Chapter 10 E-commerce: Digital Markets, Digital Goods
Learning objectives
10.1 What are the unique features of e-commerce, digital markets, and digital goods?
10.2 What are the principal e-commerce business and revenue models?
10.3 How has e-commerce transformed marketing?
10.4 How has e-commerce affected business-to-business transactions?
10.5 What is the role of m-commerce in business, and what are the most important m-commerce
applications?
10.6 What issues must be addressed when building an e-commerce presence?
10.7 How ill MIS help my career?
Cases
Uber Storms Europe. Europe Strikes Back.
Deliveroo: Australian Food Delivery
Socializing with Customers
An iDEAL Solution to the Single Online EU Market?
10.1 What are the unique features of e-commerce, digital markets, and digital goods?
E-commerce is composed of 3 major segments: retail goods, travel and services, and online content
E-commerce = the use of the internet and the web to transact business / digitally enabled
commercial transactions between and among organizations and individuals began in 1995
New e-commerce = social, mobile, local (Before: primary measure of success was how many eyeballs
(unique visitors) a website produced and how many impressions a marketing campaign generated
(impression was one ad shown to one person); both of these measures were carryovers from the
world of television, which measures marketing in terms of audience size and ad views)
But has become conversational commerce (=marketing is based on firms engaging in multiple online
conversations with their customers, potential customers and even critics; your brand is being talked
about on the web and social media (that’s the conversation part), and marketing your firm, building,
and restoring your brands require you to locate, identify, and participate in these conversations)
social marketing is all about firms participating in and shaping this social process
Why e-commerce is different
- Ubiquity – is accessible everywhere; marketspace = a marketplace extended beyond
traditional boundaries and removed from a temporal and geographic location; from a
customer point of view, ubiquity reduces transaction costs (=the cost of participating in the
market)
- Global reach – the technology reaches across national boundaries around the earth
- Universal standards – there is one set of technology standards, namely internet standards;
this lowed the market entry costs (=the cost merchants must pay simply to bring their goods
to the market) & reduce search costs for consumers (=effort required to find suitable
products)
- Richness – complexity and content of a message (web has a rich message to a large audience)
- Interactivity – allow for two-way communication between merchant and consumer and peer-
to-peer communication among friends
- Information density – the total amount and quality of info available to all market
participants, consumers, and merchant alike; e-commerce technologies reduce info
, collection, storage, processing and communication costs while greatly increasing the
currency, accuracy and timeliness of info; info density in e-commerce markets make prices
and costs more transparent (price transparency = ease with the consumers can find out the
variety of prices in a market; cost transparency = the ability of consumers to discover the
actual costs merchants pay for products; price discrimination = selling the same goods or
nearly the same goods to different targeted groups at different prices)
- Personalization/customization – personalization = target messages to specific individuals by
adjusting the message to a person’s clickstream, behavior, name, interest and past
purchases; customization = changing the delivered product or service based on user’s
preferences or prior behaviour
- Social technology: user content generation and social networking – users create and share
with their friends (and a larger worldwide community) content in the form of text, videos,
music or photos. By using these forms of communication, users can create new social
networks and strengthen existing ones
Key concepts in e-commerce: digital markets and digital goods in a global marketplace
The internet reduces information asymmetry (= exists when one party in a transaction has more info
that is important for the transaction than the other party)
Digital markets are very flexible and efficient because they operate with reduced search and
transaction costs, lower menu costs (merchants’ costs of changing prices), greater price
discrimination, and the ability to change prices dynamically based on market conditions (dynamic
pricing = price of a product varies depending on the demand characteristics of the customer or the
supply situation of the seller)
Disintermediation = removal of organizations or business process layers responsible for intermediary
steps in the value chain
Internet digital marketplace has greatly expanded sales of digital goods (goods than can be delivered
over a digital network) think of music, movies, series etcetera
10.2 What are the principal e-commerce business and revenue models?
Types of e-commerce:
- Business-to-consumer (B2C) – amazon, Walmart, iTunes, booking.com
- Business-to-business (B2B) – Sligro
- Consumer-to-consumer (C2C) – online auctions, eBay
E-commerce business models
- Portal – gateways to the web and are often defined as those sites that users set as their
home page; provides initial point of entry to the web along with specialize content and other
services; MSN, Yahoo
- E-tailer – online retail stores; sells physical products directly to consumer or to individual
businesses; Amazon
- Content provider – creates revenue by providing digital content, such as news, music,
photos, or video, over the web. The customer may pay access the content, or revenue may
be generated by selling advertising space; podcasting = method of publishing audio of video
broadcasts through the internet, allowing subscribing users to download audio or video files
onto their personal devices; streaming = publishing method for music or video files that flows
a continuous stream of content to a user’s device without being stored locally on the device;
iTunes
- Transaction broker – saves users money and time by processing online sales transactions and
generating fee each a transaction occurs; Expedia
Learning objectives
10.1 What are the unique features of e-commerce, digital markets, and digital goods?
10.2 What are the principal e-commerce business and revenue models?
10.3 How has e-commerce transformed marketing?
10.4 How has e-commerce affected business-to-business transactions?
10.5 What is the role of m-commerce in business, and what are the most important m-commerce
applications?
10.6 What issues must be addressed when building an e-commerce presence?
10.7 How ill MIS help my career?
Cases
Uber Storms Europe. Europe Strikes Back.
Deliveroo: Australian Food Delivery
Socializing with Customers
An iDEAL Solution to the Single Online EU Market?
10.1 What are the unique features of e-commerce, digital markets, and digital goods?
E-commerce is composed of 3 major segments: retail goods, travel and services, and online content
E-commerce = the use of the internet and the web to transact business / digitally enabled
commercial transactions between and among organizations and individuals began in 1995
New e-commerce = social, mobile, local (Before: primary measure of success was how many eyeballs
(unique visitors) a website produced and how many impressions a marketing campaign generated
(impression was one ad shown to one person); both of these measures were carryovers from the
world of television, which measures marketing in terms of audience size and ad views)
But has become conversational commerce (=marketing is based on firms engaging in multiple online
conversations with their customers, potential customers and even critics; your brand is being talked
about on the web and social media (that’s the conversation part), and marketing your firm, building,
and restoring your brands require you to locate, identify, and participate in these conversations)
social marketing is all about firms participating in and shaping this social process
Why e-commerce is different
- Ubiquity – is accessible everywhere; marketspace = a marketplace extended beyond
traditional boundaries and removed from a temporal and geographic location; from a
customer point of view, ubiquity reduces transaction costs (=the cost of participating in the
market)
- Global reach – the technology reaches across national boundaries around the earth
- Universal standards – there is one set of technology standards, namely internet standards;
this lowed the market entry costs (=the cost merchants must pay simply to bring their goods
to the market) & reduce search costs for consumers (=effort required to find suitable
products)
- Richness – complexity and content of a message (web has a rich message to a large audience)
- Interactivity – allow for two-way communication between merchant and consumer and peer-
to-peer communication among friends
- Information density – the total amount and quality of info available to all market
participants, consumers, and merchant alike; e-commerce technologies reduce info
, collection, storage, processing and communication costs while greatly increasing the
currency, accuracy and timeliness of info; info density in e-commerce markets make prices
and costs more transparent (price transparency = ease with the consumers can find out the
variety of prices in a market; cost transparency = the ability of consumers to discover the
actual costs merchants pay for products; price discrimination = selling the same goods or
nearly the same goods to different targeted groups at different prices)
- Personalization/customization – personalization = target messages to specific individuals by
adjusting the message to a person’s clickstream, behavior, name, interest and past
purchases; customization = changing the delivered product or service based on user’s
preferences or prior behaviour
- Social technology: user content generation and social networking – users create and share
with their friends (and a larger worldwide community) content in the form of text, videos,
music or photos. By using these forms of communication, users can create new social
networks and strengthen existing ones
Key concepts in e-commerce: digital markets and digital goods in a global marketplace
The internet reduces information asymmetry (= exists when one party in a transaction has more info
that is important for the transaction than the other party)
Digital markets are very flexible and efficient because they operate with reduced search and
transaction costs, lower menu costs (merchants’ costs of changing prices), greater price
discrimination, and the ability to change prices dynamically based on market conditions (dynamic
pricing = price of a product varies depending on the demand characteristics of the customer or the
supply situation of the seller)
Disintermediation = removal of organizations or business process layers responsible for intermediary
steps in the value chain
Internet digital marketplace has greatly expanded sales of digital goods (goods than can be delivered
over a digital network) think of music, movies, series etcetera
10.2 What are the principal e-commerce business and revenue models?
Types of e-commerce:
- Business-to-consumer (B2C) – amazon, Walmart, iTunes, booking.com
- Business-to-business (B2B) – Sligro
- Consumer-to-consumer (C2C) – online auctions, eBay
E-commerce business models
- Portal – gateways to the web and are often defined as those sites that users set as their
home page; provides initial point of entry to the web along with specialize content and other
services; MSN, Yahoo
- E-tailer – online retail stores; sells physical products directly to consumer or to individual
businesses; Amazon
- Content provider – creates revenue by providing digital content, such as news, music,
photos, or video, over the web. The customer may pay access the content, or revenue may
be generated by selling advertising space; podcasting = method of publishing audio of video
broadcasts through the internet, allowing subscribing users to download audio or video files
onto their personal devices; streaming = publishing method for music or video files that flows
a continuous stream of content to a user’s device without being stored locally on the device;
iTunes
- Transaction broker – saves users money and time by processing online sales transactions and
generating fee each a transaction occurs; Expedia
