Investment in Electronic Commerce: Financial Perspectives and Profit Conditions

Abstract

Electronic Commerce ("eCommerce") is a concept for trade based upon products and\nservices that are being marketed, contracted, and paid for over the Internet. Consequently, electronic\ncommerce demands for the investment in computer systems, marketing, logistics and payments.\nThis paper will focus on the profitability of investments in eCommerce with a special focus on\noutlays for information technology systems and sales management. If the services are made more\nstandardized, if they do not change that often, or if they are well known to the customers so that\nthere is little need for supplementary information, then the less costly will the information\ntechnology system become. The investment in marketing depends on how well known the brand\nname is to the customer. eCommerce firms `Born on the Net' have to spend substantially more\nresources on marketing than firms that `Move to the Net'.\nThese investments may be seen as parts of a process, which aims to generate larger revenues to the\nfirm, better services to the customers, a more efficient logistic system, and lower payment costs.\nThese costs and benefits are analysed and used in order to develop principles for investment\nevaluations. Finally, the analysis is applied to five case studies from the sectors of capital goods,\nfinancial services, food, ornamental horticulture, and books and stationeries, where the given\nbackground from practice and conditions for success are developed in terms of a customer-base,\nmargins, and sales growth.

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