10 Opportunities for success in e-commerce and avoiding failureNow that EC has been around for about 20 years. It is possible to observe certain patterns that contribute to the success or failure of EC project. By examining these patterns. One can find indications of the opportunities that lie a head and avoiding fitfalls along the wayFactors thatDetermine E-commerce SuccessThe economic capabiliti of EC described earlier influence some industries more than others do. The success factors of EC depend on the industry, the seller and buyers, and the products sold. Furthermore, the ability of sellers to create economic value for consumer will also determine EC success. When deciding to sell online, looking at the major factors that determine the impact of EC can assist in evaluatung the chances for success Four categories of e-market success factors exist: Product, industry, seller,and consumer characteristics.E-Commerce FailuresBy examming the economic history of previous innovations, the failure of ECC initiatives and EC companies should come as no surprise. Three economic phenomena suggest why this is the case (e.g., see the description of the hupe cycle in this chapter)Chapter 3 and 13 provide some of the spe cific reasons for failure in B2C EC : Lack of profitability, excessive risk exposure, the high cost of customer acquisition, poor performance, and static website design. Two additional financal reasons are lack of funding and incorrect revenue models. An example of a failure is the Wedvan case - an express delivery company that lost $1.2bilion - the largest of any other bankrupt dot-com. Another bankrupt company is Kozmo, whose story is available in Online File W14.3E-Commerce SuccessesDespite the failure of hundreds of start-ups and thousands of EC projects, EC is alive and well, and continues to grow rapidly (after a short pause from 2000 through 2002), as discussed throughout the text.EC success stories abound, primarily in the specialty and niche markets. One example is Puritan's Pride Inc., (puritan.com),a successful vitamin and natural health care product store. Another is GrubHub, Inc. (grubhub.com), which allows people to order food online for either pickup or delivery (previously CannpusFood.com). Also doing very well are travel sites, such as Expedia, Trip Advior or Priceline. Alloy Apparel (alloy.com) is a succesful shopping and entertainment portal for young adults. As pointed out in Chapter 3, online services such as stock trading, travel and hospitality, online banking, and more are commanding a major part of the transactions in their in dustries. For a comparison of how these and other thriving online businesses have translated critical success factors (CSFs) from the old economy into EC success, see Table 14.3. EC succesful companies such as Priceline, Netflix, Amazon.com, Facebook, and Google are becoming major players in their industries, making their shareholders very rich.Following are some of the reasons for EC success and suggestions from EC experts and consultants on how to succeed in EC.
Strategies for EC Success
. Thousands of brick-and-mortar companies are adding online marketing and/or procurement channels with great success. Exanples are Uniglobe Travel (uniglobetravel.com), Staples (staples.com). Home Depot (homedepot.com), Walmart (walmart.com), FIS (fisglobal.com/product-retailpayments-ecommerce), 1-800-Flowers.com (1800flowers.com) and Southwest Airlines (southwest.com). Existing firms can use organizational knowledge, brand recognition,infrastricture, and other " morphing strategies " to migrate from the offline marketplace to the online marketsplace. The following are strategies and critial success factors that can help EC succeed. A group of Asian CEOs recommend the following EC CSEs: Selecs proper business models, project, predict, and prepare for the EC company, encourage e-innovation, co-brand marketing, and focus on younger customers (e.g., see alloy.com and bolt3.com).
. For an EC exchange to be successful. It has to create value for all participants. A vivid example is Alibaba.com.
. Pricing in EC has continued to be a challenge for sellers because of shipping and handling costs. Often, the seller and market maker will see the potential for profits and ignore the fact that the buyers will subscribe to EC only if they see a benefit in price or product variety. For example, Amazon .com and other e-tailers dacided to absorb delivery costs for orders above a certain amount (e.g., $25). Free shipping is also available at Dell. Newegg and many others e-tailers. New technologic can boost the success of EC. For example. RFID has great potential for improving the supply chain (Chapter 12); however, it will take a large investment in EC infrastructure and applications to realize its full potential.
Additional Guidelines for EC Success
A number of experts and consultants have proposed many more keys to success. Several studies identified success factors such as:
. Effective marketing and advertising
. User-friendly website
. Good relationships between customers and merchants
. Proper supply chain management and orther fulfillment
. Integration with internal and external information systems
. Use of appropriate business models (including revenue models)
. Effective and efficient intrastructure
. Organization culture regarding becoming an e-business and social business
At this still-early srage of the EC revolution, success cannot be guaranteed, and failure rates will ramain high. However, if companies learn from the mistakes of the past and follow the guidelines offered by experts and researchers, their chances for success are greatly enhanced. In the remainder of this section, we will discuss important strategies and factors that should be considered to ensure EC success.
Cultural Differences in EC Successes and Failures
In Chapter 13, we discussed the need to understand cultural issues such as differences in social norms, measurement standards, and nomenclature. Here, we add the issue of cultural differences so that appropiate strategies can be debeloped when doing business global population of consumers or suppliers. However, they must recognize existing cultural differences and act upon them. Even the content of online ads can mean different things in different cultures. Due to these differences, the transaction costs, including coordination costs. May vary among the consumer base.
EC success factors as well as adoption strategies differ a among countries (see online file w14.4)
Can EC Succeed in Developing Economies
Similar to cultural differences, developed, and developing econimics vary in how EC is used and whether the economics favor electronic commerce. Developing economices struggle with various issues taken for granted inn dveloped economies.
Developing economies often face power blackouts, unreliable shipments, unstable political and social environments, lack of regulations that protect customers and insufficient payment options. Such limitations make it difficult for firms to predict whether EC investments will pay off, and when. However, developing economies, such as in China and India, represent a significant opportunity for EC to connect businesses to customers, as well as other businesses. The potential volume of transactions in developed countries can make EC investments more attractive for established firms. This is because much of the cost of EC systems development would have already been recovered bacause EC initiatives frequently can use existing IT infrastructures.
The traditial EC assumption is that every computer user has the ability to own a computer and afford Internet connection, as is the case in developed economies. In developing economoes, this assumption will have to be revised to include the existence infrastructure, poverty leves, and techonogy availability and affordability . The payoffs from EC use in developing countries are likely to go beyond financial retuns. Enabling people to take advantage of EC techonology without disrupting their traditions may be the most valuable, yet intangible, return.
A major booster for EC in developing countries is the increasing use of low-cost laptop computers and tablets in a wireless environment. With simple computers costing less than $100 ( and declining in 2014), and the widespread use of cell phones with Internet access and free access in public places, it is likely that EC use will increase significantly in developing countries. For comprehensive coverage of e-commerce in developing countries, see Sanayei (2010).
As discussed in chapter 6, the mobile revolution enables developing countries to leap frog EC deployment, especially in the areas of mobile banking (finance) and mobile marketing.
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