The Evolution of
eCommerce in Internet Time  

Sunil Hazari, Ed.D
Associate Professor
Department of Management
Richards College of Business
Carrollton, GA 30118

Keywords

E-commerce, business-to-consumer, business-to-business, trends, Internet strategy, marketing, security.

Abstract

The Internet has changed the way consumers and businesses conduct transactions. Because the web is such a dynamic medium, first generation web sites have quickly given way to dynamic and interactive e-commerce sites that incorporate the 7 C's of next generation web sites. This article looks at the evolution of E-commerce technology, strategy, and marketing issues that have undergone drastic changes in the past few years. 

Introduction

Less than five years ago, companies started to view the Internet as a medium over which business could be conducted. Standardization, security, privacy issues were being considered by companies who were testing the waters of E-commerce by putting up electronic storefronts that displayed products and services. Soon order entry was being enabled on E-commerce sites and a new era had dawned that allowed customers to experience a different experience while conducting business using the Internet. Amazon was a pioneer and reaped the benefits of being first-to-market. Internet time is now measured in days rather than months or years which companies of “old-economy” were used to when deciding to implement or shift business strategy decisions.

From the Internet to Intranets to Extranets has been a speedy journey in the past 5 years. The 3 C’s of first generation E-commerce: Content, Community, and Commerce have now evolved into 7 C’s of second generation E-commerce: Content (e.g. Yahoo), Community (Ivillage), Commerce (e.g. Amazon), Communication (e.g. Doubleclick), Connectivity (e.g. Cisco), Collaboration (Mercata - now defunct), and Customization (e.g. Netperceptions). Each of these C’s reflect an evolution of features that has its roots in first enabling automated processes (such as procurement) to extending these processes externally with other consumers as well as business partners.  

Business Models

B2C (Business to Consumer) models have been tried and tested during the first generation of E-commerce boom, but the newer trends are toward B2B (Business to Business) and Click-and-Mortar models. B2B provides advantages of close integration and communication with partners and suppliers, Click-and-Mortar provide takes advantage of offline and online channels being established in physical store locations but at the same time offering online commerce convenience.

Companies have quickly realized that E-commerce sites are more than digital storefronts that display products and allow customers to place an order. Business processes should extend to the back-end with systems in place to optimize the company’s supply chain and distribution system. A holistic approach will offer the company insights on creating maximum efficiencies to support all business processes. E-commerce business models are more than technology solutions. The right strategy focuses on a company’s core services and products, and one that encompasses the entire e-business value chain. Although technology plays an important part in the business goals, technology by itself is a means to an end rather than the end itself. If used properly, technology can be used to leverage the e-marketplace for competitive advantage in today’s fast paced economy.

The traditional model of Manufacturer -> Wholesaler/Distributor -> Retailer -> User is being disintermediated by providing a direct link between Manufacturer and End User (e.g. Dell). Companies are extending E-commerce capabilities of electronic storefronts to back-end processes using Supply Chain Management and Enterprise Resource Planning software.

Supply Chain Management is the process of tracking the availability, delivery, and pricing of supplies and materials required to meet customer demands for goods. Part of supply-chain management process includes forecasting which helps managers determine how quickly they can get necessary supplies and at what cost. Results are arrived at by looking at orders, inventories, production capacity, transportation availability, and other factors that affect cost of material. Enterprise Resource Planning is more complex and integrates order entry, monitoring inventory, and balancing financial records. Companies deploying ERP software that include functions of supply chain management, planning, warehousing, and transportation can make more knowledgeable decisions. Web based Supply Chain Management and Enterprise Resource Planning (ERP) applications are being deployed by corporations for significant cost savings. For companies that had operational centers all over the world, sharing data between facilities was a very complex task. The ubiquitous nature of Internet has provided an opportunity to share supply chain data by consolidating information and providing access to it in real-time for planning decisions.  

Strategy

Online and offline business strategies differ significantly. Companies planning to enter the e-commerce arena must have proper strategies to ensure their profitability, growth, and survival in the electronic marketplace. The business plan must traverse all parts of the organization and systems must be in place to react quickly to changing market conditions. Stovepipe processes must be replaced by integrated and collaborative environment that generate more value. Outsourcing technology to Application Service Providers may be an option for companies whose core competencies lie in business and not in technology. Technology must be a support mechanism for business and optimize information flow internally and externally to leverage efficiencies and strategic advantage in every aspect of business.

Marketing

With new business models emerging (e.g. Priceline), companies should balance experimentation with risk-taking to achieve optimum efficiencies. A new way of presenting information to customers over a digital medium has also required companies to re-think ways of keeping customers loyal (“stickiness” of web sites) since competitors are only one click away.

Consumers are more responsive now to new business models and what was sure to fail in the ‘old economy’ has a chance of success in the digital world if marketed correctly. E-commerce strategy should include Customer Relationship Management (CRM) to help retain customers on a long-term basis. The digital arena provides new challenges as compared to traditional brick-and-mortar business models. Knowledge management techniques are being used for effective CRM. Tracking customer orders, responding to customer queries when the order is shipped results in satisfied customers who believe the vendor is involved beyond the point when a order has been placed, products shipped, and funds transferred. Another strategy for companies that have electronic storefronts and physical location has been the merging of two models (click-and-mortar), in which a customer may be able to place an order on a web site and pickup the product at the store, or return a product to the store that had been received as a shipment from placing the web order. With satisfied customers, acquisition and retention costs are lowered.

Security

As electronic commerce becomes acceptable by businesses and consumers, transactions are now routinely carried over computer networks. This necessitates the need for network resources to be not only available, but also reliable to provide data integrity in transit. The Internet today is the leading source of fraud. Last year credit card company Visa reported that although only 2% of its total transactions were done on the internet, 50% of all disputes were as a result of orders placed on the Internet. Security of E-commerce site remains a big concern for big and small corporations and policies must be implemented to protect business strategy that relies heavily on technology. Denial of service attacks on web sites and e-mail viruses have a direct impact on productivity and reduced confidence in the e-marketplace. Ignoring security issues can endanger entire system integrity as well as expose a company’s most critical data to theft or damage. Policies for use of network resources by employees and business partners, privacy issues, etc. must be carefully considered and implemented to reduce liability, theft, and wasted computing resources. This problem has been exasperated by lack of qualified personnel needed to design and maintain secure E-commerce sites. As a result of today’s digital economy, one of the most lucrative career paths is in the field of Information Security.

Summary

First generation E-commerce sites running HTML have paved the way for more complex and dynamic web sites that tie together processes from order-entry to inventory control to financial record keeping. Wireless devices are now being web enabled and for conducting business to consumer E-commerce transactions. Success in the e-marketplace will depend on companies being able to respond to needs of the ever-changing marketplace and forming partnerships, alliances, and collaborations with others to deliver value that may not have been possible with individual efforts. The ability to innovate, change, recover from setbacks will be hallmarks of success in this competitive arena. Generic models of B2C commerce are outdated and newer efforts are needed to leverage the untapped potential offered in the digital medium.  

There is an acute shortage of personnel with the right mix of technology and managerial competencies. With continuing education and real-world experience that reflects trends in current marketplace, today’s IT professionals should seize opportunities that are available in the dynamic E-commerce field and position themselves to be leaders of the next generation E-commerce that is constantly creating rapid transformation in Internet time. 

Sunil Hazari, Ed.D is Faculty Research Associate in the Smith School of Business at University of Maryland, College Park.

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© 2002 Sunil Hazari