Week 1 submission for blog

Dear Sir,

Please find below my Week 1 submission for blog:

During the first two lectures Sir busted the myth that e-commerce has something to do with technology when it has more to with business than technology.

We also learnt about the evolution of e-commerce:-

1996-2000

Characteristics:

·         Revenue generation for the companies engaged in e-commerce was majorly through advertisements

·         The focus of ventures of this era was on innovation and these ventures were backed by the VCs.

2001-2008- slow down

Characteristics:

·         Dot com bubble burst- lots of ventures shut down since they didn't make money as per the expectations of the VCs. The revenue model was flawed in the earlier era as it focussed on advertisements and discounts.

·         Focus on cost saving

·         Most Ventures in this phase were funded by banks

·         Revenue generation based on transactions

2009-Now

Characteristics:

·         Ventures are again focusing on innovation

·         Backed by VCs

 

Key Question: Are we riding the same wave again? Is there going to be another bubble burst?

 

Some important observations

1.       This is the re-intermediation era.

·         Pre-e-commerce era was the intermediation era. B2I2C

·         Margins of the intermediaries was about 2%

·         Then came the no intermediation era where businesses directly marketed themselves to the customers and passed on the entire 2% to them

·         However, importance of intermediaries was realized when businesses failed to market themselves effectively to customers and the intermediaries popped up again since they knew how to make the sellers meet the buyers

·         However, margins of intermediaries are lower and are about 0.05%

·         The new business Model is B2E2C

2.       It was expected that e-commerce would be a place for perfect competition since there was no possibility of cash transactions and anonymity. Besides, freely available information meant transparency. But it did not happen. Ex- B2C indigo Rs10,000 , B2E2C-> Rs 9,000. Thus, contrary to expectations, e-commerce is imperfect competitions.

3.       First Mover's advantage is irrelevant.

4.       The porter's five forces model does not hold in context of e-commerce since the bargaining power of the channel will become supreme as the market matures.

·         Bargaining power customer decreases over times

·         Bargaining power of suppliers also decreases over time

·         New entrants are acquired by the big fish

·         Offline models will not be able to sustain the discounts offered online, thus threat of substitutes also decreases over time.

5.       Since the customer looks for the cheapest bargain, what was earlier customer lifetime value (CLV) has now become First Lifetime value.

6.       Trust is a major factor of e-commerce venture survival. Despite bleeding heavily, Amazon survived due to the trust its customers put in it.

7.       E-commerce is the battle of who can out survive its competitors, it's the game of deep pockets.

 

 Thanks and Regards

Samriddhee Khanna

12IB-069

Section B