E-commerce: Digital Markets &

Digital Goods
 E-Commerce Today
• E-Commerce: It refers to the use of the internet and the web to conduct
business transactions, including buying and selling goods and services
online.
• Growth Since 1995: E-commerce began in 1995 and has grown
exponentially, maintaining stability even during economic recessions.
• Survivors of the Dot-Com Bubble: Companies that endured the dot-com
crash in the early 2000s (like Amazon and eBay) have now become
dominant players in the industry.
• The New Era of E-Commerce: Modern e-commerce is evolving to be more
social, mobile, and locally focused, integrating with social media platforms
and location-based services.
• Shift to Mobile: Consumers are moving away from desktop-based online
shopping to mobile commerce (m-commerce), driven by smartphones and
apps.
The Growth of E-Commerce
 Why E-Commerce is Different

• Ubiquity
– Marketspace is virtual
– Transaction costs reduced
• Global reach
– Transactions cross cultural and national boundaries
• Universal standards
– One set of technology standards: Internet standards
• Richness
– Supports video, audio, and text messages
 Why E-Commerce is Different

• Interactivity – ability to interact

• Information density
– Greater price and cost transparency
– Enables price discrimination
• Personalization/customization
– Technology permits modification of messages, goods
• Social technology
– Promotes user content generation and social
networking
 Key Concepts in E-Commerce – Digital Markets
and Digital Goods in a Global Marketplace

• Transformation of Business Practices: The internet and digital

marketplaces have revolutionized how businesses operate, making
transactions faster and more efficient.
• Reduced Information Irregularity: Digital platforms provide better
transparency, allowing both buyers and sellers to access accurate
information, reducing asymmetry.
• Lower Transaction and Search Costs: E-commerce eliminates many
traditional business expenses, such as physical store costs, and makes
searching for products and completing transactions more efficient.
• Dynamic Pricing: Prices can change in real-time based on demand,
competition, or customer behavior.
• Switching Costs: Consumers can easily move between different e-
commerce platforms, making brand loyalty more challenging unless
businesses offer unique value.
• Disintermediation: Middlemen (such as wholesalers or retailers) are often
bypassed, allowing manufacturers or service providers to sell directly to
consumers.
The Benefits of Disintermediation to the
Consumer
 Digital Goods
1.Definition: Digital goods are products that can be distributed over digital
networks (e.g., software, e-books, music, videos, etc.).

2.High Initial Cost: The cost of producing the first unit is significant (e.g.,
software development, book writing), but replication costs are minimal.

3.Low Delivery Costs: Unlike physical goods, digital products can be

delivered almost instantly at a very low cost via the internet.

4.Marketing Costs & Pricing: While marketing costs remain steady, pricing
can vary widely—some digital goods are given away for free, while others
command high prices.

5.Industry Disruption: Industries dealing with digital goods (like publishing,

music, and media) are experiencing major transformations due to the shift
from physical to digital formats.
 Types of E-Commerce
• Three major types
– Business-to-consumer (B2C)
• Example: Barnes and Noble.com
– Business-to-business (B2B)
• Example: ChemConnect
– Consumer-to-consumer (C2C)
• Example: eBay
• E-commerce can be categorized by platform
– Mobile commerce (m-commerce)
 E-Commerce Business Models

1. Portal – Yahoo, Facebook, MSN and AOL

2. E-tailer – Online retail stores
3. Content provider – All forms of intellectual property
4. Transaction broker – Financial services and travel services
5. Market creator – Platform where buyer and seller meet
6. Service provider – Online service providers
7. Community provider – Social network for like minded people
 Interactive Session – Organizations:
Uber: Digital Disruptor
Class discussion
1. Analyze Uber using the competitive forces and value
chain models. What is its competitive advantage?

2. What is the relationship between information

technology and Uber’s business model? Explain
your answer.

3. How disruptive is Uber?

4. Is Uber a viable business? Explain your answer.

 How Has E-commerce Transformed
Marketing?
1.Customer Identification & Communication – Businesses use data
analytics and social media to understand and interact with customers.
Example: Amazon recommends products based on past purchases.

2.Long Tail Marketing – Instead of focusing on popular products,

businesses target niche audiences.
Example: Etsy enables small artisans to sell unique, handmade
products.

3.Internet Advertising Formats – Various ad types like display ads,

video ads, and pop-ups enhance online marketing.
Example: YouTube ads before videos promote brands effectively.
 How Has E-commerce Transformed
Marketing?
4.Behavioral Targeting – Online platforms track user activities to show
relevant ads.
Example: Google shows ads based on search history.

5.Programmatic Ad Buying – AI-driven systems automatically buy

and place ads for maximum efficiency.
Example: A travel company wants to advertise flights to New York.

6.Native Advertising – Ads match the look and feel of the content to
appear natural.
Example: A travel blog publishes an article titled "Top 10 Destinations for
2025," sponsored by a travel agency.
 Social E-Commerce and Social Network
Marketing
1. Social E-Commerce relies on digital social connections.

2. Key Features Driving Growth:

– Newsfeed & Timelines: Keeping users updated on products and
trends.
– Social Sign-On: Seamless login via social accounts.
– Collaborative Shopping: Group-based purchasing decisions.
– Network Notifications: Alerts on deals, recommendations, or activity.
– Social Search: Personalized product suggestions based on social
interactions.

3. Social Media is the fastest-growing tool for branding and marketing in

e- commerce.
 Social E-Commerce and Social Network
Marketing
4. Social Network Marketing:
– Uses individuals’ influence to promote products.
– Targets social networks where people share interests and advice.
– Features like Facebook’s "Like" button help boost engagement.
– Social networks provide vast audiences for marketing.

5. Social Shopping Sites:

– Platforms where users can shop collaboratively and get
recommendations based on social interactions (e.g. Etsy, Pinterest).

6. Wisdom of Crowds:
– The collective opinions of a large group help determine trends, best
products, and customer preferences (e.g. Amazon reviews).

7. Crowdsourcing:
– Using public input to generate ideas, designs, or funding for products
and businesses (e.g. Kickstarter, Threadless).
 How Has E-Commerce Affected
Business-To Business Transactions?
1.Growth in B2B Trade and E-Commerce
– In 2019, U.S. B2B trade was valued at $13.5 trillion.
– Of this, B2B e-commerce accounted for $6.2 trillion
2.Automation of Procurement
– The use of the internet and networking has helped businesses automate
procurement processes, making them more efficient and reducing manual
efforts.
3.Technologies Enabling B2B Transactions
– Electronic Data Interchange (EDI): A system that allows businesses to
exchange documents and data electronically.
– Private Industrial Networks (Private Exchanges): Closed networks
where companies collaborate with selected partners.
– Net Marketplaces: Online platforms that connect multiple buyers and
sellers.
– Exchanges: Online trading hubs where businesses can buy and sell
goods in a more dynamic, market-driven environment.
 Electronic Data Interchange (EDI)
1. EDI Defined
– EDI refers to the computer-to-computer exchange of standard business
documents like invoices, purchase orders, and shipping notices.
– It replaces paper-based transactions with digital ones, increasing
efficiency and reducing errors.
2. Industry Standards for EDI
– Many industries have established EDI standards to ensure compatibility
and consistency.
– These standards define the structure and required fields for electronic
documents, making them universally understandable between
businesses.
3. Shift Toward Web-Enabled Private Networks
– Many companies are moving away from traditional EDI toward web-
based private networks that offer more flexibility.
– These networks:
• Connect with a wider range of firms beyond the limitations of
traditional EDI.
• Allow for broader information sharing, making business processes
more collaborative and integrated.
Electronic Data Interchange (E D I)
 New Ways of B2B Buying and Selling
1. Private industrial networks
– Private exchanges
– Large firm using a secure website to link to suppliers and
partners
2. Net marketplaces (e-hubs)
– Single digital marketplace for many buyers and sellers
– May focus on direct or indirect goods
– May be vertical or horizontal marketplaces
3. Exchanges
– Independently owned third-party Net marketplaces for spot
purchasing
A Private Industrial Network
A Net Marketplace
 What is the Role of M-Commerce in
Business, and What are the Most Important
M-Commerce Applications?

• M-commerce in 2017 is 35 percent of all e-commerce

• Fastest growing form of e-commerce
– Growing at 20 percent or more per year
• Main areas of growth
– Mass market retailing (Amazon, eBay, etc.)
– Sales of digital content (music, T V, etc.)
– In-app sales to mobile devices
Mobile Retail Commerce Revenues
 Instacart Case Questions
1. Analyze Instacart using the value chain and com petitive forces
models. What competitive forces does the company have to deal
with? What is its value proposition?

2. Explain how Instacart’s business model works. How does the

company generate revenue?

3. What is the role of information technology in Instacart’s business

model?

4. Is Instacart’s model for selling online groceries viable? Why or why

not?
 Location-Based Services and
Applications
• Used by 74 percent of smartphone owners
• Based on GPS map services
• Geosocial services
– Where friends are
• Geo advertising
– What shops are nearby
• Geo information services
– Price of house you are passing
 Other Mobile Commerce Services
1. Financial Account Management Apps
– Mobile apps provided by banks and credit card companies allow users
to manage their finances, make transactions, and check balances on
the go.

2. Mobile Advertising Market

– Google and Facebook dominate the mobile ad space, leveraging their
platforms to target consumers.
– Ads are embedded in mobile games, videos, and apps, making mobile
advertising a crucial revenue stream for businesses.

3. M-Commerce Websites
– 55% of online retailers have dedicated mobile commerce websites,
reflecting the shift toward mobile-friendly shopping experiences.
 What Issues Must Be Addressed When
Building an E-Commerce Presence?

• Most important management challenges

– Developing clear understanding of business objectives
– Knowing how to choose the right technology to achieve those
objectives

• Develop an e-commerce presence map

– Four areas: websites, e-mail, social media, offline media

• Develop a timeline: milestones

– Breaking a project into discrete phases - (initiation, planning,
execution, monitoring & control, and closure)
E-Commerce Presence Map