E-commerce

Overview of the ‘E-commerce’ System

• E-commerce allows the transactions of goods and services to be conducted electronically on the internet. The ease of electronic transaction transforms the organization form due to the reduction in transaction cost ¹. For consumers, online shopping reduces the search cost for desired products. For sellers, the reduced communication cost enables businesses to outsource core functions (such as marketing, inventory, distribution, etc.) to e-commerce platforms or external providers.

• The supply chain is deconstructed to allows e-commerce participants to easily switch transacting partners both up-stream and down-stream. Core business functions become easily accessible “commodities,” offered by specialized platforms (marketing cloud, on-demand inventory, delivery services) ². The efficiency boost from business-processes outsourcing and automation enables sellers to focus more on selling and responding quickly to market demand. Meanwhile, platforms replace traditional supply chains, enjoying significant network effects and high customer switching costs.

• Because it is no longer efficient to perform many business functions in-house, value chains decompose as businesses reorganize to compete primarily on their effectiveness in selling. This gives power to the consumers facing an increasing number of options to choose from. However, increasing options also bring about information overload, in various vertical categories. Consequently, content influencers reintermediate the selling process with richer content to get closer to the audience in a particular market segment. However, content richness in one segment reduces the reach for many, driving the ever-increasing content fragmentation ³.