Published in: Antlov, Klra (ed.): Proceedings of the Liberec Informatics Forum, 4.-5. Nov.

2010, Liberec, Czech Republic, pp. 171-179

Hans-Dieter Zimmermann
FHS St. Gallen, University of Applied Sciences Teufener Strasse 2, 9000 St. Gallen, Switzerland hansdieter.zimmermann@fhsg.ch, www.hdzimmermann.net

FROM ECOMMERCE TO ECOMMERCE 2.0: THE CHANGING ROLE OF THE CUSTOMER 1. Development of Electronic Markets and eCommerce 1.1. Emergence of Electronic Markets
Since its beginning, information and communication technology (ICT) were utilized for automation of business processes. Already in the sixties ICT has been utilized to overcome organizational boundaries. The concept of Electronic Data Interchange (EDI) enabled the exchange of business documents across different organizations. With the emergence of inter-organizational (information) systems (IOS) the scientific discipline of Information Systems was born. In 1987 one of the most cited scholarly articles in the context of interorganizational systems was published by Malone, Yates, and Benjamin [6]. The authors developed the so called Electronic Markets Hypothesis (EMH), the term electronic markets occurred for the first time. The EMH is based on of transaction costs theory and including its further developments the EMH is still one of the main concepts in the discussion about electronic markets and electronic commerce (eCommerce). With the emergence of the World Wide Web (WWW) eCommerce applications began to develop in the beginning of the nineties [12]. Although there was a scholarly discussion about the long-term potentials of electronic markets and electronic commerce available in the beginning the Web

Electronic copy available at: http://ssrn.com/abstract=1671344

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only has been applied as an additional communication channel. Companies used the Web to present their existing print information as static web pages. Only in the mid nineties eCommerce applications begin to comprise more interactive features. The role of the customer remained essentially unchanged, communication and transaction processes have been digitalized, but they havent been challenged in general. The customer still was at the very end of the one-way value chain.

1.2. The eCommerce Pioneers

One of the first online marketplaces for consumers was eBay (www.ebay.com) founded in 1995. It offered a virtual flea market for consumers from the very beginning. Being a pure consumer-to-consumer (C2C) auction based marketplace at the beginning eBay developed to a business-to-consumer (B2C) marketplace as well offering different kinds of proving mechanisms beyond auctions. Thus, eBay today can be seen as a virtual department store offering products in more than 50000 categories and having more than 83 million active users worldwide. Therefore eBay today is a direct competitor of another eCommerce pioneer, Amazon (www.amazon.com). Amazon started as an online bookseller following a B2C model in 1995 as well. Nowadays, Amazon offers products from basically all categories and provides a platform for C2C transactions as well, e.g, for selling used books. Furthermore, Amazon offers its platform for third party businesses as well. Thus, although having totally different business models in the beginning, the two eCommerce pioneers today offer very similar functionalities.

2. Changing Value Creation in the Digital Economy

The developments of the emerging digital economy can be characterized applying four distinct criteria according to [14]: Structural changes of the value creation system, changing processes, new products and services, and respective infrastructures, especially networks, network services as well as market services. Using the first two criteria we will discuss the two eCommerce pioneers in the following.

2.1. Changing Value Creation Structures: New Intermediaries

Sarkar et al. provide a suitable framework to analyze the impact of ICT on electronic markets [10]. Based on transaction cost economics they developed four scenarios for intermediaries in electronic markets: re-inforced direct sales, disintermediation, extra-intermediation, and re-intermediation. Their main argument is that in electronic markets new intermediaries can emerge as well as disappear.

Electronic copy available at: http://ssrn.com/abstract=1671344

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eBay is a typical example for the third scenario, extra-intermediation. In the sense of the EMH by Malone et al. eBay emerged as a cybermediary providing an online space for the C2C and B2C exchange of goods. The added value is very obviously higher than additional transaction costs. E.g., a typical private seller wont ever be able to reach a regional, national, or even global audience at justifiable (transaction) cost. In the fourth scenario new intermediaries come into play. That applies to the origins of Amazon: As an online bookseller the company took the position of the stationary bookshops. Thus, form the value creation system perspective the profile of the intermediary has been changed but no intermediary has been eliminated or newly created.

2.2. Changing Value Creation Processes: The Integration of Customers into Value Creation
The changed value creation processes in electronic markets can be characterized through the changing role of customers. In traditional value chains the customer is at the very end buying what the chain is offering. A feedback mechanism is not part of the one-way process. eBay as well as Amazon introduced customer feedback mechanisms from the very beginning, interactivity was and is highly important in their business models. Essler and Whitaker discuss the value of interactivity in eCommerce business models in [3]. At eBay the customers have different roles: He or she is acts as buyer as well as seller. In both roles he or she contributes to the respective partners profile through an evaluation. Thus, he also takes responsibility as well; his or her role becomes much more active. For Amazon the utilization of the potentials of ICT was a source for differentiation from the very beginning and as such part of the business model. Beyond pure commercial transaction they integrated the customer into the value creation even before the emergence of the so called Web 2.0. Customers are able to evaluate bought products and based on evaluation and order history recommendations will be created. The Amazon affiliate program created a new form of cooperative marketing and distribution. Participants are directly integrated in the marketing and sales processes. From the very beginning Amazon understood how to utilize customer search and buying behavior as well as the customers knowledge and experiences. The individual is no longer only a customer but a co-creator of services. Consumers are being integrated in earlier phases of the transaction as well. Crowdsourcing and Mass Customization are respective concepts (see chapter 3.4).

4 3. The Customer in the Center: eCommerce 2.0 3.1. From eCommerce to eCommerce 2.0
For a long time eCommerce applications only have been the extended workbench of traditional commerce, the potential of the Internet in respect to interactivity has not been utilized at all: On the one side there was a lack of concepts as well as experiences available, on the other side the infrastructure in terms of broadband access and Internet flat rates for the consumers was not ready at all. Already in 1994 the research project Electronic Mall was launched at the University of St. Gallen (see [11]). Beyond enabling commercial transaction the communication and interaction between users was in the center: On this classical marketplace people gathered to buy and sell, but also to socialize, argue politics, and exercise all the other prerogatives of citizenship [13]. Based on achievements in technology as well as in broadband access and pricing todays opportunities for interactivity are much improved. In 2005 the publisher Tim OReilly coined the term Web 2.0 [7]. Web 2.0 basically comprises (design) principles and technologies which enables the realization of some of the original ideas of the World Wide Web. The respective developments in the eCommerce domain are called eCommerce 2.0. In the following we will characterize some of the typical eCommerce applications from a consumers perspective in an overview.

3.2. Comments and Evaluation

First, eCommerce applications can be enriched with additional features resulting in eCommerce 2.0 applications with a much higher degree on interactivity. For example, suppliers have the opportunity to let customers evaluate products and services as well as give feedback. As Amazon offers both features form the very beginning, other online businesses integrated these features more and more. Community portals, being independent from certain suppliers or brands, have emerged as well. Consumers are being enabled to read comments and evaluate products and services. Some typical examples are ciao.de or dooyoo.de. Both portals integrate price comparison functionalities as well. This kind of user generated content (UGC) is subject to many analyses. For example, the German market research organization ACTA (www.acta-online.de) found out that in 2009 already 97% of Internet users research for product information online. Beyond price comparison, tests, or manufacturers information 52% of

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the users trust the feedback and evaluation of other users, but only 39% trust manufacturers information. The study also revealed that the more consumers shop online the more they rely in other consumers feedbacks and evaluations. Thus, access to experiences of other buyers get more and more important whereas traditional sources such as the manufacturers itself get less relevant.

3.3. Social Software

Web 2.0 tools called Social Software can be seen as the second step of development enabling Social Commerce. Social interaction among user is in the center of the terms notion. Typical examples are weblogs or blogs, wikis, but social networks such as Facebook or Twitter as well. For example, the Facebook page Adidas Originals (facebook.com/adidasoriginals) has - as of October 2010 - more than 4.8 million fans as the supporters - and thus potential customers - are called, Bon Jovi (www.facebook.com/BonJovi) more than 5.6 million, and Starbucks (www.facebook.com/Starbucks) more than 16 million fans. Companies and other organizations using social networks such as Facebook apply them in order to inform their fans about recent developments in the context of products, services and/ or the brand. Fans can give feedback instantly as well as express whether they like it through the iLike button. The social network Twitter is being applied by more and more businesses as well. The computer manufacturer Dell, who is a pioneer in mass customization, proofs that through Twitter products can be sold as well. Several sources report that the company generated a turnover of 6.5 million USD within two years through DellOutlet on Twitter. They got close to 1.6 million followers so far (twitter.com/delloutlet). Although theres not much empirical evidence available concerning the economic benefits of social software analyses show that word of mouth can have a positive impact on turnover and profit: WOM relies on information that is communicated about companies, products, or services among consumers. ([2] p. 131). A more general discussion about viral marketing provides [4].

3.4. eCommerce 2.0 Concepts

On a further level we find eCommerce 2.0 concepts such as Crowdsourcing, Mass Customization, and the Long Tail. Crowdsourcing The notion of crowdsourcing denotes the utilization of the intelligence of the masses. Active community members carry out tasks using web based platforms

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mostly for free. The term was introduced by Jeff Howe in 2006 [5]. Basically, the Internet serves as a medium for creative and collaborative processes between organizations and community members. Papsdorf provides fife categories of crowdsourcing differentiated y the level user involvement [8]. The most prominent example may be Wikipedia. The pages of this online encyclopedia are being generated by a countless number of authors without getting financially rewarded. The knowledge of individuals results in a huge spectrum of information. Another typical example is the platform spreadshirt.de. The outsourcing of tshirt design to the community of Internet users leads to big number of designs. The user-designed t-shirts are being produced then by spreadshirt.de. Other companies with well known brands try to involve customers and users into product development. Examples are the platform of Tchibo Ideas (www.tchiboideas.de), My Starbucks Idea (mystarbucksidea.force.com), or Dell IdeaStorm (www.ideastorm.com). As a result, companies learn about their customers ideas and needs and customer loyalty may rise. From a marketing perspective these approaches can be also viewed as a kind of outsourced market research. In the meantime professional platforms offer crowdsourcing functionalities which can be used by companies; examples are atizo.ch or Bonspin (www.bonspin.de) A non commercial example is the cooperation of the Library of Congress with Flickr: A part of the photo archive is accessible through Flickr to be tagged and commented by users1. Google utilizes the crowdsourcing approach as well: In a competition users can tag images in order to increase the google image search quality (images.google. com/ imagelabeler). Mass Customization With mass customization customers are being able to create individual products such as books (e.g., www.pegastar.com), watches (e.g., www.121time.com) or sport shoes2. The basic idea is to combine individualization of products with efficiencies of mass production [9]. The Long Tail The so called long tail can be also considered as a eCommerce 2.0 concept: "The theory of the Long Tail is that our culture and economy is increasingly shifting away from a focus on a relatively small number of "hits" (mainstream products and markets) at the head of the demand curve and toward a huge number of niches __________
1 http://blogs.loc.gov/loc/2008/01/my-friend-flickr-a-match-made-in-photo-heaven/

2 www.adidas.com/com/miadidas/, mongolianshoebbq.puma.com, http://nikeid.nike.com

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in the tail." [1]. Products which are relevant only to a small group of people and not to the mass market may get visible to other customers as well. The long tail therefore means the revaluation of niche products in niche markets. Social Networks are an absolute prerequisite in order to make the long tail work. Following Anderson, the long tail democratizes the tools for production and distribution as commercial channels are no longer necessary to market respective niche products. One example for the long tail concept is the platform spreadshirt.de. Every user has the possibility to market his or her design globally what never would be possible without it.

4. Summary
The presented eCommerce development of the last two decades shows how the role of the customer dramatically has changed. Being the end of the one-way digitalized value chain in the beginning, today the customer can be actively participate in value creation in different roles such as expert, consultant, designer, or even seller. Consumers are today at eye-level with suppliers. Web 2.0 provides a variety of opportunities for the consumer to interact with suppliers but to interact among each other as well beyond the suppliers communication channels enabling social commerce. For the consumer this means on the one side that he or she get more power and more independent to follow his or hers own interests. To do so, respective competencies are required. On the other side the consumer carries more responsibility as, e.g., wrong evaluations or feedbacks may have a major impact on companies, brands, or even single persons. A respective media- and information literacy is crucial in order to benefit from the new developments and in order not to get lost or even to suffer.

Literature
[1] Anderson, Chris: The Long Tail, WIRED, No. 12.10 (2004), http://www.wired.com/wired/archive/12.10/tail.html (29.1.2010) [2] Davis, Alanah; Khazanchi, Deepak: An Empirical Study of Online Word of Mouth as a Predictor for Multi-product Category e-Commerce Sales, Electronic Markets , Vol. 18 (2008), No. 2, 130-141 [3] Essler, Ulf; Whitaker, Randall: Re-thinking E-commerce Business Modelling in Terms of Interactivity, Electronic Markets, Vol. 11 (2001) No. 1, S. 10 - 16

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[4] Helm, Sabrina, Viral Marketing - Establishing Customer Relationships by Word-of-mouse, Electronic Markets, Vol. 10 (2000), No. 3, S. 158-161 [5] Howe, Jeff: The Rise of Crowdsourcing. Wired Magazine, 14, 2006, http://www.wired.com/wired/archive/14.06/crowds.html [6] Malone, Thomas; Yates, Joanne; Benjamin, Robert I.: Electronic markets and electronic hierarchies, Commununication of the ACM 30, 484-497 (1987). [7] OReilly, Tim: What Is Web 2.0? Design Patterns and Business Models for the Next Generation of Software. 2005. http://www.oreillynet.com/pub/a/oreilly/tim/news/2005/09/30/what-is-web20.html [8] Papsdorf, Christian: Wie Surfen zur Arbeit wird. Crowdsourcing im Web 2.0. Frankfurt am Main, Campus, 2009 [9] Salvador, F., de Holan, P. M., & Piller, F. (2009). Cracking the code of mass customization - the magazine. MIT Sloan Management Review, 50 (3), 71-78. [10] Sarkar, Mitra; Butler, Brian; Steinfield, Charles: Intermediaries and Cybermediaries, JCMC Journal of Computer-Mediated Communication , Vol. 1 (1995), No. 3 [11] [Schmid et al. 1995] Schmid, Beat; Kuhn, Christoph; Mausberg, Paul; Zimmermann, HansDieter: Electronic Mall: Banking und Shopping in globalen Netzen, Stuttgart, Teubner, 1995 [12] Schmid, B. F. (1995). Electronic Retail Markets. Electronic Markets, 5(1), 3-4. doi:10.1080/10196789500000011 [13] Zimmermann, Hans-Dieter: The Electronic Mall Bodensee (EMB): An Introduction to the EMB and its Architectural Concepts. In: Electronic Markets, Vol. 7 (1997), No. 1, pp. 13-17. [14] Zimmermann, Hans-Dieter: Understanding the Digital Economy: Challenges for new Business Models, in: Chung, Michael H. (ed.): Proceedings of the 2000 Americas Conference on Information Systems (AMCIS 2000), Long Beach, CA, August 10-13, 2000

Summary
The eCommerce developments during the last two decades show how the role of the customer dramatically has changed. Being at the end of the one-way digitalized value chain in the beginning, today the customer can be actively participate in value creation in different roles such as expert, consultant, designer, or seller. Today, consumers are at eye-level with suppliers. Web 2.0 provides a variety of opportunities for the consumers to interact with suppliers but to interact among each other as well beyond the suppliers communication channels enabling social commerce. For the consumer this means on the one side that he or she gets more power and more independence to follow his or hers own interests. To do so, respective competencies are required. On the other side the consumer carries more responsibility as, e.g., wrong evaluations or feedbacks may have a major impact on companies, brands, or even single persons. A respective media- and information literacy is crucial in order to benefit from the new developments and in order not to get lost or even to suffer.

Key words: ecommerce, ecommerce 2.0, social commerce, electronic markets