Electronic commerce and online stores

Citation

Foley, P. (1999), "Electronic commerce and online stores", European Business Review, Vol. 99 No. 4. https://doi.org/10.1108/ebr.1999.05499dag.001

Electronic commerce and online stores

Keywords WWW, Shopping, Purchasing

Rapid growth of the Internet and the relative youthfulness of online commerce has created a fertile area for business opportunities and a minefield for analysts and researchers. Researchers are still at the early stages of trying to construct common terms - should Internet enabled commerce be called "e-commerce", "electronic commerce", "Internet commerce" or "e-Trade"? Even if a common term can be agreed what does it mean?

Harrington created one of the first definitions of electronic commerce in 1995 - "the exchange of information, goods, services and payments by electronic means". The Internet provides a medium for communication and in some cases it can facilitate all the elements of Harrington's (1995) definition. But it is equally possible for transactions to be completed using a range of communication media, including the Internet. For instance it is possible a purchase could be initiated by stumbling across a page on the World Wide Web while browsing, further information could be sought by fax, a telephone call may be required to get detailed technical information which could be received by e-mail, and finally a visit to the distribution depot or retailer could be made to collect and pay for the goods.

These ambiguities and the diversity of uses for the Internet in a purchasing decision caused the OECD to establish a working group and host workshops on "defining and measuring electronic commerce". The findings of this group and perhaps a more robust and more widely accepted definition will be presented at an OECD Paris conference in October 1999.

Estimates for global online sales frequently neglect to mention that the business to customer market is widely estimated to comprise less than a tenth of total Internet trade volume. This failure to distinguish between business to business and business to consumer markets is significant. Business to business electronic commerce has been delivered via electronic data interchange (EDI) systems over private networks for approximately 20 years. EDI therefore has a relatively long history. EDI trade is currently thought to be 14 times larger than the level of Internet trade (Sun Microsystems, 1998). It is possible that a proportion of business to business trade on the Internet is a migration from traditional EDI systems as businesses transfer these activities to the World Wide Web. Several companies, such as EDI Network, now offer a service converting EDI systems into Web-based Internet systems. In effect this could be mere substitution of one computer network with another, and not "new" trade.

Much of the recent stock market speculation has concentrated on consumer oriented companies, such as Yahoo, Excite, Amazon.com and eBay operating in the business to consumer market. The electronic commerce market is still in its infancy and several different models for consumer sales (sometimes known as online shopping) are beginning to emerge. A loose analogy can be drawn with the three main types of terrestrial customer sales outlets that have prevailed during the last two decades. These are:

1. 1.

   the high street,

2. 2.

   shopping malls, and

3. 3.

   out-of-town category specialists.

A fourth Internet alternative is for vendors to remain as individual online stores and not join (or become aggregated) alongside other vendors at a single Web site. Some businesses, mainly those with heterogeneous products and a strong brand image, such as Gap and Lands' End, have chosen this strategy. ShopGuide provides a list of more than 300 UK secure online shops.

In the terrestrial world the high level of passing customer traffic on the high street or in the city centre attracts some vendors. In a similar way many vendors are now being drawn to sites, such as search engines, which have a high volume of passing traffic on the Internet. Yahoo and Excite are prime examples of search engines that are investing in the development of consumer sales through partner aggregation. Excite now has numerous online partners in its "product finder" section offering goods and services such as audio equipment, flowers, garden supplies and wines and spirits.

Alternatively online vendors can consider joining virtual shopping malls. These virtual malls aggregate vendors together in the types of clusters that are found in a terrestrial suburban mall. They can aggregate by quality, price or consumer type. Most virtual malls are new operations starting from scratch. Malls in the USA include eBay and Buy.com, which both include auction areas at their sites. In the UK the best known are probably Barclaysquare and Enterprise City. These malls do not possess the search engines' sites advantage of already having a high volume of passing traffic. They face similar problems to terrestrial malls in attracting sufficient consumers to the mall to ensure vendor allegiance. However, if they become established the Internet mall developer can have the benefit of up to three revenue streams - user fees, transaction fees and advertising. Numerous virtual shopping malls exist, but they have so far only enjoyed moderate success.

Most of the preceding sites require the active involvement or consent of individual vendors to allow Mall site developers to aggregate information from their online shop alongside other vendors. A number of category specialists using intelligent agent software are now becoming established which do not require the consent of vendors to present their information alongside other complementary providers of heterogeneous products such as books, CDs or computer equipment.

Category specialists, such as Toys 'R' Us and Virgin Megastores, now dominate terrestrial retail sales of toys and CDs respectively. Through their size these retailers have a leading position in particular consumer goods categories. A similar trading pattern is starting to emerge on the Internet. Voracious aggregators, which do not require partnership or consent to access information from the various online shops that they target for information, are beginning to emerge in several markets. Acses and Bookfinder can obtain information about the availability and cheapest price for a specific book from more than 25 Internet book stores in less than 30 seconds. Infospace and Bottomdollar provide a similar service for CDs and books. KillerApp and Netbuyer are shopping agents for computers and software products. Expedia UK and Travelocity offer a similar service in the travel market.

The role of intelligent agents, the way they are providing improved access to product and price information for consumers and their impact on the dynamics of markets are considered in the next edition of the European Business Review.

Dynamic links to all the sites mentioned in this editorial can be found at http://www.dmu.ac.uk/ln/ecommerce/ebr4.html. This page will be updated regularly and new sites defining electronic commerce or new interesting online stores will be included.

Listed in Table I is a selective review of the World Wide Web sites for online shops and search engine sites. Dynamic links to these pages can be found at the De Montfort University International Electronic Commerce Research Centre: http://www.dmu.ac.uk/ln/ecommerce/ebr4.html.

Paul Foley Director, International Electronic Commerce Research Centre, De Montfort University Leicester, e-mail pdf@dmu.ac.uk