Evaluation of E-Commerce Models - Essay Example

ASSIGNMENT EVALUATION OF E-COMMERCE MODELS APRIL-2009 SUBMITTED SUBMITTED BY: INDEX CONTENTS Pg Nos. 1) INTRODUCTION 3 2) EBAY 3 3) BENEFITS AND DRAWBACKS OF PAYMENT METHODS 9 4) AMAZON.COM 11 5) DYNAMIC PRICING AND THE CONSEQUENCES 15 6) MERITS AND DEMERITS OF E-COMMERCE 16 7) FACEBOOK 19 8) CONCLUSION 22 9) REFERENCES 23 Introduction: E-commerce or electronics commerce is one of the most popular form of trades these days that involves buying and selling of electronics gadgets and the latest gizmos over the internet and other computer networks. This form of trade has seen a huge upsurge in the recent years owing to the development of internet technology. There are a number of factors which have resulted in a drastic increase in the electronic trade which includes innovations in electronic fund transfers also called EFT, electronic data interchange , internet marketing, inventory management systems, online transaction processing, supply change management, and automated data collection systems. The payment gateway used at the time of completion of an online transaction normally involves World Wide Web and some times even wider range of technologies. There are a few transactions for which there is no need of any physical labor like access to premium contents on a web site, being a paid member of some of the web group or library, transferring money from one bank account to another but most of the other transactions include transportation of goods in at least some way. Interesting terms like e-tail or e-tailer are used to define online retailers these days. Almost every bid retailer has a presence on the internet and even the websites comparing prices of same product that available online from different vendors are present for the ease and comfort of the consumer. There are two forms of electronic commerce, one that is conducted between different businesses Referred to as business-to-business or B2B and the other that is conducted between business and a consumer also called Business-to-consumer or B2C. In a B2B, there can be predefined business parties or arbitrary parties involved over the internet whereas B2C is primarily practiced with arbitrary consumers over the internet with the help of platforms like Facebook, E-bay, Amazon etc. The sales aspect of the business generally lies in the purview of e-business. I registered in ebay by the name kkkk. Below are the screenshots: The National Privacy Policy for Australia says that any organization must not collect data until and unless it is important for the smooth functioning of the organization. Ebay appears to be following most of the underlying principles of national privacy policy for the country including Use and Disclosure, Data Quality, Data Security, Access and Correction etc. but I felt that there are a few fields which may not be essential for the smooth functioning of the organization and thus therefore not in accordance with the privacy policy. For example a phone number is one such field that you need to enter while creation of the account on eBay and that you need to verify. If a person chooses not to verify his phone number then he is required to verify his credit card which is even more sensitive information. I have selected following five items from ebay for the watch list: 1) Oakley 03-458 Mens Bottlecap Black Iridium Sunglasses No. of Bids 9 Bids 12 Bids 12 Bids 12 Bids 17 Bids Price AU $60.00 $76 $76 $76 $107.5 Postage AU $10.00 $10 $10 $10 $10 Time left 5d 12h 4d 12h 3d 6h 2d 4h 16h 29m 2) Oakley 05-933 Mens SPIKE Chrome/VR28 Black Sunglasses No. of Bids 4 Bids 7 Bids 11 Bids 15 Bids 18 Bids Price AU $20.50 $26 $35.51 $ 46.51 $58 Postage AU $10.00 $10 $10 $10 $10 Time left 5d 15h 4d 15h 3d 10h 2d 8h 19h 37m 3) MARKETING - PHILIP KOTLER, L.BROWN, et al- 7th EDITION No. of Bids 1 Bid 2 Bids 2 Bids 2 Bids 2 Bids Price AU $4.95 $5.2 $5.2 $ 5.2 $5.2 Postage AU $8.00 $8 $8 $8 $8 Time left 7d 00h 6d 00h 4d 18h 3d 16h 2d 04h 4) HOW TO BUY AND SELL ON EBAY P/B - BRAND NEW No. of Bids 0 Bid 0 Bid 0 Bid 0 Bid O Bid Price AU $11.95 $11.95 $11.95 $11.95 $11.95 Postage AU $3.50 $3.50 $3.50 $3.50 $3.50 Time left 8d 19h 7d 19h 6d 13h 5d 11h 3d 23h 5) Family History Book, A Personal Record. Brand New. No. of Bids 0 Bid 0 Bid 0 Bid 0 Bid 0 Bid Price AU $7.00 $7 $7 $7 $7 Postage AU $9.70 $9.7 $9.7 $9.7 $9.7 Time left 5d 00h 4d 00h 2d 18 h 1d 16h 4h 18 m So by maintaining and keeping a watch on the logs of five different products at eBay for five days I found that the products whose bids are increasing, ebay is making their prices higher for bidding. We can see this by seeing the logs of item 1 and item 2 and also item 3. The price almost gets doubled after having bids from the buyers. If the item is not sold at ebay then the seller will get an email saying sorry, your item didnt sell. And it will ask you if you want to relist it. But if a seller wants to relist the product again then he would have to pay for it again. If you dont sell the second time, you can of course relist again, but you will not be eligible for any listing fee refunds. While bidding you can see following in ebay: You will enter into a legally binding contract to purchase the item from the seller if youre the winning bidder. You are responsible for reading the full item listing, including the sellers instructions and accepted payment methods. Seller assumes all responsibility for listing this item. Benefits and Drawbacks of Payment Methods: PayPal Credit Card COD Comparison of various payment methods:- Paypal:- The advantages of Paypal include:- 1. There is no monthly fee or any other fees to start a Paypal account. Neither is any minimum payment fee applicable. The transaction fees charged by pay pal are lower than other merchant accounts. 2. No need of any additional hardware or software, just sign up and start. 3. Relatively lower risk of fraud. 4. Almost 33% of the online buyers have Paypal accounts in U.S. The disadvantages of Paypal are as follows:- 1. For the verification of your Paypal account, you have to wait for your credit card statement which may take even a month. This is a very long time. 2. As a seller of any item your buyer needs to register for pay pal before they can purchase the product which is a limitation. Advantages of Credit Card:- 1. A credit card provides an individual with interest free credit for around a month. 2. Transactions can be performed easily over the telephone and internet. 3. A credit card generally also offers freebies like cash back and points that could be redeemed Disadvantages:- 1. Generally the interest charged on credit card is much higher than any other form of transaction. 2. Inability to pay the credit denigrates the credit history. 3. Generally has very complicated piece of terms and conditions. 4. It involves a risk of fraud in terms of online payment and payment over the phone. COD:- Advantages of C.O.D. (Collection on Delivery) are as follows:- 1. Seller can earn the customer’s trust on a promise of C.O.D. 2. There is no risk of fraudulent goods or poor quality goods being supplied to the customer. 3. There is almost no risk of online fraud or phone over the telephone. 4. Products may be delivered faster because the seller’s money is locked until the customer receives the product. Disadvantages:- 1. There is no guarantee that seller will deliver the product. He may chose to not deliver the promised goods while the customer is still waiting for his product. 2. For the seller, his money is stuck up until he delivers the good. 3. For the seller, the customer may reject the product after delivery creating substantial loss for the seller. Commission taken by half.com: Commissions for items sold in the Books, Music, Movies, Games, and Game System categories are calculated as a percentage of the selling price of the item only. The shipping cost is not added to the selling price.  (Selling price of item sold - commission + shipping reimbursement) Commission rates are as follows: Selling Price Half.com Commission $0.75 - $50.00 15.0% $50.01 - $100.00 12.5% $100.01 - $250.00 10.0% $250.01 - $500.00 7.5% > $500.00 5.0% Cookie(s): Cookies are generally the data created by the web server in order to perform requests customized to the specific customers. In simple terms, in order to identify the behavior of the consumer in terms of the specific preference, interests and to provide hassle free transactions for the customers by enabling them to not to key their password every single time, web servers create cookies. Cookies can either be session cookies (that last only until the session is active) or persistent cookies (stored on the hard disk of the user). However there are two sides of the coin:- Positive Sides:- Cookies are used to maintain the state information and the value of important variables while you are browsing the internet. For instance, if you are filling a form and want to jump on to the next window then the cookies will keep the information as it is on the form while you return back. Also it is advantageous to show the things matching the preference of a consumer to him directly on the top and also giving various recommendations to him on the basis of his interests. And even recommendations suggesting “Other people who bought these items also purchased these items” may work out beneficial to the consumer. This convenience can be attained with the help of the cookies that web server use. The Negative Side:- The cookies as we have seen earlier are not a bad thing by themselves. However, the information that they carry can be used maliciously by ill intentioned people. The cookies on the hard disk carry personal information like user name and password. As a result they may be attacked and the vital data can be hacked from your system. The default settings in a web browser generally check the third party cookies and allow the first part cookies. First party cookies are created directly by the web site that a person is visiting. Third part cookies are created by the websites other than a website that a person is visiting and are created generally by pop-ups or banners. The third party cookies are generally detrimental and intrude the privacy of the consumer. They track the online behavior of the consumer without him actually having any information on those and fetch the private data and may even sell it to different marketers as well. These are generally referred to as tracking cookies. These tracking cookies are created by unscrupulous people and are also sometimes called spywares. This is not in tandem with the privacy policy because the consumer is not aware that his online behavior is getting tracked and moreover getting sold to marketers without his knowledge let alone consent.   A consumer also has an option of blocking the cookies on his system this, however, is not very convenient and may cause some of the websites to malfunction especially the online gaming sites. Online Advertising Targeting Approaches: 1. Demographic Targeting 2. Contextual Targeting 3. Behavioural Targeting 4. Geographic Targeting 5. Daypart Targeting 6. Affinity Tageting 7. Purchased-based Category Targeting Personalized Online Advertising Model Behavioral Targeting It uses ad networks cookie tracking capabilities to trace web behaviours, including patterns of sites visited, clicks, page viewed, etc., so the ads will appear in the website one often visits. It allows site owners or ad networks to display content more relevant to the interests of the individual viewing that page. Building Profiles On-site The typical approach is to use web analytics to break down the visitors into different channels. Each channel is then analyzed and a virtual profile is created. The website manager can then decide what content, navigation, and layout to show based on the profiles. Most platforms identify visitors by assigning a unique id cookie to each visitor so they can track the visitors behaviour on their website. Across networks Advertising Networks serve many advertisements across many different sites, so they are able to build up profiles that are more personalized based on the users behaviour across different sites. For example: A user visited I Love Typography blog, followed by Sephora.ca for the latest trends on cosmetics, and then consulted the website House Rabbit Society for some tips on interacting with an antisocial bunny. >> It is reasonable to assume that this user is a female who owns a bunny, and is probably a typography geek. Benefits less expensive than contextual advertising (inventory on popular sites or network is often sold out). more cost-effective: more targeted consumers and less waste. Used for authenticating, session tracking, and maintaining specific information about users, such as site preferences or the contents of their electronic shopping carts. Recommendations at Amazon.com "More than Behavioural Targeting" Amazons consumer strategy is based on Recommender Systems to create a personalized online store. Recommender Systems is a specific type of information filtering technique that attempts to present information items (movies, music, books, etc.) that are likely of interest to the user. There are 4 main approaches to recommendations: 1. Personalized recommendation - recommend things based on the individuals past behavior 2. Social recommendation - recommend things based on the past behavior of similar users 3. Item recommendation - recommend things based on the item itself 4. A combination of the three approaches above Amazon.com uses all 3 approaches (personalized, social, and item). Its recommendations are based on individual behaviour, the item itself, or the behaviour of other people on Amazon. e.g. customers who viewed this item also viewed, customers who bought this item also bought, customers who bought items in your Recent History also bought... Widgetized Recommendations It is a part of Amazon Associates offering. Amazon Associates are website owners (usually blogs) who place links on their sites and earns referral fees through sales of Amazon products. When a user comes to Amazon, the site stores a browser cookie. The cookie stays in the browsing cache and when the same user navigates to a different website, the site is able to look up the cookie and then invoke Amazons personalized widget and generate a recommendation list. Issue Lack of relevancy. Just because the users looked at something a little while ago on Amazon, does not mean they still care to look at it now. Perhaps its better to stay contextual. Dynamic Pricing: Dynamic pricing is a concept of e-commerce where the price of a commodity is not a constant value and keeps on changing on the basis of one or more variables. Similar to any other business, the underlying factor for the price adjustment is the demand for the product as compared to its supply in the market. Most of the e-tailers have inbuilt logic in their web sites that continuously keeps on changing the price of an item keeping in view the various variables involved including the demand and supply. Amazon was also one among the league of e-tailers that use dynamic pricing model in order to maximize their operational profits. The very first time that Amazon tried this policy in the year 2000, it fell right on its feet. Customers quickly noticed that have paid different prices for the similar goods on the chat room and Amazon had no recourse but to apologize publicly. Role of Technology: However things have changed over the span of few years now because of the advanced technology. The new technology has allowed the companies to customize their prices dynamically as per the pocket of the consumer that has logged in. For an instance, most of the online portals require the customer to register himself/herself which also requires him to fill in some of the mandatory details like mailing address and postal code. On the basis of this mailing address and the postal code, companies are able to chalk out the category in which the consumer lies and thus vary their market price accordingly. With the help of advanced technology, e-commerce companies have taken the dynamic pricing to a new level. The pace at which the customer information can be gathered, analyzed and processed is unimaginably brisk. Companies also keep a log of their existing customers and also give them random discounts. Also they take the behavioral information with the help of the cookies and make calculated changes to their pricing depending on the data collated with the help of these cookies. Similarly with the help of technologies like ‘Click Stream’ companies can monitor different path that a customer takes while he/she traverses different advertisements on their web sites. Moreover, different companies keep a common data base in which they share the information about different consumers which comes in handy for the other vendors as well. Pros and Cons of Dynamic pricing: Although the strategy of Amazon in 2000 came a cropper in the year 2000 but it was primarily because of lack of technology. In present times, however, dynamic pricing is a strategy which has find successful results with many businesses including the online one. This is because the products staying in the inventory for a longer duration will in most of the cases lose their sheen and may not be able to get sold until the policy of dynamic pricing has been practiced. To add to this if a company gives loyalty bonuses to the existing customers it enhances the chances of the consumer being a loyal one and not a slut with respect to his choice of the online marketer. This in-turn will increase the volume of repeat customers will be very beneficial in terms of the mouth publicity with the help of loyal consumers. Merits of Auction and Fixed Price Selling in Digital Environment: Merits of e-marketing- Internet marketing or e-marketing is relatively inexpensive when targeting a particular segment. Following are the merits of e-marketing for any auction and fixed price selling: Growth- Internet marketing as of 2007 is growing faster than other types of media because exposure, response, and overall efficiency of Internet media are easier to track than traditional off-line media—through the use of web analytics for instance—Internet marketing can offer a greater sense of accountability for advertisers. Marketers and their clients are becoming aware of the need to measure the collaborative effects of marketing (i.e., how the Internet affects in-store sales) rather than soiling each advertising medium. The effects of multichannel marketing can be difficult to determine, but are an important part of ascertaining the value of media campaigns. Reach- The nature of the internet means businesses now have a truly global reach. While traditional media costs limit this kind of reach to huge multinationals, e-Marketing opens up new avenues for smaller businesses, on a much smaller budget, to access potential consumers from all over the world. Scope- Internet marketing allows the marketer to reach consumers in a wide range of ways and enables them to offer a wide range of products and services. E-marketing includes, among other things, information management, public relations, customer service and sales. With the range of new technologies becoming available all the time, this scope can only grow. Interactivity- Traditional marketing is largely about getting a brand’s message out there; e-Marketing facilitates conversations between companies and consumers. With a two way communication channel, companies can feed off of the responses of their consumers, making them more dynamic and adaptive. Immediacy- Internet marketing is able to, in ways never before imagined, provide an immediate impact. Imagine you’re reading your favorite magazine. You see a double-page advert for some new product or service, maybe BMW’s latest luxury sedan or Apple’s latest iPod offering. With this kind of traditional media, it’s not that easy for you, the consumer, to take the step from hearing about a product to actual acquisition. With e-Marketing, it’s easy to make that step as simple as possible, meaning that within a few short clicks you could have booked a test drive or ordered the iPod. And all of this can happen regardless of normal office hours. Effectively, Internet marketing makes business hours 24 hours per day, 7 days per week for every week of the year. By closing the gap between providing information and eliciting a consumer reaction, the consumer’s buying cycle is speeded up and advertising spend can go much further in creating immediate leads. Demographics and Targeting- Generally speaking, the demographics of the Internet are a marketer’s dream. Internet users, considered as a group, have greater buying power and could perhaps be considered as a population group skewed towards the middle-classes. Buying power is not all though. The nature of the Internet is such that its users will tend to organize themselves into far more focused groupings. Savvy marketers who know where to look can quite easily find access to the niche markets they wish to target. Drawback of e-commerce: Virtual Experience- The biggest drawback of e-commerce is that many people may not be satisfied with the virtual experience of trading and buying products which can not be felt by touching. They would be reluctant to buy a product which is lying possibly thousands of miles away just by just seeing its picture. Security of Payment- the question of safety of payments and trust is also there which will be discussed in detail in another article. No pleasure of shopping- For many people e-commerce is not about big international trade, import/export or global sourcing but simply about enjoying shopping over the net, and sometimes the electronic experience does not satisfy their social needs or holiday lust hence they become distanced to the concept of e-commerce. From the sellers point of view, e-commerce does not offer a direct face to face proximity with the probable customer and therefore things may not work out the way they would have done otherwise. No experience of buying- Many products are such that it is not possible to check them online for their effectiveness in terms of customer satisfaction parameters. For example if someone wants to buy a comfortable sofa set, no amount of pictures would deliver the experience of sitting on that sofa if it were present in a shop having physical proximity to the customer. Hence international trade, import/export or global sourcing in such as case would only be possible if its a big order and some representative of the company comes and checks the product personally before big quantities of it are delivered later on. There are quite a few social networking web sites but those that have gained enormous popularity are Facebook, Linkedin and Orkut. Facebook, owned by Facebook, Inc. is accessible to any user for no cost at all. Users can create their personal accounts on the social networking website and can communicate to people of entirely different caste, culture, religion, ethnicity etc. It also provides a platform to search your long forgotten school mates, class mates, office friends etc. People can add different other people to their network and interact with them. The name of the website has been derived from the paper face books depicting members of a campus community that some US schools and colleges used to give to the incoming students to acquaint them with various faculties, alumnae, seniors etc. The networking website has been created by Mark Zuckerberg, along with fellow students and his roommates Dustin Moskovitz and Chris Hughes while he was still studying in the Harvard University. Initially, only Harvard students could register into Facebook but then he expanded the same to enroll the students from Boston area, the Ivy League, and Stanford. He further expanded it to give access to any university then even to high school students and finally to anyone aged 13 and over. His website has now over 175 million active users across the globe. Facebook has been a part of controversies over a long time. Its operation has been blocked in various contries including Syria and Iran. Even some employees ban it but that is generally to check employees from wasting their time onto networking web sites and chat servers. There have been other claims that says that their privacy have been compromised at the Facebook and even some other class mates of Zuckerberg have alleged him of stealing their source code and Intellectual Property Rights for Facebook. Face book’s growth in popularity has hit a new milestone: 150 million active global users. Very recently Mark Zuckenberg declared that Facebook has crossed a total user count of 150 million and almost 50% of the total users, use Facebook daily. Facebook has its member present across the globe and in every continent of the world including Antarctica. If Facebook were a country, it would be one of the biggest countries in the world much bigger than Russia and Japan. Facebook is getting used in 170 countries of the world in 35 different languages and Facebook appears to be in solid financials to cater to this enormous growth. E marketing from Facebook: Facebook is social networking website that connects you and your friends. At Facebook you can update your e marketing strategies and can promote the product. Below is the screenshot which shows the e marketing done by lemonade at Facebook: Facebook can have a tie-up with the biggest retail store Walmart and the person who has the highest posts in his/her wall will be Face of the Day!! The face would be chosen from each country. He/she will get gift coupon from walmart.com in association with Facebook. In this way: Promotion of Facebook as well as Walmart will be done. There will be ecommerce activity for both the partners i.e. Facebook and Walmart. People will be excited to have that coupon and will try to connect to as many friends as they can. This will definitely increase the popularity. Conclusion: Having taken a look at the above advantages, disadvantages and the features of e-commerce; it is imperative to mention that despite the shortcomings, the technology of e-commerce is there going to exist, survive and expand because of the immense potential it offers for carrying out international trade, doing import/export business and finding right products and services through global sourcing. References: Baird, Deborah (2005) Computer Cookies: Are They Good or Bad?. EzineArticles.com. 14 Oct. 2005. Available from: [Accessed 5 April 2009]. Everything you need to know about COD. replicacenter.com. Available from: [Accessed 31 March 2009]. Kris (2009) Facebook has now 150 million global users. Facebook Advertising Guide. 9 January 2009. Available from: [Accessed 2 April 2009]. Annie (2009). Annie. Thinkubator CCSP. 7 January 2009. Available from: [Accessed 4 April 2009]. Selling - Getting Paid. Half.com Available from: [Accessed 7 April 2009]. Amazon Experiments with Dynamic Pricing. Open computing facility. Available from: [Accessed 6 April 2009]. Pricing - Dynamic Pricing Pricing - Dynamic Pricing [Accessed 6 April 2009]. Kalra, Vibhor. E-marketing. IndiaStudyChannel.com. (2009). Available from: [Accessed 9 April 2009]. Drawbacks of e-commerce. Articlebase. 28 September 2007. Available from: [Accessed 9 April 2009]. Beal, Vangie. Three Ways to Make Money on Facebook e-commerceguide.com. 1 April 2009. Available from: [Accessed 8 April 2009]. Google Image Credit: For ebay: http://gadgetsteria.com/category/uncategorized/ For amazon.com: http://www.vitp.ca/techpark-blog/2008/08/default.aspx For facebook: http://www.socsci.uci.edu/ssarc/ Read More