Definition and History
           
           The advent of the Internet, which is seen as one of the most significant revolutions of the 20th century, has given rise to a new type of business, which is called electronic commerce.

           E-Commerce is the use of internetworked computers to create and transform business relationships.  It is most commonly associated with buying and selling information, products, and services via the Internet, but it is also used to transfer and share information within organizations through intranets to improve decision-making and eliminate duplication of effort. The new paradigm of commerce is built not just on transactions but on building, sustaining and improving relationships, both existing and potential.

           Electronic commerce has permeated into 3 focal areas:

•   Business to business,
•   Business to consumers
•   Intra-business

           Preliminary stage of electronic commerce emerged as a form of EDI (Electronic Data Interchange) giving companies opportunity to send/receive business document to/from their suppliers.  Combined with JIT manufacturing (Just In Time) EDI has enabled suppliers to deliver parts directly to the factory resulting in saving in inventory, warehousing and handling costs. 

           In the 1990s, the advent of the World Wide Web on the Internet was a turning point and created new path through which electronic commerce has stepped into and flourished by reshaping itself -Business to Consumer Electronic Commerce, shortly, B2C.  This newly “computer-mediated environment” has not only changed the way the business conducted but also created a new consumer type called e-consumer by replacing the habitual purchasing pattern of consumers. 

           The main point that this new form of e-commerce differs from the business to business (B2B) e-commerce is that, for one thing, consumers are different.  In B2B (business-to-business) customers are other companies while B2C customers are individuals. Beyond that, there are two big distinctions.
     
           First, Selling to another business through B2B involves haggling over prices, delivery and product specifications, not in the case of business to consumers.

         Second, Retailers don't have to integrate with their customers' systems. Companies selling to other businesses, however, need to make sure they can communicate without human intervention.
         
           Overall, business-to-business transactions are more complex and with higher amounts relative to the business to consumer.

           Besides its differences from B2B, B2C has also many differences as compared to traditional way of doing business because, as we said before, with evolution of the e-commerce the way the way the business transactions has undergone dramatic change both for consumer and customers.  Therefore, in our project, we will study what B2C brings with it and both for the businesses and customers in more detail.

       
Business to Consumers E-Commerce

           As the name implies, business to consumer e-commerce has two perspectives; business perspective versus consumer perspective.

Business Perspective:

           The emergence of B2C e-commerce has brought with it many opportunities for the business with respect to product marketing, customer, satisfaction and competition with other businesses.

           Internet and World Wide Web technologies provide the infrastructure for the B2C electronic commerce. As a result of these technologies, unlike prior incarnation of electronic commerce such as Electronic Data Interchange (EDI), Web based electronic commerce brings even the smallest organization in touch with hundreds of millions of potential e-consumers at the individual, retail level.
           Since the Web technology provides businesses with a number of unique advantageous such as interactivity, fast response, global reach, tailored and targeted information, organizations have to revolutionize their paradigm of pricing, distribution, and promotion each of which lies at the foundation of marketing management.
           Business-to-consumer marketing is no longer driven by mass marketing instead it highly depends on target marketing and interactive dialogues with customers.  While companies are now required to know more than ever about their customers and work to retain them, there are a number of challenges make it even more difficult to win in the new digital market where consumers have increasing number of choices and where competition for attracting and retaining customers is more severe than ever.
           As for the first aspect of the marketing management, pricing, which is affected by the existence of electronic commerce, the businesses like pure plays such as Amazon.com and Virtual companies maintain zero inventory, thereby, avoid inventory and setup cost which in turn means cheaper product and service prices.
           As a second aspect of marketing, companies have exploited place concept of marketing in business to consumer e-commerce is by moving their distribution activities onto web technology.  For example, J. Crew, a catalog marketing company, allows consumers to order products on line through its web site. However, the consumers have to have a catalog on hand to enter the correct model number for the product. No product information and very little advertising is actually available on the web.
           What is more, most companies use Web channels as mean of advertising and promotion.  Often such sites do not even have a systematic way of tracing customer movements through the site they let alone a way of linking such information to product design. The Hewlett-Packard site is an example of such sites which uses Web channel as an advertising and promotion medium by proving a wide array of information of the company and its products.
           Lastly, business to consumer e-commerce has facilitated and somehow changed one and maybe the most important aspect of marketing management-Relationship marketing.
           Relationship Marketing is matching consumer preferences to product and services solutions on a one-to-one basis. It measures the lifetime value of the customer rather than a single transaction value. Relationship marketing also creates customer satisfaction and loyalty.  The web allows companies to track consumer preferences closely - both by asking the consumer directly or by auditing the consumer’s actions as they surf the company web site. This information can be used as a basis for providing a product or service that is customized to the consumer’s preferences.
           In general, we can easily say that the web has enabled companies to perform simultaneously, several key marketing activities that in the past were done by separate groups or intuitively by sales people such as design and development, advertising, distribution, service, support etc…
           All in all, what do all these changes and revolutions mean to small business?  It means the B2C e-commerce provides a new way to expand business opportunities.  It is proving to be a great equalizer, allowing the smallest of businesses and those in rural locations to access markets and have a presence that allows them to compete on equal footing. It also means businesses should watch this trend and develop a strategy to position themselves in the new Internet economy.
Consumer Perspective:
           Broadly speaking, business to consumer e-commerce seems to replace conventional method of shopping. 
           Why are people buying products over the Internet?  A survey of Internet shoppers gave the following reasons
•   Ease of placing an order
•   Large selection of products
•   Cheaper prices
•   Fast service and delivery
•   Detailed and clear product information
•   No sales pressure
•   Easy payment procedure
           However, despite the popularity and rapid growth of B2C e-commerce, there are some limitations that hinder the expansion of e-commerce and leads consumers to approach e-shopping with cautious.
           The primary concern for the most people when talking about online shopping is security due to open nature of the Internet, personal financial details necessary for the online shopping can be stolen if sufficient security mechanism is not put in place.
           Besides, another drawback is privacy issue.  Many people hesitate to give their personal information like home address for delivery, credit card number for payment etc. due to fear of hacking incident and cybercrime.         
           According to a study carried out by the National Consumer Council (NCC) in the UK has revealed that lack of confidence in online security is hindering the expansion of the Internet shopping.  It has been reported in Computer Weekly that the council found that currently only 3 percent of the British public shop online.  The report founded that customer are concerned with revealing credit card details online, the lack of opportunity to check goods before paying and risk of fraudulent suppliers.
           In order to ease payment method and remove the fear resulting from security and lack of confidence new payment systems are put into forward that complete the entire business and financial transactions over the Internet.
           Some of the new systems include:
•   Electronic cash. Based on "digital signature" cryptography, banks can enable customers to decode currency encoded with the bank’s key. Customers need to set up an account and maintain enough balance in the account to back purchases.
•   Electronic checks. Digital equivalent of the paper check process, including a signature (computed number that authenticates the check’s owner), endorsement by payee, and payment.
•   Smart cards. Handle multiple functions, such as storage of special marketing awards, access to multiple financial accounts, and other personal shopping and payment preferences.

           There's no doubt about it. The way we buy and sell consumer goods is changing -- and it's changing quickly. The reason for the big change can simply be explained with one word, Internet.  Market researcher Forrester Research Inc. predicts that business-to-consumer           e-commerce in the U.S. will grow from $38.8 billion in 2000 to $184.5 billion in 2004.  And according to another research company, industry Almanac, present estimated Internet user is 490 million, which was 242 million at the end of year 2000 and by the year 2005, the global Internet population is estimated to reach 1.17 billion.  This figure is enough to demonstrate the dimensions of pace of change taking place.

           On the road of this rapid growing digital economy, however, not all attempts end up with success.   The year 2000 was the year of dotbomb.  It may be exaggeration but certainly indicates the numbers of losers in the online retail area.  The year 2001 has also seen a lot of dotcom carnage. As of June, 330 dotcoms had closed their doors since the start of the year and losers far outnumbered the winners. Many of them undone by their failure to focus on retailing fundamentals –solid revenue, cost and profit models – a clearly differentiated consumer benefits and had implementation and organizational problem together with channel conflicts. These failures undermine the consumers’ confidence.
           Therefore a comprehensive strategy for a firm to position itself in the new Internet economy is a vital process in order to survive. In developing a strategy, first thing to ask, Does the business need a website? and, What does the business want to accomplish by establishing a website? Companies should not make the mistake of hurriedly creating a website without serious thought and business planning.
           
Recommendations:
           Both during developing and implementation stage of strategies, according to Boston Consulting Group, these are significant points that should be taken into account:
•   Leverage the Brand:
Dot-coms spent billions of dollars to build brands from ground zero.  In the world where the customers are still learning which retailers to trust- strong brand names are essential.  With the well developed brand recognition and trust incumbents should have lower customer acquisition costs and higher conversion rate from day to day they go online.  Yet some of incumbent do the reverse for example CompUSA started online division under a separate brand, Cozone which is completely unfamiliar to the customers.

Consumers’ real needs:
           A research conducted in Nanyang Technological University on consumer behavior model in online shopping environment revealed a gap in perception between consumers and online companies-dotcoms.  According to the research, contrary to what online companies thought consumer do not think the speed of the websites as their first priority when considering online shopping.  Nor is ease of navigation in the list of consumers’ priorities. The research has shown that the top priority of consumer feel that good product description is the top priority followed by background information of the company.  This mismatch indicates that online businesses do not have a good understanding of behavior of online purchasers.
Create incentives to entice customers online:
           Multichannel players should actively encourage their customer to use Internet.  For example, Kmart tries to steer customer online by making its Internet offering simple to use; by providing free Internet access etc…



Make the most customer information and relationships:
           The rich knowledge base and strong relationships allow a company to anticipate the online customers’ needs and wants and to tailor its site and services in ways that no pure-play competitor could possibly match.

Use distribution infrastructure to advantage:

           It is normally difficult to build a newly distribution infrastructure from beginning that promote efficient and effective delivery, seasonal budgeting, inventory and growth.  It would be wise to use existing infrastructure on which new online channel and distribution network can ride.  In other words, using already established systems and networks may be appropriate for the new online channel.

Manage Channel Conflicts:

           Although the Internet provides an excellent opportunity to sell directly to the consumer, the move online can trigger conflict between channels.  Problems can arise either within a company or within a supply chain that might be as a result of bypassing the distributors that could be invaluable in other channels.
           Ignoring the potential conflicts can lead to damaged relationship on many levels.  Many companies have struggled with this issue; for example, Procter&Gamble have dealt with it successfully.  The company wanted to establish a strong online presence in mass-market cosmetics, but if it launched online sales of it’s existing products, it would face the possibility of channel conflict.  Finally, Procter&Gamble spun off a new company, Reflect.com, which offers a new line of customized makeup.  This site, which is one of the top beauty sites, gives P&G an online presence.  Moreover, by not selling any P&G’s established brands, Reflect.com has avoided stepping on toes of P&G’s current distributors.




Exploit opportunities for partnering:

           Partnering offers crucial benefits.  First of all, it is not necessary to do everything in-house; partnering can speed execution and give access to critical skills that the company lacks.  Second, incumbents have a certain assets for which start-up are willing to offer equity.  As a result, incumbents have a wide array of partnering opportunity.  For example, Amazon is a pure play, not an incumbent but the partnerships that Amazon negotiated with serve as many  different relationships that can be made to work to the advantage of all players and
incumbents.





                                               





Target total customer Wallet:
It would be unrealistic and ambiguous to seek to capture 100 percent of category spending from each customer household.  Retailers should have mechanism for measuring customer satisfaction, repurchase rates and effectiveness of customer service. 

Use your best customers to model future improvements:
           Online retailers need to gain market understanding not based not on average but on in-depth dialogue with their best customer group.  They need to use feedback to improve purchase experience.  Customer dissatisfaction can be used to drive product selection, pricing options, communications, and delivery and return alternatives. 

           Incumbent retailers have a great deal to win by mastering the new Internet skill, and overcoming logistical hurdles.  Their chance of success are far greater than those of pure plays and their chance of failure of are for more controllable.  In any case, they must take risk.
According to the statistical data on our hand driven from OECD show us that consumer purchasing on the Internet will grow.  In U.S, for instance, online retailing ranges from 1.0 to 1.5 percent of all retail sales, but this figure, in this report, is expected to continue increasing and reach around 3 to 6 percent within the next few years.  Companies that wait on the sidelines may find themselves unable to catch up.

Conclusion:

           All things considered, the emergence of business to consumer electronic commerce causes inevitable changes surfacing both on consumer and business sides.  In order to survive and not to lag behind of these revolutionary developments firms have to adapt themselves into this rapidly growing environment.  During adaptation process, marketing and management information system should coordinate and co-operate successfully and have to evaluate the changes not only from their own perspectives but also from the consumers’ perspectives and in turn they should react based on planning and implementation strategies carefully tailored for the organization.