E-Commerce

To view my final project for my masters, please check out my e-commerce project: www.sodacoda.com.

To download my PowerPoint Presentation about ‘What is the  future of  e-commerce? – Past, Present and Future’ please click here.

Introduction
This essay shows an analysis and initial forecast to 2020 focusing on the U.S. and European online retail market. The research is supported by the work of economists Harry S. Dent and research organizations Jupiter Research, Forrester Research and Plunkett Research. I’ll start with the definition and characteristics of e-commerce, then looking back at its history to present the success and failure of well-known e-commerce companies. Furthermore I’ll explain the advantages and disadvantages of online shopping and last but not least I’ll draw a conclusion and predict how e-commerce will develop until 2020. My predictions are made based on the technologies and facts of today’s e-commerce research and considering the growth in mobile platforms and social computing.

Definition
Electronic commerce
(e-commerce) is made up of buying and selling products or services over electronic systems such as the Internet and other computer networks.

 

Online shopping is a form of e-commerce where the buyer is directly online to the seller’s computer via the Internet. The sale and purchase transaction is completed electronically and interactively in real‐time. This definition of e-commerce retail sales includes all online sales except travel, auto and prescription drug sales.
(Source: Electronic commerce by Wikipedia, January 2011; http://en.wikipedia.org/wiki/Electronic_commerce)

Characteristics of E-commerce
Electronic commerce that is made up of between businesses is referred as B2B (business-to-business).

Electronic commerce that is made up of between businesses and consumers is referred as B2C (business-to-consumer). E.g. Amazon.com etc.

(Source: Electronic commerce by Wikipedia, January 2011; http://en.wikipedia.org/wiki/Electronic_commerce)

The History of E-Commerce
On August the 11th of 1994, Daniel Kohn and his classmate, founder of NetMarket, started with a trend that would revolutionize the culture of e-commerce for decades to come. They completed the first ever secure online transaction on the World Wide Web with the purchase of the Sting CD, “Ten Summoner‟s Tales” (Gilbert 2004).
Economists see the first e-commerce life stage from 1997 to 2001 with the ‘dot‐com bubble’ and its peak on March 2000 (The NASDAQ recorded a high of 5132.52). This period was characterised by the founding and often failure of a number of ecommerce operations. Two well-known sites set up during this period were Boo.com and Lastminute.com.


(Source: NASDAQ/nVision)

E-Commerce – Failure in the Past

Boo.com was a British Internet company that famously went bust in May 2000; following the dot-com-boom of the late 1990s. The company was launched in 1999 selling branded fashion apparel over the Internet. Boo.com spent $135 million of venture capital in just 18 months.

The biggest failure were both the front end technology and the marketing. The problem was that customers only managed to make it as far as the checkout stage and as a global brand there were also tech­nol­ogy issues such as dif­fer­ent prices for each coun­try and multiple languages.

 

 

 

Ernst Malmsten wrote about the experience in a book called Boo Hoo: A dot.com Story from Concept to Catastrophe, published in 2001.
(Source: http://en.wikipedia.org/wiki/Boo.com)


E-Commerce – Success in the Past

 

Lastminute.com became an icon of the UK Internet boom of the late 1990s. It was launched in 1998 as an online travel agency and e-tailer and reached the peak of the dot-com-bubble in 2000. Today lastminute.com is also trading on the London Stock Exchange under the symbol ‘LMC’. The success was that the Website design was (and still is) simple, making it easily navigable for both new and experienced consumers.

(Source: http://en.wikipedia.org/wiki/Lastminute.com)


E-Commerce – Success in the Present

Amazon is the biggest online shop in the UK. Jeff Bezos founded Amazon.com in 1994 and the site went online in 1995.
Amazon offers:
1. The best selling audio and video of the day
2. Customer reviews of purchased items
3. Book contests, Book clubs and much more.


The success is that Amazon.com sales are content driven. The site relies heavily on generated content to attract customers and maintain return visits.
(Source: http://en.wikipedia.org/wiki/Amazon.com)


E-Commerce – Future Prediction

Looking back in the history of e-commerce helps me with my initial prediction. eBay and Amazon were founded in 1995 and both are now two of the major technology companies in the world. The success is due to their innovative services, applications and pricing systems. Nowadays almost every medium- and large-sized organization in the world has a website.

With the number of internet devices approaching 2 billion (Miniwatts Marketing Group, 2010), global online retail spending reaching $1 trillion (Goldman Sachs, 2010) and internet penetration rates higher than ever (Ernst & Young, 2010) it is fact that e-commerce grows at sustained double-digit rates. Goldman Sachs predicts global e-commerce growth rates of 19.4%. In its 2010-2020 Digital Agenda, the EU emphasises the need to have over 50% of European households connected with speeds over 100 Mbps. By 2014, the Internet population is forecasted to be 2,321 million (United Nations, 2011). E-commerce’s future is being chracterised predominately by the growth of mobile and social platforms. These growth drivers have major current and future technological, societal and business impact.
Harry Dent states that economics are tied to demographics and that e-commerce is the logical result of people making predictable spending decisions as they move through life (“Dent Method”).
The government institution recognizes that population trends affect both employment opportunities and the demand for goods and services. In addition population changes produce related changes in the demographic composition and size of the labour force. The Bureau of Labor Statistics also explain that “Population is the single most important factor in determining the size and composition of the labor force…” (“Tomorrow‟s Jobs”).

Research Methods
In order to accurately analyze and forecast the online shopping trend and future of e-commerce I’ll use the Dent Method, SPSS analysis, and S-Curve Economics.
SPSS creates a mathematical way in which to make fact-based predictions using current data and its methodology of S-Curve economics enables trends to be forecasted. The S-Curve can be broken down into four phases: innovation, growth, maturity, and decline.

% of adults in selected EU countries making purchases on the internet in the last 3 months, by country
70% growth in the proportion of people shopping online is predicted by 2013.
Almost half of Europeans are expected to make a purchase online, up from 21% in 2006. The growth will be most rapidly in Southern Europe. The 3ordic region is at the forefront of the e‐commerce sector in 2013, (more than ¾ of adults expected to shop online in Denmark and 60% in Sweden. Netherlands (most rapid growth) is predicted to nearly double over the next six years.
(Source: Source: Eurostat/nVision Base: 2,000 per country aged 15+
)

S-Curve economics think that the rapid growth of online shopping is due to the nature of market development and the exponential growth occurs once a new technology reaches roughly 10% market penetration. It continues until it reaches roughly 90% market penetration. It took 13 years (from 1994-2007) for e-commerce to reach 10% market penetration, experts predict it’ll take approximately 13 years from 2007 for US online sales to reach 45% of total US sales, which is 90% penetration of the projected market.

My initial forecast is that online retail sales will exceed $1 trillion by 2020 after analysing the facts. Based on the most recent U.S. Census of 2000, 60.1 million people between the ages of 40 and 54 years in 2000 representing the group in their peak spending years according to the Dent Method. (“QT-P1. Age Groups and Sex: 2000”)

According to Reuters research online retail sales in the UK will reach a value of £67 billion ($108.2bn; €75.4bn) by 2020. This will be more than three times the total set to be recorded in 2009. The research commissioned by eBay from Verdict Research reveals that e-commerce revenues stand at £21bn in 2009.
E-commerce will account for £10bn of web purchases in 2020, overtaking the £9.2bn generated offline by the category by this date. In contrary Verdict predicts the value of in-store acquisitions will decline from £265bn to £247bn in the same timeframe.
Neil Saunders, an analyst at the company, said “traditional bricks and mortar shops simply cannot afford to ignore the potential growth opportunities available online.”(Source: Data sourced from Reuters; additional content by Warc staff, 21 December 2009, http://www.warc.com/Content/News/N26102_UK_eCommerce_sales_to_treble_by_2020.content?CID=N26102&ID=70071997-84e0-48c3-a2cf-3431fd4d317c&q=retail&qr)


Advantages & Disadvantages

(Source: http://www.ecommerce-land.com/future.html)


E-Commerce – Application to Thesis Project
E-commerce website www.paddedbeneath.com and www.sweetysmagic.com
Implementation of UGC and secure payment

As a small business like ‘paddedbeneath.com’ and ‘sweetysmagic.com’, it is a good strategy to sell the products online in order to remain competitive and to reach a wider audience.
But in today’s online environment, it is not only enough to offer the products on the Internet:

It is essential to offer customers a well-structured online shop that is user-friendly and easy to navigate and find products they are looking for. According to a Forrester Research report, retailers must make their websites more user-friendly. They can elicit favour with shoppers by focusing additional energy on accurate product information, improved imagery, flexibility in payments and returns, and by reducing the hurdles of shipping costs (Rosencrance 2008).

Online marketing and SEO is key for developing traffic as the majority of the target audience is reached through online Marketing and SEO. 84% of first visitors of web sites are referred directly from SEO. The Blog is a good tool to add content and traffic to my e-commerce website. A good idea to get new customers and to generate sales is offering vouchers online and special offers.

Challenge­
Since I’ve decided to target young women aged 17-29 I’ve redesigned my e-commerce website due to research and interviewing my clients what colour and style they like to see when visiting the website. I decided to use mainly pastel colours such as cream, pink and brown for the design and create attention using bright red colours for offers. Knowing that the majority of my clients like laces and cute underwear I’ll implement those characteristics in design as well. In addition it is important that I supply customers with what they want and need while competing with other competitors online and on the high street.
Analyzing the need for trust is central to market research. Piotr Cofta, Chief Researcher in British Telecom’s Mobility Research Group, explains that without trust in businesses or the product no commercial transaction will occur no matter how convenient or developed the technology is (Cofta 1). My online shop will give customers the option to review and rate products after purchasing. I do believe that reviews both good and bad can create more trust.
More and more online firms offer all-encompassing return policies to guarantee that the customers receive the exact product they are looking for. If the customers are not satisfied, they can send it back or visit the shop ‘sweetysmagic’ for replacement or refund. My analysis shows I must offer customers competitive pricing and a satisfying online experience or risk losing the sale.

Conclusion
The turnover of e-commerce is still growing!
Online shopping’s advantage is saving time and money for the consumer as well as the business owner. Consumers have the ability to compare products, do research and read customer reviews from any location at any time 24 hours a day. This is convenient and saves time that would otherwise be spent in traffic or waiting in line.
After analyzing the past and present growth of online retail sales I come to the conclusion that e-commerce would complete its growth phase during the year 2025. Current trends move online shopping to not simply become the way of the future but the way of the present.
Even though the changes in Internet use over the past fifteen years have been significant and e-commerce is becoming more powerful, the greatest period of e-commerce growth has yet to be experienced.

Future Plans
want to stay up to date with advanced technology and plan to integrate 3D measuring guide for clothes and underwear for my online shop in future. It will be beneficial to offer customers the options to search their products regarding to occasion, style and colour.

References
The Future of E-Business; http://rewiringbusiness.com/studentscentre/2011/02/08/the-future-of-e-business/

UK eCommerce sales to treble by 2020; http://www.warc.com/Content/News/N26102_UK_eCommerce_sales_to_treble_by_2020.content?CID=N26102&ID=70071997-84e0-48c3-a2cf-3431fd4d317c&q=retail&qr=

Electronic commerce by Wikipedia, January 2011; http://en.wikipedia.org/wiki/Electronic_commerce

Source: Electronic commerce by Wikipedia, January 2011;
http://en.wikipedia.org/wiki/Boo.com
Electronic commerce by Wikipedia, January 2011; http://en.wikipedia.org/wiki/Lastminute.com

Electronic commerce by Wikipedia, January 2011;
http://en.wikipedia.org/wiki/Amazon.com

Allard, Ken. “The New Investment Cycle in Internet Commerce: Web 2.0 Goes Mainstream,” Information Today 25 Apr 2008. 4 Apr 2009; http://www.allbusiness.com/technology/software-services-applications-electronic/8956791-1.html

Cofta, Piotr. “Convergence and Trust in eCommerce.” BT Technology Journal Vol 24 (2 Apr 2006). 4 Apr 2009;
http://portal.acm.org/citation.cfm?id=1145507

“Dent Method: Economic Forecasting Based on Changes in Demographic Trends.” HS Dent: Helping People Understand Economic Change. 2009. HS Dent. 20 May 2009; http://www.hsdent.com/the-dent-method

“E-Commerce & Internet Trends.” Industry Statistics, Trends and In-depth Analysis of Top Companies. 2008. Plunkett Research, Ltd. 21 May 2009; http://www.plunkettresearch.com/Industries/ECommerceInternet/ECommerceInternetTrends/tabid/168/Default.aspx

Gilbert, Alorie. “E-Commerce Turns 10.” CNET News. 11 Aug 2004. 24 Nov 2009; http://news.cnet.com/E-commerce-turns-10/2100-1023_3-5304683.html

Hinton, Perry, Charlotte Brownlow, Isabella McMurray, and Bob Cozens. SPSS Explained. New York, NY: Routledge Inc, 2004.
“Measuring the Electronic Economy.” E-Stats Report. 2007. U.S. Census Bureau, 2009; http://www.census.gov/econ/estats/

“QT-P1. Age Groups and Sex: 2000. Census Summary File 1 (SF 1) 100 Percent Data. United States.” American FactFinder. 2000. Bureau of the Census. 15 Dec 2009.

Rosencrance, Linda. “E-Commerce Sales to Boom for Next 5 Years.” ComputerWorld. 5 Feb 2008. 13 Dec 2009. http://www.computerworld.com/s/article/9061108/E_commerce_sales_to_boom_for_next_5_years_

Seybold, Andrew. “The Convergence of Wireless, Mobility, and the Internet and its Relevance to Enterprises.” Information Knowledge Systems Management 23 Nov 2008. 13 Mar 2009; http://portal.acm.org/citation.cfm?id=1402707

“U.S. E-Commerce Gaining Market Share as Growth Slows.” Seeking Alpha. 5 Feb 2009. Forrester Research. 13 Dec 2009;  http://seekingalpha.com/article/118785-u-s-e-commerce-gaining-market-share-as-growth-slows