Statistics And Forecasts

1

Electronic Commerce- Overview –

KAIST EC Lecture

September 3, 2002

Jae Kyu Lee ([email protected])

Graduate School of ManagementKorea Advanced Institute of Science and Technology

2KAIST EC 2002 Fall – Overview Jae Kyu Lee

Table of ContentsTable of Contents

The Internet, Intranet and Extranet

Jargons and Business Models in EC

Statistics and Forecasts

Key Happenings in EC

B2C vs. B2B

Dilemmas in EC

EC Strategy in Slow Economy

Types of Exchanges

E-Procurement Strategies

Key Prospects in 2001

EC and MIS


The Internet The InternetHypertext and World Wide Web on TCP/IP

Multi-media: text, voice, image and video

No Charge on Backbone usage

Internet Service Provider (ISP)

Platform of e-Commerce

Seller Buyer

The

Internet


History of the Internet – Worldwide[www.isc.org/ds/host-count-history.html]

Host Counts Remarks

1969: 1 . ARPANET1971: 23 . Universities1974: 621982: 2351983: 500 . TCP/IP(Transmission Control Protocol1984: 1,000 /Internet Protocol1986: 5,0001987: 20,0001989. 1. 80,000 . NSFNET .T1(1.5Mbps)1991. 1. 376,000 . CIX founded(Commercial Internet Exchange)1992. 1. 727,000 . WWW(World Wide Web) . T3(45Mbps)1993. 1. 1,313,0001994. 1. 2,217,000 . Electronic Shopping Emerged1995. 1. 5,846,0001996. 1. 14,352,000 . Cyberbank Emerged1997. 1. 21,819,000 . SET Standard Announced1998. 1. 29,670,000 . B2B EC and Exchanges1999. 1. 43,230,000 . SCM and Private Exchanges2000. 1. 72,398,092 2001. 1. 109,574,429


Internet Statistics in Korea(Stat.nic.or.kr; June 2002)

Internet Statistics in Korea(Stat.nic.or.kr; June 2002)

Users:

June 2002: 25,650 K (58% of 6 year old persons)

Dec 2001: 24,380 K (1.4% increased since then)

• Near Saturation

Gender

Male: 14,050 K (54.9%) ; Female: 11,600 K (45.1%)

Oct ’99 : 66.9% vs. 33.1%

Usage Level by Age

6-19 years old: 93.4%; 20s: 86%; 30s:66.7%; 40s: 38.9%; 50s: 9.6%

Usage by Occupation

Students (94.9%), Secretary (81.2%), Professional (80.9%),

Housewife (37.1%), Blue Color (29.2%), Unemployed and others (31.1%)[Source: http://www.nic.or.kr/cgi-bin/EnterBoard/enboard.cgi?dbname=snews&ActionID=12&index=156&tempfilename=snewsV.html]

국내 인터넷동계관련 사이트 : http://stat.nic.or.kr/statlist.html

http://www.nic.or.kr/cgi-bin/EnterBoard/enboard.cgi?dbname=snews&ActionID=12&index=156&tempfilename=snewsV.html























http://stat.nic.or.kr/statlist.html








Internet Tools

Hypertext(and Hypermedia) and World Wide Web

XML (eXtensible Markup Language)

Semantic Web

E-Mail, File Transfer, and Chatting

Bulletin Board and Community Solutions

Search, Portal, Comparison and Agent

Internet Telephony

Video on Demand; Audio on Demand

Common Gateway Interface

Java

Security, PKI and Intranet/Extranet

Packet-CDMA; Mobile GPRS (General Packet Radio Service)


Security: Intranet and ExtranetSecurity: Intranet and Extranet

Extranet = Extended Intranet

Platform of B2B EC

Internet

Suppliers

Distributors

Customers

Manufacturer Extranet

Intranet

Intranet

Firewall

Firewall


Major Business PressuresMajor Business Pressures

Market and

economic pressures

Strong competition

Global economy

Regional trade agreements (e.g. NAFTA)

Extremely low labor cost in some countries

Frequent and significant changes in markets

Increased power of consumers


Major Business Pressures (cont.)Major Business Pressures (cont.)

Societal and environmental pressures

Changing nature of workforce

Government deregulation of banking and other services

Shrinking government subsidies

Increased importance of ethical and legal issues

Increased social responsibility of organizations

Rapid political changes


Major Business Pressures (cont.)Major Business Pressures (cont.)

Technological pressures

Rapid technological obsolescence

Increase innovations and new technologies

Information overload

Rapid decline in technology cost vs. performance ratio


Organizational ResponsesOrganizational Responses

Strategic systems

Continuous improvement efforts

Business process reengineering (BPR)

Business Alliances

using Electronic commerce

Organizational Responses

Framework for Organizational and Societal Impacts of Information Technology

Management

and

Business Process

Organization

Structure and the

Corporate Culture

Individual

and Roles

Information

Technology

The Organization’s

Strategy

External Environment, Social, Economic, Political, etc


Reducing cycle time and time to market

Empowerment of employees and collaborative work

Supply chain improvements Mass customization Change management

Benefits of EC


Figure 1-1The Dimensions of Electronic Commerce

Figure 1-1The Dimensions of Electronic Commerce

Source: Choi et al. (1997), p. 18.


Opening Vignette:Qantas Airways

Opening Vignette:Qantas Airways

Business-to-business (B2B) E-marketplace member

Business-to-customer (B2C): Online booking & wireless communications

Business-to-employee (B2E): Online training & banking


Business Models (cont.)Business Models (cont.)

Orbis Corporation:•Retail Catalog Service•Cost of One Picture:AUD 150•Cycle Time: 4-6 Weeks


Business Models (cont.)Business Models (cont.)Orbis Corporation

Cost:

30-40% down

Cycle Time:

50-70%

shorter


Jargons in E-CommerceJargons in E-Commerce

Online Advertisement, E-Marketplaces

B2C, C2C, B2B, B2E, G2B, P2P EC

Auction, Reverse Auction and Exchanges

SCM, eLogistics and Collaborative Commerce (CPFR)

CRM and Web Mining

E-Procurement and Integration with ERP

E-Hub and ASP

XML/EDI and Software Agents

E-Service: Banking, Stock Trading, Insurance, and

Travel Agency

E-Payment, Certificate

E-Transformation


Timmers’ e-Business ModelsTimmers’ e-Business Models

Yahoo, Comparison Shopping

Verisign

Fedex, UPS

e-Bay

Amazon

eHub

Exchanges

Missed e-Transformation


eTransformation of Traditional Business

eTransformation of Traditional Business

Bricks & Mortar

Pure Clicks

Clicks & Mortar

Reengineer Traditional Way of Doing Business

• Replace Offline Inefficiency• Supplement the Traditional Channels

• Online and Offline Synergy

• Online Only• Dis-intermediation• Channel Conflict

Traditional Business

Focus of eTransformation: Boost Online Sales; Reduce Cost; Resolve the Channel Conflict


eCommerce Business Models (Turban, Table 1.1, p.9)

eCommerce Business Models (Turban, Table 1.1, p.9)

중개형 (Brokerage)

광고형 (Advertising)

정보중개형 (Informediary)

상인형 (Merchant)

제조업자형 (Manufacturer)

제휴형 (Affiliate)

공동체형 (Community)

등록형 (Subscription)

사용료형 (Utility) – Pay by the byte


Business Models (Turban Ch. 1)Business Models (Turban Ch. 1)

Name your price

Find the best price

Dynamic brokering

Affiliate marketing

Group purchasing

Electronic tendering systems

Online auctions

Customization and personalization

Electronic marketplaces and exchanges

Supply chain improvers

Collaborative commerce


Comparative Estimates: Worldwide Total eCommerce

Comparative Estimates: Worldwide Total eCommerce

(billions $)

2000 2001 2002 2003 2004

eMarketer 286 550 1,007 1,792 3,203

International Data Corp. 1,000 2,800

ActivMedia Research 132 283 533 963 1,462

Forrester Research 657 1,234 2,231 3,980 6,790

Goldman Sachs & Co. 595 1,234 2,174 3,480 5,335

Ovum 247 393 624 991 1,619

Source : eMarketer, 2001


From B2C To B2B From B2C To B2B

Worldwide eComemrce Market

Worldwide eComemrce Market

177.7

116.5

78

50.7

31

114.5

978.4

526.4

270.9

138.8

64.8

22

1317.3

733.6

300.1

217.8

111.4

50.4

0 200 400 600 800 1000 1200 1400

2003

2002

2001

2000

99

98

B2B

B2C

*2000~2003 : Forecasts($Billion)

Source: IDC


Comparative Estimates of B2B (eMarketer, April 20, 2001: Note different past record)

Comparative Estimates of B2B (eMarketer, April 20, 2001: Note different past record)


Percentage of Online Seeking and Purchasing Frequence [2000]

Percentage of Online Seeking and Purchasing Frequence [2000]

Items purchased online(Respodnets # = 645)

Dichotomy Percentage of responses

1 Software 14.82 Books 13.43 Hardware 12.44 Music 10.65 Travel 7.76 Video 4.07 Magazines 3.88 Electronics 3.69 Apparel 3.510 Flowers 3.411 Banking 3.112 Others 3.113 Investments3.014 Concerts 2.515 Do not 2.516 Quotes 2.317 Recreation 1.318 Autos 1.119 Wine 0.620 Generic 0.621 Insurance 0.622 Real estate 0.523 Jewelry 0.424 Brand 0.325 Legal 0.326 Metals 0.2

Items Seeked for with intent to buy(Respodnets # = 645)

Dichotomy Percentage of responses

1 Hardware 12.32 Software 11.73 Books 10.14 Music 18.95 Travel 8.26 Electronics 5.77 Video 4.38 Apparel 4.09 Magazines 3.910 Quotes 3.611 Banking 3.412 Autos 3.213 Investments 3.014 Flowers 2.715 Concerts 2.716 Recreation 2.617 Real estate 2.418 Others 2.119 Insurance 1.220 Wine 0.921 Generic 0.722 Brand 0.723 Jewelry 0.624 Legal 0.625 Metals 0.326 Do not 0.2


Percentage of online Purchasing FrequencyPercentage of online Purchasing Frequency

Items purchased online (Korea)

Percentage Distribution of E-Commerce Sales

1 Hardware 30.0 2 Electronics 22.2 3 Book 5.7 4 Household commodities 5.7 5 Travel 5.2 6 Clothing and clothing accessories 3.4 7 Toy 3.1 8 Software 3.0 9 Cosmetics, perfume 2.5 10 Food, drink 2.3 11 Music and Video 1.9 12 Sports and leisure goods 1.7 13 Agricultural products 1.6 14 Office equipments 1.4 15 Commission and fee 1.2 16 Flowers 0.8 Others 8.3

Items purchased online (USA)

Percentage Distribution of

E-Commerce Sales

1 Hardware 37.02 Books 13.93 Music and Video 6.94 Software 6.55 Clothing and clothing accessories 6.56 Office equipments 5.17 Electronics 3.48 Toy, hobby goods and games 3.39 Commission and fee 3.010 Drug, health aids 2.211 Food, beer and wine 2.012 Furniture 2.0

others 8.2

[Source : Korea National Statistics Office , 1/4 2001

eCommerce Statistics Survey ]

[Source: U.S. Census Bureau, 1999

Annual Retail Trade Survey]


Korean eMarket DynamicsKorean eMarket Dynamics

급성장 분야 (Lee,p.79) : 구성비 2001 2002

( 전체 성장률 84.9%)

생활용품 / 자동차용품 5.010.5%

농수산물 0.9% 5.9%

의류및 패션 3.3%8.3%

각종서비스 0.5% 3.0%

음식료및 건강식품 1.6% 4.0%

여행및 예약서비스 4.7%5.9%

화장품 / 향수 1.9%3.5%

스포츠및 레저용품 1.6%2.4%


Key Happenings in eCommerceKey Happenings in eCommerce

B2C e-Malls evolves to B2B Exchanges

Shakeout of E-Marketplaces and Restructuring

E-Procurement Strategies

Private Exchanges emerge

E-Transformation

Enterprise Commerce Management System

(ERP II) emerges


B2B EC as an Evolution of B2C ECB2B EC as an Evolution of B2C EC

B2B EC

Business Customer

Business Customer

14 7 2

14 7 2

In the early stage of seller-centric marketplace, the architectures of B2C and B2B are basically the same.

Business Suppliers

Consumer

Consumer

14 7 2

Supplier’sProducts Catalog

Customer’sOrder Information

B2C EC

14 7 2

Supplier’sElectronic Mall

14 7 2


Figure 1-2 Transactions in Electronic Markets

Figure 1-2 Transactions in Electronic Markets


Difference of B2B from B2CDifference of B2B from B2C

Confirm the Inventory Availability at Pre-Order Stage

Assurance of Delivery Time in Advance

Buyer businesses have to store the order information in their

own control

Integrate multiple e-Marketplaces

Integrate with back-end information system (e.g. ERP)

Issues What should be the B2B architecture? Who should provide the solution?


B2B ExchangeB2B Exchange

B2B Exchange

Buyer

Buyer

Buyer

Seller

Seller

Seller

XML XML

XML

XML

XML

XML


Vertical & Horizontal e-Marketplaces

Vertical & Horizontal e-Marketplaces


Architecture of eProcurement System with B2B eMarketplaces

Architecture of eProcurement System with B2B eMarketplaces

Suppliers

Web Server

MarketSiteBuySite

Commerce OneTransaction Servers

Fax

Web Browser

Web Browser

Fax

Email

BuySite

EDIFormat

Web Browser

SupplyOrder

Firewall

Corporate User


An Integrated ArchitectureAn Integrated Architecture

Suppliers Customers

Business Intelligence

Electronic Commerce

SupplyChain

Management

CustomerRelationshipManagement

EnterpriseResourceplanning

Web-based Sales

Online Order Taking

ForecastProduction Plan

Production

Customer Service

Purchase Dirstribution

Application Framework for e-business

Web Selling , e-Procurement , EC Hosting , Internet Billing,

Employees


Expansion of Solutions and BattlefieldsExpansion of Solutions and Battlefields

C-One Ariba i2 Oracle SAP

Content Management B+ B C B C

Network platform A B C C D

Integration A B C B C

Auctioning B B

Procurement Window B A B C

Workflow C+ A C+ C

Fulfillment Expertise A C B

SCM A C+ C+

Consulting Resources C+ C C A B

Scalability C B C A C

Morgan Stanley (2000)


Dynamics in Three Types of Exchanges(InternetWeek, March 13, 2001)

Dynamics in Three Types of Exchanges(InternetWeek, March 13, 2001)

Three Types of Exchanges

Independent Exchange

Industry Consortia

Private Exchanges

Independent Exchange

Spot market

Not worked well

Changing biz model to Supply Chain Enabler or

software plays

Be careful to partner with them


Dynamics in Three Types of Exchanges (II)

(InternetWeek, March 13, 2001)

Dynamics in Three Types of Exchanges (II)

(InternetWeek, March 13, 2001)

Industry ConsortiaNone are likely to grow into huge spot markets or become a font of cost-saving reverse auctions

Benefit: Created industry standards

Wait-and-see if the consortia supply chain ASP services offer enough value to win widespread use

Private ExchangeCollaborative Commerce: CPFR

Attend to the companies need

Apply to the companies most crucial business problems

Between a few partners

Started mostly in 2001


Collaborative Planning, Forecasting and Replenishment (CPFR)

Collaborative Planning, Forecasting and Replenishment (CPFR)

Wal-Mart

Operational System

ERP

RetailLink

Sales data aboutW-L Products

InventoryPlan

Planner

ForecastReview and Comments

ManufacturingPlan

Planner

Warner-Lambert ((Mfr)

EDI

Internet

WWW

Data warehouse

(Retailer)


Stock Price Peak aroundJan 2000 and August 30, 2002

Stock Price Peak aroundJan 2000 and August 30, 2002

Commerce One: above $100 to $0.3975

Ariba: above $150 to $2.2

i2: above $100 to $0.9

Siebel Systems: above $100 to $8.47

Oracle:above $40 to $9.59

SAP AG: above $80 to $19.25 Extended ERP: Extended to include B2B EC functions

SAP’s mySAP.com




Shift the e-Business Priority

[AMR Research on 100 large corporations, March 2,

2001]

: Controlling Cost

: Customer Relations

: Boosting Revenue and Market Share

of 250 IT and e-Biz executives plan to increase

the spending on e-Biz this year. (April 2001)

Strategic focus on e-Biz shifts

from Boosting Revenue to Cost Control, and

from Joining the Market Makers to e-Transformation.

38%

25%

20%

49%


E-Procurement StrategiesE-Procurement Strategies

Spot Purchase: Seek Minimun Prices

Non-strategic MRO(Maintenance, Repair, and Operations)

Purchase at Public Exchange

Contract Purchasing : Minimize Inventory along the Key Supply Chains

Direct Material

of online B2B Transaction

of offline B2B Transaction

Supply Chain Management 와 Private Exchange

Desktop Purchasing: Internalized eStore and Designated Exchange;

Eliminate the Approval Process for low end itemsMicrosoft, Cisco, Etc.

External Exchanges with Payment Service

iMarket Korea; LG MRO; eN2B

Reduce the Procurement Department and Outsource

85%

95%


Key Prospects (AMP Research, Feb 13, 2001)

Key Prospects (AMP Research, Feb 13, 2001)

A third of companies over $ 1 Bil will implement Private

Trading eXchanges by 2005;

Consortia Trading eXchanges on shaky ground this year

By 2002, 40% of ASP and 60% of broader ASP market will

fail or be acquired.

Enterprise Application Integration (EAI) top priority in 2001,

to make it easier for customers to unify channels, process,

and data.

SCM market is expected to reach $7.8 Bil in 2001 with

Inventory Management, Order Fulfillment, and SC Planning.


Key ProspectsKey Prospects

Retailers focus on B2B synchronization, collaboration, and

enterprise integration and optimization.

Enterprise Commerce Management (ECM) system emerging.

Vertical business process collaboration

External content integration with inside

Product Lifecycle Management (PLT) grow rapidly:

Reduce time-to-market of new products

PLT application license revenue grow more than 50%

This means the Collaborative Commerce


Figure 1-3 A Framework for Electronic Commerce


Marketing

Computer sciences

Consumer behavior and psychology

Finance

Economics

Management information systems

Accounting and auditing

Management

Business law and ethics

Others

Electronic Commerce is Interdisciplinary

Electronic Commerce is Interdisciplinary


Benefits of EC to OrganizationBenefits of EC to Organization

Expands the marketplace to national and international markets

Decreases the cost of creating, processing, distributing, storing and retrieving paper-based information

Allows reduced inventories and overhead by facilitating pull-type supply chain management

The pull-type processing allows for customization of products and services which provides competitive advantage to its implementers

Reduces the time between the outlay of capital and the receipt of products and services

Supports business processes reengineering (BPR) efforts

Lowers telecommunications cost - the Internet is much cheaper than value added networks (VANs)


Benefits of EC to ConsumersBenefits of EC to ConsumersEnables consumers to shop or do other transactions 24

hours a day, all year round from almost any location

Provides consumers with more choices

Provides consumers with less expensive products and services by allowing them to shop in many places and conduct quick comparisons

Allows consumers to interact with other consumers n electronic communities and exchange ideas as well as compare experiences

Facilitates competition, which results in substantial discounts

Allows quick delivery of products and services (in some cases) especially with digitized products

Consumers can receive relevant and detailed information in seconds, rather than in days or weeks

Makes it possible to participate in virtual auctions


Benefits of EC to SocietyBenefits of EC to Society

Enables more individuals to work at home, and to do less traveling for shopping, resulting in less traffic on the roads, and lower air pollution

Allows some merchandise to be sold at lower prices benefiting less affluent people

Enables people in Third World countries and rural areas to enjoy products and services which otherwise are not available to them

Facilitates delivery of public services at a reduced cost, increases effectiveness, and/or improves quality


Technical Limitations of ECTechnical Limitations of EC

Lack of sufficient system’s security, reliability, standards, and communication protocols

Insufficient telecommunication bandwidth

The software development tools are still evolving and changing rapidly

Difficulties in integrating the Internet and electronic commerce software with some existing applications and databases

The need for special Web servers and other infrastructures, in addition to the network servers (additional cost)

Possible problems of interoperability, meaning that some EC software does not fit with some hardware, or is incompatible with some operating systems or other components


Non-Technical LimitationsNon-Technical LimitationsCost and justification

The cost of developing an EC in house can be very high, and mistakes due to lack of experience may result in delays.

There are many opportunities for outsourcing, but where and how to do it is not a simple issue

In order to justify the system, one needs to deal with some intangible benefits which are difficult to quantify.

Security and Privacy

These issues are especially important in the B2C area, but security concerns are not so serious from a technical standpoint

Privacy measures are constantly improving too

The EC industry has a very long and difficult task of convincing customers that online transactions and privacy are, in fact, very secure

Lack of trust and user resistance

Customers do not trust: Unknown faceless sellers, Paperless transactions

Switching from a physical to a virtual store may be difficult: Egghead Case


Other limiting factors are:

Lack of touch and feel online

Many unresolved legal issues

Rapidly evolving and changing EC

Lack of support services

Insufficiently large enough number of sellers and buyers

Breakdown of human relationships

Expensive and/or inconvenient accessibility to the Internet

Channel Conflict:

Strategies (Lee, Ch. 2)

Non-Technical Limitations (cont.)


Toy R Us Case:Putting It All Together

Toy R Us Case:Putting It All Together

Major concern of today’s companies—how to transform themselves to take part in digital economy

Example:Toys, Inc.

Uses intranet for internal communications, collaboration, dissemination of information

Networked to e-marketspaces and large corporations

Corporate portal for communication and collaboration with business partners

Figure 1-7

Putting It All Together

Prentice Hall, 2002 55


전자상거래의 성공요건전자상거래의 성공요건

풍성한 상품과 정보

상품의 품질 보증

효과적 물류체계 제공

참여기업의 자유경쟁 환경 제공

필요한 제도와 법률의 공동 개선

채택한 표준이 세계표준과 부합되게 선도


전자상거래 수행 전략 및 사업 모형전자상거래 수행 전략 및 사업 모형

고객가치

범위

가격설정

수익원천

연계된 활동

실행

사업수행능력

지속가능성


국외동향국외동향

미국글로벌 전자상거래 기본계획 (1997)

전자상거래작업반 (The U.S. Government Working Group on Electronic Commerce)

Digital Economy

GE, Dell, …

일본E-Japan 구상 (2000)

IT 기본법

영국[email protected]

E-Minister, e-Envoy


국내동향국내동향

IT 인프라

광케이블망 구축 완료 (2000)

초고속통신망 구축사업 완료 예정 (2005)

OECD 회원국 중 초고속 인터넷 보급률 1 위

산업부문 전자상거래 추진을 위한 노력

전자거래기본법

전자서명법

전자거래정책협의회

전자상거래 활성화 종합대책

E- 비즈니스 확산 국가전략

Figure 1-8

Plan of the Book

Prentice Hall, 2002 60


전자상거래의 구성요소전자상거래의 구성요소

전자상거래응용 영역

사이버쇼핑몰

기반 시스템 부문

전자상거래 수행 전략인터넷 마케팅

판매구매 지원 시스템전자 지급결제 시스템

전자상거래 보안물류 수송 배달체계

인공지능 기술

인 프 라 부 문

사회적

부문

제도적

부문

사이버은행

증권회사

사이버언론 관광 교육

… …