The World Economy Runs on Credit
Virtual hosting services give you some of the flexibility of enterprise computing, but what you get depends on the vendor. For lots more information on e-commerce and related topics, check out the links on the next page. You provide the web designers and developers to create and maintain your site. In this option the vendor provides a simplified system for creating your store. Database access is sometimes a part of the package. You pay by the month for these services. Two good examples of this sort of offering include Yahoo Stores and Verio Stores. The system usually involves a set of forms that you fill out online. Part of the package includes security, and almost always a merchant account is also an option. In general the vendor maintains the equipment and software and sells them in standardized packages. The vendor’s software then generates all of the web pages for the store for you. Simplified e-commerce is what most small businesses and individuals are using to get into e-commerce.
So if 25 percent of Dell’s sales move over to the Web instead of using the telephone, is that a big deal? Or what if people purchasing over the web tend to purchase more accessories? If the transaction cost on the web is lower, or if the presentation of merchandise on the web is more inviting and encourages larger transactions, then moving to the web is productive for Dell. But what if the sales conducted over the web cost the company less (for example, because the company does not have to hire someone to answer the phone)? Dell would be selling no more computers. If Dell were to lose 25 percent of its phone sales to achieve its 25 percent of sales over the web, then it is not clear that e-commerce has any advantage.
However, it is important to point out that the impact of e-commerce only goes so far. Getting people to buy something from your Web site. The mall has social and entertainment aspects that attract people, and at the mall you can touch the product and take delivery instantly. Mail order sales channels offer many of these same advantages, but that does not stop your town from having a mall. E-commerce cannot offer any of these features.
With banner ads, the advertiser takes all the risk — if no one clicks on the banner then the advertiser wastes money. If the Web site sends a bunch of people to the affiliate e-commerce site but no one buys anything, then it has no value for the Web site. In CPC links, both sides share risks and rewards equally. Commission-based affiliate programs place all the risk on the Web site.
