My overarching emphasis in my business model would be security. The “internet factors” have increased access to the internet and increased the psychological expectation of its use. In turn the internet has quickly become a conduit between the business and consumer. Thinking as a consumer, my biggest worry in using the internet for online purchases is the security of my credit card and personal information. I believe that most American consumers have that same concern, so any e-business model should revolve around the safe and secure transmission of sensitive information. If you plan on procuring flexible and reliable security solutions up front, then you can leverage the benefits of using the internet. If your e-business cannot support continuous secure online transactions as your company grows, then there is no reason to take on the venture.
The reduction in brand loyalty and perception of competitive convergence has created an abundance of products and services to choose from. I am not an economist, but as a consumer I know that before the internet, products and services were limited. These were tangible items I had to purchase in person. These services and products were also controlled by a limited amount of vendors who controlled the market. Now, as an e-commerce consumer I have access to an unlimited amount of options in choosing services and products. Because of this an e-business’ success hinges on its ability to provide reliable and concise information on a product. For example, sites such as CDNow.com, Amazon.com, and Ebay.com offer a variety of products with well packaged information about the products all over the site. They continue to dominate the e-business market because they have invested in reliable security solutions and also offer simple and organized access to vendors all over the world.
The reduction in transaction and switching costs makes it more attractive for a consumer to stay at home and shop online. Companies such as Dell and Amazon that do not actually hold inventory do not have the burden of inventory costs. This creates flexibility in providing tailor made products to the consumer. As the switching costs disappear, it also continues to keep consumers using the internet. It would not cost me anything to switch from using Amazon.com to Overstock.com. The only thing I am giving up is the time to enter my personal information. In spite of the benefits that low transaction and switching costs provide, there are some drawbacks. I see companies such as the Gap, Footlocker, and Old Navy reducing the amount of “stores near you”. As more focus shifts toward managing online stores and more consumers shop online, I think they will cause companies to have to make hard decisions. It is costly to manage stores and manage a major online website. As we gain flexibility in using the internet we will lose the availability of physical stores to shop in.
In order for e-businesses to continue to be successful they most focus on managing the customer. In the e-business model, the consumer has significant power in the market. Shopping online must continue to stay attractive to the consumer in order to keep them coming. In order to maintain this appeal companies must be able to sustain online performance. This means frequent upgrades to software and hardware. I would suspect that the successful online companies such as Dell and Amazon invest heavily in servers and supply chain management software. As consumers scale, these companies must purchase increased capacity. They must also invest in marketing in order to maintain their share of the market. With the decrease in barriers to entry and low switching costs, current industry leaders must be innovative in maintaining their customer base.
In order to stay viable in this industry I think that partnering with e-business industry leaders is critical. This will be the only way to mitigate the challenges associated with being an online business. For example, partnering with Amazon.com creates long-term competitive advantage. Now I have access to their business model, access to their suppliers, access to their subcontractors, and access to their customers. Strategic partnering buys you increased e-commerce capabilities and improved customer operations. In viewing their website, I notice that many companies that have wanted to transition into e-commerce have partnered with Amazon.com. Target, ToysRUs, BabiesRUs, Office Depot, and even Weight Watchers are aligned with Amazon. These collaborations unite the name recognition and retail leadership with the online e-commerce support of Amazon.com.