Special issue on: New business models for electronic commerce

• Authors: Virpi Kristiina Tuunainen;Matti Rossi;Timo Saarinen
• Venue: ACM SIGMIS Database
• Year: 2003

Electronic commerce has been developing at a rapid pace in thepast few years resulting in some great success stories. In somerespects, these successes have created both an aura and impressionfor many that achieving such success is common and perhaps eveneasy to accomplish. Investors with this mindset, in turn, becameenthusiastic supporters for companies that were willing to take thechallenges offered by these new information and communicationtechnologies. Thus, we have witnessed a real "eboom" in the pastfew years. However, we have also seen a dramatic down-turn forthose companies that have not been able to realize the expectationsof the investors.It seems obvious now in hindsight that in many situations, theexpectations for e-business initiatives, both for dot. coms ande-channels of traditional companies, were far too optimistic. Infact, a large percentage of these initiatives were not welldesigned and implemented. Consequently, problems occurred, forexample, in customer services, deliveries, returns, as well aslogistics in general. Huge money was also often spent in building abrand image and marketing activities to complement the web-servicesthemselves.What seems clear today is that e-business initiatives require asolid business model that helps focus and direct tactical andoperational efforts. With an explicitly defined business model, itbecomes possible to distinguish the basic choices for productdevelopment, marketing, ordering, logistics, financing and paymentsolutions that either carry the ebusiness initiative to success orhelps further refine the system. In our opinion, it is clear that adefinitive single "all encompassing e-business model" does notexist. Rather there is likely to be many different business modelsthat fit into different context, economic environment, customergroups and needs, products and services. This special issue aims tofocus on what kind of business models have been used, or could beused, and what has been their contribution among other factorsleading to success of failure of the recent e-businessexperiments.The four papers for this special issue offer interestingperspectives and insights on different e-business models.The article by Lee and Brandyberry examines the e-tailersdilemma. They look at the problems e-tailers have faced in tryingto obtain new customers regardless of costs. In many cases wherethe number of effective visitors (i. e., those who actuallygenerate business) has increased, additional costs for servicingthese customers have also increased resulting in the e- tailersfacing financial trouble. This represents a situation that hasoccurred far too frequently in the past few years. Lee andBrandyberry have developed a model to formalize the e-tail visitordynamics to understand the situation better. They also offer avisitor function by which it is possible to project profitabilityof infrastructure investments to support etailing for effectivevisitors.Palmer and Lindeman's study focuses on consumer markets andthree different market mechanisms used for e-business. The threemarket mechanisms are direct search, broker and dealer. They haveconducted an empirical comparison on three consecutive cases,PriceMarket, NetMarket and Bottom Dollar, on the trust mechanisms,reputational ratings, information quality, availability, speed andliquidity. They found significant differences across these threemodels. The basic message is that different market mechanisms, ormix of mechanisms are appropriate in different buyer-seller andproduct context in the consumer market.The article by Craighead and Shaw looks at ebusiness from aresource-based perspective of the entire supply chain. They proposea model that represents an integration of supply chain withindirect and direct value for the customer at multiple points in asupply chain. They also provide a set of matrices that enablemanagers and researchers to conceptualize the business rulesprovided by the model. Their model shows the role of informationtechnology and the supply chain in creating value with e-commerceapplications.Krieger and Muller consider possibilities for benefiting fromthe value created when Internet communities solve problems ofcollective actions. They focus on the beliefs of the communitymembers, and use a metaphorical approach to describe Internetcommunities, focusing on their legitimacy and reproduction. Theyalso offer a framework on how the value created can be translatedinto profit. Krieger and Muller conclude that it is not enough toconsider success as the ability to legitimize the community, butthe communal entrepreneur must also position the community to itscompetitive environment.