Growth of ecommerce

1
Growth of e-commerce

• Growth in Retail Commerce
• From 7.1 - 12 billion (1998-99) (69 growth)
• Fastest growth rate for ages over 55 and female
• Auction pricing helps set prices
• Upper limit of 15 of total retail sales
• Growth in Business-to-Business Commerce
• From 43.1 to 109.3 billion (1998-99) (154
  growth)

2
Growth of e-commerce

• Stock Valuations are sky high
• 10-20 times earnings with no profitability in
  sight
• Huge inflows of venture capital to support
  e-commerce start-ups
• 13.7 billion in 1998
• IBM and HP give away free hardware to starting
  e-commerce companies

3
Stock valuations
4
What industries are thriving?

• Travel
• PCs
• Books
• Providing goods in privacy of home

5
What industries are NOT thriving?

• Perishables
• Groceries (how/when deliver?)
• Sporting Goods
• Guns
• Shoes
• Heavy items

6
Advantages of engaging in e-commerce

• Greater access to customers
• Can track progress of order
• Can gather data about customers through use of
  Web
• Easy entry. Low entry requirements (capital).
• Dont have to pay/charge for sales tax.

7
More advantages

• Compatible with changing demographic and
  lifestyle trends.
• Eliminates costs associated with brick and
  mortar and growth constraints associated with
  hard assets.
• Better management of inventory.
• Instant communication between suppliers and
  manufacturers through EDI.
• Eliminates some transaction costs.

8
Challenges of engaging in e-commerce

• Creates downward price pressures.
• Need great customer service. Top factor in
  number of return customers.
• Special challenges for traditional retailers.

9
Special challenges of e-commerce for traditional
retailers

• New business model that may not be compatible
  with traditional business model. Hard to do
  both.
• Customer service requirements greater/ different.
• Make take business from current dealers.
  Examples autos or Compaq computers.
• May not be suitable for target market (e.g., over
  55) or product (e.g., shoes).

10
Technological challenges

• Encryption of data is critical to keeping data
  secure for manufacturers/suppliers.
• Hard to support high number of passwords/logistics
  for all parties.

11
Strategies for e-commerce

• Low prices to gain customer base.
• Good customer service.
• Multiple products to corner marketplace.
• Thorough competitor analysis required. (Example
  Barnes Noble lag to Amazon.com)

12
Challenges for the future of e-commerce

• Security/encryption issues
• Trust issues
• Tax issues
• Faster access through broadband technologies

13

• Demographics
• Free Speech Issues
• Monopoly issues. Big companies vs. independents
• flow of ideas (e.g., bookstores)
• threat to diversity
• Consumer Protection
• Pharmaceuticals
• International Commerce