Introduction to Electronic Commerce

Online business has many names; e-Commerce, e-business, online shopping and others involving the use of the internet or a modern telephone or smart phone to place transactions for desired products and services. As you read, think about the power a successful online firm has over his store-based counterpart. What is online business? What is the role of the Internet and other communications media in providing an organization's e-business presence? What are some similarities and some differences between e-business and brick and mortar commerce? How can they complement each other? Are the days of brick-and-mortar stores coming to an end?

Who should use the Internet?

Every organization needs to consider whether it should have an Internet presence and, if so, what should be the extent of its involvement. There are two key factors to be considered in answering these questions.

First, how many existing or potential customers are likely to be Internet users? If a significant proportion of a firm's customers are Internet users, and the search costs for the product or service are reasonably (even moderately) high, then an organization should have a presence; otherwise, it is missing an opportunity to inform and interact with its customers. The Web is a friendly and extremely convenient source of information for many customers. If a firm does not have a Web site, then there is the risk that potential customers, who are Web savvy, will flow to competitors who have a Web presence.

Second, what is the information intensity of a company's products and services? An information-intense product is one that requires considerable information to describe it completely. For example, what is the best way to describe a CD to a potential customer? Ideally, text would be used for the album notes listing the tunes, artists, and playing time; graphics would be used to display the CD cover; sound would provide a sample of the music; and a video clip would show the artist performing. Thus, a CD is information intensive; multimedia are useful for describing it. Consequently, Sony Music provides an image of a CD's cover, the liner notes, a list of tracks, and 30- second samples of some tracks. It also provides photos and details of the studio session.

The two parameters, number of customers on the Web and product information intensity, can be combined to provide a straightforward model (see Exhibit 1) for determining which companies should be using the Internet. Organizations falling in the top right quadrant are prime candidates because many of their customers have Internet access and their products have a high information content. Firms in the other quadrants, particularly the low-low quadrant, have less need to invest in a Web site.

Exhibit 1.: Internet presence grid