Electronic Commerce:
Spectacular successes and dismal failures in Electronic Commerce
Vassilios Parashos
Kassapidis
kassapidis@usa.net
Stream: The lack of
professionalism in Electronic Commerce
Abstract
The creation of the Web in 1993 provided
a major boost for ecommerce, which has since seen an enormous influx of capital
and creativity. In this paper the author is focused in the issues that electronic
commerce carries as a new expanding phenomenon in the computing society. An
examination to benefits and the risks is made to balance this great deal of
expansion. As support to this paper, case studies have been examined and many
of the e-commerce characteristics have been outlined. Finally overall conclusions
are given and the aspects that need particular attention in the future are sketched.
1. Introduction
Electronic commerce is shopping
on the Web, but it is also much more - in transactions through the Internet,
intranets and extranets both between businesses and between businesses and consumers.
It enables businesses to reduce costs, reach a global market and provide a higher
level of customer service, 24 hours a day, 365 days a year, without heavy staff
costs. It blurs the lines between local and global markets. E-commerce propels
business in almost the same way that the railways revolutionised distribution
100 years ago. (BCS, 1999) One of the most important questions about e-commerce
is whether it is a real, lasting business phenomenon or a passing fad. In the
4 years that the web has been used for electronic commerce, we've witnessed
both spectacular successes like Amazon.com, and dismal failures like Nets, Inc.
(Cohan, 2000a) This mainly occurred not only because of a great deal of lack
of professionalism in electronic commerce but also from that many organisations
believed that the route to electronic commerce and general to electronic business
(e-Business) was the easy way. Although it is been proved that electronic commerce
is a real challenge to many well-established businesses.
2. Electronic Commerce: Benefits and Risks
To keep a balanced opinion in this
paper both benefits and risks must be pointed out to give an integrated picture
of the factors making electronic commerce being a real lasting or a passing
fad business.
2.1 Electronic Commerce Benefits:
Profit margins no longer have to
be restricted by marketing and advertising budgets. A well-conceived web site
and a strong commerce application is a good start. With the traditional way
of conducting business, companies will extend their market with high investment
on operation cost. However, with the electronic commerce technology coming to
the market and the fast growing number of Internet users buying through the
net, companies hold the opportunity to expand their market by deploying a cost
effective and efficient solution. With the added convenience of communication
via Email, WEB Site and Internet Telephony, the company can easily reach the
customer globally 24 hours a day.
Typically, the Internet sales channel
is entirely in the direct control of the selling company. As such, it can literally
be changed as rapidly and as dramatically as needed. For example, simple price
changes, short-term promotions and market trials of new products or services
can all be easily executed and introduced immediately to customers. (Techbyte,
2000)
The buyer can browse through an
on-line store, select the products he or she wants to buy, goes to the Virtual
check out counter and pays. The Internet can be an outstanding way to grow a
profits base.
Right from the WEB Site customers
can find everything they need in order to make wise purchasing decisions. Eliminate
the need for unnecessary phone calls and mailings. Electronic commerce eliminates
the need for physical stores. This leads to reduced inventory, employees and
purchasing cost. Electronic commerce also cuts down the order-processing costs
associated with faxing, phone calls and data entry duties. (Techbyte, 2000)
Easier business administration is
another benefit of electronic commerce, which helps companies improve their
operations process by making it more efficient and effective. With the right
application and technology, inventory levels, shipping and receiving logs can
be automatically stored, categorized and updated in real-time. With all product
and shipping information available up in front, customers needn't bother with
as many phone calls to your customer service or sales support personnel.
Business success if often determined
by perception. It is possible to have the greatest products and the best service,
yet if it is not up to speed with the latest innovation, customers will notice.
Electronic commerce gives customers total control of the sales process. They
can now easily choose from all of the available products, get up to the minute
accurate product and inventory data and shop anytime. (Techbyte, 2000)
On-line interaction can actually
result in closer ties with customers and a deeper understanding of their needs.
Many businesses are also able to gain a better understanding of their customers
through on-line profiles that they themselves complete. Such information as
customers' gender, age, mailing and Internet address all provide a wealth of
information that can be used for a better marketing strategy. Finally E-Commerce
promotes a new way of doing business. Via dedicated intranets and extranets,
vendors and suppliers can access product specifications, order details, confirmations
and updates - anything they need to complete the transaction electronically.
Through efficient and effective communication, stronger relationships between
company with vendors and suppliers are built.
2.2 Electronic Commerce Risks
The arrival of the Internet brings
many possibilities for companies to buy and sell electronically. Companies interested
in electronic commerce are able to set up a web site with product descriptions,
prices, purchasing forms, and other relevant information that is accessible
to anyone with a web browser. Customers wishing to make a purchase from their
own home may do so by calling up the company's web page on their web browser,
filling in some personal information (e.g. name, e-mail address, credit card
number), and placing the order on a page from the site. Products usually ship
by courier, so the entire process is quick and convenient. The issues that may
arise from this process, often as risks to the customer, are detailed as follows:
2.2.1 Encryption Issues
Data does not get transmitted directly
from a home computer to an e-commerce web site when orders get placed over the
Internet. Instead, data gets passed between various computers and computer networks
on its way to its final destination. Since direct, private communication is
not a reality on the Internet, there is the risk that data getting transmitted
along the way to a company's web site will get seen or abused by some malicious
third party.
In order to protect transmitted
data from being recognized and misused, companies and web browsers have gotten
together to implement an encryption scheme so those who are clever enough to
access the transmitted data cannot understand the content. There is a risk inherent
in any encryption scheme since it is always theoretically possible for someone
to unlock the encryption code and determine the underlying data. Significant
research has been placed in determining how to break encryption schemes, and
the evidence suggests that current encryption algorithms are safe and secure.
Customers wishing to perform electronic transactions over the Internet should
ensure the web sites they interact with for business purposes are secure sites,
so they can take advantage of the security encryption offers.
2.2.2 Web Site Security
The potential for information theft
is a risk present in the electronic commerce world. Information theft is not
a risk specific to electronic commerce. Retail stores, credit card companies,
and other such organizations also have important personal information and are
susceptible to theft. For example, there have been reported cases where retail
store cashiers have made copies of credit card information and used it to steal
credit from credit card holders and the credit card company itself. The primary
difference between most theft and electronic theft is that there is greater
access to an electronic web site than there is to non-electronic businesses.
There are different types of web
site security risks to consider, depending on the size and experience of the
company selling on the web. Larger companies tend to have greater experience
and better security measures in place, but their greater popularity makes them
more open to attack, and if penetrated, more information is at risk. Smaller
companies tend to have less experience at web site security, and so they may
be easier targets, but the reward for violating the site's security is also
lower. Customers concerned with web site security have no say in web site security,
except that they may choose not to do business with companies they don't trust.
2.2.3 Receiving the Purchased Product
Since the Internet spans the globe,
it is possible to trade with companies of unknown reputation, location, and
size. Unfortunately, it is technically simple for someone to develop a web site
fronting as a legitimate business that only takes orders from customers without
delivering. Customers wishing to retaliate against these companies may find
it difficult to get sufficient information to prosecute, or to spend the time
and effort required prosecuting a "business" based in a different
country. Even if the web site you do business with is legitimate, there are
concerns surrounding the terms of product delivery.
2.2.4 Large Email Distribution
Companies usually require customers
to give their e-mail address before any electronic transactions occur. Companies
need this information so they can contact the customer in case there is a problem
processing the transaction after it has been entered. Unfortunately for the
customer, giving away e-mail addresses also gives the company an opportunity
to send you messages at their convenience, or to sell your address to other
companies wishing to send the public information. Spam is a term that refers
to not want e-mail usually sent in large bulk deliveries to a wide distribution
of people. The risk in giving companies e-mail address (which they do need)
is that they have the ability to send a large amount of emails, which costs
the customer time.
3. Electronic Commerce Successes
– EasyJet.com
It is definite that many companies
that moved from traditional business to e-business and electronic commerce have
become a trading success. Traditional “recipes” in to modern “internet world”
were almost enough for doing the right job. Other used modern business models,
which also became successes stories.
Looking at examples of established
companies embracing the Internet and making a massive success of it, it will
be hard pushed to find a better one than easyJet. "Airline Wants to Take
Web All the Way," (New York Times, 2000). During the last week of January
2000, European budget airline EasyJet sold 61.7% of its nearly 90,000 seats
on the web. The entrepreneur behind that success story is aiming to do the same
in car rental business with EasyRentacar, an Internet- only service that will
be rolled out before the summer. EasyJet, a no-frills airline that serves European
short-haul routes, sells only directly to customers, and does not use travel
agents. It started its online ticket sales in March 1998, offering a small discount
of £1 on Web-booked flights, as opposed to tickets bought over the phone. "We
went past the 50 percent mark in November last year, and it just keeps going
up," said Stelios Haji-Ioannou, the 33-year-old founder and chief executive
of the company.
"I guess we can claim to be
the first Internet airline," he added. Only three years ago, however, the
unconventional Greek-born industrialist was saying that the Internet was a nerdy
pastime with no real commercial potential. Then someone in his staff convinced
him to give it a try. "We just published on our Web site a different phone
number for reservations, and it started getting an amazing number of calls,
so I knew that something was happening out there," he explained. Now, basically
everything Haji-Ioannou does has an Internet focus, and he's doing a lot. (New
York Times, 2000)
4. Electronic Commerce Failures
– Living.com
Electronic commerce is changing
the way a lot of companies do business, but it's not everything it's pumped
up to be. (TechWeb, 1998) 'Businesses using the Internet to promote trade are
struggling,' Paul Foley says. 'The number of losers exceeds the number of moneymakers
by at last two or three to one. The Internet is potentially a huge market and
everyone believes there is money to be made, but few have so far figured out
how to do it.' (BCS, 1999)
Although it will be difficult to
find a certain case study as a failure, of course there are cases of company
failures in electronic commerce.
Living.com has died. Market instability
forces online furniture store to discontinue operations. Award-winning online
furniture store Living.com announced that it will close its doors due to the
lack of capital assets required to achieve profitability. "After exhausting
all apparent alternatives, we have no choice but to file Chapter 7," Living.com's
CEO Shaun Holliday, said in a statement. The company will file for bankruptcy
to liquidate its assets in court and lay off 275 employees. "Despite our
employees' tremendous efforts and the loyalty of our customers, the recent downturn
in the capital market has substantially impaired our ability to raise capital
required to achieve profitability," said Holliday. Four months ago, online
research firm Gomez.com rated the site as the "best online furniture store."
Living.com was launched in July 1999, and this past May, the company formed
a partnership with Amazon.com to enable customers to access its store through
the Amazon site. Amazon however said the failure of Living.com would not impact
its bottom line and did not call into question the aggressive expansion of its
product lines. "We work to support our partners to enhance their likelihood
of success. Many partners within the network are doing quite well. When we enter
these alliances we look to leverage the strength of our platform," Amazon
spokeswoman Patty Smith said. Smith said Living.com's failure would not have
an adverse affect on Amazon's future financial performance because it had already
recognized most of the losses. (The CNN Financial Network, 2000)
5. Electronic Commerce: Lasting
Business?
It is almost safe to say that an
electronic based business with the right guidelines is a lasting business. This
can be supported by many success case studies – and not only the one stated
above – available from many sources. According to International Data Corp.,
the business-to-consumer e-commerce market will hit $64 billion in Europe by
2003. (Computer World, 1998) A new survey of business
people by British Telecom and Management Today shows that 63% expect the Internet
to 'fundamentally alter' the way they do business or to open new commercial
opportunities in the next two years. (BCS, 1999) It is true that it will have
a great deal of life for the next 5 years and with many organisations going
on with a major investment in new technologies like mobile commerce (mCommerce),
it is definite that a good start in this field has been made.
6. Conclusion
E-commerce is not a binary switch
from traditional to e-ecommerce. The key to success is mix management, where
the e-business and traditional business models co-exist and are tailored to
fit the market they address. Organisations need to develop an e-business roadmap,
to be implemented in stages, and to look for ways to build innovation into selected
processes. Learning from step-by-step initiatives can then be used to constantly
evaluate the ultimate goal and adjust strategy accordingly. (BCS, 2000) It is
true that e-commerce can be a real life-changing situation but it can also be
a real headache and can lead to ether long lasting high profit organisations
or to a real disaster. Managing directors have to be very strict to their actions
and go on with ecommerce if the company it is really ready to. Finally it is
clear that an ecommerce start is always a challenging and as every kick-off
always is a hard start for anything.
7. References
1.
(O’Connor, Galvin, 1998) J. O’Connor, E. Galvin, “Creating Value
Through ecommerce”, Financial Times – Prentice Hall 1998
2.
(Cohan 2000) Peter S. Cohan, “e-Profit high pay off strategies for
capturing the E-Commerce Edge”, American Management Association (AMACOM)
2000
3.
(BCS, 2000) The Computer Bulletin "E-business is not
easy business” The British Computer Society, January 2000
4.
(The CNN Financial Network, 2000) The CNN Financial Network, News Article:
“Living.com has died.” 15 August 2000
URL: http://europe.cnnfn.com/2000/08/15/companies/living_dead/
Last accessed: 24/02/2001
5.
Storey, J. B. Thompson, A. Bokma, Quality Issues for electronic commerce
systems, University of Sunderland, The British Computer Society Quality Special
Internet Group’s 8th Annual Conference. SQM 2000 10 – 12 April 2000,
Greenwich. UK
6.
(Techbyte, 2000) Techbyte M SDN BHD “Benefits of E-Commerce”
URL: http://www.techbyte.com/
Last accessed: 24/02/2001
7.
(New York Times, 2000) New York Times Article: “Airline Wants to Take Web All the Way by Bruno
Giussani”
URL: http://www.nytimes.com/library/tech/00/02/cyber/eurobytes/08eurobytes.html
last accessed: 24/02/2001
8.
(TechWeb, 1998) TechWeb IT Network, “E-Commerce
Myths And Realities by Clinton Wilder” December 07, 1998
URL:http://www.planetit.com/techcenters/docs/e_businesse_commerce/product_review/PIT19981210S0001
Last Accessed: 24/02/2001
9.
(Computer World, 1998) Computer World Ecommerce,
"Commerce by Numbers," 26 January 1998
URL: http://www2.computerworld.com/home/emmerce.nsf.
Last accessed: 26/02/2001
10.
(Claude, 2000) Claude P. D'Hermillon Jr, ”Risk meets e-commerce”,
Philadelphia Business Journal, April 7, 2000
11.
(Klein, 2001) S. Klein, International
Journal of Electronic Commerce, “Introduction to the Special
Section: Building Relationships in Electronic Commerce: Challenges, Opportunities,
Risks” Volume 5, Number 2, Winter 2000-2001, pp. 5.
12.
(BCS, 1999) The Computer Bulletin “Electronic
Commerce: Business rethink” The British Computer Society, May
1999 |
