Home EuropeEurope I 2013 The evolution of e-commerce

The evolution of e-commerce

by david.nunes
Jeff Orr Issue:Europe I 2013
Article no.:14
Topic:The evolution of e-commerce
Author:Jeff Orr
Organisation:Stack Data Solutions
PDF size:254KB

About author

Jeff Orr is the founder and CEO of Stack Data Solutions.

Mr Orr studied at Liverpool University obtaining a B.Eng and an MBA.

Article abstract

The almost universal availability of connectivity is truly globalising industry and commerce and Internet players are already having a major impact on the economic and social structure of society. The availability of ever faster communications is shrinking the planet to a connected virtual village while at the same time isolating its inhabitants in the real world.

Full Article

In 1981 I gave a lecture in which I was invited to take a crystal ball look into the future of what was to become known as e-commerce.

To put a proper perspective on this we need to turn the clock back some thirty plus years to a time before the Internet, a time of modems and bulletin boards. A time of green screens, a time without graphics or Windows.

I suggested that any organisation offering to supply any product at a price including delivery merely half a penny lower than others would attract 100 per cent of the market. I went on to pronounce the death knell of newspapers, magazines and books in paper form as these could be downloaded and read on screen or printed locally if desired. All this with dial up links at 30 bits per second over analogue telephone lines!

Fast forwarding to the Internet age we can assess the validity of such speculation. Was I wrong in 1981? The answer is yes and no. Internet entrepreneurs by their successes have curbed their own progress. The spawning of so many virtual ventures has created a market place so crowded that players have to resort to conventional media to get their message through to you and me. Look at the plethora of television and newspaper advertisements for on-line companies. If the Internet were the communication medium of preference why the need for conventional marketing?

Although connection speeds have increased by several orders of magnitude and reliability improved beyond recognition demand has continued to outstrip availability. Global geographic diversity has connected billions of new users to the web and the sheer volume of content has increased exponentially and continues to do so. This content has within it a mixture of absolute gems and absolute dross which together with the proliferation of providers creates the chaos that is the World Wide Web today.

Wireless connectivity

In recent years we have seen a shift in the end user device of choice. Users now expect devices to be smart and mobile and have on average three to four such devices at their disposal. Instead of static desktop computers or portable laptops the preference is now for truly mobile.

Mobility requires a new delivery system – wireless. Wireless bandwidth is constrained by spectrum availability at a time when bandwidth demand is soaring because of the popularity and availability of rich multimedia content.

The delivery of content to these mobile devices over the final few metres is not typically provided by the telco but rather by a free to use hot spot or a domestic wireless router. In the UK the licence free frequency used for Wi-Fi is 2.4 GHz, a frequency shared with microwave cookers, cordless telephones, wireless security cameras and even radio controlled toys. It is not surprising then that users are frequently dissatisfied with the performance they experience.

Some larger telcos are moving to attempt to regain control of the content delivery pipeline. BT for example is installing 4.5 million free-to-use hotspots around the UK at the moment.

In practice it is impossible to achieve and maintain such control as there is nothing to protect a hotspot from co-channel interference from another provider rendering BT’s installation unusable.

Why are telcos even thinking of providing free connectivity? The answer as always is profit, not from the delivery platform but from the content. The competition between telcos and the overprovision of unused fibre in the ground is and will continue to drive bandwidth prices downwards. Savvy players have recognised this and focussed on monetising content delivery.

Telcos are embracing the cloud putting investment into hosted services such as VoIP telephony, remote backup platforms and software as a service model.

Customers find these attractive as they are tax efficient and revenue based rather than capital intensive. They are usually more reliable and feature rich than an individual organisation could justifiably afford.

Content is the key to future profitability and market share. Ownership and protection is the contentious issue here. Copyright theft is ubiquitous and almost impossible to counter. Once the intellectual property genie is out of the bottle it cannot be put back. There are many large developing countries that completely disregard copyright and patent legislation to the dismay of content owners.

Much content is user provided and cannot be charged for but can be monetised nevertheless by accompanying it with advertising or by garnering user metrics that can be sold on. Social media sites are good examples of user owned and provided content earning the providers fortunes through sponsorship and advertising. Take for example the recent market valuation of Facebook but look too at its vulnerability. Its share price plummeted as investors realised that the company did not have a plan to adapt to the smartphone revolution. Facebook could not find a way to earn advertising revenue from this platform.

Business specific social media sites such as LinkedIn provide an excellent opportunity to self-promote but this site is a double edged sword yielding a rich harvest of personal information for telesales canvassers and identity thieves.

Social and economic impacts

Internet based successes such as Amazon and eBay are having a major impact on the economic and social structure of society. The high street in particular is suffering from the impact of on-line shopping as is evidenced by the number of empty or rundown properties. This is not just a consequence of the current global economic malaise but a result of the convenience and low prices offered by online retailers.

Customers are voting with their feet or rather their fingers in favour of these so called ‘etailers’ visiting the bricks and mortar stores (if they do) only to view the goods they intend to purchase online. It prompts the question ‘Where will this lead?’ Will the online sellers need to have product viewing outlets when all of the shops have gone or will some new technology emerge to obviate the problem?

The almost universal availability of connectivity is truly globalising industry and commerce. My Hi Fi fanatical colleague thinks nothing of importing electronic valves from China and other components from suppliers anywhere in the world who can offer best prices and speedy delivery. This globalisation is creating a flurry of activity in the logistics world as it tries to cope with an affordable small parcel delivery demand.

It is clear that these individual phenomena collectively represent a step change in the way organisations need to address the emerging landscape. Each function of the online process increasingly relies on the success of the others.

It will benefit the pure telcos and pure content providers together with the logistic elements of the chain to collaborate and co-operate to take cost out of the process. If they do not do this and do it soon then the demand will drive a solution into the market. This solution could come from a new player or more likely from an established but agile and forward thinking Internet giant.

Think of the evolution of Amazon from a book and compact disk mail order retailer into the Kindle product set now generating revenues from eBooks and magazines. It already has a sophisticated warehousing and distribution arm. How difficult would it be for Amazon to be that Internet giant?

Recent conferences have strongly emphasised the impact of smart devices and the mobility challenge for connectivity. Keynote speakers from IBM, Hewlett-Packard and Cisco all speak of the revolution in end user computing and content consumption. Each concludes that provision and management of the wireless media is of paramount importance and places strong emphasis on the need for security. They see the smart device as both a challenge and an opportunity.


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