?

O-Commerce vs. E-Commerce Crucial Success factors for Economic Growth & Development Benjamin Joffe
Managing Director | Plus Eight Star | www.plus8star.com

Sometimes the most direct route to innovation is to look abroad and translate what you find
Tom Kelley Author of The Art of Innovation

Chinese proverb

Agenda 0. Introduction 1. O-commerce and E-commerce 2. Building online trust 3. Shift to a digital economy 4. Shift to a knowledge economy

Introduction

e-Readiness Ranking
ICT infrastructure and the ability of its consumers, businesses and governments to use ICT to their benefit

TIER 1
#1 Denmark #2 US #16 South Korea #18 Japan

TIER 2
#21 Ireland #37 Malaysia

TIER 3
#57 China #55 Egypt

Source: The Economist Intelligence Unit & IBM, 2007

Non-US markets lead in many usage categories

E-commerce: Germany

Source: Morgan Stanley Research, 2007

Measuring the success of e-commerce

C2C & B2C transactions amount

Usage

Penetration rate among Internet users

Retailers

Retailers

Internet companies Total ecosystem (incl. material & immaterial goods)

Investment
Payment infrastructure (Internet, mobile, other)

Macroscopic

% of e-commerce in total commerce Jobs / companies created Innovation

e-Commerce

Knowledge

Digital goods

Physical goods

e-Commerce

Knowledge

Digital goods

Physical goods

O-commerce and E-commerce

Offline commerce
and

Online commerce

Question #1
Do you use Internet regularly?

Question #2
Have you shopped online?

Offline transaction (o-commerce)

Display product

Select product Contact seller Offline visit Pay on site

Return product Get replacement or refund

e-commerce transaction
Return product Get replacement or refund Online payment Display product Select product Contact seller Deliver product Pay on delivery Deliver product

Return product Get replacement or refund

Updating your words

Updating your thinking

e-commerce has obvious

advantages
over o-commerce
(Choice, speed, delivery, price)

Building online trust

There is little assumed trust and payment is a problem

Day 1

Day 2

Day 1

Day 2

Trust
Return product Get replacement or refund Online payment Display product Select product Contact seller Deliver product Pay on delivery Deliver product

Return product Get replacement or refund

Trust is a lubricant for transactions

1. Trust in the seller
2. Trust in the payment system

3. Trust in the buyer

Story 1 Online shopping in China

<1 year since purchase but No refund No replacement (No repair?)

Net result
1. Loss of trust
2. I will not buy again from Taobao shops

3. (Maybe you neither ^_^; )

Lets compare to Germany

Story 2 Online shopping in Germany

LCD TV 2000 EUR

Delivery: free (over 40 EUR) Free refund within 30 days

4.5 stars 187 reviews

Payment security and shopping warranty certificates

[test] Test from a government magazine Winner of 2006 for every test (the best you can get)
[TUV] also from the government Tests cars, elevators and online shopping

[e Trusted Shops Guarantee]

[Safe and Easy] Mastercard certification [EHI] no extra fees for online shopping [Verisign] = Security certificates

Plasma TV 2000 EUR

Write positive review about previous vendor

Net result
1. Higher trust in both vendors 2. Handling fees for first vendor but virtuous circle of trust creation

Keys to this transaction

1. Certificates by trusted third parties 2. Money back guarantee

3. Seller rating 4. Secure payment system (bank transfer or credit card)

5. Reliable logistics and limited costs

Shift to a digital economy

eBay
B2C & C2C

> 200 million users

> 1 million make a living on eBay > 800,000 US citizen > 100,000 UK citizen

Rakuten
B2B2C

Results
59,305 companies 18,549,514 items 30 million members

2Q 2007
5 million unique buyers 16 million transactions 800 million EUR gross merchandise sales

Shift to a knowledge economy

E-commerce is not just about physical goods!

Immaterial goods
1. Cultural goods

2. Information 3. Content industry (music, movies, knowledge)

Example Buying online in Korea

Digital Korea
(by Tomi Ahonen, August 2007)
1. Over 50% citizen use Internet banking 35% of transactions are online
2. 63% use mobile for payment 25% of all Visa cards are mobile 3. m-commerce transactions for non-telecom goods exceeded $1bln in 2006

4. (Electronic Signature & E-Commerce Laws)

Naver | Portal

Pay via
1. 2. 3. 4. 5. Mobile phone Credit card Telco 1 (KT) Telco 2 (Hanaro) Bank account

Process
1. 2. 3. Select product or information Enter your mobile number and user ID Receive an SMS

4. 5.

Enter the code on the website Pay on your phone bill

In China, numerous payment systems

(bank cards, Yeepay, UnionPay, 99bill, Alipay, various escrow systems, )

but still cumbersome

It takes 10 minutes to pay online with a bank card!

CTO of an Internet VOD service company in China

The Mechanical Turk

Chess-playing automaton (Europe, 18th century)

Mechanical Turk is a "crowdsourcing" system

1. Requesters post Human Intelligence Tasks (HITs) along with the fee they will pay.
2. Turkers (the workers) choose their HITs, do the jobs and submit the results.

40,622 tasks available from 352 requester

Examples of HITs
1. Locating information on a document 2. Translating foreign languages 3. Transcribing speech
4. Comparing audio to written transcripts.
(most pay very little: 0.1-0.5 RMB)

Internet is a retail channel for human intelligence

Internet research by English-speaking University graduates (Masters, PhD)

Convenient.info is based in Sri Lanka

Payment online or by invoice in several currencies

Conclusion

Idea #1
E-commerce can create jobs and enhance economic activity

Idea #2
e-commerce is not so different from o-commerce

Idea #3
The keys for growth are TRUST and PAYMENT

Idea #4
Mobile is a payment infrastructure for goods and content
(and not just mobile content)

Idea #5
With the right legal framework and awareness, China is able to leapfrog to the digital age

Key roles
1. Protect consumer rights 2. Clarify suppliers rights and obligations 3. Simplify procedures 4. Support easier payment systems 5. Increase awareness

Closing remarks
West African regional workshop on e-commerce (June 15, 2007) E-commerce is a catalyst for inclusion in world trade and for enhancing competitiveness on the global market
Secretary General Finance Ministry of Niger

We need to establish a legal framework for e-commerce that will guarantee a secure environment for online trading by simplifying processes and procedures,

Closing remarks
West African regional workshop on e-commerce (June 15, 2007) 37% of the surveyed enterprises still cited the lack of a legal framework as one of the difficulties faced in rolling out e-commerce in Egypt.
Dr Nagwa El-Shenawy Economic Researcher Egypt

They also required an awareness campaign on the Egyptian e-signature law.

Participants also stated the importance of using mobile communication as a potential tool for trade.


Thanks!
benjamin@plus8star.com +86 1371 880 3321 Skype: benjamin0123