion in 2005.
• Online business-to-business e-commerce is projected to
speed past $1 trillion in annual revenue by 2003
 Future Trends to Watch in E-Commerce
• Women take control. Women make or influence 80 percent
of household sales in the United States, according to
WomanTrend, despite the fact that they make up 51 percent
of the population.
• The untapped get tapped. Two highly touted markets $509
million health and beauty, and $513 million grocery still lag
behind expectations.
• More "click and mortar." Traditional retailers Circuit City,
Crate and Barrel, Sears, Toys R Us, Wal-Mart, and
Federated Department Stores missed the boat in 1995 and
1996, but rest assured they "get it" now, and are attempting
re-entry, this time around with more money and smarts.
Watch out.
 Security
Issues are
Important
 Still a Long Way To Go
• Andersen Consulting and Forrester Research both
show shopping cart abandonment rates of 25%.
• E-commerce still accounts for less than 1% of total
retail sales
• Pure plays have struggled to maintain cash flow and
have either:
– Folded
– Cut back
– Been bought at cheap prices