Week
Six: Digital Markets
Digital Markets
Read or
listen to the podcast on the Digital Enterprise (32
minutes) on digital markets, then answer the questions about an online shopping
experience you have had. There are three questions to answer.
Question 1
a) What experiences have you
had with shopping online?
This is
an easy question. I have never purchased anything online! There has never been the need for me to do so. My sisters regularly
purchase online so I will live through
them to complete this week’s task!
b)
Describe a good experience.
A good experience is purchasing the product at a cheaper price than
retail prices, you receive the product quickly and it is everything you
expected it to be. I know people who have purchased jewellery for bargain
prices on ebay. One example is purchasing a sterling silver item and it turns
out to be white gold!
c) What
did you like about the online store you used?
·
Not leaving
the house!
·
Price Transparency
·
Global
access from any location
·
Comparison
d)
Describe a bad experience.
Purchasing an expensive item
through ebay and depositing the money in the sellers bank account and never receiving the
product. Even though you speak to the seller on the phone who is now claiming
to be a third party and you give authorities their details including their
address, you do not receive your money back and they are not held accountable!
The good old saying ‘if it’s too good to be true, it is’
Another bad experience I know of is when a deb dress was purchased
online from China and when it arrived it did not resemble the picture that was
on the net at all. Luckily enough when contacted the company did agree to a
refund. Phew!
e) What
problems did you have with the online store?
I imagine the most frustrating issue is having to wait an extended
period of time for an answer
to a query about the product especially if the site is inadequate in informing
or instructing customers.
f) What
features make an online store more appealing?
·
Special discounts for
shopping online
·
Access to items not
available in stores
·
Convenient
·
Anywhere, anytime
·
Little effort
·
Extra information about
product online
g) What
features make an online store less appealing?
·
Fraud and
security concerns
·
Lack of
cost disclosure. My example is plane tickets over the internet, they advertise
the tickets for $50 but then charge you an additional $30 for using your credit
card!! To add to the frustration they do not offer any alternative payment
method!@#$%^ RIP OFF
·
No hands
on inspection can lead to disappointment
·
Privacy
·
Receiving
annoying emails after purchase.
h) Should
we expect to see the prices of goods and services rise or fall due to the
migration of consumers online?
I expect the prices of goods and services to fall due to the migration
of consumers online. Cutting out the middle man, no market
entry costs and no overheads allows businesses to sell at a more competitive
price. As consumers shopping online we are empowered through the transparency of prices which
again will generate greater competition between businesses.
Marketplace elements include:
Communications infrastructure
Structured environment
Transaction mechanism
Delivery
Marketplace elements include:
Communications infrastructure
Structured environment
Transaction mechanism
Delivery
I have included an additional reading from
MIT (Understanding Digital Markets).
After reading it please discuss the following statements and indicate if you
agree with them or not. Please note there may not be a
right or wrong answer.
Question 2
a) The
dispersion of prices (that is, the spread between the lowest and highest price
for a particular product) will narrow.
No. Research by Bailey (1998a, 1998b), Brynjolfsson and Smith (1999) find that price
dispersion is no lower in Internet markets as compared to conventional markets.
The factors they give for this result is market immaturity and awareness. Since
the report is from 1999, |I wonder if this would change in a more updated
report?
There are several potential
sources of price dispersion in electronic markets that need to be researched
further which include, product heterogeneity, convenience, shopping experience,
neural real estate, trust, low menu costs and price discrimination.
b) The
importance of brand names will decrease.
No I believe they will remain important especially while we still have
celebrities to endorse them and teenagers who want to be trendy! Also, the
report revealed that sites that have missing information regarding products
will result in consumers relying more heavily on known brand names that they
can trust for quality.
c) Price competition will make all products
cheaper.
Of course
price competition will make all products cheaper! This statement is already
proven. But seriously how low can they go? There has to be a limitation if we
value quality.
d)
Digital markets will become dominated by a handful of mega-sites, like
Amazon.com.
As the article suggested, Amazon is a mega site due to the extensive
advertising they undertook to ensure people were aware of their site and what
they have to offer. To ensure you are
not ‘a needle in the haystack’ you will need to advertise just like any
business online or not.
e) How do
you think the balance of power between buyer’s and seller’s will change?
As stated before ‘information is power’ and as consumers we are more
informed and more empowered when making purchasing decisions. We are more aware
of prices and have a whole world to browse so I think our power has increased. But
thinking about Kony 2012 I remember how convincing this was and feel that with
the right advertising the seller’s power has also increased.
f) Prices are clustered online.
Reminds
me of the cardboard price fixing scandal!
I don’t think so, what a huge job. It would be easier for the business
to let the customer do all the work (if they want to). I feel businesses will
be more inclined undercut one another. An example was given in the report where
Books.com has a compare button for customers to use to see fi their prices are
lower.. This is also evident in the physical market where retailers like JB
HIFI and |Bunnings will match competitors prices.
g) Online prices are elastic. (i.e.
immune to change up and down with demand)
People
will always try to make the most money they can from products in demand which
generally are the latest brand name fad
h) Online prices are generally
transparent (the extent to which prices for a given product or service are
known by buyers in the marketplace.).
When shopping online prices are generally
transparent. When comparing identical products between sellers we can achieve
transparency but as consumers if we desire full transparency we need to be
aware of product heterogeneity. Also I remember when we were looking at good
and bad web sites that I came across a site which did not offer prices for their lounge suites. As a
consumer I didn’t appreciate it nor would I bother calling or emailing them for
a price.
Question
3
a) What types of m-commerce
services does your cell phone provider offer?
Telstra
equals bigpond tv, city search, foxtel, games, gmail, access to work emails,
internet, maps, gps, my account details.
b) Which of these services do you
use?
gps,
games, internet.
c) What types of transactions do
you perform through your cell phone or other wireless device?
Internet
banking, emails, google maps, facebook, city search for businesses, access work
emails.
d) What types of transactions
would you like to perform, but are currently unable to?
I would
like my phone to have voice recognition not only for when you want to call
someone but for your gps. How good would it be to say how do I get to the
Regent Theatre and your phone tells you or “Is it going to rain?|’
e) What is your opinion of
wireless advertising/mobile marketing?
When Telstra SMS me about special deals I find it
annoying and rude. I like receiving SMS that remind me of appointments or when
credit card payments are due.
Further research:
Chris Anderson, the editor of Wired Magazine, wrote a book called 'The Long Tail'. Anderson's theory of 'The Long Tail' has been widely acclaimed, but there has also been recent research which questions it's veracity.
Conduct your own research about 'The Long Tail', and state your opinion
in favour or against the theory.
I agree with the theory.
I don’t feel that Anderson is
claiming the tail will overtake the head but merely that there is a market out
there and is proven in businesses like Amazon and Ebay.
The head represents the products
found in retail stores while the tail represents products only found on the
internet. I do believe that with time, awareness and the better we become with
using the digital enterprise, the tail will grow. Ian’s horse book business is
an example of a tail business.
It is also worth reading about Pareto's Principle, the 80/20 Rule. How
do the two relate to each other?
The 80/20 Rule is a golden business rule which means that 80% of your business or sales will be generated from 20% of your customers. In other words 20% of your efforts or customers are responsible for 80% of your businesses' revenue. The Long Tail Theory is a concept that somewhat counters the golden 80/20 Rule. The Long Tail Theory is derived from Pareto's thinking that low demand can effectively and collectively make up a market share that exceeds the few of those that are in high demand. In other words, a large number small customers can potentially out-perform a small number of large customers. http://www.developer-resource.com/long-tail-vs-80-20.htm
Research
Readings:
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