WHY E-COMMERCE IS DIFFERENT
Why has e-commerce grown so rapidly? The answer lies in the unique nature of the Internet and the Web. Simply put, the Internet and e-commerce technologies are much more rich and powerful than previous technology revolutions like radio, television, and the telephone. Table 10.2 describes the unique features of the Internet and Web as a commercial medium. Let’s explore each of these unique features in more detail.
Ubiquity
In traditional commerce, a marketplace is a physical place, such as a retail store, that you visit to transact business. E-commerce is ubiquitous, meaning that is it available just about everywhere, at all times. It makes it possible to shop from your desktop, at home, at work, or even from your car, using smartphones. The result is called a marketspace a marketplace extended beyond traditional boundaries and removed from a temporal and geographic location. From a consumer point of view, ubiquity reduces transaction costs the costs of participating in a market. To transact business, it is no longer necessary that you spend time or money traveling to a market, and much less mental effort is required to make a purchase.
Global Reach
E-commerce technology permits commercial transactions to cross cultural and national boundaries far more conveniently and cost effectively than is true in traditional commerce. As a result, the potential market size for e-commerce merchants is roughly equal to the size of the world’s online population (estimated to be more than 2 billion). In contrast, most traditional commerce is local or regional—it involves local merchants or national merchants with local outlets. Television, radio stations
Why has e-commerce grown so rapidly? The answer lies in the unique nature of the Internet and the Web. Simply put, the Internet and e-commerce technologies are much more rich and powerful than previous technology revolutions like radio, television, and the telephone. Table 10.2 describes the unique features of the Internet and Web as a commercial medium. Let’s explore each of these unique features in more detail.
Ubiquity
In traditional commerce, a marketplace is a physical place, such as a retail store, that you visit to transact business. E-commerce is ubiquitous, meaning that is it available just about everywhere, at all times. It makes it possible to shop from your desktop, at home, at work, or even from your car, using smartphones. The result is called a marketspace a marketplace extended beyond traditional boundaries and removed from a temporal and geographic location. From a consumer point of view, ubiquity reduces transaction costs the costs of participating in a market. To transact business, it is no longer necessary that you spend time or money traveling to a market, and much less mental effort is required to make a purchase.
Global Reach
E-commerce technology permits commercial transactions to cross cultural and national boundaries far more conveniently and cost effectively than is true in traditional commerce. As a result, the potential market size for e-commerce merchants is roughly equal to the size of the world’s online population (estimated to be more than 2 billion). In contrast, most traditional commerce is local or regional—it involves local merchants or national merchants with local outlets. Television, radio stations
and newspapers, for instance, are primarily local and regional institutions with limited, but powerful, national networks that can attract a national audience but not easily cross national boundaries to a global audience.
Universal Standards
One strikingly unusual feature of e-commerce technologies is that the technical standards of the Internet and, therefore, the technical standards for conducting e-commerce are universal standards. They are shared by all nations around the world and enable any computer to link with any other computer regardless of the technology platform each is using. In contrast, most traditional commerce technologies differ from one nation to the next. For instance, television and radio standards differ around the world, as does cell telephone technology.
.The universal technical standards of the Internet and e-commerce greatly lower market entry costs the cost merchants must pay simply to bring their goods to market. At the same time, for consumers, universal standards reduce search costs—the effort required to find suitable products
Richness
Information richness refers to the complexity and content of a message. Traditional markets, national sales forces, and small retail stores have great richness: They are able to provide personal, face-to-face service using aural and visual cues when making a sale. The richness of traditional markets makes them powerful selling or commercial environments. Prior to the development of the Web, there was a trade-off between richness and reach: The larger the audience reached, the less rich the message. The Web makes it possible to deliver rich messages with text, audio, and video simultaneously to large numbers = of people.
Interactivity
Unlike any of the commercial technologies of the twentieth century, with the possible exception of the telephone, e-commerce technologies are interactive, meaning they allow for two-way communication between merchant and consumer. Television, for instance, cannot ask viewers any questions or enter into conversations with them, and it cannot request that customer information be entered into a form. In contrast, all of these activities are possible on an e-commerce Web site. Interactivity allows an online merchant to engage a consumer in ways similar to a face-to-face experience but on a massive, global scale.
Information Density
The Internet and the Web vastly increase information density the total amount and quality of information available to all market participants, consumers, and merchants alike. E-commerce technologies reduce information collection, storage, processing, and communication costs while greatly increasing the currency, accuracy, and timeliness of information. Information density in e-commerce markets make prices and costs more transparent. Price transparency refers to the ease with which consumers can find out the variety of prices in a market; cost transparency refers to the ability of consumers to discover the actual costs merchants pay for products.
Personalization/Customization
E-commerce technologies permit personalization: Merchants can target their marketing messages to specific individuals by adjusting the message to a person’s clickstream behavior, name, interests, and past purchases. The technology also permits customization changing the delivered product or service based on a user’s preferences or prior behavior. Given the interactive nature of e-commerce technology, much information about the consumer can be gathered in the marketplace at the moment of purchase. With the increase in information density, a great deal of information about the consumer’s past purchases and behavior can be stored and used by online merchants.
Social Technology: User Content Generation and Social Networking
In contrast to previous technologies, the Internet and e-commerce technologies have evolved to be much more social by allowing users to create and share with their personal friends (and a larger worldwide community) content in the form of text, videos, music, or photos. Using these forms of communication, users are able to create new social networks and strengthen existing ones. All previous mass media in modern history, including the printing press, use a broadcast model (one-to-many) where content is created in a central location by experts (professional writers, editors, directors, and producers) and audiences are concentrated in huge numbers to consume a standardized product. The new Internet and e-commerce empower users to create and distribute content on a large scale, and permit users to program their own content consumption. The Internet provides a unique many-to-many model of mass communications.
Universal Standards
One strikingly unusual feature of e-commerce technologies is that the technical standards of the Internet and, therefore, the technical standards for conducting e-commerce are universal standards. They are shared by all nations around the world and enable any computer to link with any other computer regardless of the technology platform each is using. In contrast, most traditional commerce technologies differ from one nation to the next. For instance, television and radio standards differ around the world, as does cell telephone technology.
.The universal technical standards of the Internet and e-commerce greatly lower market entry costs the cost merchants must pay simply to bring their goods to market. At the same time, for consumers, universal standards reduce search costs—the effort required to find suitable products
Richness
Information richness refers to the complexity and content of a message. Traditional markets, national sales forces, and small retail stores have great richness: They are able to provide personal, face-to-face service using aural and visual cues when making a sale. The richness of traditional markets makes them powerful selling or commercial environments. Prior to the development of the Web, there was a trade-off between richness and reach: The larger the audience reached, the less rich the message. The Web makes it possible to deliver rich messages with text, audio, and video simultaneously to large numbers = of people.
Interactivity
Unlike any of the commercial technologies of the twentieth century, with the possible exception of the telephone, e-commerce technologies are interactive, meaning they allow for two-way communication between merchant and consumer. Television, for instance, cannot ask viewers any questions or enter into conversations with them, and it cannot request that customer information be entered into a form. In contrast, all of these activities are possible on an e-commerce Web site. Interactivity allows an online merchant to engage a consumer in ways similar to a face-to-face experience but on a massive, global scale.
Information Density
The Internet and the Web vastly increase information density the total amount and quality of information available to all market participants, consumers, and merchants alike. E-commerce technologies reduce information collection, storage, processing, and communication costs while greatly increasing the currency, accuracy, and timeliness of information. Information density in e-commerce markets make prices and costs more transparent. Price transparency refers to the ease with which consumers can find out the variety of prices in a market; cost transparency refers to the ability of consumers to discover the actual costs merchants pay for products.
Personalization/Customization
E-commerce technologies permit personalization: Merchants can target their marketing messages to specific individuals by adjusting the message to a person’s clickstream behavior, name, interests, and past purchases. The technology also permits customization changing the delivered product or service based on a user’s preferences or prior behavior. Given the interactive nature of e-commerce technology, much information about the consumer can be gathered in the marketplace at the moment of purchase. With the increase in information density, a great deal of information about the consumer’s past purchases and behavior can be stored and used by online merchants.
Social Technology: User Content Generation and Social Networking
In contrast to previous technologies, the Internet and e-commerce technologies have evolved to be much more social by allowing users to create and share with their personal friends (and a larger worldwide community) content in the form of text, videos, music, or photos. Using these forms of communication, users are able to create new social networks and strengthen existing ones. All previous mass media in modern history, including the printing press, use a broadcast model (one-to-many) where content is created in a central location by experts (professional writers, editors, directors, and producers) and audiences are concentrated in huge numbers to consume a standardized product. The new Internet and e-commerce empower users to create and distribute content on a large scale, and permit users to program their own content consumption. The Internet provides a unique many-to-many model of mass communications.
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