Business skills for e-commerce

Business Skills for E-Commerce Unit 1 Report

Report on Ebay.com (Ebay Inc.) World’s largest auction platform

Contents Contents..................................................................................................................................... 2 What is E-commerce and E-Business?.......................................................................................3 E-Commerce........................................................................................................... 3 E-Business.............................................................................................................. 3 Types of e-commerce............................................................................................. 3 eBay.com.................................................................................................................................... 3 eBay’s Business Aims (Mission Statement)............................................................4 Business Functions of Organization........................................................................4 Core Business Functions of eBay............................................................................5 Impact of Ebay.com.................................................................................................................... 6 On Business............................................................................................................ 6 On Consumer.......................................................................................................... 7 Risks....................................................................................................................... 7 Advantages and Disadvantages of Using E-Commerce for Customers and Society...................8 Advantages to Customers and Society of Using E-Commerce................................8 Disadvantages to Customers and Society for Using E-Commerce..........................8 Market potential of an e-Commerce............................................................................................9 SWOT Analysis........................................................................................................ 9 E-commerce System................................................................................................................11 Financial Implication of E-commerce........................................................................................12

Introduction Today every businessman wants to launch their business on the internet. It is an ultimate aim of every businessman to market their product to as many people as they can no matter which part of the world they belong to. Businessmen want unlimited exposure. More exposure means higher chances of product sales which lead to higher profit.

Although e-commerce is growing every day, still it has not met the predictions of experts. This is because many companies lack the internet strategy and are revising to come up with better internet strategies, so to convenience consumer for online purchasing and change buying behavior of consumer. “Because electronic channels still are in very early stages of development, little is known about consumer attitudes toward adopting or not adopting electronic media and the factors that influence consumers’ about them” (Eastlick & Lotz 1999, Rowley 2000, Amit & Zott 2001)

What is E-commerce and E-Business? E-Commerce

E-commerce or electronic commerce means electronic purchasing and selling of a product via internet. E-commerce is usually associated with any form of business activities for services and products that include business transaction in which business parties interact via internet (electronically) rather than by face-to-face exchange.

E-Business In e-business, an organization uses application of technologies for the transformation of its processes to deliver additional customer value. In other words, use of ICT and computing paradigm to enhance one’s business is called e-business.

Types of e-commerce There are different types of e-commerce. 1. Business to Consumer (B2C) 2. Business to Business (B2B) 3. Business to Government (B2G) 4. Consumer to Consumer (C2C) 5. Government to Government (G2G) 6. M-commerce (Mobile Commerce)

eBay.com Ebay is an online auction and shopping website (www.ebay.com). On eBay, not only people but also businesses can sale and purchase large variety of products and services globally. EBay is the pioneer of automated online C2C auctioning. In the past, this type of business was conducted through garage sales, collectibles shows, flea markets, and classified

advertisements. An online marketplace facilitates easy perusing for buyers and enables sellers to list an item for sale within minutes of registering. Today ebay has more than 97 million users world wide, including both customers and businesses.

eBay’s Business Aims (Mission Statement) “Pierre Omidyar founded eBay on a simple idea: People are basically good. This fundamental belief created a completely new kind of marketplace, forever transforming e-commerce. Today our values continue to guide how we do business and connect buyers and sellers around the world.” (http://www.ebayinc.com/values) eBay pioneers communities built on commerce, maintained by trust, and inspired by opportunity. eBay has brought together millions of people every day not only on a local, but also on a national and international basis via websites that focuses on commerce, communication and payment. They have provided a platform for online sale of goods and services. eBay’s mission is to become the world’s leading ecommerce franchise by investing in their core Marketplaces segment and continuing to build their adjacent Marketplaces businesses.

Business Functions of Organization Every business follows some business functions. Following are the common business function of an organization:  Human Resources (HR) Responsibilities

of

Human

Resource

(HR)

include

recruitment,

professional

development and training, health and safety environment for the staff at work stations.  Marketing and Sales This department is responsible for making price, promotion and sales strategies. Come up with ideas for product development.  Research and Development Their responsibility is to develop new products, improve products and test them. Use maximum resources at low cost (cost saving products).  Production and Operations

Their core responsibility is to monitor cost of production and come up with method for producing a product. This department is also responsible for acquiring resources such as labour, capital and land.  Customer Service Their core responsibility is to provide after sales services to customer and deal with any complaints customer have. This department is also responsible for building public relationship.  Finance and Accounts Organization’s cash flow i.e. monitoring of income, expenditure and revenue is handled in this function.  Administration and IT Administration and IT includes all the clerical works and managing the work area, like reporting,

recording,

record keeping,

communication,

cleaning,

health and safety,

maintenance, security. This department is also responsible for maintenance of IT systems in an organization.

Core Business Functions of eBay As mentioned above, every organization has or follows some business functions. Similarly, core business functions of eBay include:  HR- Human Resource  Customer Services  Finance Accounts  IT  Marketing and Sales  Product Management

The Business Model

eBay has an online consumer-to-consumer (C2C) trading community on the internet. eBay acts primarily as a broker and facilitator between buyers and sellers. eBay provides the infrastructure; sets up the rules; provides value added services for example resolving disputes amon buyers and sellers and maintaining privacy of personal information about buyers and sellers. Sellers are allowed to list products for sale, buyers then browse through listed products and bid on items of interest in a fully automated way. The items are arranged by topics, where each type of auction has its own category. The core message was that eBay is a company that is in the business of connecting people, not selling them things. eBay established a system in such a way where buyers and sellers would do much of the work over the internet. Ebay’s designed system organized items by topic and by category and then created a searching system for prospective bidders so they could look through complete catalog in an automated way. eBay set up another system for collecting fees and charges for their services. Searching and bidding on products is free of charge, whereas sellers are charged as follows:  Insertion fees. Nonrefundable fee is charged when a product is listed on eBay. This fee charge ranges from 30 cents to $3.30, depending on either the seller’s selected opening value or reserve price.  Promotional fees. These charges are for additional listing options that help attract attention for an item, for example highlighted or bold listings.  Final value fee. A commission is charged from the seller at the end of the auction. This ranges from 1.7% to 5.25% of the final sale price. At the end of the auction, eBay notifies the buyer and seller via e-mail, if a bid exceeds the seller’s set minimum price, and both parties finish the transaction independently of eBay. Auction’s binding contract is between the winning bidder and the seller only.

Impact of Ebay.com On Business EBay is different from any other company because its business depends on the hard work of hundreds of thousands of people who sell on its Website but are not employed by eBay. Almost ½ million people earn their income from selling on eBay. It conducts more transactions every day than either the New York Stock Exchange or the NASDAQ. EBay has been the fastest growing company in the history of U.S. business. EBay serves two main purposes. The first is to effectively expose your item to millions of people on the web. eBay is the first place many people go to look for items, both new and used, so placing your item here means that you have a much higher chance of people finding out about it.

The second, and equally important reason, is that eBay gives your site and company tremendous exposure at a very low cost. For as little as 30 cents, you can create an auction which highlights your product—and can direct people to your web site. That’s incredibly cheap advertising that’s totally focused towards people who are searching for what you have to offer. Success Story: “A teddy bear maker in Virginia used to sell her hand-made crafts for $30 apiece. With the exposure she gets on eBay, her bears now sell from $100 to $300 each. Even if you don’t have a web site, you can use eBay.” “An antiques and crafts store in a very small town now sells their items worldwide. A simple links from their site to eBay allows them to showcase items in stock. They can do this all without any knowledge of web building software—or any software other than their web browser.” (http://www.will-harris.com/design/ebay.html) “Entrepreneurs in record numbers are setting up shop on eBay. More than 724,000 Americans report that eBay is their primary or secondary source of income. In addition to these professional eBay sellers, another 1.5 million individuals say they supplement their income by selling on eBay.” (Survey by ACNielsen International Research, July 2005)

On Consumer EBay is known as source of 'good deals', to consumer. Consumers have an objectively, functionally and economically satisfying buying experience on eBay. Consumer can easily compare prices, sellers (by looking at sellers' feedback ratings) and products on eBay and then determine how much they are willing to pay for that particular item. The consumer face no discomfort in saying ‘no’ to seller; in case the price exceeds the price a consumer is willing to pay. He can then search for the same item and bid on it. This consumption motivation is difficult to experience in some shopping mall or store. Mostly consumers bidding strategy depends on seller’s feedback rating.

Risks Ebay selling isn't always trouble-free, nor is it always risk-free. There is risk to corporate information and intellectual property from internal staff and trading partners. It is difficult to control how sensitive information will be handled by third parties or contract workers. Few organizations have systems in place to ensure common standards in vetting staff and provide security mechanisms between trading partners.

Advantages and Disadvantages of Using E-Commerce for Customers and Society Advantages to Customers and Society of Using E-Commerce The primary advantage to customers of using E-Commerce is the increased competition that reduces market prices. Lower prices mean the customer can get more for a given amount of money, raising living standards provided inflation is low. Secondly, E-Commerce gives convenience to customers who can shop online 24 hours a day, 365 days a year. They also do not need to leave the comfort of their homes as they no longer need to travel to a retail establishment to purchase items. Thirdly, customers typically have the option to have their goods delivered to them, directly to their door. This makes E-Commerce more appealing than shopping in the high street as it saves on time and effort. E-Commerce is better for the environment due to the reduced amount of infrastructure and overhead involved. A customer will have a greater access to different products and services via the internet. This is gained by the opening of international markets to the customer. It is a hallmark of globalization and the furthering of a more united, global world. Customers with the internet have better accessibility than a customer without the internet. Disabled people can shop online and improve their quality of life. As a customer does not need to leave the comfort of their home, they have an increased sense of privacy from the limited interaction they experience. They do not need to talk to a single person while doing anything from obtaining car insurance to purchasing the weekly shopping. Rural areas have more access to products as they can shop online instead of travelling a distance to get to physical shops. Finally, given the versatile nature of the internet, a customer has the ability to judge a product or service in advance by using one of many review or price comparison sites. A customer can sift through a large amount of comments by previous customers on the goods they’re after. This gives more power to the consumer, since they have a better idea of what they’re buying before they make the purchase.

Disadvantages to Customers and Society for Using E-Commerce A customer has numerous disadvantages when shopping online. One of which is the security of the website they are using. If the website is not secure, then they are subject to

fraudulent bills or identity theft. Additionally, the customer must place a certain level of trust on the website to purchase items as it is not a physical place where they can guarantee obtaining their goods. Although goods can be delivered directly to the customer, problems with delivery limit the ability to shop online. If a customer needs to return an item, they must post it specifically to the address that they obtained the item from. When this address is international, it can cost a great deal to the customer who could otherwise return the item to the store free of charge. If a customer has no hands on experience with using a computer, than they will encounter difficulties shopping online. A user must be IT literate in order to shop online properly and usually have access to online banking. This is well represented as a digital divide between generations where the younger generations who are exposed to technology more are more proficient than their parents. A side effect of E-Commerce is that the lower need for infrastructure reduces the amount of jobs in society. Fewer jobs can result in frustration as an area loses jobs, shops close and becomes more run down. Goods shipped from foreign countries are usually designed for the infrastructure of that country. A customer may come across a product that they desire but find it incompatible with their infrastructure such a plug sockets being incompatible. Finally, a language barrier stops customers from being able to purchase online as effectively as they otherwise could. Products bought from other nations may not have instructions written in English or whatever native language the customer uses. If this is the case then the product could become useless to the customer.

Market potential of an e-Commerce I will investigate market potential of an e-commerce opportunity of eBay.com, by PEST and SWOT analysis. PEST analysis views Political, Economic, Social, and Technological aspects of a company, whereas SWOT analysis strength, weakness. In this report I will be using SWOT analysis for evaluation of eBay.com.

SWOT Analysis STRENGHTS • World’s leading brand for online auctions. • More than 100 million users buy and sell on eBay. • Pierre Omidyar wrote computer code himself.

• Company benefits from Customer Relationship Management (CRM). • Each user’s data is collected by eBay, when they register with the company. • For strong customer relationship, eBay uses both B2C and C2C business model. • Strong interrelationship is seen between buyers and sellers, when they leave feedback for each other. • eBay recognizes genuine sellers and rewards them.

WEAKNESSES •

Although staff at eBay works very hard to overcome fraud, but eBay model has flaws and leave space for fraudulent activity.

•

Fraud includes counterfeit goods, redistribution of stolen products.

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These problems are with invidual not eBay but the weak point is that such individuals can exploit C2C model of eBay.

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In the past eBay and its payment brand Paypal have suffered systems breakdowns.

OPPURTUNITIES •

To acquire new technology like services of Skype for enhanced customer services

•

Ebay has PayPal as a payment system, which increases the number of services it offers to consumers and

keeps eBay’s profits growing. • To develop market in other countries like China and India, where people are becoming richer and improving in terms of technology, (Market Development)

THREATS •

Success attracts competition. Ebay also face domestic as well as international competition.

• •

International competitors include Yahoo! Which dominates Japanese market Illegal practices i.e. eBay is attacked by unscrupulous users. For example, e-mails sent to eBayers pretending

to come from eBay. Such attacks are designed so that receiver input their private information like bank accounts, passwords and other identification • Some costs cannot be controlled by eBay. For example delivery charges and credit card charges. This could make the overall cost of an auctioned item expensive

E-commerce System We will discuss the ecommerce system used by ebay.com. first of all let’s see what services does eBay provides on its website.

This level of ecommerce system is not only based on architecture of software but also on the architecture of system as well. The components of e-commerce system of this level are not only web clients and web servers but it also consists of security, databases, and application, transaction and proxy servers. Ebay system has 3-tier architecture consisting of browser, application server, transaction server and databases. The following diagram shows the relations between these components. Figure 1: Services provided by ebay.com

Figure 2: Subsystems in eBay's e-commerce system

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Web browsers for Modifiability

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HTTPS for Security

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Proxy servers for Performance

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Load balancing for Performance, Scalability, and Availability

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Web Servers for Performance

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Application servers for Modifiability, Performance, and Scalability

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Databases for Performance, Scalability, and Availability

Figure 3: Overview of the component interaction

Financial Implication of E-commerce There are a lot of hurdles faced by company when transferring to ecommerce, because ecommerce system does majority of your work. The main problem is the financial implication an organization has to face. This is because ecommerce system is a very expensive application developed by professional developers/coders. But in case of eBay, this was not a much problem because Pierre Omidyar, founder of eBay designed the basic code of eBay himself. But later on he did get the job done with the help of professional developers to enhance the security system of eBay. Today eBay has 31 sites that are developed by Technical and IT department of eBay.