Project Report

(Submitted for the Degree of B.Com. Honours in Accounting & Finance under the University of Calcutta)

E-COMMERCE
A maturing sales channel

Submitted by: Name of the Candidate: Registration Number: Name of the College:

Md. Saniur Rahaman. 146-1121-010-10 Maulana Azad College.

Supervised by: Name of the Supervisor: Name of the College:

January 2013

Annexure- IA Supervisors Certificate

This is to certify that Mr. Md. Saniur Rahaman a student of B.Com. Honours in Accounting & Finance in Business of Maulana Azad College under the University of Calcutta has worked under my supervision and guidelines for his project work and prepared a Project Report with the title e-Commerce which he is submitting, is his genuine and original work to the best of my knowledge. Place: Date:
Signature

Name: Designation: College:

Annexure- IB Students Declaration

I hereby declare that the Project Work with the title E-Commerce. Submitted by me for partial fulfillment of the degree of B.Com. Honours in Accounting & Finance under the University of Calcutta is my original work and has not been submitted earlier to any other University/Institution for the fulfillment of the requirement for any course of study. I also declare that no chapter of this manuscript in whole or in part has been incorporated in this report from any earlier work done by others or by me. However, extracts of any literature which has been used for this report has been duly acknowledged providing details of such literature in the references.

Place: Date:

Signature Name: Md. Saniur Rahaman

Address: 27(5/5), Barasat Road, Barrackpore. Kol-700122.

Registration No. 146-1121-010-10 Roll No. 1146-61-0015

Introduction
Electronic Commerce is defined as the buying and selling of products and services by businesses and consumers through an electronic medium, without using any paper documents. e-Commerce is widely considered the buying and selling of products over the internet, but any transaction that is completed solely through Electronic measures and be considered e-Commerce. e-Commerce is subdivided into three categories: business to business or B2B (Cisco), business to consumer or B2C (Amazon) and consumer to consumer C2C (eBay). E-commerce (EC) is everywhere. Papers, magazines and scholarly journals extol the virtues and promises of getting into e-commerce. Laudon and Laudon (1998) define e-commerce as "the process of buying and selling goods electronically by consumers and company to company through computerized business transactions." Another definition of e-commerce provided by Electronic Commerce Dictionary is "The conducting of business communication and transactions over networks and through computers." A more expansive and detailed definition is: The buying and selling of goods and services, and the transfer of funds, through digital communications. However, EC also includes all inter-company and intra-company functions (such as marketing, finance, manufacturing, selling, and negotiation) that enable commerce and use electronic mail, EDI, file transfer, fax, video conferencing, workflow, or interaction with a remote computer, Electronic commerce also includes buying and selling over the World-Wide Web and the Internet, electronic funds transfer, smart cards, digital cash (e.g. Mondex), and all other ways of doing business over digital networks (Electronic Commerce Dictionary, 1995). Electronic commerce is generally considered to be the sales aspect of e-business. It also consists of the exchange of data to facilitate the financing and payment aspects of business transactions. E-commerce can be divided into:

E-tailing or "virtual storefronts" on Web sites with online catalogs, sometimes gathered into a "virtual mall" The gathering and use of demographic data through Web contacts and social media Electronic Data Interchange (EDI), the business-to-business exchange of data E-mail and fax and their use as media for reaching prospects and established customers (for example, with newsletters) Business-to-business buying and selling The security of business transactions.

Timeline
A timeline for the development of e-commerce:

1979: Michael Aldrich invented online shopping. 1981: Thomson Holidays, UK is first B2B online shopping. 1982: Minitel was introduced nationwide in France by France Telecom and used for online ordering. 1984: Gateshead SIS/Tesco is first B2C online shopping and Mrs. Snowball, 72, is the first online home shopper 1984: In April 1984, CompuServe launches the Electronic Mall in the USA and Canada. It is the first comprehensive electronic commerce service. 1985: Nissan UK sells cars and finance with credit checking to customers online from dealers' lots. 1987: Swreg begins to provide software and shareware authors means to sell their products online through an electronic Merchant account. 1990: Tim Berners-Lee writes the first web browser, WorldWideWeb, using a NeXT computer. 1992: St. Martin's Press publishes J.H. Snider and Terra Ziporyn's Future Shop: How New Technologies Will Change the Way We Shop and What We Buy. 1992: Terry Brownell launches first fully graphical, iconic navigated Bulletin board system online shopping using RoboBOARD/FX. 1994: Netscape releases the Navigator browser in October under the
code name Mozilla. Pizza Hut offers online ordering on its Web page. The first online bank opens. Attempts to offer flower delivery and magazine subscriptions online. Adult materials also become commercially available, as do cars and bikes. Netscape 1.0 is introduced in late 1994 SSL encryption that made transactions secure.

1995: Thursday 27 April 1995, the purchase of a book by Paul Stanfield, Product Manager for CompuServe UK, from W H Smiths shop within CompuServes UK Shopping Centre is the UKs first national online shopping service secure transaction. The shopping service at launch featured WH Smith, Tesco, Virgin/Our Price, Great Universal Stores/GUS, Interflora,Dixons Retail, Past Times, PC World (retailer) and Innovations. 1995: Jeff Bezos launches Amazon.com and the first commercial-free 24 hour, internet-only radio stations, Radio HK and NetRadio start broadcasting. Dell and Cisco begin to aggressively use Internet for commercial transactions.

1996: IndiaMART B2B marketplace established in India.

1998: Electronic postal stamps can be purchased and downloaded for printing from the Web. 1999: Alibaba Group is established in china. Business.com sold for US $7.5 million to eCompanies, which was purchased in 1997 for US $149,000. The peer-to-peer file sharing software Napster launches. ATG Stores launches to sell decorative items for the home online. 2000: The dot-com bust. 2001: Alibaba.com achieved profitability in December 2001. 2002: eBay acquires PayPal for $1.5 billion. Niche retail companies Wayfair and NetShops are founded with the concept of selling products through several targeted domains, rather than a central portal. 2003: Amazon.com posts first yearly profit.

2004: DHgate.com, China's first online b2b transaction platform, is established, forcing other b2b sites to move away from the "yellow pages" model. 2005: Yuval Tal founds Payoneer - a secure online payment distribution solution.

2007: Apple launched the iPhone beginning the advancement of mCommerce and in 2010,Magento Mobile is released, allowing easy mobile storefront apps. And Business.com acquired by R.H. Donnelley for $345 million. 2009: Zappos.com acquired by Amazon.com for $928 million. Retail Convergence, operator of private sale website RueLaLa.com, acquired by GSI Commerce for $180 million, plus up to $170 million in earn-out payments based on performance through 2012. 2010: Groupon reportedly rejects a $6 billion offer from Google. Instead, the group buying websites went ahead with an IPO on November 4, 2011. It was the largest IPO since Google. 2011: Quidsi.com, parent company of Diapers.com, acquired by Amazon.com for $500 million in cash plus $45 million in debt and other obligations. GSI Commerce, a company specializing in creating, developing and running online shopping sites for brick and mortar businesses, acquired by eBay for $2.4 billion. 2012: US e-Commerce and Online Retail sales projected to reach $226 billion, an increase of 12 percent over 2011. 2012: US e-Commerce and Online Retail holiday sales reach 33.8 billion, up 13 percent.

CONCEPTUAL FRAMEWORK OF E-COMMERCE

ABSTRACT This paper will explore e-commerce and discuss shortcomings associated with current definitions of ecommerce. It will then propose a continuum for defining and describing the level of computer-based systems, activities and business functions necessary to control and expand marketing and sales activities in the business organization

INTRODUCTION E-commerce (EC) is everywhere. Papers, magazines and scholarly journals extol the virtues and promises of getting into e-commerce. The dollar value of EC transactions are increasing at a rapid rate and are expected to reach $108 billion in web related sales (WWW) (Tedeschi, July 1999). However, even though web based commerce is expanding, there seems to be no clear definition of what constitutes e-commerce. Laudon and Laudon (1998) define e-commerce as "the process of buying and selling goods electronically by consumers and company to company through computerized business transactions." Another definition of e-commerce provided by Electronic Commerce Dictionary is "The conducting of business communication and transactions over networks and through computers." A more expansive and detailed definition is: The buying and selling of goods and services, and the transfer of funds, through digital communications. However, EC also includes all inter-company and intra-company functions (such as marketing, finance, manufacturing, selling, and negotiation) that enable commerce and use electronic mail, EDI, file transfer, fax, video conferencing, workflow, or interaction with a remote computer, Electronic commerce also includes buying and selling over the World-Wide Web and the Internet, electronic funds transfer, smart cards, digital cash (e.g. Mondex), and all other ways of doing business over digital networks (Electronic Commerce Dictionary, 1995). As can be seen from the above examples the definition of what constitutes e-commerce is far from complete and still evolving. According to the U.S. Department of Commerce, standard definitions of e-commerce must still be established (U.S. DC, 1999). The lack of a standard definition for e-commerce adversely affects all measurement attempts. Depending on what definition is employed, measurements can be obtained that are erroneous and make comparability impossible across and within industry segments. In its recent report on "The Emerging Digital Economy 11" the USDC highlights some of the difficulties caused by the lack of a standard definition: Current market research estimates of aggregate online retail trade generally purport to include only those transactions that are ordered and paid for on-line. But they must rely on data supplied by individual companies who may not keep information that way. Individual companies sometimes include as online sales transactions those transactions that were conducted substantially online, but which may also include a critical non-Internet component. For example, although eBay encourages sellers to establish an account tied to a credit card, they will also accept one-time payments by check. Similarly Dell Computer's online revenues include sales where although the majority of the transaction occurred online, the final steps were conducted over the phone (U.S. DC, 1999). The Internet clearly impacts sales activities and can be measured across a wide spectrum of business functions. According to Thompson, the effect of the Internet on sales transactions is much larger than just those transactions completed online (Thompson, 1999). Individual consumers and businesses can use an infinite combination of the Internet and traditional purchasing methods to complete a sales transaction. Another aspect of e-commerce lost in the definition jungle is that there are two distinct groups of customers that must be defined, measured and managed. These two groups are Retail E-Commerce (REC) customers and Business to Business E-Commerce (B2B) customers. These groups are not similar in their needs and wants. According to

Forrester research, in 1998 B2B sales activity over the Internet was $43 billion; this was five times more than REC (Tedeschi, April, 1999). Forrester Research also estimates that B2B will grow to $1.3 trillion over the next four years. Aberdeen Group, another research firm, estimates that B2B may now be ten times larger than REC (Tedeschi, April, 1999). So what should businesses do? Both retail and business-to-business activity is increasing but measurement indicators are incomplete and may give erroneous and unreliable output. It is logical to assume that for an organization to participate in this area of commerce it must first determine, prior to embarking on an e-com effort, whats and the how's. More specifically what activities are to be measured: online transactions, sales calls precipitated from online browsing, web-site traffic, EDI, etc. Metrics must then be created that will accurately reflect how those activities are to be measured for contribution to sales efforts and integrated into marketing plans. Getting involved in a search for a specific all-inclusive definition of e-com may in fact be an unproductive task. The task is made more difficult by the very nature of technological advances. Moore's law is based on the premise that computer power doubles every 18 months. This doubling of computer power has been an accurate measurement in the past and will probably continue into the future. What is new leading edge technology today will be replaced by something twice as powerful in 18 months. This exponential increase in technology will create new ways of doing business that one cannot now envision. Although technology can create new or modified business practices at a rapid rate, successful adoption of new business practices must stand the acid test of free market forces. Technology and the market place are continually reshaping business activities. Businesses and academic researchers will be required to describe and exploit emerging technologies. Therefore the purpose of this paper is to aid businesses and academic researchers in the evolution of e-commerce by forwarding: 1.) A more general definition of e-commerce, and 2.) A more focused framework of organizational e-commerce activity. Adopting a more general definition of e-com significantly reduces the definitional obsolescence caused technology advances and, consequently. Would not require revision as new business practices are introduced and previously defined business practices are replaced. Electronic commerce is the process of deploying computer and communications technology to support an organization's sales process. This definition eliminates the need to precisely delineate how the sales process is performed. It also is general enough to be useful into the indefinite future. Anyone trying to craft a long term definition for EC must consider how different industries and organizations within those industries react to changes in their technological environment. The current morass created by the ever enlarging number of competing definitions appears to be the result of how authors and researchers are dealing with different reactions to EC development found in different organizations (due in part, but not totally, to differences in B2B versus REC activity). Each author or researcher appears to create an EC definition that exactly suits the activity, organization, or industry, he or she is studying without regard to the impact of yet another definition to the overall body of knowledge. At a Macro level most sales processes appear to share similar characteristics. However, at the micro level an organization must shape the sales process to meet customer expectations and as a consequence each sales process will have some unique characteristics. The details of how business processes are performed and what technology is deployed to support those processes are better described through use of a framework. The framework utilizes a continuum. To deal with the needs of EC theorists, we propose that an organization's level of employment of EC technology be measured along a continuum, where a Level 1 company makes little or no use of computers and/or communications technology, and a Level 5 firm makes extensive, cutting-edge use of these tools. See Exhibit 1 for further discussion.

Exhibit 1 Continuum of E-commerce

Development

E-Commerce level analysis:

The following descriptions flesh out the various levels of the continuum and should serve to clarify to the reader the authors' intentions vis--vis how an organization achieves a particular level of EC development. The reader, however, should keep in mind that further advances in technology might necessitate a redefinition of the levels. As Will Rogers is reputed to have said, "Even if you're on the right track, you'll get run over if you just sit there." In other words, a Level 5 firm that becomes satisfied with its position in the marketplace and ceases to pursue cutting edge technology might find itself behind competitors who succeed in updating and adapting to new technological advancements. New technologies must be incorporated into systems to sustain competitive advantage. Indeed, a company that has advanced to a Level 5 can fall back to a Level 4 or lower unless it applies constant effort to the task of staying on the cutting edge. Level-1 An organization that is at Level-1 poorly utilizes computer or communications technology. This level is characterized by an internal focus that is not integrated. Customer contact is handled via salesperson calls, telephone contact, mailing and fax. Product and Service literature is usually in hardcopy only. Information systems to support sales and marketing activity are typically non-existent. Back Office Systems (BOS) such as accounting, production, sales processing, and customer information, if they exist at all, are not integrated. Level-2 A Level-2 organization begins to integrate computer and communications technology. The process is still internally focused but begins to see the benefit of integrating part or all of their internal systems. Customer contact via phone is enhanced through on-line systems. These on-line systems are more supportive of critical business process. The integrated systems support order-taking, tracking, customer information and more extensive marketing and sales reporting. Level-3 Level-3 organizations continue to integrate computer and communications technology. The organization also begins to incorporate an external focus in systems development and customer support. Internal systems become tightly integrated. Tightly integrated systems introduce improved levels of customer support by coupling sales, inventory, production and customer information. Externally focused systems are deployed. Systems such as Electronic Data Interchange (EDI) and web-based company information are developed to increase efficiency. EDI is deployed to support Business to Business (B2B) activity. Web-based systems are primarily used as an information-mart and begin to replace hardcopy as a means to convey product and service information. E-mail is also introduced to improve internal and external communication.

Level-4 Level-4 is characterized by the introduction of web-based technologies. This level continues to see expansion of externally focused systems via the web. These web-based systems increase in capability from being an information mart to include sales order processing. The web storefront has been created but remains a stand-alone system that is not integrated with the organizations internally focused information systems. Level-5 At Level-5 an organization has utilized a wide array of computer and communications technology to develop a highly integrated system that encompasses business process requirements for both internal and external information uses. This integrated system is holistic and recognizes the need for internal and external query and reporting requirements. Customer support is improved by permitting customers to access internal information such as order status, inventory availability, customer sales history and accounting information. High levels of business process support and high levels of system integration characterize this level. A summary of this descriptive framework (continuum) for EC analysis is presented in Exhibit 2. A framework of this type for defining and describing EC processes is essential. E-commerce researchers must have a uniform way of reporting and describing their findings. Without the development and adherence to such a framework, comparison of research results will continue to be difficult if not impossible.

Exhibit 2 E-commerce Levels

Moreover, this continuum can benefit business organizations. It will provide organizational managers with a method of assessing where their organizations are relative to where they could be in EC development. The continuum will also provide a tool for assessing an organization's competitive environment within its industry. It seems likely that not all organizations will want to achieve level 5. Some managers are still somewhat afraid of these technological advancements. However, the acceptance and adoption of this continuum will allow such managers to judge what level of system integration and process support is appropriate for their organizations. (It should be noted here that

some industries will be more motivated by the nature of their business to employ EC than others. Thus, the commitment to EC may be a reaction to external forces rather than any internal proactive strategies.) The associated relationships between business process support and system integration for each of the levels of the EC Development Continuum are graphically presented in Exhibit 3.

Exhibit 3 Process Support and System

Integration

Summary/Conclusion:
This paper has explored and discussed shortcomings associated with the definition of e-commerce. The authors have proposed a framework for defining and describing the degree to which marketing and sales activities and processes are using computer and communications technology along a continuum that places an organization's level EC development into one of 5 levels. This framework will prove important and useful to organizations and individuals that are considering e-commerce activities. The framework will also assist organizations already involved in e-commerce by providing a tool to describe and assess the level of current activities.

Future Direction/Further Research Areas:

Future research and development in the area of e-commerce, both in the market place and in academia needs to focus on a.) How to test the merit of the new definition in terms of its applicability and b.) measure its advantages / disadvantages to assist in the transformation to an e-commerce mindset. Additionally, from an operational perspective the proposed framework needs to a.) Be tested for validity, b.) Have quantifiable metrics developed to assist in determining a company's current e-commerce level. c.) Have managerial and technology strategies developed that will provide for a cost effective progression along the proposed continuum. While outside the realm of this paper, the authors realize the continuum would be stronger if we could identify organizational cultures that are commonly found at each level. Of course, the theory that there is a cultural uniformity among organizations at each level may not be accurate. Other areas that should be looked at include organizational structure, leadership style, overall business strategy, and level of commitment to customer service.

About eBay
eBay is The Worlds Online Marketplace. Founded in 1995, eBay created a powerful platform for the sale of goods and services by a passionate community of individuals and businesses. On any given day, there are millions of items across thousands of categories for sale on eBay, as well as on Half.com, eBays site dedicated to fixed price trading. eBay enables trade on a local, national and international basis with customized sites in markets around the world.

Company Overview
People come to the eBay marketplace to buy and sell items across multiple categories, including antiques and art, books, business & industrial, cars & other vehicles, clothing &
accessories, coins, collectibles, crafts, dolls & bears, electronics & computers, home furnishings, jewelry & watches, movies & DVDs, music, musical instruments, pottery & glass, real estate, sporting goods & memorabilia, stamps, tickets, toys & hobbies and travel.

Members from all over the world buy and sell on eBay. Currently, eBay has local sites that serve Australia, Austria, Belgium, Canada, France, Germany, Ireland, Italy, Korea, the Netherlands, New Zealand, Singapore, Spain, Sweden, Switzerland, Taiwan and the United Kingdom . In addition, eBay has a presence in Latin America and China through its investments in MercadoLibre.com and EachNet, respectively.

EBay is a highly successful eCommerce platform. The larger category of eBay includes 19 different platforms (e.g. Skype, payPal, rent) but we'll be focusing on the search and trade platform. The other sister platforms became part of eBay due to recent acquisitions and in some cases result in architectural mismatch which would be an interesting topic for a separate case study, therefore this case study focuses on the original platform's architecture and its evolution in recent years. EBay is an eCommerce system where a user can browse to the website eBay.com and search for anything they want to buy, in auction or right away from the buyer, or to post some item for sale which other users can search for as prospective buyers. The users then arrange for payments online (using eBay's payPal system which is a separate system designed solely for that purpose and recently integrated onto the eBay platform) and receive the item by mail. Like most internet-enabled business systems, eBay is constructed using distributed object technology. It requires scalability, high performance, high availability, and security. It needs to be able to handle large volumes of requests generated by the internet community and must be able to respond to these requests in a timely fashion.

In addition to the end-user application, eBay has now released its new APIs for developers to create buying applications, access eBay web services platform with java script and flash, enable eBay bidding from anywhere, and create lightweight alerts about platform activity. This allows the developer community to customize eBay applications to their own needs and to release new useful features.

An overview of the services provided by eBay

General Services
About Me page Express yourself page through your own personal eBay Warranty Program Give buyers assurance and peace of mind offering them a warranty. Options, Authentication & Grading Get a professional opinion of your item's authenticity or condition. Picture Services Add pictures to get more visibility for your items Feature your item Showcase your item on eBay Add link buttons Use these buttons on your Web pages to your eBay listings.

Tools
eBay Toolbar - Use this browser companion to receive alerts before your listings end, and more. eBay Anything Points - Pay for your purchases and seller fees with special offers from this free program. eBay Anywhere-Wireless - Access eBay from wireless devices. eBay Affiliate Program - Earn cash by introducing your site visitors to eBay. eBay Developers Program - Create Software applications on the eBay platform. International Trading - Buy and Sell effectively across international borders

 Manage Your Active Listings

Revise an item Add to item description Manage Counters Change Gallery Image Bidder Management Cancel bids End your listing early Change your description, price, and more. Add additional information to your listing. Manage or edit your Andale.com counters. Change the picture you want to appear in Galley. Get tools to manage who can bid on your items. Remove unwanted bids on your item. Close your listing before it's scheduled to.

Bidding and Buying Services

Rebid from your mobile phone Use Rebid.com to receive outbid alerts and rebid on items. Retract your bid Remove a bid if your situation meets specific criteria (for example, you accidentally placed an incorrect bid)

Manage your Ended Listings

Relist your item List an unsold item again, or list a duplicate Request final value fee credit Inquire about a Final Value Fee credit for a successful listing where your buyer did not complete the transaction.

Advanced Seller Recommendations

Shipping Center Get shipping supplies and service. Trading Assistants Sell items for others. Keywords on eBay Add banners to promote your business. Preferred Solution Provider Program-Find out how companies working with evaluate your sales
Recent status of the Company
The most recent stats regarding eBay state that: It managers 248,000,000 registered users It manages over 1 Bllion photos eBay has nearly 10,000 live applications eBay currently has 30 Software Architects in its employ eBay averages well over 1 billion page views per day The eBay platform handles 4.4 billion API calls per month 100,000+ lines of code are added every two weeks There are 30,000 software builds per week There are more than 44 billion SQL executions per day

Annual Report

Like eBay, Amazon.com was born in 1995. The name reflected the vision of Jeff Bezos, to produce a large scale phenomenon like the Amazon River. This ambition has proved justified since just 8 years later, Amazon passed the $5 billion sales mark it took Wal-Mart 20 years to achieve this. By 2008 Amazon was a global brand with other 76 million active customer accounts and order fulfillment to more than 200 countries. Despite this volume of sales, at December 31, 2007 Amazon employed approximately 17,000 full-time and part-time employees. In September 2007, it launched Amazon MP3, a la carte DRM-free MP3 music downloads, which now includes over 3.1 million songs from more than 270,000 artists. Founded by Jeff Bezos, the Amazon.com website started in 1995 as a place to buy books because of the unique customer experience the Web could offer book lovers. Bezos believed that only the Internet could offer customers the convenience of browsing a selection of millions of book titles in a single sitting. During the first 30 days of business, Amazon.com fulfilled orders for customers in 50 states and 45 countries - all shipped from his Seattle-area garage. It is by design that technological innovation drives the growth of Amazon.com to offer customers more types of products, more conveniently, and at even lower prices. Among its many technological innovations for customers, Amazon.com offers a personalized shopping experience for each customer, book discovery through "Search Inside The Book", convenient checkout using "1-Click Shopping", and several community features like Wish Lists (www.amazon.com/wishlists) that help customers discover new products and make informed buying decisions. In 2000, Amazon.com began to offer its best-of-breed e-commerce platform to other retailers and to individual sellers. Today, more than two million small businesses, world-class retail brands and individual sellers increase their sales and reach new customers by leveraging the power of the Amazon.com e-commerce platform. Through programs such as Selling on Amazon, Fulfillment by Amazon, Amazon Webstore, Checkout by Amazon, Product Ads and Advantage, sellers of all shapes and sizes offer their selection to Amazon.com customers by using various components of the e-commerce platform.

A Comparative Analysis of eBay and Amazon

INTRODUCTION
It is odd in some ways to be comparing Amazon and eBay. To most people, Amazon is a retailer selling products to consumers and eBay is an auction house where consumers congregate to sell to one another. However, a keen analysis reveals that these two companies are direct competitors. For instance, the only site to receive more visitors than Amazon during the 2002 holiday season was eBay. It is now well known that Amazon considers eBay to be its biggest competitor. Amazon.com is perhaps the company that is most closely tied with the eCommerce phenomenon. The Seattle, Washington based company has grown from a book seller to a virtual Wal-Mart of the Web selling products as diverse as music CDs, cookware, toys, games, tools and hardware. At the same time, the company now offers selling services either through auctions or by a fixed-price format. The company has also become a major provider of technology to partners such as Toys R Us and Target. Amazon has grown at a tremendous rate with revenues rising from about $150 million in 1997 to $3.9 billion in 2002. However, the rise in revenue has led to a commensurate increase in operating losses. At the end of 2002, the company had a deficit (i.e. cumulative losses) in excess of $3 billion. On the other hand, eBay has had a focused and slower growth path. The core nature of the companys business has always been auctions. Even though the company has grown rapidly, it is still a relatively small company with revenues of about $750 million. Starting with the Initial Public Offerings (or IPOs), the stock trajectories of Amazon and eBay have provided an interesting contrast. On the first day of its IPO, Amazons stock rose from the target price of $18 to $30. In a strange coincidence, eBay shares were also priced at $18. However, the closing price was much higher$47.37. Since then, the stock prices have gone in opposite directions (see Figures 1 and 2). Amazons share price path is perhaps the biggest symbol of the rise and fall of the dotcoms. On the other hand, eBays steady price path reflects th e consistent profitability of the company. Amazon.com has never had an entire year that was profitable. It has been profitable in the fourth quarter of 2001 and 2002. The stock prices clearly reflect this. While Amazon had the glamour of growth in sales revenue, eBay was the steady plodder that nobody noticed in the initial years. Most dot-coms wanted to replicate the model of Amazon. It was very common for a dot-com start-up to proclaim that it wanted to be the Amazon of XYZ product category. Pets.com wanted to be the Amazon of pet food, for instance. Fundamentally, these two companies provide us with two interesting models of how to grow a company. Bezos, the founder of Amazon, has famously argued that excessive focus on profits would detract from growth. In his view, growth must come first and profits can come later. This is an unconventional view- to say the least. Most

companies take the approach eBay took which is to first build a small company that is profitable and then grow it to a larger business.

Figure 1. EBays Stock Price Path.

Figure 2. Amazon.coms Stock Price Path. For eBay the focus was really on being profitable. They did not care as much about becoming the largest e-commerce company. All they wanted was to be an efficient intermediary so that they could make profits. Today, eBay perhaps represents the cheapest way of selling products on the Internet. Thus, these two stalwarts of e-commerce present us with two contrasting growth paths and track records.

EARLY LIFE
eBay.com Pierre Omidyar, the founder of eBay, graduated from Tufts University with a computer science degree. He worked for a variety of companies producing computer programs for Apples products including Claris and Innovative Data Design. His first foray into the Internet was at General Magic, a communications start-up. The story that led to the formation of eBay is very interesting and is described well by Kevin Pursglove, Senior Director of Communications: A key component that prompted him to do this was at the time his fiance now wife was interested in her Pez (dispenser) collection. She was experiencing a frustration that many collectors have experienced, and that is often times when youre collecting a particular item or you have a passion for a particular hobby, your ability to buy and trade or sell with other people of similar interests is limited by geographical considerations. Or if you trade through a trade publication, often volunteers produce those publications, and the interval between publications can often run several weeks if not months. All of that was shortened down when Pierre, at the prompting of his wife and interest in Pez dispenser collections, used his interest in fragmented markets and efficient marketplaces as a laboratory for what eventually became eBay. Pierre wanted to name the company Echo Bay. However, another company had registered echobay.com. As a result, he chose eBay. Pierre had strong opinions about the unfairness of many market arrangements. This led to his interest in auctions. As a recent book puts it: He had never attended an auction himself, and did not know much about how auctions worked. He just thought of them as interesting market mechanisms that would naturally produce a fair and correct price for stocks or for anything anyone wanted to sell. Instead of posting a classified ad saying I have this object for sale, give me a hundred dollars, you post it and say heres a minimum price, he says. If theres more than one person interested, let them fight it out. When the fighting was done, Omidyar says, the seller would by definition get the market price for the item, whatever that might be on a particular day. Pierre launched eBay.com on Labor Day of 1995. He developed the program and the Web design for the initial pages himself. The site was publicized in USENET discussion groups. Initially, the site was free. When his Internet Service Provider started charging him the business rate for the service ($250), he began to charge consumers. The initial fee was 5 percent of the sale price for items below $25, and 2.5 percent for items more than $25. Soon, he started to receive small amounts of money and he was able to make more than the $250 he was being charged to run the site. eBay was in business. Amazon.com The story of the formation of Amazon.com is often repeated and is now an urban legend. The company was founded by Jeff Bezos, a computer science and electrical engineering graduate from Princeton University. Bezos had moved to Seattle after resigning as the senior vice-president at D.E.Shaw, a Wall Street investment bank. He did not know much about the Internet. But, he came across a statistic that the Internet was growing at 2,300%,

which convinced him that this was a large growth opportunity. Not knowing much more, he plunged into the world of e-commerce with no prior retailing experience. He chose to locate the company in Seattle because it had a large pool of technical talent and since it was close to one of the largest book wholesalers located in Roseburg, Oregon. Clearly, he was thinking of the company as a bookseller at the beginning. Moreover, the sales tax laws for online retailers state that one has to charge sales tax in the state in which one is incorporated. This means that for all transactions from that state the price would be increased by the sales tax rate leading to a competitive disadvantage. Therefore, it was logical to locate in a small state and be uncompetitive on a smaller number of transactions rather than in a big state such as California or New York. The company went online in July 1995. The company went public in May 1997. As a symbol of the companys frugality, Jeff and the first team built desks out of doors and four-by-fours. The company was started in a garage. Ironically, initial business meetings were conducted at a local Barnes & Noble store. Bezos first choice for the company name was Cadabra. He quickly dropped this name when a lawyer he contacted mistook it for cadaver. He picked Amazon because it started with the letter A, signified something big and it was easy to spell. For his contribution, Jeff Bezos was picked as the 1999 Time person of the year at the age of 35 making him the fourth-youngest person of the year. Describing why it chose Bezos, Time magazine said, Bezos vision of the online retailing universe was so complete, his Amazon.com site so elegant and appealing that it became from Day One the point of reference for anyone who had anything to sell online.

COMPARISON OF VISIONS eBay

Pierre Omidar, the founder of eBay, was interested in creating a trading community. In his own words: The first commercial efforts were from larger companies that were saying, Gee, we can use the Internet to sell stuff to people. Clearly, if youre coming from a democratic, libertarian point of view, having corporations just cram more products down peoples throats doesnt seem like a lot of fun. I really wanted to give the individual the power to be a producer as well. Put otherwise, the vision of Bezos at the initial stage was that of a dominant firm selling products to individual customers. In direct contrast, eBays approach was to create a bazaar where people bought and sold to one another. I have shown these contrasting visions in Figures 3a and 3b. Figure 3a represents Bezos vision. He thought of a large company (represented by the large circle) selling to individuals (represented by the small circles).

eBays vision. This is the vision of an intermediary in a complex marketplace. eBay sought to be the facilitator of exchanges between many individuals. eBay did not want to own the products being exchangedwhich is a key difference between the two companies. The issue is really one of control. Amazon wanted to control the transaction and eBay wanted the transactions to emerge organically.

Amazon
Jeff Bezos, the leader of Amazon was always interested in building an online retailer. It is very clear that Bezos wanted to replicate a catalog operation online. In this way, the business model of Amazon was not particularly innovativenor was it uniquely customized to the idiosyncrasies of the Internet. Bezos never had the vision that the company will one day be supplying its technology to other retailers or hosting other sites. Bezos was always focused on creating an online retailer and he saw himself improving on traditional bricks-and-mortar stores. This was a naive observation on his part and it was made in the early days of Amazon when the company thought it could grow without making physical investments. We have now learned that huge physical investments are needed to serve markets better. The company has now invested in large warehouses that have proven to be costly. Ironically, eBay has pretty much continued to be a virtual operation.

In direct contrast, even early on, eBay had a completely different view of the world and the Internet and how it applied to retailing. While most companies (led by Amazon) were interested in opening online stores where they could sell products to consumers.

Conclusion of comparison between both companies

eBay set out to create an intermediary that helps buyers meet sellers. Unlike the traditional retailer model adopted by Amazon, eBay has created a unique business model. The company makes money by matching buyers with sellers. Sellers ship the items directly to the buyers. As a result, eBay does not have any distribution or fulfillment cost which gives it a tremendous advantage. While Amazon set out to build a store on the Web, eBay created something unique that did not exist anywhere. It is, therefore, hard to find the proper offline analogy to describe eBay. The most common way to think of eBay is an auction house since the method used to sell products on eBay is mainly auctions. However, some have suggested that eBay could be thought of as a giant classified advertisement page where individuals can advertise an item that they would like to sell for a price and buyers can contact the sellers directly. Similarly, one could think of the company as a large swap meet or yard sale where individuals can buy directly from consumers.

GROWTH STRATEGY
A comparative study of the history of these two companies points out that Amazon has gone from an exclusive product seller to a company that now sells products, offers services and is a technology provider. On the other hand, eBay has been completely focused as a service provider. eBay has stayed the course without excessive change.

eBays Growth
eBay has been very focused as a service provider. The major variation from this strategy has been the purchase of Half.com, which is a fixed-price retailing operation. This is a place where consumers can go to buy new items. In addition, the company recently acquired Paypal, a leading provider of person-to-person payment services. eBay has many other service operations: eBay International - eBay has consciously tried to create a global marketplace. Even though users from other countries may bid on U.S. auctions, the legal and financial barriers prevent easy trading. Country-specific sites are seen as the way to overcome this. As of now, eBay has country-specific sites in Austria, Australia, Canada, France, Germany, Ireland, Italy, Japan, Korea, New Zealand, Switzerland and the UK. eBay Motors - In addition to selling used cars online, this site features motorcycles, as well as auto parts. The company has created a unique trading environment with services such as financing, inspections, escrow, auto insurance, vehicle shipping, title & registration, and a lemon check. eBay Stores - eBay Stores expands the marketplace for sellers by allowing them to create customized shopping destinations to merchandise their items on eBay. For buyers, eBay Stores represents a convenient way to access sellers goods and services. Buyers who shop at eBay Stores are able to make immediate and multiple item purchases for fixed-price and auction-style items. eBay Professional Services. Professional Services on eBay serves the fast growing and fragmented small business marketplace by providing a destination on eBay to find professionals and freelancers for all kinds of business needs such as Web design, accounting, writing, technical support, among others. eBay Local Trading. eBay has local sites in 60 markets in the U.S. These sites feature items that are located near them. As a result, buyers pay low shipping ratesespecially for difficult-to-ship items such as automobiles, furniture or appliances. eBay Premier. This is a specialty site on eBay, which showcases fine art, antiques, fine wines and rare collectibles from leading auction houses and dealers from around the world. Through its Premier Guarantee program, all sellers on eBay Premier stand behind and guarantee the authenticity of their items. eBay Live Auctions. This interesting feature allows consumers to participate in auctions being conducted by the worlds leading auction houses.

Amazons Growth
Amazon.com started out as an online bookseller. Indeed, to some, Amazon.com will always be a bookseller. Selling books on the Internet made sense at many levels.

In addition, as a product, books were easy to ship since they were not bulky, they represented a low value (and risk) item and they are informational products making them amenable to selling them via online storefronts using features such as sample chapters, table of contents, editorial reviews and customer reviews. However, Amazon.com rapidly expanded into a number of products. Here is a timeline for the first few product introductions: June 1998: Music November 1998: DVD/video July 1999: Toys and electronics November 1999: Home improvement, software and video games . Its foray into music was dramatic. In Amazons first full quarter selling music CDs, ending last September, it drew $14.4 million in sales, quickly edging out two-year-old cyber-leader CD now Inc. However, it is not clear if it could translate such success into products as disparate as cookware and hardware. The following arguments have been made in favor of rapid diversification: Cross Selling Amazon wanted to get a greater share of each customers overall shopping basket. They felt that they had already established a relationship with the customer with books. All that remained was to leverage this trust in persuading consumers to buy everything else from them. Economies of Scale From a technology standpoint, the company had already incurred the fixed costs of developing software for the online storefronts. Expanding into other product categories would allow the company to spread these fixed costs across a larger pool of transactions leading to greater profits. . Selling books alone would not catapult Amazon as the leading e-tailer and a cutting-edge firm. They would forever be constrained by the small market that they operated in. Moving into other product categories allowed them to be thought of as a dominant retailer as opposed to a ho-hum business. Blessing of Wall Street Perhaps, the most important reason for Amazon to diversify was that at the time it was a darling of Wall Street. Skeptics were overruled by high-flying optimists who viewed Amazon as the symbol of the new economy and a new way of doing business. As a result, Amazon made the best use of the opportunity. On the other hand, many arguments have been made against expanding into new product categories: Brand Amazon established a relationship with its first customers on the basis of being a bookseller. Redefining this relationship in terms of other product categories is a nontrivial task. A typical customer reaction can be stated as, Many of us old customers have a hard time thinking of Amazon as a place to buy a set of Polk home theater speakers or a set of

Calphalon cookware. For me, the Earths Biggest Bookstore moniker has occupied a spot in my mind since it began appearing in those tiny bottom-of-page-one advertisements in the New York Times. New Products Lead to New Challenges As mentioned earlier, books provided certain unique advantages to Amazon. Moving into new product areas provided new challenges. The case of consumer electronics items illustrates this best. In this business, Amazon.com has not been able to buy directly from leading manufacturers such as Sony, Panasonic and Pioneer. As a result, Amazon is forced to buy products from distributors leaving it with a hefty competitive disadvantage that may be hard to overcome14. In addition, selling at prices lower than what the manufacturer wanted strained relationships with such giants as JVC15. There are many reasons for this16. In the electronics business, manufacturers have a stringent set of requirements on how a retailer will display and sell their products. Only retailers who pass this are pronounced authorized dealers. Authorized dealers get lower prices, money for cooperative advertising and the right to sell warranties. Large manufacturers did not want to jeopardize existing relationships with retailers by selling through Amazonwhom they feared would sell at lower prices. At the same time, some manufacturers wanted to set up their own online stores. For example, Sony sells electronics through sonystyle.com and deals with the online counterparts of established players such as Best Buy and Circuit City. Moreover, some manufacturers felt that Amazon did not have a long-enough history in the business and were turned off by its string of losses. Also, Amazon may have appeared as too unconventional for them to feel comfortablee.g., Amazons reliance on e-mail as the primary customer service tool did not please some manufacturers. The vital part of this is that electronics represent the fastest growing part of Amazons business while the book, music and video portions have leveled off. In the final analysis, the company has showed an inability to grasp the intricacies of some of the businesses it entered into. Interestingly, BN.com did not diversify beyond books, music and videos. Competition Amazon.com was the de facto first-mover in the book market. But, this was not the case in most other product categories. For example, e-tailers such as CD Now were already in place before Amazon.com appeared in the music category. As a result, Amazon exposed itself to new levels of competition creating new vulnerabilities. In many cases, established players in the brick and mortar space had also established a presence in the online arena. Moreover, as brick-and-mortar stores such as JC Penney and Circuit City expanded to the online arena, Amazon was faced with escalating levels of competition. Cost of Complexity Amazon.coms business is not driven by technology costs alone. Rather, its costs are significantly dependent on the handling of physical goods and inventory. As the magnitude and variety of good increase, the cost of real estate, labor and inventory also increase.

In addition to expanding into new product categories, Amazon.com proceeded in two new directions. The first initiative was to partner with e-tailers who sold products that Amazon did not carry and did not plan to carry. The second one was to host several small businesses as part of the Zshops initiative. With each of these initiatives, the company leveraged its reputation and minimized its risk, but it also relinquished control over the consumer experience. In addition, it created layers of complexity and cost due to issues of due diligence and monitoring.

HEAD-TO-HEAD COMPETITION
On March 30, 1999, Amazon.com announced that it was introducing Amazon.com Auctions. This was a bold move on the part of Amazon to overthrow the large Internet auction house eBay. The rationale for Amazons entry into auctions was: Cross-selling: Amazon wanted to leverage its large customer base and encourage them to become buyers or sellers on its auction service. EBays focus was almost exclusively on small businesses (e.g., antique dealers) and collectors. The thinking at that time was that Amazon might introduce new kinds of buyers and sellers leading to a different market dynamic. Competition: At this point, variable price mechanisms such as auctions were being projected as the dominant form of e-commerce in the future. As a result, a number of companies introduced auctions. Consider the moves made by Amazons competitors in March 1999: PriceLine.com, the reverse auctioneer went public on March 30, rocketing 57 to close at 70. eBay forged a $75 million deal with America Online on March 25 to promote its eBay auctions on AOL. Catalogue retailer Sharper Image began offering online auctions of new and excess merchandise on March 1. Computer e-tailer Cyberian Outpost launched a site on March 16.How did Amazons approach differ from previous efforts? Amazon provided a money-back guarantee for purchases less than $25021. Since sellerside fraud is a big issue with auctions, this was seen as a radical move. In addition, Amazon invited a group of merchants to set up shop on its auction site.The biggest challenge faced by the company in this arena was to topple the giant, eBay and offer something that it does not. It is also difficult to build a critical mass of buyers and sellers to survive in the long run.

As shown in Table 1, it is safe to say that Amazons auction venture was not very successful. Here, satisfaction rate refers to the average satisfaction score with max being 10. The conversion rate refers to the proportion of visitors who actually transacted on any particular site.The embarrassing thing was that eBay did not have to do anything special to counteract Amazon. What is even more troublesome for Amazon is that eBay now dominates it in every aspect.

As shown in Table 2, as of January 2003, eBay has beaten Amazon in terms of unique visitors to the site. EBay always had a clear and dramatic edge over Amazon in terms of time spent at the site. This advantage continues.

1. Balance sheet of eBay for the past five years

Assets
Fiscal year is January-December. All values USD millions (M) billions (B). Cash & Short Term Investments Cash Only Short-Term Investments Total Accounts Receivable Accounts Receivables, Net Accounts Receivables, Gross Bad Debt/Doubtful Accounts Other Receivables Inventories Finished Goods Work in Progress Raw Materials Progress Payments & Other Other Current Assets Miscellaneous Current Assets Total Current Assets Net Property, Plant & Equipment Property, Plant & Equipment - Gross Buildings Land & Improvements Computer Software and Equipment Other Property, Plant & Equipment Accumulated Depreciation Total Investments and Advances Other Long-Term Investments Long-Term Note Receivable Intangible Assets Net Goodwill Net Other Intangibles Other Assets Tangible Other Assets Total Assets

2008
3.35B 3.21B 142.48M 2.54B 435.2M 588.2M (153M) 2.11B 0 0 0 0 0 389.55M 229.68M 6.29B

2009
4.94B 29.12M 4.92B 3.19B 153.1M (153.1M) 0 0 0 0 0 327.74M 225.03M 8.46B

2010
6.66B 20.35M 6.64B 4.13B 454.37M 540.87M (86.5M) 3.68B 0 0 0 0 0 271.17M 155.7M 11.07B

2011 2012
6.04B 19.49M 6.02B 6.2B 681.59M 768.79M (87.2M) 5.51B 9.41B 11.08B 822M 822M 10.25B 0 0 0 0 0 425.14M 255.65M 12.66B 21.58B

2008
1.2B 2.81B 430.5M 1.88B 505.14M 1.61B 106.18M 5.51M 0 7.76B 7.03B 736.67M 238.89M 238.89M 15.59B

2009
1.31B 3.32B 431.46M 2.19B 699.71M 2B 1.38B 709.11M 0 6.91B 6.14B 767.81M 341.12M 341.12M 18.41B

2010
1.52B 3.96B 688.28M 2.73B 404.5M 2.44B 2.58B 1.85B 0 6.73B 6.19B 540.71M 97.81M 97.81M 22B

2011 2012
1.99B 4.88B 783.89M 3.37B 488.13M 2.89B 2.45B 2.26B 9.77B 8.36B 1.41B 448.42M 448.42M 27.32B 2.49B 3.04B 3.04B 0 9.67B 8.54B 1.13B 37.27B

Liabilities & Shareholders' Equity 2008

ST Debt & Current Portion LT Debt Short Term Debt Current Portion of Long Term Debt Accounts Payable Income Tax Payable Other Current Liabilities Dividends Payable Accrued Payroll Miscellaneous Current Liabilities Total Current Liabilities Long-Term Debt Long-Term Debt excl. Capitalized Leases Non-Convertible Debt Convertible Debt Capitalized Lease Obligations Provision for Risks & Charges Deferred Taxes Deferred Taxes - Credit Deferred Taxes - Debit Other Liabilities Other Liabilities (excl. Deferred Income) Deferred Income Total Liabilities Non-Equity Reserves Preferred Stock (Carrying Value) Redeemable Preferred Stock Non-Redeemable Preferred Stock Common Equity (Total) Common Stock Par/Carry Value Retained Earnings ESOP Debt Guarantee Cumulative Translation Adjustment/Unrealized For. Exch. Gain Unrealized Gain/Loss Marketable Securities Revaluation Reserves Treasury Stock Total Shareholders' Equity Total Equity Liabilities & Shareholders' Equity
1B 1B 0 170.33M 100.42M 2.43B

2009
0 192.41M 210.52M 3.24B

2010
0 184.96M 40.47M

2011 2012
564.6M 564.6M 283.1M 297.69M 5.59B 413M 413M 0 301M -

0 300M 0 300M

3.99B 0 0 174.78M 280.45M 348.5M 2.26B 3.71B 0 0 0 0 0 753.97M 753.97M 49.53M 49.53M 0 4.51B 0 0 0 0 11.08B 1.47M 5.97B 0 788.16M 165.23M 0 (5.38B) 11.08B 11.08B 15.59B (5.38B) 13.79B 13.79B 18.41B 13.79B 1.49M 8.36B 4.62B 0 0 0 0 15.3B 1.51M 10.16B 2.96B 3.64B 3.64B 4.52B 0 1.49B 0 1.49B

10.35B 0 489.09M 5.1B 6.73B 1.53B 1.51B 10.35B 11.07B 4.11B 4.11B 0 0 1.02B 1.02B 207M 207M 0 16.4B 0 0 0 0 17.93B 1.54M 13.39B 20.88B -

0 1.49B 1.51B 0 0 0 0 14.92M 1.07B 1.07B 58.14M 58.14M 0 6.7B 0 0 0 0 9.39B 0 929.14M 645.46M 929.14M 645.46M 49.56M 49.56M 0 45.39M 45.39M

0 0 0 565.62M 408.4M 185.75M 413.75M 0 (6.09B) 15.3B 15.3B 22B 531.18M 0 (7.16B) 17.93B 17.93B 27.32B 587.99M -

0 20.88B 20.88B 37.27B

2. Balance sheet of Amazon for the past five years

Assets Fiscal year is January-December. All values USD millions (M) billions (B). Cash & Short Term Investments Cash Only Short-Term Investments Total Accounts Receivable Accounts Receivables, Net Accounts Receivables, Gross Bad Debt/Doubtful Accounts Other Receivables Inventories Finished Goods Work in Progress Raw Materials Progress Payments & Other Other Current Assets Miscellaneous Current Assets Total Current Assets Net Property, Plant & Equipment Property, Plant & Equipment - Gross Buildings Land & Improvements Computer Software and Equipment Other Property, Plant & Equipment Accumulated Depreciation Total Investments and Advances Other Long-Term Investments Long-Term Note Receivable Intangible Assets Net Goodwill Net Other Intangibles Other Assets Tangible Other Assets Total Assets

2007 2008 2009 2010 2011

3.11B 813M 2.3B 682M 682M 746M (64M) 0 1.2B 1.2B 0 0 0 170M 147M 5.16B 2007 543M 1.02B 285M 377M 480M 214M 197M 0 248M 222M 26M 56M 56M 6.49B 2007 17M 0 17M 2.8B 59M 3.59B 3.73B 355M 3.37B 827M 827M 908M (81M) 6.37B 391M 5.98B 988M 72M (72M) 0 1.4B 2.17B 1.4B 2.17B 0 0 0 0 0 0 204M 272M 204M 272M 6.16B 9.8B 2008 2009 854M 1.29B 1.41B 1.92B 331M 398M 339M 258M 555M 625M 90M 397M 306M 0 0 598M 1.8B 438M 1.23B 160M 567M 470M 510M 470M 510M 8.31B 13.81B 2008 59M 0 141M 5.61B 2009 141M 0 224M 8.05B 8.76B 3.78B 4.99B 1.59B 72M (72M) 3.2B 3.2B 0 196M 196M 13.75B 2010 2.41B 3.26B 487M 451M 842M 436M 157M 0 1.91B 1.35B 563M 266M 266M 18.8B 2010 224M 0 9.58B 5.27B 4.31B 2.57B 1.2B 1.28B (82M) 1.37B 4.99B 4.99B 0 351M 351M 17.49B 2011 4.42B 5.79B 643M 2.46B 1.37B 364M 156M 2.6B 1.96B 647M 377M 377M 25.28B 2011 524M 0 524M 11.15B

ST Debt & Current Portion LT Debt Short Term Debt Current Portion of Long Term Debt Accounts Payable

Income Tax Payable Other Current Liabilities Dividends Payable Accrued Payroll Miscellaneous Current Liabilities Total Current Liabilities Long-Term Debt Long-Term Debt excl. Capitalized Leases Non-Convertible Debt Convertible Debt Capitalized Lease Obligations Provision for Risks & Charges Deferred Taxes Deferred Taxes - Credit Deferred Taxes - Debit Other Liabilities Other Liabilities (excl. Deferred Income) Deferred Income Total Liabilities Non-Equity Reserves Preferred Stock (Carrying Value) Redeemable Preferred Stock Non-Redeemable Preferred Stock Common Equity (Total) Common Stock Par/Carry Value Retained Earnings ESOP Debt Guarantee Cumulative Translation Adjustment/Unrealized For. Exch. Gain Unrealized Gain/Loss Marketable Securities Revaluation Reserves Treasury Stock Total Shareholders' Equity Accumulated Minority Interest Total Equity Liabilities & Shareholders' Equity

902M 902M 3.71B 1.34B 1.28B (1.22B) 2.5B 62M 98M (260M) 260M 132M 132M 0 5.29B 0 0 0 0 1.2B 4M (1.38B) 0 (1M) 7M 0 (500M) 1.2B 0 1.2B 6.49B

1.09B 1.09B 4.75B 533M 409M (261M) 670M 124M 144M (145M) 145M 219M 219M 0 5.64B 0 0 0 0 2.67B 4M (730M) 0 (128M) 6M 0 (600M) 2.67B 0 2.67B 8.31B

1.62B 1.62B 7.36B 252M 109M 109M 0 143M 202M (18M) 18M 738M 738M 0 8.56B 0 0 0 0 5.26B 5M 172M 0 (66M) 10M 0 (600M) 5.26B 0 5.26B 13.81B

2.1B 2.1B 10.37B 641M 408M 408M 0 233M 243M (22M) 22M 677M 677M 0 11.93B 0 0 0 0 6.86B 5M 1.32B 0 (203M) 13M 0 (600M) 6.86B 0 6.86B 18.8B

3.23B 3.23B 14.9B 1.42B 255M 255M 0 1.16B 266M (28M) 28M 944M 944M 0 17.52B 0 0 0 0 7.76B 5M 1.96B 0 (326M) 10M 0 (877M) 7.76B 0 7.76B 25.28B

WHAT THE FUTURE HOLDS

eBay
The company is totally committed to the Internet. As CEO Meg Whitman put it: The Internet is not dead. When I talk about the future of the Internet many people say, What future? But I believe the Internets best days are still ahead. eBay realizes that it has a very powerful place in the market with a loyal customer base. On January 17, 2002, the company announced that it was increasing the Final Value Fee which is the fee paid to the company when an item is sold. This had previously not been increased since 1996. Such increases in fees could be expected in the future leading to strong profits. A clear direction of growth for eBay is in foreign markets. It is currently operating in eight of the top ten countries by online market size outside of the U.S. eBay currently has a presence in major Asian markets, Japan, South Korea, Singapore, and plans to expand to Taiwan and China soon. It is gaining users 50% faster in Europe than in the U.S., and gross merchandise sales are growing 135% faster. eBay has also identified m-commerce as a potential growth area. Specifically, eBay is working with Microsofts .Net initiative to provide access to its auction services to cell phone users. With this technology, consumers will be able to bid on auctions using their cell phones. This will make it even easier for users to participate in auctions and is expected to increase usage. There are some indications that eBay feels that sticking to the auction format alone limits its growth prospects. As a result, it has said that it will pursue fixed-price retailing, something it started with its purchase of Half.com. However, eBay will always be known as the auction site that was the last man standing in the dot-com movement due to prudent business approach.

Amazon
Amazon stands at a critical juncture today. Profits have proven to be elusive. For the longest time, Jeff Bezos has argued that focusing on profits would mean giving up on growth opportunities and is not in the interest of the company. However, this has now changed with Bezos saying, This is the right time to focus on the fundamental economics of our business, even if it means sacrificing growth. The vast majority of investments in online firms have been written off. The company does not have adequate cash to operate for a long period of time. The company has accumulated a vast deficit. However, this has not stopped the company from making new acquisitions and forming new partnerships. A key partnership was announced with Target on September 2001. Target agreed to use Amazon.com technology for order fulfillment and customer care services on its Target.com, MarshallFields.com, Mervyns.com and GiftCatalog.com websites. It acquired the operations of the defunct Egghead.com on December 19, 2001. This provides Amazon.com another channel to reach customers. The company also announced a partnership with Circuit City on December 11, 2001. Customers can now place an order for an electronics item at Amazon.com and pick it up at their local Circuit City. The company continues to add innovative features on its web site. It added the

millions of tabs feature in September 2002. Customers now have a tab that is t heir own and is completely customized to their needs. Amazon.com also added computers and eBooks to its site. One problem that analysts have identified is that the growth in the number of customers has slowed down. One analyst has been quoted as saying, Everyone who wanted to buy a book online has already heard of Amazon. An expert within Amazon has come up with this solutionAmazon should increase its holdings of best sellers and stop holding slow-selling titles. He sees this as the way to reduce costs and move toward profitability. The company has attracted a $100 million investment from America Online fueling speculation that this may be the first step towards a merger. Moreover, there is some sentiment that the long-term future of the company may be as a technology provider. This is really based on the alliance with Toys R Us where Amazon runs the online storefront and Toys R Us controls inventory and logistics.

Results
Resent study across the globe has shown some incredible results

Summary/Conclusion
This paper has explored and discussed shortcomings associated with the definition of ecommerce. The authors have proposed a framework for defining and describing the degree to which marketing and sales activities and processes are using computer and communications technology along a continuum that places an organization's level EC development into one of 5 levels. This framework will prove important and useful to organizations and individuals that are considering e-commerce activities. The framework will also assist organizations already involved in e-commerce by providing a tool to describe and assess the level of current activities.

Future Direction/Further Research Areas

Future research and development in the area of e-commerce, both in the market place and in academia needs to focus on a.) how to test the merit of the new definition in terms of its applicability and b.) measure its advantages / Disadvantages to assist in the transformation to an ecommerce mindset. Additionally, from an operational perspective the proposed framework needs to i.) Be tested for validity, ii.) Have quantifiable metrics developed to assist in determining a company's current e-commerce level iii.) Have managerial and technology strategies developed that will provide for a cost effective progression along the proposed continuum. While outside the realm of this paper, the authors realize the continuum would be stronger if we could identify organizational cultures that are commonly found at each level. Of course, the theory that there is a cultural uniformity among organizations at each level may not be accurate. Other areas that should be looked at include organizational structure, leadership style, overall business strategy, and level of commitment to customer service. Each of these concepts would be useful in creating a more general structure (not industryspecific) for identifying the depth to which an organization is committed to e-commerce.