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Strategies value creation in e-commerce: best practice in Europe

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This report investigates the business models of 30 European e-commerce companies in order to better understand their strategies for value creation. Our main assumption is that e-commerce fundamentally affects the way business is conducted across many industries. To support this insight, the authors discuss the unique characteristics of 'virtual' markets brought on by the Internet, observing that they differ from those of 'traditional' markets. These characteristics are identified as reach, richness and digital representation, and they form the backdrop against which we discuss the value-creation potential of e-commerce business models. They analysed the companies in our sample with one principal question in mind - what are their strategies for creating value? Their exploratory analysis of the data revealed that a company's ability to create value is a function of both how efficient its business model is and how well it is able to draw and retain customers to its website (how "sticky" the site is). Using both qualitative and quantitative results from our checklist and illustrating some of the best practice examples they uncovered, they hope to show what these individual European companies are doing to create value. Companies that can use the Internet to increase transaction efficiency have the potential to create value for all parties involved in the transaction. Their analysis of the case data revealed that companies that are able to do this effectively: · Strengthen the supply chain by reducing supplier costs and integrating vertically. · Provide a large array of products and services. · Make the transaction convenient for the consumer. · Allow the consumer to save time. · Reduce the asymmetry of information amongst parties. Stickiness creates value by increasing transaction volumes. This is of critical importance as the competition for site visitors will grow as the number of consumers and vendors increases. They have identified a few effective means by which the companies in our sample create stickiness: · Reward customers for their loyalty. · Personalise the product or customise the service. · Build virtual communities. · Establish their reputation for trust in the transaction. They believe that the companies that scored high in these categories are more likely to see customers make a purchase, return to a site, and stay for longer periods of time when they do come back. To illustrate these two strategies, the authors give examples that can be considered 'best practice' companies. However, they found that there are wide variations in the degree to which successful European companies have achieved efficiency and stickiness in their business models. They believe that this indicates the existence of untapped opportunities for e-commerce companies to create value. The identified strategies for value creation, and the examples cited as "best practice" in this report should enable managers of e-commerce firms to gain a better awareness of the competitive benchmarks that are driving e-commerce in Europe today. They should also help individual companies evaluate their own performance, and take steps to affect improvements where appropriate, by using the evidence presented in this report to enrich their own offering with novel ideas.

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