Page 46 - Electronic Commerce

Introduction to Electronic Commerce

One business process that is especially well suited to electronic commerce is the
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selling of commodity items. A commodity item is a product or service that is hard to
distinguish from the same products or services provided by other sellers; its features have
become standardized and well known. The only difference a buyer perceives when
shopping for a commodity item is its price. Gasoline, office supplies, soap, computers, and
airline transportation are all examples of commodity products or services, as are the
books and CDs sold by Amazon.com.
Not all commodity items are good candidates for electronic commerce. They must
have an attractive shipping profile to be sold online. A product’s shipping profile is the
collection of attributes that affect how easily that product can be packaged and delivered.
A high value-to-weight ratio can help by making the overall shipping cost a small fraction
of the selling price. A DVD is an excellent example of an item that has a high value-
to-weight ratio. Products that are consistent in size, shape, and weight can make
warehousing and shipping much simpler and less costly. Commodity items that have an
attractive shipping profile include books, clothing, shoes, kitchen accessories, and many
other small household items.
A product that has a strong brand reputation—such as a Sony television—is easier to
sell on the Web than an unbranded item, because the brand’s reputation reduces the buyer’s
concerns about quality when buying that item sight unseen. Expensive jewelry has a high
value-to-weight ratio, but many people are reluctant to buy it without examining it in person
unless the jewelry is sold under a well-known brand name or with a generous return policy.
Other items that are well suited to electronic commerce are those that appeal to
small, but geographically dispersed, groups of customers. Collectible comic books are an
example of this kind of product.
Traditional commerce, rather than electronic commerce, can be a better way to sell
items that rely on personal selling skills. For example, sales of commercial real estate involve
large amounts of money and a high degree of interpersonal trust. Even if commercial real
estate is listed online, it will usually require personal contact to negotiate the deal. Many
businesses are using a combination of personal contact enhanced by an online presence to
sell items such as high-fashion clothing, antiques, or specialized food items.
A combination of electronic and traditional commerce strategies works best when the
business process includes both commodity and personal inspection elements. For
example, most people find information on the Web about new and used automobiles and
do considerable research on specific makes and models before they visit a dealership to
buy. In the case of used cars, electronic commerce provides a good way for buyers to
obtain information about available models, features, reliability, prices, and dealerships,
and also helps buyers find specific vehicles that meet their exact requirements. The range
of conditions of used cars makes the traditional commerce component of personal
inspection a key part of the transaction negotiation.

ELECTRONI C C OMMERCE: OPPORTUNITI ES,
CAUTIONS, A ND CONCERNS
Electronic commerce has changed the way business is conducted in many industries.
However, not every business process is suitable for electronic commerce. As technologies
advance, more and more types of business processes become candidates for electronic

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