Internet and E-commerce: diffusion and practice. Daniela Andreini

Transcription

1 Internet and E-commerce: diffusion and practice Daniela Andreini

2 World Internet Users

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5 UNITED STATES OF AMERICA 52 European Countries US - Population: 301,139,947 - Area: 9,629,047 sq km (3,717, sq miles) 809,624,686 population estimate for Europe in ,088,545 Internet users as of Nov./07, 71.4% penetration, Nielsen//NetRatings. 337,878,613 Internet users and a 41.7% penetration as of Sept.30/07 64,614,000 Internet broadband connections as of Dec./06, per FCC- CTIA. 98,003,362 Broadband connections, 12.1% penetration as of Sept.30/07

6 INTERNET USERS AND POPULATION REGION Population ( 2007 Est. ) % Pop. of World Internet Users, Latest Data % Population (Penetration) % Usage of World Use Growth ( ) North America United States Europe European Union 334,659, ,139,947 5 % 4,5% 238,015, ,088, % 71.4 % 27.3 % 15% % % 800,401, % 382,005, % 27.1 % 263,5 % 489,188, % 293,070, % 20.8 % %

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9 The Broadband Daniela Andreini

10 How to predict the evolution of e- commerce (B2C + B2B) in a Nation? the diffusion of the BROAD BAND

11 Why? Thanks to the Broadband the internet users are able to: Spend much more time online, and visit much more web sites Use more multimedia contents, for instance video, music, animation and games More rich media means more interactive creativity and more engaging than a traditional media offline Broad Band = More experience online = New Potentiality

12 Broadband: definition For Broadband we mean the possibility of transmitting, for any user, wide quantity of information and such a technique can be achieved by using several transmission systems that we will analyze in the following. Broadband term is used for home, for mobile and for any communication user and the concept is the same: transmission of wide information. The common telephone call operates at a speed of 64 Kb/s ( by the OECD that considers the Broadband as a connection to the telephone network that permits a downstream access at 256 Kb/s and an upstream at 128 Kb/s (That corresponds to the most common ADSL); Conversely the Recommendation T (of 1997) of the ITU defines Broadband only the transmission with a speed higher than 2 Mb/s. BROADBAND REPORT Italian _ Ministry of ICT and Fondazione Ugo Bordoni

13 La potenzialità della Banda Larga Consumption in Europe Time per person Pages per person Sessions per person Time per session Pages per session Broadband users spend double the time in the internet and visit quadruple the pages more than narrowband users

14 Broadband Diffusion in the world

15 Broadband Diffusion in the USA

16 Broadband diffusion in the EU

17 Mobile Diffusion Daniela Andreini

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19 EC diffusion among firms Daniela Andreini

20 Why e-commerce is more developed in some counties and less in others? THEORETIC CONTEXT EC DIFFUSION GLOBAL NATIONAL FIRM Rogers, 1995; Swanson, 1994; Cooper & Zmud, 1990; Fichman, 2000; Ramamurthy et al., 1999; Gibbs et al., 2003; Zhu & Kraemer, 2005

21 Conceptual Framework Concepts Global Environment National Environment 1. Environment 2. Policy Firm 3. Drivers and Barriers Variables Global Production networks, global markets, technical innovation, trade liberalization, global competition, MNC strategies, e-commerce movement Wealth, industry structure, information structure, consumer preferences, social/cultural factors, business practices. Telecommunications diffusion and cost, infrastructure investment, openness of trade and investment, regulatory and legal environment, e-commerce promotion Drivers: external, internal operational, and strategic drivers. Barriers:economic, institutional, cultural, legal and privacy barriers 4. E-commerce Diffusion Level of internet use; use for online sales, procurement and services; use with distribution channels 5. Firm Impact 6. National Outcomes Organizational Performance: sales, efficiency, cost, competitiveness. Competitive Environment: number of distribution channels, suppliers, and competitors, competitive intensity Diversity versus convergence in e-commerce diffusion and impacts Gibbs et al. 2005

22 Global Environment E-commerce Development MNCs Multi National Corporations + bring resources, capital, knowledge, practices (Coe et al. 1997) + competition pressure (Grossman & Helpman, 1993) + global Production networks (Ernst, 2003; Dietrick & Kraemer, 1998) Kramaer et al. Globalization and National Diversity: e-commerce diffusion and impacts across Nation in Global E- commerce Cambridge University press, 2006

23 National Environment E-commerce Development 1. National Environment + Wealth: GDP per capita and annual growth rate + Investment in new technologies, infrastructures, HR, high wage rates (Caselli & Coleman, 2001; Shih et al., 2004) + investment resources, industry structure, payment mechanisms, and rule and laws (Ernst, 2003; Zhu & Kraemer, 2002; Zhu et al., 2004, 2005) 2. National Policy + Liberalization of telecommunication (OECD, 1996 ), + Lower telecom. and competition in financial services (Shih et al., 2004, 2005; Zhu et al. 2004) + transportation services (Fomin et al., 2003 ), = national plan to encourage internet and ecommerce use

24 Firm-level findings CRITO GEC Survey 2002 E-commerce Development Survey in firms in USA, Brazil, China, Denmark, France, Germany, Japan, Mexico, Singapore and Taiwan 35% manufacturing; 33%Wholesale&Retail; 32% Banking&Insurance 1. Drivers to e-commerce use + Expand market for existing product and services 47,9% + To improve coordination with customers and suppliers..43,7% + To enter new businesses and markets..42% + Customer demanded it.36,9% + To reduce Costs 35,7% + Major Competitors were online...31,3% + Suppliers required it. 22,3% + Required for government procurement 15,2% + Government provided incentives. 8,3% 1. Barriers to e-commerce use + Concerns about privacy of data or security issues 44,2% + Inadequate legal protection for Internet purchases...34,1% + Need for face-to-face customer interaction....33,8% + Costs of implementing an ecommerce site.33,6% + Customers do not use this technology 31,4% + Finding staff with ecommerce expertise ,5% + Internet is not part of business strategy ,8% + Business law do not support ecommerce. 24,2% + Making organizational changes..23,9% + Making organizational changes...23,9% + revalence of credit card use in the Country...20,3% + Taxation of Internet sales.16,5% + Cost of internet access....15,1%

25 Firm use of e-commerce: Ecommerce is more than just sales online CRITO GEC Survey 2002 Survey in firms in USA, Brazil, China, Denmark, France, Germany, Japan, Mexico, Singapore and Taiwan 35% manufacturing; 33%Wholesale&Retail; 32% Banking&Insurance Formally integrating same business processes w ith suppliers or other business partners; 34% Making Sales online; 30% After-sales customer service and support; 44% Exchanging Operational data w ith business customers ; 51% Advertising and market purposes; Exchanging Operational data 58% w ith suppliers; Making purchases online; 48% 47% 100% 80% 60% 40% 20% 0%

26 Firm use of e-commerce: Ecommerce is more than just sales online CRITO GEC Survey 2002 Survey in firms in USA, Brazil, China, Denmark, France, Germany, Japan, Mexico, Singapore and Taiwan 35% manufacturing; 33%Wholesale&Retail; 32% Banking&Insurance 100% 80% Formally integrating same business processes with suppliers or other business partners Making purchases online Exchanging Operational data with business customers 60% 40% High Local High Global 34% 34% 30% 41% 42% 50% 51% 49% 43% 56% 46% 61% 64% 66% 20% Making Sales online; After-sales customer service and support Exchanging Operational data with suppliers 0% Advertising and market purposes

27 B2B and B2C sales and services CRITO GEC Survey 2002 Survey in firms in USA, Brazil, China, Denmark, France, Germany, Japan, Mexico, Singapore and Taiwan 35% manufacturing; 33%Wholesale&Retail; 32% Banking&Insurance Firms doing online sales Percent B2B only Percent B2C only Percent both B2B and B2C Firm online sales as percent of total sales (among firms selling online) B2B B2C Firms doing online services Percent B2B only Percent B2C only Percent both B2B and B2C 12,9 7,1 15,0 15,2 18,6 23,1 12,9 33,3 E-commerce is more than just sales

28 B2B and B2C sales and services in Local and Global Firms 100% 90% 90% 87% 93% 90% 81% 80% 76% 76% 71% 70% 60% 50% 40% 40% 38% 38% High Local High Global 30% 28% 20% 10% 0% B2C sales B2B sales B2C services B2B services B2C B2B

29 Theory on firms advantages: Demand-Side Advantages Demand expansion. The Internet can increase sales in three ways: - market expansion: occurs when new segments of customers are reached who did not yet buy in the category. Estee Lauder, for example, hopes that Clinique.com will attract customers who avoid buying at a cosmetics counter because they find the experience intimidating. - brand switching: by winning customers from competitors. One specific way in which new segments can be tapped or customers won from competitors is through expansion of the current market to the global market (Quelch and Klein 1996). - relationship deepening: selling more to existing customers. Barnes and Noble, for example, experienced record sales in its real-world stores upon launching its online store, because this increased its customers' interest in books. Higher prices. Lai and Sarvary (1999) show that when the proportion of Internet shoppers is sufficiently high and the product's nondigital attributes (i.e., attributes for which a physical inspection of the product is necessary) are not overwhelming, the Internet may represent an opportunity for firms to increase their prices. Also, because the Internet enables consumers to save shopping time and effort, it makes it costly for them to try new products for which sensory attributes need to be physically evaluated. Instead of going to the store, consumers may decide to infer the missing attributes on the basis of their overall evaluation of the brand. Consequently, in some cases, consumers may become more brand loyal when purchasing through the Internet. Because loyal customers are less price sensitive, firms may be able to raise their prices and enjoy higher revenues. Source: Inge Geyskens, Katrijn Gielens, & Marnik G. Dekimpe (2002), The Market Valuation of Internet Channel Additions Journal of Marketing Vol. 66 (April 2002),

30 Theory on firms advantages: Demand-Side Disadvantages Demand reduction: adding an Internet channel to an entrenched channel system may involve channel "shift (customers moving from one channel to another) without channel "lift" (new sales) (Alba et al. 1997). Adding an Internet channel may even lead to a decrease in total sales when consumers buy less through the new channel than through their old channel for example, when there are fewer impulse purchases through the Internet or when disenchanted distributors offer less support to the firm's products, resulting in more brand switching toward the firm's competitors. Lower prices. For many firms, a major threat posed by the Internet is that profits could be eroded through the intensified price competition that might ensue as consumers search costs are lowered (Alba et al. 1997). The Internet can increase the power of the consumer, because price comparisons across suppliers can be performed quickly and easily. Therefore, prices and margins are expected to be pushed down (Degeratu, Rangaswamy, and Wu 2000). Source: Inge Geyskens, Katrijn Gielens, & Marnik G. Dekimpe (2002), The Market Valuation of Internet Channel Additions Journal of Marketing Vol. 66 (April 2002),

31 Theory on firms advantages: Supply-Side Advantages Supply-Side Advantages The Internet can offer supply-side advantages through reduced production and transaction costs. In a distribution context, the former refer to the costs of completing the physical distribution activity (Klein, Frazier, and Roth 1990). Transaction costs are the costs incurred as a result of the firm's efforts to coordinate and control the entities performing the physical activities. They include such ex ante costs as drafting and negotiating agreements with these entities and such ex post costs as monitoring and enforcing agreements (Rindfleisch and Heide 1997). Lower physical distribution costs. Internet distribution can help companies dramatically cut physical distribution costs. For intangible goods that can be delivered digitally, distribution costs are often reduced by 50% to 90%. For tangible goods, Internet channels are estimated to reduce distribution costs by more than 25% (Organisation for Economic Cooperation and Development 1999). These savings can be attributed to a variety of factors: Transaction processing is eased, thereby reducing paperwork, human errors, and customer disputes; inventory costs may be reduced as intermediaries are bypassed; and some marketing functions are shifted to the customer (Hoffman, Novak, and Chatterjee 1995). Lower transaction costs. Organizational innovations often have the purpose of economizing on transaction costs. By setting up an Internet channel, companies can reduce ex ante transaction costs by bypassing intermediaries (thereby reducing commission costs) and dealing directly with their customers (Benjamin and WJgand 1995). Airlines, for example, are making headway selling tickets online because their direct sales model eliminates the commission paid to travel agents. Source: Inge Geyskens, Katrijn Gielens, & Marnik G. Dekimpe (2002), The Market Valuation of Internet Channel Additions Journal of Marketing Vol. 66 (April 2002),

32 Theory on firms advantages: Supply Side Disadvantages Higher physical distribution costs. The cost of an Internet channel has two components: fixed start-up costs, such as the purchase of computer hardware and software, and the costs of Internet hosting services. Also, higher advertising expenditures may be needed to create awareness for the new channel. Even though Internet channels can vary dramatically in cost, some incremental expenditures are always involved. Higher transaction costs. Existing channels may view the new Internet channel as unwelcome competition. They may fear their sales will be reduced if firms reach out directly to their consumers. In addition, the low physical distribution costs and easily obtainable economies of scale of Internet channels may lead firms to reduce their prices and may put pressure on the existing channels' profit margins (Alba et al. 1997). When this happens, inter-channel friction becomes likely. The firm's entrenched channels may lose motivation and reduce their support for the firm's products (a passive response), retaliate, or even discontinue their distribution (active responses) (Coughlan et al. 2001, p. 252). To prevent entrenched channels from shirking, firms need to monitor them more extensively to check whether they live up to their agreements and, if necessary, enforce these agreements. This is likely to increase ex post transaction costs (Stump and Heide 1996). In a recent survey of 50 consumer goods manufacturers by Forrester Research, 66% indicated that channel conflict, with its potentially costly result, was the biggest issue they faced in their online strategies (Gilbert and Bacheldor 2000). Source: Inge Geyskens, Katrijn Gielens, & Marnik G. Dekimpe (2002), The Market Valuation of Internet Channel Additions Journal of Marketing Vol. 66 (April 2002),

33 ,2 29,8 29,8 17,7 19,5 20, ,4 33,9 34,8 Customer Service Improved CRITO GEC Survey 2002 Survey in firms in USA, Brazil, China, Denmark, France, Germany, Japan, Mexico, Singapore and Taiwan 35% manufacturing; 33%Wholesale&Retail; 32% Banking&Insurance Inventory costs decreased Procurement costs decreased International Sales Increased Sales Increased Staff Productivity Increased Competitive Position Increased improved Coordination with suppliers improved Sales area widened Internal processes more efficient Intangible Advantages

34 High Local High Global Customer Service Improved Internal processes more efficient Sales area widened Coordination with suppliers improved ompetitive Position Increased improved Staff Productivity Increased Sales Increased International Sales Increased Procurement costs decreased Inventory costs decreased

35 E-Readiness e-readiness is the ability to use Information and Communication Technologies (ICT) to develop the national economy and to foster one's welfare.

36 E-Readiness Rank

37 E-commerce

38 E-commerce Electronic commerce is about doing business electronically. It is based on the electronic processing and transmission of data, including text, sound and video. It encompasses many diverse activities including electronic trading of goods and services, online delivery of digital content, electronic fund transfers, electronic share trading, electronic bills of lading, commercial auctions, collaborative design and engineering, on-line sourcing, public procurement, direct consumer marketing, and after-sales service. It involves both products (e.g. consumer goods, specialized medical equipment) and services (e.g. information services, financial and legal services); traditional activities (e.g. healthcare, education) and new activities (e.g. virtual malls). European Commission, 1997 M-commerce the buying and selling of goods and services throught wireless handheld devices such as mobile phones and personal digital assistants

39 Why is it important to be online? 32 million are the Consumers who research information online and then buy offline in the USA These 32 million cross-channel consumers a great target for firms. They are 43 years old and their income is around dollars, they are 2 years younger and 18% healthier than consumers whop buy offline without searching online Infocommerce

40 E-C in the USA E-commerce sales growth is still higher than overall retail sales growth, which has been 6% at most over the past five to six years. In contrast, retail e-commerce sales growth has been about 25% or more during the same time.

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42 Products researched online and bought offline in the USA Percentage of consumers who have reaserched these product online and have bought offline Consumer electronics 12.1% Computer hardware 9.1% Toys 6.0% Books 5.9% Automobiles 4.8% Software 4.3% Major appliances 4.0% Home improvement 3.9% Small appliances 3.8% DVDs (not including DVD player) 3.6% Travel arrangements 3.5% Music 3.3% Video games 3.1% Office supplies 2.7% Clothing accessories 2.1% General apparel 1.7% Movie tickets 1.7% Base: North American cross-channel shoppers Automotive parts/accessories 1.5% Sporting goods 1.5% Nonprescription health and beauty aid 1.3% Prescription medicines 1.2% Linens/home décor 1.2% Jewelry 1.1% Furniture 1.1% Footwear 1.1% Lawn and garden supplies 1.0% Concert/sports tickets 1.0% Cosmetics/fragrances 0.9% Videos 0.9% Food and beverages/groceries 0.9% Flowers 0.6% Magazine/newspaper subscription 0.3%

43 Infocommerce in EU

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