E-commerce & Web Technologies: Core Concepts

Posted on Jul 1, 2025 in Business Administration and Management (BAM)

Web 2.0 & E-commerce Fundamentals

What is Web 2.0? Examples & Impact

Web 2.0 is a set of applications and technologies that allows users to create, edit, and distribute content; share preferences, bookmarks, and online personas; participate in virtual lives; and build online communities. In other words, Web 2.0 is the set of new, advanced applications that have evolved along with the Web’s ability to support larger audiences and more involved content.

Examples of Web 2.0 sites include:

Facebook
Pinterest
Twitter
YouTube
Instagram
Wikipedia
StumbleUpon
Tumblr
WordPress

These platforms exemplify Web 2.0 by enabling user-generated content, social interaction, and community building, which are core tenets of this web evolution.

E-commerce Growth Limitations & Challenges

Several major limitations impact the growth of e-commerce:

The initial price of personal computers.
The need for many people to learn complicated operating systems, especially compared to simpler technologies like television or the telephone.
The requirement for users to acquire sophisticated skills to effectively utilize the Internet and e-commerce capabilities.
The unlikelihood that the digital shopping experience will ever fully replace the social and cultural aspects of traditional shopping environments.
Persistent global income inequality, which excludes a significant portion of the world’s population from accessing e-commerce.

The toughest limitation to overcome is arguably the inability of the digital shopping experience to fully replicate the social and cultural aspects of traditional retail. However, new interfaces supported by mobile computing platforms (smartphones) have drastically reduced other limitations on future e-commerce growth. As Internet access technologies become cheaper and easier to use, e-commerce is poised for significant long-term expansion.

Future of E-commerce: Key Defining Factors

The factors that will help define the future of e-commerce over the next five years include:

The technology of e-commerce—the Internet, the Web, and the number of mobile devices—will continue to proliferate through all commercial activity. Overall revenues will continue to rise rapidly, and the numbers of both visitors and products and services sold will continue to grow.
Prices will rise to cover the real costs of doing business on the Web and to provide investors with a reasonable rate of return on their capital.
E-commerce margins and profits will rise to the level of traditional retailers, meaning the difference between revenues from sales and cost of goods sold will align with traditional firms.
The top e-commerce sites will increasingly acquire very well-known brands from strong, established firms.
The most successful e-commerce firms will leverage both traditional marketing channels, such as physical stores and printed catalogs, alongside their e-commerce websites. The competition between giants like Walmart and Amazon for dominance in online retail will likely provide a definitive answer to these trends in the coming years, with Walmart currently leading in the offline traditional retail marketplace.

E-commerce Intermediaries & Marketing

Online Intermediaries: Create or Rely?

The advent of e-commerce suggests that marketers cannot solely rely on the online presence of existing intermediaries; instead, they must consider creating their own online intermediaries. This concept sparks debate, with arguments for and against this approach.

Arguments for Creating Online Intermediaries:

Intermediaries are crucial online for service and product comparison, representing a missed opportunity for direct communication if not controlled.
It eliminates the cost of paying referral fees to third parties.
A company can use its own intermediary to explore new concepts and markets while minimizing potential damage to its core brand.

Arguments Against Creating Online Intermediaries:

The significant cost involved in setting up independent intermediaries.
The risk that these intermediaries may not appear truly independent, potentially reducing their effectiveness.
The risk of failure in an already crowded marketplace.
The option to form partnerships with existing intermediaries at a lower risk.

E-commerce Site Development & Design

E-commerce Site Puzzle: Six Key Components

The six main pieces of the e-commerce site puzzle are:

Organizational Capabilities and Human Resources: The team and skills needed to build and manage the site.
Hardware: The physical infrastructure required.
Software: The applications and systems that run the site.
Telecommunications Infrastructure: The network capabilities to meet customer demands.
Site Design: The visual and functional layout to implement business objectives.
Business Objectives: The strategic goals that the site aims to achieve.

System Development vs. Maintenance Costs

For an e-commerce website, system maintenance costs can range from 50% to 100% per year of the original systems development costs. While smaller sites might see annual maintenance costs parallel development costs, larger sites often achieve some economies of scale.

Maintenance is typically more expensive because e-commerce sites are perpetually in a process of change, improvement, and correction. They are, in essence, never truly “finished”; they are always being built and rebuilt to adapt to evolving user needs and technological advancements.

Eight Key Factors for Effective Website Design

The eight most important factors impacting website design are:

Functionality: The site must have pages that load quickly, perform correctly, and direct the user to the requested product information efficiently.
Informational: The site must feature easily discoverable links for customers to obtain information about the company and its product offerings.
Ease of Use: The site must incorporate a simple, foolproof navigation scheme.
Redundant Navigation: The site should provide alternative paths to reach the same content, enhancing user flexibility.
Ease of Purchase: The purchasing procedure should require no more than one or two clicks.
Multi-Browser Functionality: The site should operate seamlessly across popular web browsers.
Simple Graphics: The site should avoid distracting graphics and/or sounds that users cannot control.
Legible Text: The site should avoid backgrounds that distort text or make it difficult to read.

Failure to address these factors will adversely affect a site’s operation, as users will find it frustrating to navigate and view, struggle to obtain product information, and perceive the purchasing process as overly complicated.

Choosing Your Website Platform: Top 3 Factors

When selecting the best platform for your website, the three main factors to consider are:

Anticipated Number of Simultaneous Users: The expected volume of concurrent visitors will dictate system capacity requirements.
Customer User Profile: Understanding expected requests and behavior while at the site.
Nature of the Content: Dynamic pages and large multimedia files demand significantly more capacity than static content.

The more visitors you anticipate, the greater the demand on your system. If users will be viewing dynamic pages and large multimedia files, far more capacity will be required.

E-commerce Technology Features

Unique Features of E-commerce Technology

The unique features of e-commerce technology include:

Ubiquity: E-commerce is available almost everywhere and at all times, transcending geographical and temporal boundaries.
Global Reach: The potential market size for e-commerce is roughly equivalent to the size of the world’s online population.
Universal Standards: The technical standards of the Internet, and thus for conducting e-commerce, are shared globally, facilitating seamless transactions.
Richness: Complex and content-rich information can be delivered without sacrificing reach, offering a comprehensive user experience.
Interactivity: E-commerce technologies enable two-way communication between the merchant and the consumer, fostering engagement.
Information Density: The total amount and quality of information available to all market participants is vastly increased and is cheaper to deliver, leading to greater market transparency.
Personalization/Customization: E-commerce technologies allow merchants to target marketing messages based on a person’s name, interests, and past purchases. They also enable merchants to tailor products or services to suit the purchasing behavior and preferences of individual consumers.
Social Technology: The integration of user content generation and social network technologies enhances community and shared experiences.

Cloud Computing & Web Services

Cloud Computing: Definition & Internet Impact

Cloud computing refers to a model where firms and individuals obtain computing power and software applications over the Internet, rather than purchasing and installing hardware and software on their own computers. It is currently the fastest-growing form of computing.

Cloud computing has significantly impacted the Internet by radically reducing the cost of building and operating websites. The necessary hardware infrastructure and software can now be licensed as a service from Internet providers at a fraction of the cost of purchasing these services as products, making advanced computing resources accessible to a wider range of users and businesses.

Common Web Services & Applications

Services currently available through the Web include:

E-mail: The most widely used application on the Internet, enabling messages and file attachments to be transferred between users.
Instant Messaging: Software that allows typed text to be displayed on a recipient’s computer almost instantaneously, facilitating real-time conversations.
Search Engines: Websites or services within a site that enable users to locate information by matching keywords to relevant documents.
Online Forums: Web applications that allow Internet users to communicate via message boards, bulletin boards, or discussion groups.
Online Chat: Software that enables multiple people or groups to engage in live conversations.
Blogs: Personal web pages created by individuals or corporations to communicate with readers, often featuring regular updates.
Really Simple Syndication (RSS): A program that automatically sends digital content, including text, articles, blogs, and podcast audio files, to users’ computers over the Internet.
Podcasts: Audio presentations stored as audio files and posted to the Web, available for download onto computers or portable devices.

The Rise of Mobile Applications

Mobile apps are considered the “next big thing” due to the explosive growth in mobile Internet access devices. In 2012, total mobile commerce revenues approached $25 billion, with mobile app sales contributing around $6.7 billion of that amount. More than 70% of U.S. mobile phone owners were expected to use their devices to research and browse products and services, and over 35% were projected to make at least one purchase via mobile phone, more than double the number in 2010. This trend underscores the increasing importance of mobile platforms for commerce and content consumption.

E-commerce Business Models & Revenue

Effective Business Model: Seven Key Components

The seven key components of an effective business model are:

Revenue Model: How the firm will earn income.
Market Opportunity: The market space and its potential size for the firm.
Competitive Environment: Identification of competitors within the market space.
Competitive Advantage: The unique qualities that differentiate the firm from others.
Market Strategy: The plan the firm will use to promote its products and services.
Organizational Development: The structure and capabilities that enable the firm to execute its business plan.
Management Team Capabilities: The expertise and leadership to guide the firm’s endeavors.

Primary E-commerce Revenue Models

The five primary revenue models used by e-commerce firms are:

Advertising Revenue Model: Derives profit by displaying paid advertisements on a website. The goal is to attract a sizeable or niche viewership to convince advertisers.
Subscription Revenue Model: Offers users access to some or all of their content or services for a recurring subscription fee.
Transaction Fee Revenue Model: Profits from enabling or executing transactions. Examples include fees paid to eBay for successful auctions or E*Trade for stock transactions.
Sales Revenue Model: Companies generate profit directly from the sale of goods, information, or services to consumers.
Affiliate Revenue Model: Sites receive referral fees or a percentage of revenue from sales generated by steering business to an affiliate partner.

Amazon vs. eBay: Direct Competitors?

Amazon and eBay are generally considered direct competitors because they sell very similar products and services to the same market segment. Both platforms offer books, music, computers and software, games and toys, electronics, tools, movies and DVDs, and camping equipment, among other categories.

While eBay traditionally operates with a consumer-to-consumer (C2C) business model and Amazon primarily with a business-to-consumer (B2C) model, eBay also sells new, overstocked, and remaindered products at discounted prices. Although eBay might attract more “bargain hunter” shoppers who wouldn’t initially visit Amazon, they fundamentally compete for the same broad market segment of online consumers.

Online Consumer Behavior & Merchant Strategies

Converting Online Researchers to Buyers

Research indicates that many consumers use the Internet to investigate purchases before buying, often completing the actual transaction in a physical storefront. This has significant implications for online merchants, suggesting that e-commerce serves as a major conduit and generator of offline commerce. This trend highlights the importance of integrating e-commerce and traditional commerce strategies.

It is crucial for online merchants to enhance the informational content on their sites to attract browsers and convert them into buyers. Improvements that web merchants can make to encourage more online purchases include:

Designing websites to provide easy-to-access and simple-to-use product information.
Creating robust policies for better credit card and personal information security.
Making it easier to locate items on the website through intuitive navigation and search.
Establishing customer service facilities where users can get answers to questions and product advice.
Increasing delivery speeds to meet consumer expectations.
Presenting products more clearly with high-quality images and detailed descriptions.
Creating loyalty reward programs to incentivize repeat purchases.
Streamlining the buying process to make it quicker and more efficient.