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11 E-COMMERCE Business to Consumer Erin Allan Hsiao-chun Chen Yuliya Pak Xiaowen Pan Wei Xu November 4, 2008.

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Presentation on theme: "11 E-COMMERCE Business to Consumer Erin Allan Hsiao-chun Chen Yuliya Pak Xiaowen Pan Wei Xu November 4, 2008."— Presentation transcript:

1 11 E-COMMERCE Business to Consumer Erin Allan Hsiao-chun Chen Yuliya Pak Xiaowen Pan Wei Xu November 4, 2008

2 2 Why E-commerce is important to General managers? “When I took office, only high energy physicists had ever heard of what is called the Worldwide Web.... Now even my cat has its own page....” Jeffrey Bezos, CEO of amazon Source: viewed October 14,2008www.afterquotes.com “Look at growth, look at how much time people spend on the Net and look at the variety of things that they are doing. It's all really good, so I am actually encouraged by the fundamentals that underlie usage growth on the Net.” Meg Whitman, the former CEO of ebay 2

3 33 Overview Definition and Description 1 B2C E-Commerce 2 3 Statistics – Global Spread 4 Case Studies 5 Benefits/Pitfalls of E-Commerce 6 Top Products. Top Engines. Conclusion 7 3

4 44 Concept of E-Commerce the online transaction of business, featuring linked computer systems of the vendor, host, and buyer Buying and selling of goods and services on the internet involve the transfer of ownership or rights to use a good or service Source: paymentprocessing.cc/showthread.php?s=af0be6cfeb825065a06af29eca743e10&t=382,viewed Sept 4, 2008

5 55 Type of E-Commerce Business to Consumer (B2C) Commerce between companies and consumers Example: Amazon.com, Drugstore.com Business to Business (B2B) Deals with relationships between and among businesses Example: Dell, Cisco Business to Employee (B2E) The requisitioning of supplies by employees for use in their jobs commonly known as an “Intranet” Mobile Commerce (M-commerce) The buying and selling of goods and services through wireless technology, such as cellular telephones Consumer to Consumer (C2C) Commerce between private individuals or consumers Example: eBay E-Commerce Source: (1)Zorayda Ruth Andam (2003),”e-Commerce and e-Business”, e- ASEAN Task Force & UNDP-APDIP, pp.9- 13(2)www.accountingsoftwareadvisor.com/ec/ectypes.htm, viewed Sept 11, 2008

6 Introduction B2C Business Model

7 77  What is a business model? Consists of two elements: What the business does How the business makes money doing these things Source: (1)www.unibg.it/dati/corsi/16007/26896-Internet%20and%20E-commerce_diffusion%20and%20practice.pdf, viewed Sept 11, 2008 (2) Reference (15) 7

8 88 B2C Business Model Business model DescriptionRevenueExample PortalOffer powerful search tools plus an integrated package of content and services Advertising, subscription fees, transaction fees Yahoo.com, MSN.com E-tailerOnline version of traditional retailer Sales of goodsAmazon.com, Wal-Mart.com Content Provider Information and entertainment companies provide digital content over the web Advertising, subscription fees affiliate referral fees CNN.com, ESPN.com Transaction Broker Process online transactions for consumers Transaction feesHotels.com, Expedia.com Market CreatorUses internet technology to create markets that bring buyers and sellers together Transaction feesEbay.com Community Provider Create a digital online environment where people with similar interest can transact, communicate, and receive interest-related information Advertising, subscription, affiliate referral fees ivillage.com, about.com Source:(1)K. Laudon, C. Guercio Traver (2004), “E-commerce “Basics of e-Business”, Pearson (2) Vatcharaporn Esichaikul, Asian Institute of Technology

9 99 Users of B2C  Manufacturers: to sell and to retail the business buyers  Distributors: To take orders from the merchants they supply  Publishers: To sell subscriptions and books  Direct sales Firms: As another channel to reach the buyers  Entertainment Firms: To promote new products and sell copies  Information Providers: To take payment for downloaded materials  Insurance Firms: On-line rate quotes and premium payments Source: viewed Sept 10, 2008

10 10 Statistics Global Spread 10

11 11 Global Spread of Internet Hosts Notes: Only the machine numbers with addresses on the net as reported by the name severs Source: viewed September 9,2008http://www.isc.org/index.pl?/ops/ds/host-count-history.php 11

12 12 Global Spread of Internet Users Source: 12

13 13 Internet Users Growth, (%) Source: 13

14 Statistics-by nation US & China

15 15 US Online Retail Sales ( ) In billions Note: excludes sales of travel products, automobiles, and prescription drugs Source: viewed September 4,

16 16 China B2C E-Commerce Market Size RMB Million Source: (1) english.analysys.com.cn/3class/detail.php?id=210&name=report&FocusAreaTitleGB=&daohang=Internet-Media&title=China%20B2C%20E- Commerce%20Market%20Size%20Reached%20RMB%20854%20Million%20in%20Q1%202006, viewed Sept 4, 2008 (2) english.analysys.com.cn/3class/detail.php?id=887&name=news&FocusAreaTitleGB=&daohang=Internet- Media&title=China%20B2C%20Market%20Reached%20CNY% %20bln%20in%20Q4%202007, viewed Oct 24, 2008 RMB: Renminbi, currency of the People's Republic of China US$1=RMB$6.84 USD77.0 USD124.9 USD138.2 USD149.1 USD165.9 USD174.0 USD

17 17 Demographics of Internet Users Women73 Men73 Use the internet % Source: (1) viewed Sept 4, 2008 (2) “Statistical Survey Report on the Internet Development in China Abridge Edition” (July 2008), CNNIC Women46.4 Men54.6 US China % Sample: 16,000 persons Sample: 2,251 adults 17

18 18 Demographics of Internet Users % % % 65+35% Use the internet % Under % % % % Over 503.9% % Age Source: (1) viewed Sept 4, 2008 (2) “Statistical Survey Report on the Internet Development in China Abridge Edition” (July 2008), CNNIC 18

19 19 US Demographics of Internet Users Less than high school44% High school63% Some college84% College+91% Use the internet % Education Below junior middle5.9% Junior middle school23.8% High school39% Junior College15.9% Bachelor’s degree14.1% Master and above1.3% % Source: (1) viewed Sept 4, 2008 (2) “Statistical Survey Report on the Internet Development in China Abridge Edition” (July 2008), CNNIC 19

20 20 E-Commerce, Top Products. Top Engines. 20

21 21 Global e-commerce Statistics  Over 875 million Internet Shoppers as of Jan (Nielsen Global Online Survey)  More than 85% of world’s online population  40% increase in online shoppers over last 2 years Source: Viewed 09/09/2008www.reuters.com GLOBAL INTERNET SHOPPERS 21

22 22 Global e-commerce Statistics TOP 5 GLOBAL PURCHASES Source: Nielsen Global Online Survey, Viewed September 9,2008www.reuters.com Sample size: 26,312 Internet users in 48 markets from Europe, Asia Pacific, North America and the Middle East 22

23 23 Global e-commerce Statistics Source: Nielsen Global Online Survey, viewed 09/09/2008www.reuters.com GLOBAL PURCHASES INCREASES IN 2 YEARS TIME Items Increase, %Markets Books7% China, Brazil, Vietnam & Egypt Clothing/Accessories/ Shoes16% Germany, the U.S. and the U.K. Videos/DVDs/ Games2% The U.K., South Africans, the U.S. Airline Tickets3% Indians, Irish and the UAE Sample size: 26,312 Internet users in 48 markets from Europe, Asia Pacific, North America and the Middle East 23

24 24 Global e-commerce Statistics TOP 10 ONLINE E-COMMERCE SITES RankRetailerAudience,unique 1eBay124,132,042 2Amazon99,863,339 3Target37,717,553 4Wal-Mart36,994,959 5Best Buy24,089,267 6Circuit City19,725,537 7Sears17,651,868 8ToysRus17,610,395 9Overstock.com17,192,765 10JC Penney16,331,132 Source: Nielsen Global Online Survey, viewed October 9,2008www.reuters.com 24

25 25 Global e-commerce Statistics Source: Nielsen Global Online Survey, viewed October 9,2008www.reuters.com  60% Credit Cards globally, 53% refers to Visa  Paypal MOST COMMON PAYMENT INSTRUMENTS 25

26 26 Contents 1 Case Study I (Kazakhstan) 2 Case Study II (On-line Drug Market, USA) 3 Benefits/Pitfalls of E-Commerce Case Study III (China) Q&A 26

27 27 Case Study I: Kazakhstan 27

28 28 Internet penetration, Kazakhstan  Number of urban Internet users ~ 10% of the total adult (min 18 years old) population  Current high growth of Internet users Source: Actis Systems Asia and BRIF Central Asia, viewed October 3,2008www.stat.kz

29 29 Internet penetration, Kz  Low income level (37% of urban families and 42% of rural families of Kazakhstan can only cover basic needs)  Treatment of a computer as a luxury due to its high price and low income level of the majority of population in Kazakhstan (only 19% of the total adult population have a computer at home)  High price of the Internet connection in Kazakhstan (only 14% of those who have computer at home go online) Source: TNS Gallup Media Asia 2006; Actis Systems Asia and BRIF Central Asia; Viewed September 12, 2008,www.kazpost.kzhttp://www.profit.kz Reasons for low Internet penetration 29

30 30 Internet penetration, Kazakhstan  Majority of Internet users are above middle and top level managers Source: Actis Systems Asia and BRIF Central Asiawww.stat.kz % % % % % % % 30

31 31 E-Commerce in Kazakhstan Activities in the Internet as of September 2007,% 59% 56% 28% 17% 13% 12% 11% 7% 3% 17% Information Search Music Downloads Dating Messengers Chats/forums Online games Personal web pages E-shopping Other Source: provided by Philip Morris Kazakhstan 31

32 32 Internet penetration, Kz  Lack of safe and convenient payment methods  Cash is accepted in most cases but the transaction cost is higher  Local online sellers accept verified payments only through one local bank  Special category for debit/credit cards which are available to few  Logistics/shipment issues, especially in the regions  Most online vendors are concentrated in one major city – Almaty (70% - Almaty, 20% Astana, the capital, 10% - other cities) Source: TNS Gallup Media Asia 2006; Actis Systems Asia and BRIF Central Asia; Viewed September 12, 2008,www.kazpost.kzhttp://www.profit.kz Reasons for low Internet penetration 32

33 33 E-Commerce in Kazakhstan  The number of Internet users is growing and the tariffs are declining  Current trend towards online buying  A number of popular online stores by June 2008 is 69  Most online buyers still prefer American online stores to the local ones due to the assortment and trust in payment operations  Most online buyers tend to avoid buying from China due to the long delivery process Source: : p.m. 12/09/2008, developing p.m. 12/09/2008, p.m. 12/09/2008, p.m. 12/09/2008, Continent, June 2008, TNS Galllup Media Asiawww.profit.kz 33 Current Trend of Online Purchases Source: TNS Gallup Media Asia 2006; Actis Systems Asia and BRIF Central Asia; Viewed September 12, 2008,www.kazpost.kzhttp://www.profit.kz 33

34 34 Top Local Online Stores  Computers: hardware and software digital cameras  telephone/Internet cards  Films, music, computer games, software, memory cards  computer accessorieswww.Rm.axon.kz  Houseware Appliances  Gifts, souvenirs, flowers  (houseware appliances, computers and accessories, office appliances, photo and video equipment)  DVD films  Computers, accessories Source: viewed September 12, 2008.http://www.ictm.kz 34

35 35 Top Local Online Stores Computers: hardware and software digital cameras 35

36 36 Top Local Online Stores Films, music, computer games, software, memory cards 36

37 37 Top Local Online Stores Gifts, souvenirs, flowers 37

38 38 Top Local Online Stores DVD films 38

39 39 Top Foreign Online Stores    Source: viewed September 12, 2008www.ct.kz 39

40 40 Top 3 Reasons for online shopping  Availability of collectible items (A legendary CD with the best songs of Rolling Stone)  Lower priced branded products  Online shopping is an aspiring trendy activity 40 Source: viewed September 12, 2008www.ct.kz 40

41 41 Online Pharmacy Websites LEGITIMATE WEBSITES Prescriptions are Necessary Legal Walgreens.com On-line Pharmaceutical DOMESTIC Sales ROGUE WEBSITES No Prescription Necessary No Prescription Necessary Illegal Source: FDA website: viewed on September 15, 2008http://www.fda.gov/oc/buyonline/faqs.html#faqs2 41

42 42 ROGUE WEBSITES Drug Trafficking Targets Rogue Websites Perfect Medium for Drug Trafficking  Global Connection  Anonymity  Deploy from anywhere  Rapid means to divert large quantities of controlled substance PHARMACIES  Struggling pharmacies, providing prescriptions from above doctors DOCTORS  Target in-debt doctors, offer reassurance by allowing phone/ diagnosis or survey results Illegal sale of prescription drugs to general public  Often use a medical history survey to justify a doctor filling a prescription Source: DEA website: viewed on September 15, 2008http://www.usdoj.gov/dea/pubs/cngrtest/ct html 42

43 43 LEGALITY IS IT LEGAL??? Outdated Laws! Current laws are pre-fax machine Source: DEA website: viewed September 15http://www.usdoj.gov/dea/pubs/cngrtest/ct html 43

44 44 NEW LEGISLATION Ryan Haight Online Pharmacy Consumer Protection Act of 2008  Amends the Controlled Substances Act with these key features :  Must have valid prescription with one in-person visit to the doctor  DEA endorsed websites  Enhanced penalties: 2-20 yrs depending on what schedule drug and number of offenses  Illegal to advertise rogue websites  October 1 st – passed in Congress, now awaiting signature from the President Source: viewed October 11, 2008; (8)http://www.usdoj.gov/dea/pubs/pressrel/pr100108p.html 44

45 45 PROS & CONS PROS  Allows people in remote areas or disabled individuals easy access  Convenience for all  Privacy  Lower prices (sometimes)  Reduce prescription errors (by using computer technology to transmit the prescription from the doctor)CONS  Allows the distribution of drugs illegally and without medical consultation  Mainstreaming prescription drugs as street drugs  Possibility of less effective or dangerous drugs being sold in place of legitimate drugs Source: FDA website: viewed September 15, 2008http://www.fda.gov/oc/buyonline/faqs.html#faqs2 45

46 46 Canadian Online Prescriptions Source (7) 46

47 47 PROS & CONS PROS  PRICE! Canadian government monitors price making sure it is not too excessive.  This is only true for brand name drugs which are reported to be around % higher in the US.  Generic drugs are actually much cheaper in the US than Canada – up to 100% less expensive.  American senior citizens account for 90% of sales in Canadian e-pharmacies. CONS  SAFETY!!  April 2008 scare from Chinese imported Heparin – causing 81 deaths in US  Counterfeiting  Improper packaging and labeling Source: viewed October 22, 2008, (3),http://www.nytimes.com/2008/04/22/health/policy/22fda.html?_r=1&oref=slogin 47

48 48 Politically Speaking… Obama&McCain 48

49 49 IMPLICATIONS LAW/POLITICS Laws need to be updated Will government need to regulate prices? PHARMACIES Open online store to stay competitive PHARMACEUTICAL COMPANIES Compete globally, reduce prices Lower prices = less money for R&D = drugs are slower to market JOE THE PLUMBER Weigh pros and cons of e- pharmacies Watch out for abuse of prescription drugs (Joe’s kids) E-Commerce 49

50 50 Case Study III: China 50

51 51 Online Pharmacy in China  Boston Consulting Group: Annual revenues of China’s pharmaceutical market are expected to reach US$24bn by 2010, making China the fifth largest pharmaceutical market in the world. Source (9)

52 52 Online Pharmacy in China  Self-medication  Go to community pharmacies for health care demand  Research showed that 86 percent of self-medication consumers bought drugs from community pharmacies Source (9)

53 53 Online Pharmacy in China  leading online pharmacy--Jingwei Pharmacy -initial sales $1,300 per day when they started trading in January increased seven-fold by August 2006 Source (9)

54 54 Online Pharmacy in China  there is a growing movement toward buying drugs online  China’s medical reimbursement system –invoice Source (9)

55 55 Online Pharmacy in China  Seven legal online pharmacies 1 。 Shanghai pharmacy (www.818shyf.com) 2 。 Beijing Jing-wei-yuan-hua (www.yaofang.cn ) 3 。 Qing-Tao Baiyang (www.baiyjk.com ) 4 。 Yun-nan Bai-yao (www.yunnanbaiyao.com.cn ) 5 。 Shanghai Fu-xing (www.fxdyf.com) 6 。 Liao-ning Sheng-sheng (www.4ujk.com ) 7 。 Bei-jing Jiang-xiang (www.jxdyf.com.cn )www.818shyf.comwww.yaofang.cnwww.baiyjk.comwww.yunnanbaiyao.com.cnwww.4ujk.comwww.jxdyf.com.cn

56 56 Online Pharmacy in China 

57 57 E-commerce in China Source: Maris G. Martinsons, “Relationship-based e-commerce: theory and evidence from China,” Info Systems J (2008) 18,

58 58 E-commerce in China Consequences for e-commerce  Limited infrastructure and services to support e- commerce  Profitable scale and/or scope of e-commerce is difficult to achieve  Privileged interests will oppose and/or restrict e- commerce development Source: Maris G. Martinsons, “Relationship-based e-commerce: theory and evidence from China,” Info Systems J (2008) 18,

59 59 E-commerce in China  Source:

60 60 E-commerce in China  Runs like E-bay: individual sellers— individual distribution channel Source:

61 61 E-commerce in China  Individuals get products directly from their relationship channels—uncle, good friend who work in manufacturing companies  Transport from Hong Kong, US, Europe

62 62 E-commerce in China  Price gap makes producer’s online business less competitive source:

63 63 Contents 1 Case Study I (Kazakhstan) 2 Case Study II (On-line Drug Market, USA) 3 Benefits/Pitfalls of E-Commerce Case Study III (China) Conclusion 63

64 64 Benefits of E-commerce Toorganizations Unlimited market place and business access which extend customer base Lower cost of doing business A 24 hour store reduced sale cycle Larger purchases per transaction Larger catalogs Improved customer relations Toconsumers Wider range of choices Cheaper goods and services Delivery time and costs can be saved Source: (1) Wiki.media-culture.org.au/index.php/e-commerce_-Overview_-_Advantages; (2) (3)www.dmccormick.org/EcommerceAdvantages.htm,www.dmccormick.org/EcommerceAdvantages.htm 64

65 65 Pitfalls of E-commerce Fromorganizations Legacy issues(Compliance) Business strategy and implementation Customers service Marketing communication Fromconsumers Personal data protection and privacy Limited payment option Online communication Customer service Refund/Return policy Commodity quality Source: reference (5),(9),(12),(13)http://www.hiebusiness.co.uk/bdotg/action/layer?topicId= &site=203,and 65

66 66 Future of E-commerce  Sales increase  Death of midsize e- retailer  More satisfied customers  Customers do their own thing  Multichannel retailing arrives Source: and reference (1), (4)http://ecommercetimes.com/story/16967.html?wlc= “Stores will not look anything like they look now. This time for real. With the eventual proliferation of mega-ease, mega-fun shopping online (think voice recognition, avatar try-on and virtual stimulation), stores will have to take on the dimension of experience full force in new old ways: smart, lovely people to talke to, wonderful things to touch and try, incredible visual media and only the newest of the new to gaze at. Hurry up, future.” -Lee Peterson, VP, brand and creative services, WD Partners 66

67 67 Business Implications of E-commerce  Do Business Online & Globally!!!!! 67

68 68 THANK YOU!  THANK YOU! 68

69 69 References (1) Agatz, A. H., Fleischmann, M., van Nunen, J. (2008) “E-fulfillment and multi-channel distribution – a review”. European Journal of Operational Research, Vol. 187, No. 2; pg 339 (2) Anonymous. (2007), “Founder of RxPop.com Says, 'State programs which endorse Canadian drugs are good starting points'” PR Newswire. New York: Nov 19, 2007Founder of RxPop.com Says, 'State programs which endorse Canadian drugs are good starting points' (3) Anonymous. (2008) “Central planning to regulating prescription drug prices provides no cost savings”, PR Newswire. New York: September 15, 2008 (4) Anonymous. (2008), “Future of the store: Visions of the future,” Chain Store Age, Vol 84, No 3, p88 (5) Datta, P., Chatteriee, S. (2008) The economics and psychology of consumer trust in intermediaries in electonic markets: the EM-Trust Framework”, European Journal of Information Systems, Vol 17., No 1; pg 12, 17 pgs (6) Fallows, D. and Senior Research Fellow (2007), “China’s online pouplation explosion: what it may mean for the internet Globally…and for US users”, and Pew Internet & American Life Project (7) Farrell, C., and Fearon, G. (2005), “Prescription drug exports to the USA: An Analysis of the online communication strategies of Canadian e-pharmacies,” Journal of Medical Marketing, Vol. 5, No. 4, pp (8) GovTrack.us. S. 980—110th Congress (2007): Ryan Haight Online Pharmacy Consumer Protection Act of 2008, GovTrack.us (database of federal legislation) viewed September 15, 2008http://www.govtrack.us/congress/bill.xpd?bill=s110980&tab=summary (9) Hu Yuanjia, Franny Geng, Bian Ying, Wang Yitao, “The Chinese pharmaceutical market: Perspectives of the health consumer”. Journal of Medical Marketing. London: Sep Vol. 7, Iss. 4; p. 295 (6 pages) (10) Kassim, N., Abdullah, N. (2008) “Customer Loyalty in e-commerce settings: An empirical study”, Electonic Markets, Vol 18, No. 3, pg 275 (11) Laudon, K. C. and Guercio Traver, C. (2004), “E-commerce”, Pearson Education Inc.

70 70 References (12) Martinsons, M. (2008). “Relationship-based e-commerce: theory and evidence from China”. Information Systems Journal, Vol 18, No 4, pg 331. (13) Ratnasingam, P. (2008), “The impact of e-commerce customer relationship management in business-to-consumer e-commerce”, Journal of Electronic Commerce in Organizations, Vol. 6, No 4, pp 30, 17 pgs. (14) Saffu, K., Walker, J. H., Hinson, R. (2008), “Strategic value and electronic commerce adoption among small and medium-sized enterprises in a transitional economy”, Journal of Business and Industrial Marketing, Vol. 23, No. 6, pg 395. (15) Thomas W. Malone, Peter Weill, Richard K. Lai, Victoria T. D’ Urso, George Herman, Thomas G. Apel, and Stephanie L. Woerner (2006), “Do Some Business Models Perform Better than Others?”, MIT Sloan School of Management, MIT Sloan Working Paper Zorayda Ruth Andam (2003),”e-Commerce and e-Business”, e-ASEAN Task Force & UNDP-APDIP, pp.9-13 “Statistical Survey Report on the Internet Development in China Abridge Edition” (July 2008), CNNIC Vatcharaporn Esichaikul, Asian Institute of Technology viewed October 22, viewed September 15, viewed September 15, viewed September 10,

71 71 References September 4, viewed September 11, viewed September 10, viewed September 10, viewed October 14,2008 viewed 09/09/2008 Actis Systems Asia and BRIF Central Asia, viewed October 3,2008 viewed September 12, Nielsen Global Online Survey, Viewed September 9,2008 TNS Gallup Media Asia 2006; Actis Systems Asia and BRIF Central Asia,Viewed September 12`08www.kazpost.kz 71

72 72 References Viewed September 12, viewed October 11, viewed October 22, viewed September 4, viewed September 4, viewed September 4, viewed September 10, of%20e-Business.pdf, viewed September 11, viewed Sept 11, viewed Sept 10, 2008 Philip Morris Kazakhstan 72

73 73 References ohang=Internet-Media&title=China%20B2C%20E- Commerce%20Market%20Size%20Reached%20RMB%20854%20Million%20in%20Q1% , viewed Sept 4, hang=Internet- Media&title=China%20B2C%20Market%20Reached%20CNY% %20bln%20in%20Q4 %202007, viewed Oct 24, viewed Sept 4,


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