The evolution towards C-Commerce

From it’s beginning as a military communications network, the Internet was quickly adopted by the entrepreneur as the newest frontier to promote their businesses. The earliest business use of the Internet was the creation of informational websites, which typically involved merely reformatting existing marketing materials to create an online brochure. This simple use of the Internet to present static information was quickly supplanted by the first generation of e-commerce merchants, such as electronic catalogue businesses selling hard goods such as books and computers to consumers. These approaches revolved around generating transactions through click-through banner advertisements or increasing traffic-based advertising revenues rather than capitalizing on the unique aspects of Internet commerce. Furthermore, these

First-generation online businesses were stand-alone operations that replicated traditional, physical-world business models online and competed based on price and breadth of product selection.

Historically, the simple E-catalogue Internet business model has been successful in generating online traffic and transactions. However, as the number of companies attempting to conduct business online has increased, the Web has become a highly competitive and crowded business environment. Businesses require more than just competitive pricing and product range to succeed online.

The beginning of C-Commerce: Affiliate Marketing

With the limited scope of banner advertising as a viable mechanism for sales generation, portals found increasing need to alter their strategy to ensure their stake in online e-tailing. Affiliate marketing arose from this need.

Amazon.com, the U.S. based e-tailer was and still is one of the pioneers in new affiliate marketing and uses an associates program that puts an Amazon hyper text link on over 400,000 websites. For example, a local music news website featuring a link to amazon.com allows users to purchase latest release albums. The local music website then receives a commission on each sale with Amazon.com executing the order, customer service, fulfilment and shipping operations.

Amazon.com patent its internal affiliate program in February 2000. The patent is a threat to companies running or managing pay-for-performance referral programs presenting potential litigation issues associated with this business model. Although, dotcoms can still go-head with their own affiliate programs as the patents are too broad and won’t withstand judicial scrutiny when tested in court. Affiliate programs still make business sense but are complex with possible risks.

According to research organization APT Strategies, by 2002, affiliate programs will generate 15 per cent of all Asia Pacific Internet sales. The ultimate benefit of an affiliate marketing system is its capacity to allow companies to proliferate their ‘selling web’ deep into the Internet, giving other sites an onus to enter affiliate partnership through revenue sharing.

However, as fast as affiliate marketing rose in importance, it quickly had its shortcomings noted. Its most significant limitation is that most affiliate marketing systems offer no content aggregation processes. The static nature of the iconic link means that further depth cannot be developed into the relationship between the two entities. Collaborative commerce can take more radical and effective routes. Companies about to embark on an affiliate program need to assess issues such as:

The structure of affiliate compensation

Management of programs and payouts either internally or with a third party which requires the merchant to track and report transactions

How should affiliates be selected to maximize qualified customer leads?

Who internally to the company will manage the affiliate program, as affiliate programs need to be actively monitored to evaluate the program’s success and performance?

Should your company to be an affiliate as well as the benefits of affiliate programs for merchants may generate revenue by serving as an affiliate for other companies

How will affiliates be supported as merchants provide affiliates with ongoing offers, product information?

The Collaborative commerce business model can deal with affiliate program issues seamlessly.

As we have seen in the rapid development of advanced affiliate marketing solutions since 1998, the next step for online selling is networks of Web partners linking together. These networks will comprise of many companies, with tight financial and enterprise integration.

HMV, the global music retailer is an excellent example of this kind of system. The retailer’s website features aggregated content from its network of partners using XML technology. MTV provides its music reviews for latest releases. Businesses are able to reach new markets through co-branding, co-marketing and cross selling. A major advantage is that the operator is able to compare potential partners and scrutinise on cost and offerings, taking only the most competitive.

In my mind, questions that must be asked when determining a collaborative commerce strategy include:

What level of co-branding is most effective with your demographic?

Which special offers are best matched with the demographic?

What offers are most effective for your Web Selling Partner?

What information do your customers seek out when deciding on a purchase?

What do your customers browse before and after viewing your offer?

Collaborative commerce uses the web to facilitate the flow of information rather than process transactions. As collaborative commerce simplifies data interchange- the use of online information exchanges between traditional

The way businesses utilise the Internet is in its early infancy. The communication revolution that will continue to occur in the coming years will dramatically force a rethink of business frameworks with business models becoming obsolete with each and every advance in Web technology and reach.

Businesses have long been using electronic communications systems to relay transactional information. Systems used such as Electronic Data Interchange were and are used to facilitate simple informational flows, such as inventory orders from a factory floor to the provider of raw materials. The Internet’s dominance as the world’s communication platform has created a far more efficient and flexible means for businesses to collaborate than devoted data stream systems.

Collaborative commerce uses Web based business-to-business exchanges to facilitate information flow, rather than just to perform raw transaction processing as seen in antiquated systems such as dedicated electronic data interchange.

The accessibility and ubiquity of the Internet makes possible a radical paradigm shift with the potential to transform insular supply chains, B2B exchanges and sub-optimal approaches to online consumer distribution into open and dynamic marketplaces or trading communities. Companies can publish information online so it is instantly available to all business partners. They can exchange ideas, collaboratively brainstorm and cooperate on design of new products and services. With suitable security systems proprietary data can be exchanged, allowing projects to be managed jointly regardless of geographical segmentation.

Businesses are increasingly focusing on B2B relationships as an alternative method of extending their online reach and developing new product offerings. Several new approaches to Internet distribution channels have emerged that go beyond the traditional model of using the Internet merely as a catalogue and ordering system.

Complementary business partners that participate in an online network can leverage their relationships to combine financial and enterprise resources to create new value and reach new markets. This allows large companies to bring online traditional business partners, such as suppliers and distributors, and help each network participant broaden its market reach and create new markets. In addition, this collaborative commerce model goes beyond affiliated networks by replacing vertical and closed selling chains with a web of collaborating partners working together to present jointly created offerings. The power of the Internet can be leveraged to rapidly to create a worldwide distribution system and customer reach irrespective of its established physical distribution capabilities. In essence, the Internet permits businesses to go beyond traditional distribution chains to create a matrix of online business partners.

Ideally, online marketplaces should be open and able to operate with similar systems, so that buyers and suppliers can reach the largest number of business partners, irrespective of the procurement or trading applications they may be using or the trading communities to which they belong. In addition, the Internet can enable interconnectivity between marketplaces and thus allow the end-consumer access to wholesale exchanges directly, disintermediating traditional distribution channels and creating new opportunities to dynamically cross-sell or up sell.

With the potential for the totally direct and dynamic marketplace, anyone-to-anyone e-commerce becomes possible. Entities of any size will be able to interact on the same platform, in the same manner. The prohibitive cost barriers of complex private networks are removed with Web servers allowing simplification of automation processes that are scalable and inherently compatible.

Anyone-to-Anyone eCommerce or C-Commerce is becoming a tangible, viable concept with the Web as a hub for collaboration through common communication standards. Through focusing on partnerships with target market synergies, businesses are able to leverage other less obvious marketing opportunities to their advantage. Individuals will be able to directly access points on the distribution chain that previously would have required several intermediaries.

For more information contact APT Strategies at info@aptstrategies.com.au