CHAPTER 2

Contrasting E-Commerce and M-Commerce

Why a Digital Commerce Strategy Matters?

Businesses are formed to make money. In order to turn profits, companies develop goals and objectives, and a plan of action to achieve those goals and objectives. Strategy refers to that plan of action a firm conducts in order to define the business and maximize those profits. High-level strategic plans, or business strategies, direct the firm toward meeting organizational goals. Divisional plans within the firm give different levels of the organization that grow the business. However, in order to develop a business strategy, firms must take into account the environments in which to conduct business.

Development of marketing strategies is based on the objectives of the firm, the marketing division, as well as what is happening in the environment. Marketing strategy involves bringing revenues and customers into the firm. Marketing strategy takes into account not only the goals of the organization, but also the business model of the firm, consumer behavior, the marketing mix, competition, and the overall marketplace. One of the aspects that marketing must consider in developing its strategy is digital commerce. Digital commerce initiatives within the firm consist of those strategies that take into account the opportunities and challenges in the marketplace where digital gives the firm a competitive advantage.

In developing a digital commerce strategy, companies consider electronic commerce, mobile commerce, and social commerce. Each, when identified through a SWOT (strengths, weaknesses, opportunities, and threats) analysis, can be found to benefit the strategic goals of the firm. Each plays important but different roles.

• Strengths that the company has in digital commerce
• Weaknesses that the company needs to overcome in digital commerce to stay competitive
• Opportunities that digital commerce affords the company
• Threats from the environment the company must encompass

Many firms bypassed having a mobile commerce strategy for a social commerce. The strengths of the firm were not considered when firms only saw the technological weaknesses. Social commerce is cheaper (in terms of infrastructure). However, when used in conjunction, all of the components of digital commerce can offer gains to both revenue and customers.

Developing a digital commerce strategy means understanding changes in the marketplace and capitalizing on the changes. For example, if the goal of the firm is to increase sales in stores, it makes sense to step back and understand digital shopping behavior. Are your customers using the physical location for purchasing, or is the market moving online? If so, are your customers shopping on the desktop computer, tablet computer, or mobile phone for shopping? Digital commerce strategy aids in generating revenue and developing better relationships with customers in several strategic areas. These areas include

• Brand engagement
• Customer service
• Loyalty programs

Brand Engagement. How engaged is your brand with your audience? Increasing brand awareness and engagement can be accomplished with e-commerce and m-commerce as both allow consumers to engage with brands through more personalized relationships and interactivity. Product reviews dominate brand engagement activities by consumers. Reading product reviews dominates brand-purchasing activities by consumers. E-commerce users are more likely to research the brand, read reviews concerning the brand, and interact with the company through reviews, blogs, forums, e-mail, and website chat sessions. In m-commerce, users are more likely to download apps, or click on mobile websites for product information, immediate purchase, or to locate a specific store featuring a specific brand.

Customer Service. Developing better customer relationships is vital to any firm. Being responsive to customer needs gives firms the opportunity to increase customer support and retention. E-commerce lends itself to customer responsiveness through interactivity such as e-mail support, chat sessions, and detailed product information. M-commerce is vital when customers need quick support, including store location, updated product information, and pricing. In each case, timely responses help build better relationships.

Loyalty Programs. Successful loyalty programs are incorporated into the strategies of many businesses in order to support customers, track program progression, and drive sales—all of which can be done online. Coca-Cola looked to improve its My Coke Rewards program by going mobile. Customers were offered the ability to gain reward points through mobile activities. The program trackers on the mobile website let members know their status and give opportunities to share with other members in the My Coke Rewards community. Although there is no direct mobile purchasing, Coca-Cola used mobile for heightened brand awareness and customer retention.

E-Commerce as a Marketing Strategy

Offering customers the ability to transact business in more than one channel was the purpose of e-commerce, and is now also the purpose of m-commerce. This is not to say that the services offered from each are identical. As there were risks in adopting a multichannel strategy, including cannibalization, technology investment, new alliance associations, new supply chain partners, and the fear that the Internet was just a passing fad (Biyalogorsky and Naik 2003), many of these risks, as well as others are evident in establishing an m-commerce channel.

Although fears of cannibalization were not realized, there is still the perception of the passing fad. Cannibalization refers to lessening of sales in one channel because of the impact of sales in another channel. Some firms felt that too many channels could be harmful, as consumers may not use any channel if there are too many choices. If channel decision becomes another purchase decision, it could turn buyers off.

Established brand name, large customer base, distribution channel, and lower customer acquisition costs gave physical retailers advantages, but these retailers also had large capital investments and limited hours within those physical structures (Enders and Jelassi 2000; White and Daniel 2004). Branding, for example, was the reason for bookstores like Barnes and Noble to establish themselves quickly online. The Internet, on the other hand, has lower entry and establishment costs making it viable as a new marketing channel (Peterson, Balasubramanian, and Bronnenberg 1997) and allowed click only firms, such as Amazon.com, to also start quickly. Many of those first online were more interested in the technology of the Internet, but as online shopping grew, the interest in the Internet as another shopping vehicle abounded.

E-commerce offers retailers opportunities beyond stores. Other products and services such as software, music downloads, insurance, and travel afford the consumer instant gratification. Offering merchandise not found in physical locations, freeing up the costs of inventory, gives consumers a wider variety of products to purchase. Even small town consumers have the ability to purchase merchandise found only in large, metropolitan areas.

E-commerce became popular with retailers once firms realized the Internet’s potential as a marketing channel. Implementation of e-commerce increased in competitiveness (Lederer, Mirchandani, and Sims 1997) and found valuable in advancing corporate goals and firm performance. Retailers not only compete with local firms, but global as well. Firms enhance their performance through operational efficiency, automated customer service, greater customer data insight, as well as exchange of information with customers, suppliers, and partners in real-time (Zhuang and Lederer 2006). Exchange of information garners better relationships with stakeholders, strategic alliances as these alliances become market-based assets, tending to be relatively rare and difficult to replicate offline (Srivastava, Fahey, and Christensen 2001). Older, more established retailers developed relationships with newer technology companies, expanding their digital relationships and competitiveness.

Mobile Commerce Strategy and the Marketing Mix

In developing a mobile commerce strategy, consideration of the marketing mix aids in the decision. The marketing mix, or the 4Ps, offers the opportunity to understand the marketplace while bearing in mind the goals and objectives of the firm. What products to sell, how to price products, where to sell products for the target market, and how to promote products are included in the marketing mix. These aspects of marketing can be assessed, not only for marketing as a whole but also in terms of digital commerce. For example, the products sold in the store may be different from those sold online. Alternatively, online promotions may differ from broadcast advertising, which may differ from mobile promotions and advertising. An overall assessment of the goals of the firm should substantiate how the marketing mix is decided and developed. We will give an overview of how mobile fits into this mix.

Product. Product information, or the availability of products, is vital to mobile commerce. Over 28 percent of young adult mobile phone owners use their device to look up reviews while in the store to help their purchase decision (Pew Research Center 2013). Having this information available on a mobile website increases product purchase, not only for young adults, but for executives as well. Seven out of ten executives reported using their mobile device for product information, and many prefer using their tablet for business purchases (Forbes Insights 2013).

Price. Price has more bearing on the effectiveness of mobile commerce than any other portion of the marketing mix. Consumers want the lowest price. Mobile gives them the opportunity to find the lowest price quickly. Best Buy and other retailers were concerned with showrooming, whereby consumers would examine merchandise in the store, check out pricing on their mobile phones, and then purchase elsewhere. However, retailers found that reverse showrooming is more common. Most consumers look for information online, then purchase at the physical location.

Place. Place is anywhere the consumer is located. Place allows the consumer to check product, price, and promotion at any location. Most credit cards are contact based, meaning there has to be physical contact with a machine to read embedded information. With contactless smart cards and smartphones, consumers can tap their phones for payment, coupons, and other in-store offers through a signal that transfers data. Near field communications (NFC), discussed later, makes this type of payment system possible. Credit and debit cards are no longer needed, as information concerning payment is stored in the mobile phone. NFC can be used for product purchases, ticketing, vending machines, restaurants, and other retail establishments. For example, many fast food restaurants allow for mobile ordering whereby consumers preorder, then tap their phones in-store for payment. This procedure allows for quick service for both mobile order and in-line customers.

Promotion. Promoting products and services to individuals is gaining in popularity in m-commerce. Coupons directed toward individuals allows for personalization. Location-based services give retailers the opportunity to offer promotions to those who are nearby.

Firms learned that e-commerce would draw unique customers, and these customers could be attracted to the online channel (Schoenbachler and Gordon 2002). This same understanding is being sought for m-commerce consumers. Benefits of time specificity coupled with geographic distance gives consumers the ability to locate businesses. Understanding mobile consumer behavior allows for better mobile strategy development.

When to purchase, where to purchase, and why purchase have changed with the Internet. Now, mobile commerce has heightened the customer’s role in purchase decision-making. With these changes, businesses must also decide how to get their share of revenue in digital commerce.

Business Models

Business models are the ways a firm has for generating revenues. Business models serve as a guide to profit making, based on the firm’s goals and objectives. A department store’s business model is selling products. A hair salon’s business model is selling hair services. A newspaper’s business model is based on subscriptions and advertising. The business model can be further refined. Walmart sells products, but at the lowest price possible.

Several different types of business models exist in e-commerce. Some of the more popular business models for E-commerce mimic those models in traditional business environments:

• Bargain discounter
• Brand builders
• Buyer cooperatives
• Dealer support organizations among others.

Sales, advertising, fee assessment, subscriptions, and commissions on sales are basic business models used in e-commerce. Most retailers use a sales business model. Online newspapers, magazines and other content sites rely on subscriptions for revenue. Service transaction firms, such as eBay and investment sites offer their services for a fee.

Many e-commerce business models are unique to the Internet environment. Bundling offers online and offline products in a group to create more value for the users. Cable and telecommunication companies will bundle landline phone, mobile phone, and television services.

Other business models developed because of e-commerce:

• A collaborative consumption business model gives firms the opportunity to use the Internet real-time, or near real-time basis and share profits. Airbnb.com offers worldwide rooming, Uber and Zipcar offer transportation through collaboration with other consumers.
• Offering a basic service and charging for premium services refers to freemium. Sites that offer freemium services include LinkedIn, Dropbox, and Skype.

Based on referring users to a site, affiliate marketing is an add-on business model for many companies online. Using an affiliate model, a retail site will reward other sites when the other sites provide customers to the retail site. For example, a small business owner may have a link to Amazon. When someone on that site clicks on the Amazon link and makes a purchase, the small business owner gets a portion of the proceeds of the sale. This not only brings revenue to the small business owner, but to Amazon as well. Many large corporations offer affiliate marketing for smaller businesses.

Mobile commerce offers firms the opportunity to make a profit, when done effectively. In order to develop a strategy and business model, it is imperative to understand the marketplace. In the early 2000s, the advertising revenue model was popular. Instead of profiting from customers, dotcom companies expected high profits from other companies. However, it was not a stable business model because did not offer a competitive advantage. Now, firms want to enter mobile commerce with a sustainable business model. For now, mobile applications are effective. Many firms are using their e-commerce business models and finding success.

The same e-commerce business models generate revenue on mobile commerce sites. However, the most widely used, and obviously effective business model, has been an elaboration of freemium. The mobile application (or app) is widely used to attract both customers and revenue. The app may be downloaded for free, however, to get the most from the application, or after a period of time, there is a charge for the app. Or, the app is free. However, the user understands that there is a large amount of advertising to endure.

Apps not only allow for revenue building, but data building as well. Data generated through mobile applications allow firms to develop better insight into their customers. In order to download an app, customers must register. Name, address, and other demographic information allows the firm to target advertising, understand the target market, upsell to premium content, and sell products or services. However, free apps come with a lot of churn. Churn refers to subscribers who come and go within a given period. Mobile app users do not feel compelled to continue app usage when investing no money.

Integration of Digital Commerce with Other Business and Marketing Strategies

The integration of digital commerce with other strategies of the firm has not garnered much enthusiasm. Many firms associate digital commerce as its own strategy. In fact, most firms outsource vital Internet functions, as anything digital is considered “too technical” for marketing to handle. However, both e-commerce and m-commerce play vital roles in firms’ goals and objectives. Globalization and supply chain are two areas that many companies see as expansion opportunities. Companies looking to expand their customer base globally find starting online can give indications on the possibility with a low financial obligation. Integration of the supply chain allows efficiencies within for all partner companies. Management and coordination of the supply chain through the Internet can make it more productive.

Globalization

E-commerce sales in Asia grew 36 percent in 2014, making this international market twice the size of the U.S. online retail market (Brohan 2015). The European e-commerce grew 15 percent last year. With this growth, many firms are looking to expand their operations globally. Using both e-commerce and m-commerce aid in this expansion as digital commerce is an effective and efficient means of globalization.

The reach of the Internet allowed retailers to expand globally, overcoming obstacles of time and communication. Several advantages afforded those retailers that decided on a global e-commerce strategy. Hamill (1997) suggested that the future of international Internet commerce should lead to international price standardization, reduction of intermediaries, and an effective medium for worldwide market research Further, the Internet has significant potential in satisfying customer demand on a global level (Jones, Clarke-Hill, and Hillier 2002).

In looking at the globalization of e-commerce through internationalization theory, Kim, Suh, and Hwang (2003) posited that gradual internationalization was better for sociocultural distance than just cultural distance, even though the process was rapid with the Internet. As firms gradually move globally, their perceived risk diminishes (Kim, Suh, and Hwang 2003). With websites available 24 hours a day and translated into other languages with translation software, retailers were able to reach out to new international markets (Erdem and Utecht 2002), including small and medium-sized enterprises (Haas 2002). The main reason firms engaged in online international retailing were relationship facilitation, information, as well as transactions in international markets (Arnott and Bridgewater 2002).

Retailers who integrated global activities with their overall marketing and corporate strategies gained more effectiveness of e-commerce than those who did not extend globally (Doherty, Ellis-Chadwick, and Hart 2003). There are now several barriers to the globalization of m-commerce; specifically, the nature of the telecommunications industry worldwide.

The diffusion of mobile devices began more extensively in Europe and Asia than in the United States. In a contrast between American buyers (an individualistic culture) and South Koreans (a collective culture), Park and Jun (2003) found no significant differences in Internet shopping experience, though the perceived risks were higher in Korea (Park and Jun 2003). This difference afforded firms the desire to go global in terms of customers. More than 13 percent of global consumers use mobile devices for online shopping, with smartphones preferred over tablets (Callard 2014). In both Japan and South Korea, m-commerce accounts for more than 45 percent of retail transactions (Criteo 2014).

In several studies discussing consumer behavior Phau and Poon (2000) compared potential Internet buyers and nonbuyers in Singapore finding, as in the United States, that expensive goods like cars were not ready for online sales because of the monetary risks involved. Most of the purchasing done for products frequently purchased had a low outlay. Globalization in m-commerce may mean going country-by-country, as was done in traditional retailing, until there is cohesion in global technology. Future research can determine, and assess the diffusion of m-commerce. Until there is a diffusion of mobile capabilities globally, the advantages of worldwide mobile commerce will not be met. All the players within the supply chain will only satisfy customer demand on a global level after the technology is not only in place, but also in use.

Supply Chain Integration

Business-to-business revenues are twice those of business-to-consumer revenues (Hoar 2012), making B2B a viable channel for both e-commerce and-m-commerce. Electronic commerce has enabled supply chain partners to reduce costs, allowing the savings passed to consumers. Internet, as well as an extranet, provide ease in transactions, quick and updated information, reduced costs, and closer buyer/seller relationships.

During the 2013 holiday season, many deliveries were delayed. Many Christmas gifts were late and people were upset. Although bad weather was blamed by UPS, FEDEX, and the U.S. Postal Service, consumers faulted the delivery companies for the late deliveries. A breakdown in the supply chain was the culprit.

Resources that firms have developed through electronic commerce include technological applications and relationships, both business and consumer. Capabilities include the knowledge gained through these technologies and relationships. Technology is not only changing how we live, but these same technologies are changing how firms conduct business. How these technologies incorporate themselves into corporate strategies and provide revenues are questions to be answered by the firms.

Other companies are taking advantage of m-commerce abilities in order to develop new technologies. In order to make web surfing easier on mobile phones, the .mobi domain name for wireless web pages has been made available for companies to design pages specifically for wireless devices (Yuan 2006).

The ability to update pricing and product information online gives suppliers and buyers easy access to data in order to make quicker, more informed decisions. Companies no longer send salespersons to clients as often, lessening travel costs, as online meetings can be just as productive. The relationships between clients and salespersons can still be purposeful, as well as efficient, as online communications saves time.

Rim In Motion was one of the first companies to understand the value of mobile in supply chain communications. Marketing to a B2B audience, Blackberry was introduced to companies to communicate with other companies. Outfitting firms with their Blackberry mobile devices, many companies that were just beginning to understand e-commerce within the supply chain were now about to realize how mobile could integrate partners. Going beyond pages, supply chain partners could now exchange e-mails anywhere, anytime. Salespersons and other business people could stay connected on the road. It was once said that if Blackberry went out of business, so does the U.S. government, as it became the communication device of choice.

Now, with smartphones and tablets, supply chain operations can be used to optimize routing, assess inventory quickly, transmit orders, verify orders, scan code information, and communicate with anyone in the chain.

Through mobile communications, routes can be changed depending upon traffic, weather conditions, and other obstacles. Responsive logistics refers to the ability to be flexible and adjust the supply chain through hurdles while still delivering as close to on time as possible. Mobile allows responsive capability. Customer demand, damaged products, and other problems can impede inventory controls. Mobile communication allows for quick response to inventory management challenges for rapid replenishment.

Tablets have replaced not only desktop computers, but clipboards as well. Tablets allow supply chain personnel, especially those within warehouse operations, to retrieve information, read purchase orders, check inventories, develop invoices, print shipping labels, and track order processing.

Three types of systems are used in transmitting large data in a small format:

• Barcodes
• Quick response codes (QR)
• Radio frequency ID tags (RFID)

Once scanned, barcodes allow for speedy access to product and other information. As QR codes are specific to mobile devices, all are useful in mobile commerce. RFID tags are beneficial in tracking large quantities of goods as the tags can be placed on large boxes and palettes. Bar code technology is allowing cell phone users to download information for items while shopping. Barcodes aid in managing inventory to know what is available, improve efficiency by reducing data entry errors, and improve transaction accuracy. Mobile devices all along the supply chain can scan each so that anyone can gain the information needed in real time. All of these activities impact the consumer as a robust supply chain maximizes efficiency and passing costs along to the end customer.