Developement of E-commerce in the Czech republic Business Management in the Czech Republic Lukas Gottwald lukasgottwald@gmail.com Department of Business Management Lecture Structure n1. E-commerce ¨Definition, Characteristics, Quotes, Benefits&Riscs n2. E-commerce developement Timeline 1995-1999 ¨In USA ¨In the Czech republic ¨Summary 1995 - 1999 n3. 2000 Dot Com bubble bust ¨Disillusion, more realistic investor expectations in the Western economies ¨Comparatively small effect in the Czech republic n4. E-commerce developement in 2001-2009 ¨In the USA ¨In the Czech republic ¨Trends & 2009 Outlook n5. Case Study: Opening an e-store as a SMC ¨Why and How nManagerial and marketing considerations ¨ ¨ n ¨ n E-commerce nDefintion ¨„Refers to commercial transactions occurring over open networks, such as the Internet. Both business-to-business and business-to-consumer transactions are included.“worldbank.org nDefinition 2.: „Electronic Commerce, commonly known as (electronic marketing) e-commerce or eCommerce, consists of the buying and selling of products or services over electronic systems such as the Internet and other computer networks.“ wikipedia.org E-commerce nCharacteristics ¨Custumer has to own a „gadget“ connected to a network in order to participate in e-commerce (i.e. PC) ¨Merchant has to have a space within the network (i.e. domain name and website) ¨Customer obtains information about the product electronically ¨Customer confirms his decision to purchase the product electronically (i.e. filling in a form on a website) ¨Payment can be made online nCredit Cards, Paypal, PaySec(Czech), SMS payments ¨Distibution nElectronic - Online ( i.e. songs, books, software, services) nPhysical - Offline ( necessary for physical goods) E-commerce nCharacteristics ¨Quote from Rubens Ricuper Secretary-General of the UNCTAD (2000) n„Electronic commerce is quickly emerging as a particularly visible and spectacular incarnation of globalization. At this stage, it is still too early to say whether electronic commerce will narrow or broaden the gap between rich and poor. However, it is safe to say that the rapid expansion of electronic transactions constitutes a major opportunity for trade and development…“ nHowever further on in the 2000 UNCTD report ¨The United States and Europe will dominate world e-commerce ¨The change here will come from Europe’s progressive “catching up” with the United States. §Most available data show that the United States will retain its global lead in e-commerce well into the next decade (2000-2010) E-commerce nCharacteristics ¨Quote from Kofi A. Annan Secretary-General of the UN (2004) n„Information and communications technologies have considerable potential to promote development and economic growth. They can foster innovation and improve productivity. They can reduce transaction costs and make available, in mere seconds, the rich store of global knowledge. In the hands of developing countries, and especially small- and medium-sized enterprises, the use of ICTs can bring impressive gains in employment, gender equality and standards of living.“ n ¨ ¨ ¨ E-commerce nBenefits ¨Lower transaction cost nMerchant side ¨Store, inventory, staff, communication nCustomer side ¨Time needed to get info and compare prices, communication ¨Global market ¨Outsource services globaly ¨Take advatage of price diffreneces, exchange rates etc… ¨Marketing ¨Whole AIDA + payment + distribution in one moment ¨Both B2B and B2C in one channel §example: www.hp.com ¨ n E-commerce nRiscs & Drawbacks ¨Security Issues nFraud, both on Merchant and Customer sides ¨Virtual relationship nNo face-to-face interaction – may contribute to the trust problem ¨Technology & Equipment nDirect proportion between Internet expansion and E-commerce growth ¨Consumer behaviour more „item specific“ nAccording to Stuchlik, Dvoracek (2002) customers engage mostly in „targeted shopping“ not in „leisure shopping“ in the online environment ¨ E-Commerce Timeline 1995-1999 nCZECH REPUBLIC n1995 ¨„Czech Telecom“ looses monopol ¨It is now possible for other providers to offer Internet connection ¨First households connect to internet. UNITED STATES n1995 ¨Jeff Bezos launches Amazon.com ¨The first commercial-free 24 hour, internet-only radio stations, Radio HK and NetRadio start broadcasting ¨Dell and Cisco begin to aggressively use Internet for commercial transaction ¨eBay is founded by computer programmer Pierre Omidyar as AuctionWeb. E-Commerce Timeline 1995-1999 nUNITED STATES n1996 ¨Google began in January 1996 as a research project by Larry Page, a Ph.D. student at Stanford, he was soon joined by Sergey Brin n1997 ¨Business.com sold for 150 000 USD ¨Amazon IPO on Nasdaq ¨30% US population is online (59 mil. people) n CZECH REPUBLIC n1996 ¨Seznam.cz, now a major Czech search engine is founded by Ivo Lukacovic ¨Vltava.cz and Cybex.cz among first online Stores n1997 ¨Seznam reachers an yearly turnover of nearly 50 000 USD nmost of the income is from advertising ¨Only 27% households have a computer nout of these only 8% are online (0.216 mil. people) E-Commerce Timeline 1995-1999 nUNITED STATES n1998 & 1999 ¨Dot Com bubble growing, lot of start ups, some suceed nPaypal founded 2000) ¨In 1999: 3,7 billions USD spent on online advertising ¨ ¨ CZECH REPUBLIC n1998 & 1999 ¨27% of households owns a computer, out of these 33% are online ¨In1999: 2,7 millions USD spent on online advertising nNo bubble – too little money involved… ¨Paegas Internet Call nProgresive VoiceOverIP service in Czech rep. ¨ 1995 – 1999 Summary nCzech republic ¨The concept of e-commerce has been much slower to develop in the Czech Republic than in most of Western Europe. ¨Czechs are a relatively well-educated group and computer literate. Yet, there were many difficulties in accessing the Internet. A significant factor was the reletively very high cost of access ¨low personal-computer penetration ¨slow growth of the financial applications needed to conduct online commerce, mainly those concerning credit cards and more-sophisticated banking methods globaltechforum.eiu.com USA ¨Golden Era ¨113 mil. People online in 1999 ¨Unrealistic growth expectations ¨Online payments available and commonly used 1995 – 1999 Summary nInternet usage growth - worldwide n1995 – 2008 e-comm-world-95-08 1995 – 1999 Summary n n 6-5-2009-graf E-commerce transactions growth worldwide 1995 - 2002 Internet usage growth in Czech rep. e-comm-czech Dot Com Bubble Bust nUSA n Nasdaq2 NASDAQ index peaked 10th March 2000, • followed by a rapid downturn, recovery and another downturn • from 2003 quite steady growth Dot Com Bubble Bust nCzech republic ¨Less money involved, bubble bust indirec effect ¨Faster Internet user growth after 2000 nOnline ad spending in Czech rep. ¨1999: 2.5mil USD ¨2000: 4 mil USD ¨2001: 6 mil USD nUser base - growth ¨3/1999: 1 163 170 people ¨2/2001: 1 806 800 people ¨ § E-commerce Timeline 2001 – 2009 USA n2002 ¨eBay acquires PayPal for $1.5 billion n2006 ¨Google Buys You Tube in 2006 ($1.65 billion USD) ¨US e-comm sales 1st time over 100 bil. USD n2007 ¨Microsoft bought 1.6% share of Facebook for $240 million, giving Facebook a total implied value of around $15 billion ¨ CZECH REPUBLIC n2003 ¨Ministry of Informatics established n2005 ¨APEK reports 40% E-Commerce sales growth from 2004, total of 0.5 bil. USD sold in CZ that year ¨Mall.cz the becoms the largest e-comm store in CZ, reports sales over 50 mil. USD (1 bil. CZK) ¨Important Electronic Communication Bill passed ¨ E-commerce Sales 2001 – 2009 nUSA e-comm-usa-00-08 E-commerce Sales 2004 – 2009 nUSA n e-comm-usa-04-08-2 Common Online Activities nCzech republic e-comm-cz-activities-2008 21% of Czech population shops online •That is 39%of the internet userbase E-commerce Timeline 2001 – 2009 nHighlights 2005 - 2009 ¨Rapid growth of social networks & Google eBay great success… •Fasciliate international trade •Revenue around 9 bil. USD expected for 2008 •370 million registered users around the world. Google phenomenon •In less then 10 years a multi-billion dollar company (2005 a 7 bil. USD stock market value) • Facebook becomes huge… •Czech: 560 000 (5%) •Slovakia: 361 000 (5%) •Hungary: 167 000 (1,6%) •Poland: 320 000 (1%) •Austria: 538 000 (7%) •France: 9 000 000 (15%) •United States: 61 000 000 (20%) Seznam remains no.1 in CZ 1,5 mil. Users daily E-commerce Outlook nE-marketer report e-comm-outlook Brief Case study: opening an e-store nConsiderations from SME Management perspective ¨Why? nGlobal sales channel at low cost nGlobal Networking possibilities nTypically low transaction cost nEconomies of scale – great possibilities (one store for millions of people) ¨Why not? nProfitability – lot of competition nRestrictions in human resources (typical for SMEs) n Brief Case study: opening an e-store nMarketing ¨Benefits nImagine buying software offline and online ¨Promotion – AIDA continously, seemlesly - one click… ¨Product - Automatization in product customization ¨Price – custom price, or auction type interactive price + internet as a payment channel ¨Place – Internet as distribution Channel (Software… iTunes…) nViral marketing, PR, buzz marketing, WOM ¨Give your satisfied customers a platform for sharing their emotions and experiences ¨Give your satisfied customers a possibility to endorse ypur products ina easy and entertaining way ¨ ¨Riscs nSecurity + Product lifecycle „Time runs faster online“ n n Thank you n?UESTIONS ¨lukasgottwald@gmail.com References nE-commerce definition: web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTINFORMATIONANDCOMMUNICATIONANDTECHNOLOGIES/0,,contentMD K:21035032~menuPK:2888320~pagePK:210058~piPK:210062~theSitePK:282823,00.html nE-commerce on wikipedia http://en.wikipedia.org/wiki/E-commerce nUNTCD 2000 report http://r0.unctad.org/ecommerce/docs/building.pdf nUNTCD 2004 report http://www.unctad.org/en/docs/ecdr2004_en.pdf nSTUCHLIK, P.; DVORACEK, M. Reklama na Internetu. Grada Publishing. 2002.226 p. nInternet timeline http://www.webopedia.com/quick_ref/timelne.asp nAmazon History: http://en.wikipedia.org/wiki/Amazon.com#History_and_business_model nUS ad spending in 1999 http://www.socialresearchmethods.net/Gallery/Cho2/noname6.htm nCzech e-commerce http://globaltechforum.eiu.com/index.asp?layout=rich_story&doc_id=9933&title=Czech+Republic:+Overvi ew+of+e-commerce&categoryid=29&channelid=4 nDot Comm bubble http://en.wikipedia.org/wiki/Dot-com_bubble nE-comm sales usa: http://www.emarketer.com/Article.aspx?R=1007068 nGlobal internet usage http://www.globalpolicy.org/globaliz/charts/internet.htm nUSA internet usage 1995-2006 http://blogs.zdnet.com/ITFacts/?p=10998 nElectronic Commerce:Concepts, Methodologies, Tools, and Applications http://www.igi-global.com/downloads/excerpts/reference/ecom.pdf nCzech internet usage statistics http://www.czso.cz/csu/redakce.nsf/i/3_kolik_ceskych_domacnosti_ma_pocitac_a_internet n n n