Monday, July 9, 2007

Assignment 2

Frictionless E-Commerce

The idea of a Semantic rich web is a noble idea. The World Wide Web Consortium has many different projects going on to enhance different aspects of a semantic web. Giving the web the ability to describe itself in standard forms would allow for greater ease of machine searching. Utilizing Uniform Resource Identifiers and Extensible Markup Language provide the language in which the Resource Description Framework standards rely upon. The RDF utilizes common vocabulary to describe resources on the web. The goal is to build a vocabulary rich enough to be utilized by automated tools.

E-Commerce on the web is envisioned as near perfect competition for sellers as identical goods can be compared between sellers instantly. With a single click a potential buyer can see the range of prices for goods across not only the country but the world. However, in the studies done by Erik Brynjolfsson and Michael D. Smith they found that the lowest price sellers did not have the highest sales volume (5).

While semantic web technologies has the ability to affect e-commerce, consumers have still been fairly brand loyal. I myself have had good experiences with purchasing from and I continue to purchase from them even if or shows them as slightly more expensive. Even in the world of globalization I still have some loyalty to the sites that have proven service to me. I rely very heavily on the customer reviews when I am looking to purchase a product. I do not think that e-commerce is frictionless; there might be less boundaries to new competition and easier access to competitors for the buyers but that does not make the market frictionless.

I suppose though that I have only been looking at large scale operations, a small easy and cheap to operate business such as a T-Shirt store would be rather frictionless to open online. The kind of product would also affect the amount of friction on the market. Buying a car online is probably one item very few people purchase online, while nearly every college student buys text books online. By utilizing auction sites and other store hosting sites like Amazon someone could get into selling little items very easily.

I remember when the X Box 360 was first released, a friend of mine got a free trail of the EBay store. He and his friends bought 10 X Box 360’s and he was able to sell them all through EBay and he claimed he had a net profit of over $2,000. Now, I suppose reselling hard to get game consoles is not quite a real business but it is a great example of a frictionless market.

I have just totally flip flopped on my idea of frictionless e-commerce, but I do think it depends on the item and the market. As we begin to see more common use of semantic web technologies I do believe that entering markets for low prices easy to produce items will be easier. Thinking not just of the technology side though, being able to do more efficient searches and get relevant price data might lead to less price competition and more of a focus on the differentiation of products. In the rather mature beverage market, prices for Coke and Pepsi have been the same for as long as I have been alive, I can see this same sort of thing happening in other markets eventually. The manufacturers might realize that trying to compete on the cost basis will result in a much lower profit margin and they would not be able to make the margins they want.

I am very excited as a consumer to see what further advances come about in the e-commerce field. I already heavily utilize and other online retail sites, I have even bought a few items that Amazon had suggested to me through their ‘Other people who bought this item bought this as well’ ads. I had read about how Google wants to start collecting more and more personal data and do something very similar to that for all kinds of products. I know some people worry about the security of such personal information being out there, but I think the potential benefits outweigh the risks of someone finding out what kind of things I commonly shop for and what not…

I wonder if I will see true globalization in my life time, we are already getting closer and closer every year. What happens after China runs out of cheap labor?

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