Chapter Summary

E-commerce is a complex topic. On one hand, the Internet and mobile commerce simply represent new ways to interact with customers and handle transactions. On the other hand, they have the potential to change the economy and society. The production chain is a key issue in e-commerce. Businesses must decide whether the advantages of selling directly to customers are worth the loss of goodwill from distributors and retailers. The production chain also provides the means to evaluate EC alternatives from business-to-business or business-to-consumer. EC also provides the ability to charge different prices to each customer through direct sales or auctions.

E-commerce can be analyzed in three phases: prepurchase, purchase, and postpurchase. The prepurchase phase consists primarily of advertising, providing specifications, and product configuration or selection. Purchase largely consists of handling the transactions, including verifying the customer, protecting the data transmissions, and handling the money transfer. Postpurchase support includes service, problem tracking, and cross-selling.

Promoting websites is increasingly important. Search engines are an important means for potential customers to find sites, but many sites also need to advertise on other websites and on more traditional media. It is also important to analyze the website’s traffic patterns to find out what pages are in demand, and what sections do not work well.

Several types of e-commerce are in use, including simple static HTML pages to present information about products; single unit sales using low-volume payment systems and auction sites; and Web malls and commerce server software for large product catalogs. Many firms choose to outsource the website hosting to a specialty company, but hosting your own servers makes it easier to integrate the Internet data with the other corporate data.

Mobile commerce is similar to e-commerce, but the wireless capabilities can provide some interesting applications—particularly for B2B e-commerce. Sales taxes and the Internet are a challenging problem for states. Ultimately, states will have to alter their tax systems. Similar problems arise on a global scale. Many issues involving customer authentication, payment validation, and national control need to be resolved before global e-commerce can seriously expand.

Early EC firms failed for many reasons, including unrealizable expectations by investors. Firms focused on pure Internet plays encountered many problems because they did not have ties to real sales. Other firms failed because they attempted to capture market share through heavy advertising and low prices, losing money on every sale. The slump in Internet advertising revenue contributed to the failure of many firms—particularly those offering free content and services. Despite the early problems, there is a strong future for e-commerce and m-commerce.

E-business and e-commerce mean more than just the dot-com firms that sell products. Many Internet-based business opportunities still exist, both within existing firms and for new companies. Joseph Schumpter, an economist, coined the term creative destruction to represent the dynamic changes required in a modern economy. A dynamic economy needs to have new firms to force the mainstream companies to respond to the pressure of new ideas. Firms that are set in their ways will ultimately fail. Entrepreneurs can work within larger organizations creating new products, but they generally choose to build entirely new firms. In any case, it takes solid ideas, good research, and an organized plan to succeed as an entrepreneur.