Maf 635 E Commerce

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PART

1
CHAPTER 1

The Revolution Is Just Beginning
CHAPTER 2

E-commerce Business Models and Concepts

Introduction
to

E-commerce

C H A P T E R

1

The Revolution Is Just Beginning
LEARNING OBJECTIVES
After reading this chapter, you will be able to:
■ ■ ■ ■ ■ ■ ■ ■

Define e-commerce and describe how it differs from e-business. Identify and describe the unique features of e-commerce technology and discuss their business significance. Describe the major types of e-commerce. Discuss the origins and growth of e-commerce. Understand the vision and forces operating during the first five years of e-commerce, and assess its successes, surprises, and failures. Identify several factors that will define the next five years of e-commerce. Describe the major themes underlying the study of e-commerce. Identify the major academic disciplines contributing to e-commerce research.

A m a z o n

a t

1 0 :

Profitable At Last

A

mazon.com is one of the Web’s most exciting and instructive stories. Started in a garage by Jeff Bezos in 1995, it has since grown to become the largest Internet retailer, with the highest levels of customer satisfaction, the fastest revenue growth rates, and finally, after nine years, profitable. One of the Internet “Big Four” companies, along with Yahoo, eBay and Google, few would have thought it possible when Amazon first opened for business that an online bookstore would become one of the premiere general retailers in the world. But Amazon’s ability to maintain operations at a sufficiently profitable level is a fact that continues to worry investors in 2005. Critics are of two minds: either Amazon will become the online Wal-Mart (and suffer from its huge size just as WalMart does) or it will fail to deliver superior growth and profits because it has spread itself too thin, taken on too many product lines, and given away too much revenue to customers by offering free shipping and superior service. Supporters, and Bezos himself, counter that Amazon has become the Web’s largest retailer on a revenue basis by focusing on the customer, not short-term profits, and that it will ultimately become one of the most profitable by following the same strategy. Amazon certainly has had a roller coaster ride in its ten brief years. In December 1999, Jeff Bezos graced the cover of Time magazine as its Person of the Year. In the same month, Amazon’s stock reached a peak of $113 per share. In January 2001, Amazon reported a whopping $1.411 billion as its overall loss for the year. Its stock hit a low of $6 a share. Amazon laid off 1,300 employees, constituting about 15% of its workforce. Questions about its long-term viability abounded. Bezos promised he would make the company profitable in two years, but few believed this was possible. But, in 2003, Amazon reported soaring sales; it achieved its first annual profit ever (about $35

@

Amazon.com’s first Web site

3

4

CHAPTER 1

The Revolution Is Just Beginning

million), and its stock price more than doubled to $25 a share. The good news continued into 2004 when Amazon reported profits of $588 million on $6.92 billion in revenue. How was Amazon able to turn around its business from a $1.4 billion annual loss to a $588 million profitable operation despite the dot.com stock market crash and the withdrawal of venture capital funding for e-commerce companies? The story of Amazon.com, the most well-known e-commerce company in the United States, in many ways mirrors the story of e-commerce itself. So, let’s take a closer look at Amazon’s path to preview many of the issues we’ll be discussing throughout this book. In 1994, Jeff Bezos, then a 29-year-old senior vice president at D.E. Shaw, a Wall Street investment bank, read that Internet usage was growing at 2,300% per year. To Bezos, that number represented an extraordinary opportunity. He quit his job and investigated what products he might be able to sell successfully online....
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