E-Commerce: Concepts, Principles, and Application 9811964378, 9789811964374

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Advanced Studies in E-Commerce

Zheng Qin · Qinghong Shuai · Guolong Wang · Pu Zhang · Mengyu Cao · Mingshi Chen

E-Commerce Concepts, Principles, and Application

Advanced Studies in E-Commerce Series Editors Zheng Qin, School of Software, School of Information Science and Technology, Tsinghua University, Beijing, China Qinghong Shuai, School of Economic Information Engineering, Southwestern University of Finance and Economics, Chengdu, China Ronggang Zhang, School of Management, Northwest University of Politics and Law, Xi’an, China Qiongwei Ye, Professor and Associate Dean in the Business School, Yunnan University of Finance and Economics, Kunming, Yunnan, China Li Xiong, Department of Information Management, Shanghai University, Shanghai, China Jie Cao, Professor in the College of Information Engineering, Nanjing University of Finance and Economics, Nanjing, China

Advanced Studies in E-Commerce takes a fresh and global viewpoint to E-Commerce development. It encompasses such issues as the basic concepts and principles of E-Commerce, the industry chain of E-Commerce, the security management of E-Commerce; the architecture of E-Commerce; the analytics of E-Commerce; and some cutting-edge topics of E-Commerce.

Zheng Qin · Qinghong Shuai · Guolong Wang · Pu Zhang · Mengyu Cao · Mingshi Chen

E-Commerce Concepts, Principles, and Application

Zheng Qin School of Software, School of Information Science and Technology Tsinghua University Beijing, China Guolong Wang School of Information Technology and Management University of International Business and Economics Beijing, China Mengyu Cao Department of Mathematical Sciences Tsinghua University Beijing, China

Qinghong Shuai School of Economic Information Engineering Southwestern University of Finance and Economics Chengdu, Sichuan, China Pu Zhang School of Law Tsinghua University Beijing, China Mingshi Chen School of Economics and Management Tsinghua University Beijing, China

Advanced Studies in E-Commerce ISBN 978-981-19-6437-4 ISBN 978-981-19-6438-1 (eBook) https://doi.org/10.1007/978-981-19-6438-1 Jointly published with Xi’an Jiaotong University Press The print edition is not for sale in China (Mainland). Customers from China (Mainland) please order the print book from: Xi’an Jiaotong University Press. © Xi’an Jiaotong University Press 2022 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publishers, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publishers nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publishers remain neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore

Contents

1 Background of E-Commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 Social Ecology of E-Commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1.1 National Ecology of E-Commerce . . . . . . . . . . . . . . . . . . . . . 1.1.2 The United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1.3 The European Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1.4 Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1.5 China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2 The Economic Ecology of E-Commerce . . . . . . . . . . . . . . . . . . . . . . . 1.2.1 Digital Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2.2 Internet Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2.3 Platform Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2.4 Discipline Ecology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3 Engineering Ecology of E-Commerce . . . . . . . . . . . . . . . . . . . . . . . . . 1.3.1 Big Data Ecology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3.2 Cloud Computing Ecology . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3.3 Internet of Things Ecology . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3.4 Artificial Intelligence Ecology . . . . . . . . . . . . . . . . . . . . . . . . 1.3.5 Blockchain Ecology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4 Innovation Ecology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4.1 Realization of the Virtual Environment . . . . . . . . . . . . . . . . . 1.4.2 Intelligent Logistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.5 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 2 2 2 4 7 8 12 13 15 17 21 29 29 33 37 43 49 54 56 58 64 65 67

2 Commerce Basics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1 Commerce Basics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.1 Basic Concept of Electronic Commerce . . . . . . . . . . . . . . . . 2.1.2 E-Commerce Architecture . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.3 Basic Model of E-Commerce . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.4 E-Commerce Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . .

69 69 69 74 78 84

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2.1.5 E-Commerce Consumers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.6 E-Commerce Enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2 Basic Knowledge of E-Commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2.1 Basic Knowledge of Logistics . . . . . . . . . . . . . . . . . . . . . . . . 2.2.2 Basic Knowledge of Marketing . . . . . . . . . . . . . . . . . . . . . . . 2.2.3 Basic Knowledge of Cybersecurity . . . . . . . . . . . . . . . . . . . . 2.2.4 Basic Knowledge of Digital Currency . . . . . . . . . . . . . . . . . . 2.2.5 Basic Knowledge of Finance . . . . . . . . . . . . . . . . . . . . . . . . . 2.2.6 Basic Knowledge of Computer . . . . . . . . . . . . . . . . . . . . . . . . 2.2.7 Basic Knowledge of Accounting . . . . . . . . . . . . . . . . . . . . . . 2.2.8 Basic Knowledge of Management Science and Engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2.9 Basic Knowledge of E-Commerce Law . . . . . . . . . . . . . . . . 2.2.10 Basic Knowledge of Digital Society . . . . . . . . . . . . . . . . . . . 2.3 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

89 93 97 98 107 112 119 124 135 142

3 Basic Models of E-Commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1 Basic Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1.1 B2B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1.2 B2C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1.3 C2C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1.4 O2O . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1.5 G2G . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1.6 O2On . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2 Model Evolution and New Configuration: Model Composition . . . . 3.2.1 Modeling Analysis of Model Configuration . . . . . . . . . . . . . 3.2.2 Theoretical Analysis of Model Configuration . . . . . . . . . . . 3.3 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

183 184 184 189 195 197 200 203 207 208 216 218 219 220

4 Architecture and System of E-Commerce . . . . . . . . . . . . . . . . . . . . . . . . . 4.1 Principle of Architecture Composition . . . . . . . . . . . . . . . . . . . . . . . . . 4.1.1 Definition of Architecture . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1.2 Common Architecture Styles . . . . . . . . . . . . . . . . . . . . . . . . . 4.2 Important Components of E-Commerce . . . . . . . . . . . . . . . . . . . . . . . . 4.2.1 General Components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2.2 Specialized Components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3 E-Commerce Architecture Style . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3.1 Cloud Architecture Style . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3.2 Layering Styles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3.3 Flexible Architecture Style . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3.4 Pipe-Filter Style . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3.5 Object-Oriented Style . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

221 222 222 223 282 283 290 294 294 297 299 301 304

147 154 160 166 166 178

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4.3.6 Event-Driven Style . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4 E-Commerce Architecture Protocols . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4.1 SSL Protocol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4.2 SET Protocol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4.3 Messaging Protocols . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4.4 Fault Tolerance Protocol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4.5 Shared Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5 E-Commerce System Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5.1 Practical Examples of Business Architecture Design . . . . . 4.5.2 Practical Examples of Data Architecture Design . . . . . . . . . 4.5.3 Practical Examples of Technology Architecture . . . . . . . . . 4.6 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

307 311 311 312 313 314 318 319 319 321 322 323 323 324

5 Basic Operating Principles of an E-Commerce System . . . . . . . . . . . . . 5.1 Principles of E-Commerce Production . . . . . . . . . . . . . . . . . . . . . . . . . 5.1.1 E-Commerce Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1.2 E-Commerce Production Models . . . . . . . . . . . . . . . . . . . . . . 5.1.3 E-Commerce Production Management . . . . . . . . . . . . . . . . . 5.2 Principles of E-Commerce Transaction . . . . . . . . . . . . . . . . . . . . . . . . 5.2.1 Traditional Commerce and E-Commerce . . . . . . . . . . . . . . . 5.2.2 Transaction Credit Risk of E-Commerce . . . . . . . . . . . . . . . 5.2.3 E-Commerce Transaction Platform . . . . . . . . . . . . . . . . . . . . 5.3 Principles of E-Commerce Circulation . . . . . . . . . . . . . . . . . . . . . . . . . 5.3.1 Traditional Composite Circulation Mode . . . . . . . . . . . . . . . 5.3.2 E-Commerce Circulation Mode . . . . . . . . . . . . . . . . . . . . . . . 5.3.3 Impact of E-Commerce on Commodity Circulation . . . . . . 5.3.4 E-Commerce Circulation Organization Innovation . . . . . . . 5.4 Principles of E-Commerce Consumption . . . . . . . . . . . . . . . . . . . . . . . 5.4.1 Consumer Behavior Analysis . . . . . . . . . . . . . . . . . . . . . . . . . 5.4.2 The Impact of E-Commerce on Consumption . . . . . . . . . . . 5.4.3 Consumption Characteristics in the E-Commerce Era . . . . 5.5 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

327 330 330 337 342 345 345 349 352 361 361 364 367 371 372 373 376 379 381 384 387

6 Theory Application and Case Analysis of E-Commerce . . . . . . . . . . . . 6.1 Classic E-Commerce: JD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.1 JD’s Corporate Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.2 JD’s Commerce Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.3 JD’s Commerce Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2 Cross-Border E-Commerce: Xiaohongshu . . . . . . . . . . . . . . . . . . . . . . 6.2.1 Xiaohongshu’s Corporate Overview . . . . . . . . . . . . . . . . . . . 6.2.2 Xiaohongshu’s Commerce Operations . . . . . . . . . . . . . . . . . 6.2.3 Xiaohongshu’s Commerce Innovation . . . . . . . . . . . . . . . . . .

389 390 391 392 396 400 400 402 407

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6.3 New Retail E-Commerce: Meituan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3.1 Meituan’s Corporate Overview . . . . . . . . . . . . . . . . . . . . . . . . 6.3.2 Meituan’s Commerce Operations . . . . . . . . . . . . . . . . . . . . . . 6.3.3 Meituan’s Commerce Innovation . . . . . . . . . . . . . . . . . . . . . . 6.4 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

411 412 414 417 421 423

Chapter 1

Background of E-Commerce

Case Artificial Intelligence and Digital Economy At Dartmouth College in the United States in 1956, John McCarthy and other scientists began to explore the use of machines to mimic human learning skills. John McCarthy was later called the “father of Artificial Intelligence”, and 1956 was considered the “year of Artificial Intelligence”. With the gradual maturity of deep learning algorithms and big data technologies, the development of artificial intelligence has entered a “fast lane”. New types of social ecology, such as smart cities, intelligent manufacturing and digital economy, are developing rapidly with the support of national strategies. Japan put forward the Advanced Integrated Intelligence Platform Project (AIP) in early 2016 to promote the comprehensive development of artificial intelligence, big data, the Internet of Things and other technologies. In May 2016, the United States established a committee on artificial intelligence as a national strategy. During the same period, China released the Three-Year “Internet Plus” AI Action Plan, which put forward a series of measures related to the digital economy. The emergence of new economic ecology promotes the further development of electronic commerce and generates new social demands. To meet the needs of society, new industrial ecology is gradually emerging, and the information environment of the era has begun to undergo significant changes. This chapter uses basic mathematical tools to explain the concepts and applications of new technologies such as big data, cloud computing, the Internet of Things, artificial intelligence and blockchain. In the process of emerging technology generation and application, the complexity of the engineering environment generates more innovation demands and promotes the construction and improvement of innovation ecology. At the same time, engineering ecology and innovation ecology represented by artificial intelligence and other emerging technologies also promote the development of social ecology such as digital economy from three aspects: first, enabling products

© Xi’an Jiaotong University Press 2022 Z. Qin et al., E-Commerce, Advanced Studies in E-Commerce, https://doi.org/10.1007/978-981-19-6438-1_1

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to enhance the added value of products through intelligence; second, enabling industries to improve the information decision-making ability of the industry through the intelligent system; and finally, empowering society to promote social development through engineering research and innovation.

1.1 Social Ecology of E-Commerce 1.1.1 National Ecology of E-Commerce Currently, our world is experiencing a new round of industrial revolution and commerce transformation. The wide application of high-tech achievements in commerce has given birth to the emergence and development of e-commerce. In the wave of economic globalization, the trade between countries has become closer. Equality, mutual benefit, harmony and development have become the main themes of international economic exchanges. The continuous innovation of science and technology injects new vitality into the trade and economic development of various countries and calls for the birth of a new order and a new way. E-commerce is a manifestation of this new way. On the one hand, the wide area of the Internet can break the two-dimensional constraints of time and space. E-commerce based on the Internet has the natural advantages of being instant and global. On the other hand, e-commerce can integrate the scientific and technological achievements brought by the industrial revolution and make it more advanced with the times to realize the connection and integration of technology and life. While promoting economic growth, e-commerce also stimulates the transformation of traditional business models. At present, e-commerce has occupied a large proportion of the world economy, and its development has received great attention from countries all over the world, which is reflected not only in each country’s plan for its own e-commerce development blueprint but also in its efforts to realize intercountry cooperation of e-commerce.

1.1.2 The United States As the leader of today’s global e-commerce, the United States plays an important role in promoting global trade reform and reshaping the world trade pattern. Compared with other countries, the network infrastructure of the United States is relatively complete, and e-commerce also started earlier. The huge advantages of network technology and digital technology make the United States in an absolute leading position in the development of global e-commerce. In recent years, the United States has continuously introduced its own e-commerce development agenda and strives to incorporate e-commerce issues into global trade negotiations.

1.1 Social Ecology of E-Commerce

3

Fig. 1.1 Principles of the “Framework for Global Electronic Commerce”

The Framework for Global Electronic Commerce issued in 1997 is the first attempt and exploration of the e-commerce development strategy of the American government. The Framework for Global Electronic Commerce establishes the basic principles for the development of e-commerce in America and lays the foundation and points out the direction for the development of e-commerce in America. It can be said that the America’s e-commerce policies since then are all formulated on the basis of the Framework for Global Electronic Commerce (Fig. 1.1). The Trade Promotion Authority Act passed by the U.S. Congress in 2002 involves trade in IT products, trade in digital services, e-commerce of digital products and corresponding intellectual property protection. Compared with the Framework for Global Electronic Commerce of 1997, the Trade Promotion Authority Act focuses more on expanding the influence of U.S. in global rule-making, aiming to achieve the goals of e-commerce negotiations on issues such as trade in digital services, free flow of information, and nondiscrimination and transparency in digital trade. In 1998, the World Trade Organization (WTO) launched the “Work Program on Electronic Commerce”,1 so the United States hoped to achieve its goals through the WTO. However, due to disagreement between the members of the WTO on basic issues such as the classification of goods and the application of rules, the e-commerce negotiation work of the WTO has not made much progress. The obstruction of multilateral rulemaking has led the United States to gradually rely on the negotiation and formulation of bilateral rules to pursue its trade policy goals. The U.S.-Chile Free Trade Agreement and the U.S.-Singapore Free Trade Agreement in 2003 began to include e-commerce 1

WTO, Work Program on Electronic Commerce, WT/L/274, 30 September 1998.

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clauses, which also created a model of bilateral trade agreements for U.S. after that. In 2015, the Trade Promotion Authority Act was reauthorized by the U.S. Congress, which reflected the U.S. Congress’ desire to maintain the continuity of e-commerce policy in trade negotiations. The negotiating objectives of the new Act go far beyond the Trade Promotion Authority Act in 2002. Based on these negotiating objectives, the U.S. published a series of trade negotiation agendas on e-commerce in May 2015, which later constituted the main criteria for the U.S. in the negotiations on the Trans-Pacific Partnership Agreement (TPP). TPP has a special chapter for e-commerce, which largely meets the development needs of the e-commerce industry. Although the U.S. withdrew from the TPP, the way to articulate, advocate and implement its e-commerce policy through various trade agreement negotiations was not changed. In October 2018, the U.S., Mexico and Canada reached the United States-Mexico-Canada Agreement (USMCA). USMCA not only inherits the e-commerce rules in TPP but also expands the scope of ecommerce regulation to the scope of digital trade. USMCA is the latest model of US e-commerce negotiation thus far. In 2019, the U.S. and Japan reached the U.S.-Japan Digital Trade Agreement specifically on digital trade.2 In terms of the content, the U.S.-Japan Digital Trade Agreement is similar to USMCA. However, such a way of conducting trade negotiations with an independent text of the agreement is enough to reflect the high importance the United States attaches to the development of global e-commerce.

1.1.3 The European Union The EU regards e-commerce as one of the important means of promoting global economic integration and leading the world economy and regards the development of e-commerce as a key factor for the EU to gain a competitive advantage in the future global economy. Therefore, since 1997, the EU has planned and formulated the framework and supporting policies for the development of e-commerce from a strategic level to guide the integrated development of e-commerce in EU members. In April 1997, the European Union issued A European Initiative in Electronic Commerce. The initiative proposes action principles for the integration of EU information infrastructure, e-commerce development and management. In that July, the Bonn Ministerial Declaration was adopted at a Ministerial Conference titled “Global Information Networks: Realizing the Potential” in Bonn. The Bonn Ministerial Declaration is similar to the Framework for Global Electronic Commerce of the United States, mainly involving the independent development of e-commerce enterprises, limiting unnecessary government interference, and expanding the specific application of e-commerce (Fig. 1.2). 2

USTR. “FACT SHEET on U.S.-Japan Trade Agreement”, September 25, 2019, https://ustr. gov/about-us/policy-offices/press-office/fact-sheets/2019/September/fact-sheet-us-japan-tradeagreement.

1.1 Social Ecology of E-Commerce

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Fig. 1.2 Ten-year plans and main development strategies of the EU after 2000

In 2000, the Lisbon Strategy was launched by the EU heads of state and government. It was a programmatic document to guide the EU’s economic development in the first ten years after entering the new century, aiming to make Europe “the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion”. To implement the Lisbon Strategy, the EU issued the eEurope 2002 Action Plan (eEurope 2002) on informatization and digital trade in June 2000. Under the guidance of eEurope 2002, the EU has achieved the rapid growth of Internet access and the unification of legal frameworks in the fields of telecommunications and ecommerce. After that, the EU launched the eEurope 2005 Action Plan (eEurope 2005) in 2002, striving to establish an online public service system represented by e-government, e-education, and e-health and create a vibrant e-commerce environment. At the EU summit held in early 2005, the European Commission conducted a mid-term assessment and adjustment of the Lisbon Strategy. According to the newly adjusted Lisbon Strategy, the EU issued a new five-year plan for the development of informatization and digital trade—i2010: European Information Society 2010, with the goal to improve the EU’s existing policy tools to promote the development of the digital economy. In 2010, the EU released its second ten-year economic development plan, the Europe 2020 Strategy. In May of the same year, the Digital Agenda for Europe was released. As one of the flagship initiatives of the Europe 2020 Strategy,3 the Digital 3 The seven flagship initiatives of the Europe 2020 Strategy are: Innovation Union, Youth on the move, A Digital Agenda for Europe, Resource efficient Europe, An industrial policy for the globalization era, An Agenda for new skills and jobs, European Platform against Poverty.

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Agenda for Europe is the first programmatic document for the second ten-year of the EU’s digital strategy. The core goal of the Digital Agenda for Europe is to build a Digital Single Market (DSM) that enables consumers to freely choose products and services provided by all EU member states, relying on an open, fair and seamless network environment. Therefore, the European Commission adopted the Digital Single Market Strategy in May 2015. The Digital Single Market Strategy clarifies three major measures to establish a DSM: first, to provide consumers and businesses with better digital goods and services; second, to create a favorable business environment for the development of digital networks and services; and third, to maximize the growth potential of the European digital economy. In addition, to comprehensively enhance its competitiveness in the digital economy, the EU launched the Industrial Digitalization in Europe in 2016 and Artificial Intelligence for Europe in 2018. In November 2017, the Committee on International Trade of the European Parliament adopted the report Toward a Digital Trade Strategy. The report aims to establish an EU data trade strategy and accelerate the development of relevant policies to ensure the free flow of data and information across borders. The report makes recommendations to the European Commission on topics such as e-commerce, net neutrality, and protecting online consumers. The report advocates that the EU should set standards for international rules and agreements on digital trade, ensure that third countries open digital products and services, allow trade rules to create tangible benefits for consumers, and promote digital trade to respect the fundamental rights of consumers.4 Since 2020, the EU has formulated a series of master plans to deal with the digital age, such as Shaping Europe’s Digital Future, EU Industrial Strategy, A European Strategy for Data and White Paper on Artificial Intelligence: a European Approach to Excellence and Trust. In March 2021, the EU released another ten-year programmatic document—2030 Digital Compass: the European Way for the Digital Decade (2030 Digital Compass). The 2030 Digital Compass clarifies the development direction of the EU in the digital age from four aspects: digital skills, digital infrastructure, digital business and digital public services, which mainly cover the construction of safe and reliable digital infrastructure, the digitalization of public services and the digital transformation of the business sector.5 In addition to the unified plan of the European Union, European countries have paid great attention to the transformation of industrial digitalization in the past decade. In this industrial revolution, Germany is undoubtedly at the forefront. In 2013, Germany proposed the concept of “Industry 4.0” for the first time. Subsequently, the United Kingdom, France and other countries also gradually began to explore industrial digitalization. In 2018, Germany, the United Kingdom, and France formulated a series of important digital transformation strategies. Since 2021, the ecommerce market has remained strong in Europe after the digital transformation of

4

https://www.europarl.europa.eu/doceo/document/A-8-2017-0384_EN.html. See European Commission: 2030 Digital Compass: the European Way for the Digital Decade. https://eufordigital.eu/wp-content/uploads/2021/03/2030-Digital-Compass-the-European-wayfor-the-Digital-Decade.pdf. 5

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its industry. In addition to countries with relatively mature e-commerce development, such as Germany, the United Kingdom and France, many countries also have outstanding market share growth, such as the Czech Republic, Italy, and Spain.

1.1.4 Japan Japan’s high level of economic development and relatively developed information technology have laid a solid foundation for the development of e-commerce. At present, Japan is the fourth largest e-commerce market in the world, after China, the United States and the United Kingdom. At the end of the last century, the Japanese government recognized the important role of information technology in economic development, so it vigorously promoted the construction of the information network system. From 1993 to 1996, the Japanese government successively invested approximately 50 billion yen to establish an electronic network system among scientific research institutions. The establishment of the electronic network information system has realized the sharing of information technology research and development resources among scientific research units, which has greatly improved the overall level of information technology research and development in Japan. With the encouragement and promotion efforts from the government, Japanese communication companies and multinational companies such as Sony and Panasonic have increased their investment in network information communication and information technology research and development, which has greatly improved Japan’s information technology and Internet development level. To promote the development of information technology, the Japanese government vigorously developed the Internet between 1995 and 2000, which made a breakthrough in the construction of Japan’s e-commerce infrastructure and gradually became a world leader. In recent years, the Japanese government has also actively deployed 5G, big data, artificial intelligence and other high-tech industries. As early as the beginning of this century, Japan issued a series of policy support for e-commerce enterprises to promote the development of the e-commerce industry. At the national planning level, Japan has established the strategic goal of “building a nation with IT”. In June 2000, the Japanese government issued the Outline of Japan Electronic Digital Development. In July of the same year, the Japanese government held an IT strategy meeting and established the National Information Technology Research Organization-IT Strategy Headquarters. Subsequently, Japan put forward three informatization development plans: “E-Japan”, “U-Japan” and “I-Japan”. On the basis of the three informatization development plans, Japan has continuously introduced a series of digital economy development planning strategies to promote digital transformation and economic revitalization. In short, the Japanese government has built a forward-looking and systematic policy support for the development of the e-commerce industry from an overall perspective. Since 2021, Japan has made the

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Fig. 1.3 Digital economy development strategies in Japan

promotion of digitalization one of the three pillars to promote economic development (Fig. 1.3).6 In addition, in terms of international cooperation, the Japanese government has made it clear in the White Paper on International Economy and Trade (2018) that it will state its position in the negotiation of e-commerce rules. In recent years, the Japanese government has made continuous efforts in the field of international rules. As far as the cooperation of international organizations is concerned, the Japanese government actively participates in the WTO’s cooperation, negotiation and rule-making, and its concerns mainly involve issues such as e-commerce tariffs, cross-border data flow, key source code protection, online consumer protection, and network security. In addition, the Japanese government is actively communicating with other countries or regions on e-commerce cooperation. For example, in January 2019, the trade ministers of Japan, the United States, and the European Union issued a joint statement in Washington to strengthen digital trade cooperation and commit to WTO negotiations on e-commerce.7 In July of the same year, at the G20 summit held in Japan, more than 20 countries and regions, including China, the United States, Japan, and the European Union, jointly signed the Osaka Declaration on Digital Economy, officially launching the “Osaka Track”.

1.1.5 China Since the development of the Internet industry in China in 1994, China’s ecommerce has experienced leaps and bounds. On the one hand, it benefits from China’s huge e-commerce market. On the other hand, it benefits from the national plan for e-commerce development. Overall, China’s e-commerce development has 6

See People’s Daily Online: The Minister of Japan’s Economic Regeneration Points Out the Three Pillar Areas of Future Economic Development. http://japan.people.com.cn/n1/2021/0119/c3542132005011.html. 7 USTR, “Joint Statement of the Trilateral Meeting of the Trade Ministers of the European Union, Japan and the United States’, January 9, 2019, https://ustr.gov/about-us/policy-offices/press-office/ press-releases/2019/january/joint-statement-trilateral-meeting.

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gone through three stages. In these three stages, China has formulated a series of development plans based on different development goals (Fig. 1.4). The first stage is the initial period of informatization construction (1994–2002). In this stage, since the Internet was just introduced into China, the information infrastructure was not yet complete. Therefore, the national strategy at this time mainly focused on the construction and development of information infrastructure,

Fig. 1.4 Development periods and overall plans of e-commerce in China

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such as the development of the mobile communication industry, spatial information infrastructure and the software industry. Under the advocacy and support of many national development plans, China’s Internet industry began to rise, and a large number of Internet companies were established successively, such as Sina, Sohu, NetEase, Alibaba, JD.com, etc. The second stage is the growth period of e-commerce (2003–2012). In this stage, the network economy represented by e-commerce began to develop rapidly. In 2003, Taobao was established, and JD.com (JD) also became involved in e-commerce. E-commerce in the modern sense began to form and rise in China. In 2005, the State Council issued the Recommendations on Accelerating the Development of E-commerce, which elevated the development of e-commerce to the height of the national strategy. To implement this document, in 2007, the National Development and Reform Commission and the Information Work Office of the State Council jointly issued China’s first five-year plan for e-commerce, the Eleventh Five-Year Plan for E-commerce Development, which clarified the principles, main objectives and tasks, major guidance projects, and supporting safeguards of the development of e-commerce during the Eleventh Five-Year period. The third stage is the maturity period of e-commerce (2013–present). Since 2013, China’s e-commerce has gradually entered a stage of maturity and innovation. On March 5, 2015, Premier Li Keqiang proposed for the first time in the government work report to formulate an “Internet +” action plan to promote the integration of modern manufacturing with the Internet, cloud computing, big data, the Internet of Things (IOT), etc., and to promote the healthy development of e-commerce, industrial Internet and Internet finance, which guides Internet companies to expand the international market.8 In July 2015, the State Council issued the Guiding Recommendations on Actively Promoting the “Internet +” Action, aiming to promote the expansion of the Internet from the consumption field to the production field, accelerate the improvement of the level of industrial development, enhance the innovation capabilities of various industries, and build new advantages and new kinetic energy for economic and social development.9 Subsequently, the State Council successively issued a series of national strategies, such as the Guiding Recommendations on Deepening the Integrated Development of Manufacturing and Internet and the Guiding Recommendations on Accelerating the Promotion of “Internet + Government Services”, to guide the application and development of the digital economy in various fields. In September 2020, the State Council issued the Recommendations on Leading the Accelerated Development of New Types of Consumption with New Business Formats and New Models, which set short-term goals for the development of e-commerce; that is, “after 3–5 years of efforts, the institutional mechanisms and policy systems to promote the development of new consumption will be more perfected. By further 8

See the office website of the State Council of PRC: Report on the Work of the Gvoernment (16 March, 2015), http://www.gov.cn/guowuyuan/2015-03/16/content_2835101.htm. 9 See Xinhuanet: Guiding Recommendations on Actively Promoting the “Internet +” Action (4 July, 2015), http://www.xinhuanet.com/politics/2015-07/04/c_1115815942.htm.

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optimizing the environment for the development of new forms and new models of consumption, improving the supply quality of new consumer products, and enhancing the support of new-type consumption for expanding domestic demand and stabilizing employment, a number of new-type consumption demonstration cities and leading enterprises will be cultivated and formed, the proportion of online retail sales of physical goods in total retail sales of consumer goods will increase significantly, and “Internet + service” and other new consumption formats and new models will be popularized and mature in 2025. To implement this document, 28 departments, including the NDRC and Ministry of Commerce, jointly issued the Implementation Plan for Accelerating the Cultivation of New Consumption to promote the integration of online and offline consumption and further realize the promotion and application of e-commerce in other fields. In addition, in some specific areas, the Chinese government has continuously introduced a series of policies and measures to promote the comprehensive development of e-commerce. For example, in 2017, the Central Committee of the Communist Party of China and the State Council issued the Recommendations on Deepening the Structural Reform of the Agricultural Supply Side and Accelerating the Cultivation of New Momentum for Agricultural and Rural Development, which proposed the goal of promoting the development of rural e-commerce, pointed out the development direction of rural e-commerce, and provided policy support for the development of rural e-commerce. In 2018, the State Council approved the establishment of a number of new cross-border e-commerce comprehensive pilot zones and clarified the regulatory system, service system and policy framework to promote the further development of cross-border e-commerce.10 In 2021, the State Council issued the Recommendations on Accelerating the Development of New Formats of Foreign Trade, which put forward requirements and clarified the direction for the development of e-commerce in the field of foreign trade. After three five-year development plans, China’s e-commerce has achieved steady and rapid development. At present, the scale of China’s e-commerce ranks first in the world. In October 2021, the Ministry of Commerce, CAC and NDRC issued the Fourteenth Five-Year Plan for E-commerce Development. This is the fourth five-year development plan of China’s e-commerce, which points out the direction for the development of China’s e-commerce in the next five years. During the “Fourteenth Five-Year Plan” period, China’s e-commerce will pay more attention to innovations in technology applications, business models and deepening collaboration, shifting from quantitative expansion to qualitative improvement. In terms of online retail, China’s e-commerce will develop toward the direction of omni-channel, encourage and support enterprises to use 5G, artificial intelligence, virtual reality (VR), 3D printing and other new technologies to build diversified online consumption scenarios, explore new modes of human-computer interaction, cultivate new hightech audio-visual formats, innovate online consumption methods, and improve online

10

See the State Council of PRC: Reply on the Approval of Establishment of Cross-border ECommerce Comprehensive Experimental Zones in 22 Cites including Beijing.

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consumption experience. In terms of cross-border e-commerce, China will accelerate the global layout of “Silk Road E-commerce”, encourage e-commerce platform companies to operate globally, improve the construction of global e-commerce technology facilities such as warehousing, logistics, payment and data, cultivate cross-border e-commerce supporting service enterprises, support the digitization of the global industrial chain and supply chain, drive brands to “go global”, continue to promote the construction of cross-border e-commerce comprehensive pilot zones, and explore the whole process innovation of cross-border e-commerce transactions. In terms of rural e-commerce, China’s e-commerce will realize the diversification of business formats and use rural e-commerce to realize digital agriculture and rural revitalization. The rural revitalization strategy has brought new opportunities for the development of rural e-commerce, and the development of rural e-commerce has also promoted the two-way flow of rural and urban resource elements. At present, the high-quality development of China’s county economy needs to further strengthen the role of digital e-commerce as a new driving force to serve the development of agriculture and rural areas, effectively help consolidate the effective connection between the achievements of poverty alleviation and rural revitalization, and accelerate the digitalization process of agriculture and rural areas. In terms of life services, China’s e-commerce will further realize digital and intelligent upgrades, expand the in-depth application of e-commerce in cultural tourism, medical care, education, sports and other fields, carry out digital empowerment actions for life services, and improve the digital level of convenience living circles. At present, China’s life service industry has basically realized networking. During the “Fourteenth Five-Year Plan” period, on this basis, the life service industry will build a more efficient and intelligent service consumption scene with the use of new technologies. Online tourism, online travel, and online medical care have been gradually upgraded to smart tourism, smart transportation, and smart medical care to realize the deep integration of e-commerce and various industries.

1.2 The Economic Ecology of E-Commerce As the saying goes, “The economic base determines the superstructure, and the superstructure reacts to the economic base.” Thus, the development of e-commerce. Under the dual impetus of economy and technology, e-commerce came into being. While ecommerce is prospering and developing, its penetration into social life also changes and leads the development direction of economy and technology. In general, in the process of e-commerce development, four typical economic forms have emerged around the world. In 1996, the United States took the lead in proposing the concept of the digital economy. In 2000, the popularity of the Internet, especially the integration of the Internet and economic activities, formed an Internet economy. In 2010, e-commerce was approaching maturity, and the platform economy began to emerge. Today, the sharing economy led by China has gradually become a hot topic around the world. These four forms are all based on e-commerce as the most important

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form of expression. As an important driving force, e-commerce not only induces the emergence of these four forms but also determines the development of these four forms.

1.2.1 Digital Economy In the 1940s, major technological breakthroughs were made in the field of microelectronics. The emergence of second-generation transistor electronic computers, integrated circuits and other scientific and technological achievements has greatly improved people’s ability to process knowledge and information. Digital technology has been gradually introduced into the field of economic life. By the 1970s, largescale integrated circuits, microprocessors and other achievements in software fields has led to the further promotion of digital technology. Around the 1990s, network technology became increasingly mature. With the popularity of the Internet, digital technology has begun to integrate with network technology. The vast amount of data generated by global Internet connections far exceeds the processing capabilities of previously dispersed terminals. Therefore, new digital technologies, such as big data and cloud computing, have developed rapidly. The rapid spillover of digital technology from the information industry not only accelerated the informatization of traditional sectors but also produced new production factors and formed new business models. E-commerce is the most typical application. New business forms and new models, such as e-commerce, mark new changes in the economic development model. It is in such a technical and application background that American scholar Don Tapscott first proposed the concept of “digital economy” in his book “The Digital Economy: Promise and Peril in the Age of Networked Intelligence” in 1996.11 Subsequently, the U.S. Department of Commerce successively released research reports titled the Emerging Digital Economy and the Digital Economy, which marked official recognition of the concept of the digital economy. At the beginning of this century, the concept of the digital economy was widely accepted around the world, and the digital economy also began to develop in a wider, deeper and more advanced direction. The economy and society have also undergone profound changes under the influence of the digital economy. The digital economy refers to a series of economic activities that use digital knowledge and information as key production factors, modern information networks as an important carrier, and the effective use of information and communication technology as an important driving force for efficiency improvement and economic structure optimization. The digital economy realizes deep integration of digital technology and the real economy by improving the digitalization and intelligence level of traditional industries. Therefore, the digital economy is different from the traditional real economy, but it is inseparable from the real economy. In terms of content, the digital economy includes not only digital industrialization but also industrial 11

See ref. [1].

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digitization. Digital industrialization is mainly reflected in the emergence of a large number of information industries, such as the telecommunication service industry, the Internet service industry, the electronic self-manufacturing industry, and the software industry. Industrial digitalization is reflected in the deep integration of digital technology and traditional industries. In terms of scope, the digital economy is no longer limited to the information industry. Since the 1970s, the rapid development of digital technology has made the information industry gradually become the most dynamic emerging industry. With the further development of digital technology, its role and influence in the entire social economy are expanding, which also enables digital technology to be gradually introduced into all walks of life. The extensive application of digital technology has shaped the new form of the economy. In terms of nature, the digital economy is a brand new economic and social form. Compared with the traditional agricultural economy and industrial economy, the digital economy has undergone revolutionary changes in terms of basic concepts, essential characteristics, and operating rules. The digital economy with digital technology innovation as the core driving force is the inevitable result of the development of science and technology and is also the result of the application of the innovation achievements of the current industrial revolution in the economic field. In the evolution of economic and social forms, the digital economy is a more advanced economic form after the agricultural economy and the industrial economy. This advance stems from two salient features of the digital economy. First, the digital economy takes knowledge and information as the basic production factors. Historical experience shows that every major change in economic form will inevitably give birth to and rely on new production factors. For example, the agricultural economy takes labor and land as the key factors, and the industrial economy takes capital and technology as the key factors. The digital economy is based on knowledge and information as key factors. The deep integration of digital technology and the economy and society has made information gradually digitized. Today, digitized information not only pervades all aspects of society but also inspires people to constantly create new ways to process this information. In the era of the digital economy, digital information and the knowledge carried by information have become a new driving force for business decision-making, a new form of economic commodities, and a new method of social governance. Second, the digital economy places more emphasis on the integration of digital technology and various industries. In every technological change and industrial revolution, some basic leading industries will emerge first, such as the textile industry during the first industrial revolution and the chemical industry during the second industrial revolution. The information industry is the leading industry in the current technological change and industrial revolution. However, throughout history, the proportion of leading industries in the total economic volume has shown a gradual downward trend. During the first industrial revolution, the British leading industries accounted for more than 40% of the total economic output. By the time of the Second Industrial Revolution, the share of leading industries in the United States has dropped to 20%. In today’s information revolution stage, the proportion of major

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national information industries stabilizes to approximately 6%.12 This shows that the development of the digital economy has gone beyond the field of the information industry and continues to penetrate and integrate into other industries. In the digital economy, if traditional companies want to maintain their business advantages, they must undergo digital transformation.13 For the e-commerce industry, the digital economy has achieved full penetration of the traditional retail industry from production to consumption, and the increasing digital technology innovation has also continuously spawned new models and new formats, such as new retail and sharing economy.

1.2.2 Internet Economy The information revolution that originated at the end of the last century not only brought the great development of productive forces and the new mode of management but also caused changes in industrial and economic structures. In particular, the advent and rapid development of the Internet has greatly improved the transmission speed and transmission capacity of information. At the beginning of this century, the Internet began to be introduced into commercial applications and gradually became a superior electronic commercial medium. Many companies use the Internet not only as a channel for selling goods but also as a tool for contacting customers and for daily management. New communication methods and technologies, such as e-mail, Internet fax and e-commerce, have gradually attracted attention and have been widely used in the business activities of enterprises. In addition, the mass production of computers and the reduction of the cost of network use have also greatly promoted the widespread use of computers and the Internet. It can be said that the Internet economy based on computers and the Internet is the product of the information revolution. The information revolution only created the material conditions for the emergence of the Internet economy. Fundamentally speaking, the emergence of the Internet economy also depends on the transformation of social production relations. The impetus for this transformation stems from the expectation of lower transaction fees. According to the theory of new institutional economics, transaction costs are the costs of obtaining accurate market information and the costs of negotiation and recurring contracts. Due to the incompleteness and asymmetry of information, transaction fees are unavoidable. To reduce transaction costs, people often seek new transaction methods and improve the original transaction methods and institutional arrangements through technological progress. It is precisely under the impetus of this force that when the new technological revolution emerges, people apply new technologies to social production activities and reproduction processes, thus prompting changes in production methods and social and economic relations and providing opportunities

12 13

See ref. [2]. See ref. [3].

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for the emergence of the network economy.14 In recent years, the network has become a new market paradigm. The Internet industry has also begun to actively explore business models that can not only increase Internet usage but also provide the basis for differentiated service products. Similar to the information economy and the digital economy, the Internet economy is also a description of the emerging economic forms in the world. However, different from the concepts that emphasize the information connotation and digital form of the economy, the Internet economy highlights the basic form of economic operation, that is, the network feature.15 Compared with the traditional economic form, the Internet economy is open, direct, virtual and sustainable. First, the Internet economy is an unprecedented open economy. Traditional economic exchanges are often limited by time and space, while the open Internet enables people to communicate, share information, and inquire about data anytime, anywhere. The openness of the Internet also enables the network economy to meet the needs of current economic globalization. The open Internet economy makes international trade more convenient, which greatly promotes the integration of the global economy and the development of economic globalization. Second, the Internet economy is a direct economy that can realize intercommunication between producers and consumers. In the traditional economy, due to the asymmetry of information, it is often difficult for producers to communicate directly with consumers, and they have to adopt a roundabout way of passing through middlemen. The Internet economy based on the Internet can realize direct communication between different subjects and then solve the problem of waste of resources caused by the disconnection of production and consumption. Third, the Internet economy is a virtual economy running in the information network space. The virtuality of the Internet determines the virtuality of the Internet economy. The Internet economy has prompted some social economic activities to shift from traditional offline to online. The completion of these economic activities often no longer requires the transfer of physical materials in space and time but through the transmission and processing of information, which can improve the efficiency of economic activities and reduce unnecessary consumption. Finally, the Internet economy is a sustainable economy dominated by nonmaterial resources. The core driving force of the development of the Internet economy is no longer physical labor, nor material resources such as capital and energy, but nonmaterial resources such as information and knowledge. Labor, capital, and energy can be regarded as finite resources, while knowledge and information are actually infinite.16 The prominent feature of information and knowledge is its shareability, which can realize the simultaneous possession of the same information and knowledge by multiple subjects. Therefore, the reproducibility and shareability of knowledge and economy also determine the sustainability of the Internet economy.

14

See ref. [4]. See ref. [5]. 16 See ref. [6]. 15

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From the perspective of industrial development, the Internet economy is an Internet industry established on the basis of e-commerce, which not only involves the construction of network infrastructure and the supply of network equipment, network products, network services and other economic activities, but also includes electronic transactions, electronic payment, operation and management of network enterprises, and a series of e-business activities. As the main manifestation of the Internet economy, e-commerce also has a great driving effect on the emergence and development of the Internet economy. On the one hand, e-commerce has subverted the traditional economic operation model and shaped the Internet economy. E-commerce realizes the integration of information flow, capital flow and logistics on the Internet, making the Internet the main place for business activities and then forming the basic structure of the Internet economy. On the other hand, e-commerce optimizes traditional economic structures. Driven by e-commerce, the proportion of the information industry in the total economy has increased substantially. Internet products and services with advanced technology and high added value have gradually been integrated into various industries, thus making the network economy a new economic growth point in various industries.

1.2.3 Platform Economy The new digital technology system based on the developed data acquisition and transmission system enables more and more information in the real physical world to be standardized and digitized. At the same time, the combination of digital technology and computer technology has provided huge, cheap and popular computing power for the whole society. This computing power promotes the operation of application systems based on powerful algorithms such as artificial intelligence and processes massive digital information according to demand. The developed digital technology system realizes the digital abstract isomorphism of the information in the real world, carries out the rapid processing and transmission of digital information, and creates the ability to widely integrate the relations of social production, distribution, exchange and consumption. This digital infrastructure that can collect, process and transmit information on economic activities such as production, distribution, exchange and consumption is a digital platform.17 The huge scale effect and network effect make digital platforms an ideal sales channel and promotion channel. On the one hand, the digital technology system can realize the operation of economic activities in different regions and different departments on the same platform, thereby reducing the operating cost of users. On the other hand, the increase in the number of users not only enhances the value of the platform itself but also attracts more users to use the platform and more researchers to research and optimize the platform to continuously explore and expand the potential value and use of the platform.18 17 18

See ref. [7]. See ref. [8].

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The boom in digital platforms has given birth to the platform economy. At present, the platform economy presents the characteristics of various types, large scale and fast growth rate. With the acceleration of digital technology innovation, the platform economy has also achieved rapid development. Online payments and modern logistics not only provide necessary support for online transactions but also expand the application of digital platforms. The emergence of e-commerce platforms, social platforms, game platforms, payment platforms and other different digital platforms has realized the diversified development of the platform economy. Driven by digital technology, many platform companies, such as Apple, Amazon, Google, Tencent, and Alibaba, have become giants in the Internet industry. With the continuous innovation and improvement of platform technology, the number and scale of large platform companies will continue to increase. The platform economy is not only a change of business model but also a change of business philosophy. Different from the traditional business model, the platform economy pays more attention to the development concept of openness, sharing and collaboration. The digital platform realizes the sharing of resources through the open Internet and provides users with personalized and diversified services. This open and shared service is also the core competitiveness of digital platforms. In the platform economy, the social division of labor and collaboration are more critical. The development of the platform economy requires not only cooperation between commercial enterprises such as production enterprises and sales enterprises but also cooperation between these enterprises and service enterprises such as financial enterprises and digital technology enterprises. In recent years, platform companies have shown great development potential, and their growth momentum far exceeds that of traditional companies and other emerging companies. Currently, the platform economy has become one of the fastest-growing operating modes in the economic field. As a new economic form, while the platform economy is developing rapidly, its impact on society is also increasing. Therefore, the development of the platform economy has also received great attention from various countries. In July 2015, China issued the Guiding Recommendations on Actively Promoting the “Internet +” Action, striving to achieve deep integration of the Internet and various social and economic fields and create a networked, intelligent, service-oriented and collaborative “Internet +” industrial ecology. As one of the main manifestations of the platform economy, the “Internet +” industrial ecology is based on digital platforms, uses digital technology to integrate with various industries, promotes industrial transformation and upgrading, and continuously creates a new economic ecology. The platform economy represented by “Internet +” has not only brought about changes in industrial paradigms but also brought about innovations in business models. With the continuous evolution of globalization, informatization and networking, the platform business operation mode with the Internet as the main position and offline entities as an important supplement has become the direction of e-commerce development. Both traditional e-commerce and new e-commerce represented by new retail are important parts of the platform economy. The current new round of information revolution is driving the transformation of the retail industry, and with the continuous integration of high-tech into digital platforms,

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the platform economy will also release tremendous vitality and benefits. Digital platforms based on digital technology will undoubtedly be integrated into the innovative achievements of the new round of information revolution and then determine the development direction of the platform economy.

1.2.3.1

Sharing Economy

The idea of sharing has a long history and is often accompanied by people’s daily lives. Borrowing a pen from someone, sharing a desk with someone, or circulating a document among colleagues are all examples of sharing. Since the beginning of the 21st century, the Internet, especially mobile Internet technology, has made sharing between people possible.19 The open Internet and the digitization of information make it possible for people to share information on the Internet. At first, people expressed their opinions and shared information through virtual online communities. This sharing of information usually does not involve the transfer of physical objects, nor does it involve corresponding remuneration. With the development of Internet commercialization, the sharing economy has begun to emerge. Especially after the outbreak of the global economic crisis in 2008, the sharing economy has developed rapidly. A number of sharing platform companies, such as Airbnb and Uber, have begun to emerge. The sharing model has also begun to transform from free sharing and information sharing to commercialization. The sharing economy has gradually become a new business form. The sharing economy is a new economic form emerging in recent years, also called the “cooperative economy”.20 In 2010, the American magazine Times listed the “sharing economy” as one of the ten ideas that would affect the world in the future. As an economic form under a new concept, the sharing economy is based on network technologies and information technologies such as the Internet, big data and cloud computing. Thus, the sharing economy has the characteristics of platform, openness, and efficiency. First, the sharing economy is a platform economy. The sharing economy needs to use the sharing platform as the medium to realize the information exchange between the supply side and the demand side. Specifically, the sharing platform needs to form the resource supply pool of the supplier and the resource demand pool of the demander and achieve the intensification of resources and the matching of demands on both sides. Second, the sharing economy is an open economy. The openness of the sharing economy is determined by the openness of the sharing platform. On the one hand, the interface to a shared platform is usually open. This open interface allows users to freely use the platform. On the other hand, the sharing platform is open to all suppliers and demanders and has the same threshold for use. Any supplier or demander can use the platform equally and reasonably

19 20

See ref. [9]. See ref. [10].

20

1 Background of E-Commerce

according to their own expectations.21 Finally, the sharing economy is an efficient economy. The virtual Internet can help the supply and demand sides eliminate the constraints of time and space and realize the matching of information at a lower cost. The Internet can also create value by aggregating people’s fragmented resources at almost zero cost, maximizing the efficiency of resource utilization.22 In recent years, the sharing economy has attracted the attention of many countries. As the birthplace of the sharing economy, the United States is in a leading position in terms of enterprise scale and enterprise strength. Australia, South Korea, the United Kingdom and other countries also attach great importance to the development of the sharing economy. As early as 2008, Sydney in Australia included the car-sharing project in the Sustainable Sydney 2030. In 2012, Seoul in South Korea also proposed the sharing economy plan, “Sharing City Seoul”. Under the promotion of this plan, Seoul has made great achievements in platform construction, financial support, information collection and space sharing. At the beginning of 2014, the British government announced its attempt to build a global sharing economy center and issued a series of policies and recommendations to support and develop the sharing economy. For example, government workers were encouraged to use the sharing economy platform for travel and accommodation, the sharing of government office resources was encouraged, financial support for the construction of shared platforms and tax incentives for shared rental services were provided. Compared with foreign countries, China’s sharing economy started slightly later but developed rapidly. In 2011, the sharing model first appeared in the two industries of housing rental and finance. Short-term housing rental platforms such as Tujia and Xiaozhu and P2P online lending platforms such as Lufa gradually started. In 2012, the emergence of two sharing transportation platforms, Didi Dache and Kuaidi Dache, led to widespread understanding, acceptance and use of sharing platforms. China’s sharing economy has also entered a stage of rapid development. In addition to transportation, many industries are also exploring the sharing economy. At present, the more mature industries of China’s sharing economy include transportation, housing rental, finance, education, medical care, logistics, and housekeeping services. Compared with foreign countries, China’s sharing economy involves a wider range of fields and has penetrated into people’s daily lives. Sharing bike, sharing power bank, sharing umbrella are already everywhere. To guide the healthy development of the sharing economy, eight departments, including the National Development and Reform Commission (NDRC), the Cyberspace Administration of China (CAC), and the Ministry of Industry and Information Technology (MIIT), jointly issued the Guiding Recommendations on Promoting the Development of the Sharing Economy in July 2017. As the top-level design of China’s sharing economy, this document provided principled and oriented policy guidance for the development of the sharing economy. In May 2018, the NDRC took the lead in issuing the Notice on Work in Guiding and Regulating the Healthy and Sound Development of the Sharing Economy, which proposed 11 demands, including establishing a 21 22

See ref. [11]. See ref. [12].

1.2 The Economic Ecology of E-Commerce

21

comprehensive governance mechanism, promoting the implementation of classified governance, consolidating the main responsibility of enterprises, regulating market access restrictions, strengthening the construction of technical means, promoting the improvement of the credit system, rationally using public resources, ensuring the security of personal information, standardizing the market competition order, strengthening positive publicity guiding, and improving emergency response guarantees. According to statistics, the transaction scale of China’s sharing economy market reached 3,377.3 billion yuan in 2020, and in the next five years, the average annual growth rate of China’s sharing economy will remain above 10%.23 Although the sharing economy has achieved leading development in China, from the perspective of cultivating new drivers of economic growth and satisfying consumer demand, the role and potential of the sharing economy are far from being fully released, and it will also expand and integrate into more industries and fields.

1.2.4 Discipline Ecology The social ecology of e-commerce determines the direction of enterprise development, and the introduction of national policies makes the construction of e-commerce platforms continue to standardize. Under the new economic ecological background, e-commerce enterprises are constantly exploring the promotion and integration of new business models. With the change in social ecology, the survival, development and growth of e-commerce enterprises have generated the needs of engineering ecology. For example, the construction of the basic e-commerce platform requires the integration of elements in the real market into the online platform to produce a new retail business model.24 The gradual increase in the transaction volume of e-commerce platforms requires a credit mechanism for both sides of the transaction object and even integration with financial platforms, which requires the protection of user privacy on the basis of data sharing in different network environments25 and data security.26 At the same time, the demand of e-commerce engineering constitutes a huge e-commerce engineering ecology and requires the development and application of new technologies. According to a large e-commerce platform in China, the number of active purchasing users of the company in 2020 was as high as 471.9 million.27 The processing of a large amount of user information and consumption information requires the integrated use of technologies such as big data technology and cloud computing technology. The desensitization processing and security protection of user information rely heavily on blockchain technology. The keen use of user data and 23

State Information Center: China’s Sharing Economy Development Report (2021). See ref. [13]. 25 See ref. [14]. 26 See ref. [15]. 27 www.jd.com. 24

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1 Background of E-Commerce

analysis of user preferences to recommend products for users in real time requires the comprehensive use of big data technology, cloud computing technology, artificial intelligence technology and other new technologies. When a user buys a product, the product goes through delivery from the manufacturer, freight forwarding, and delivery to the user. The tracking of the product requires the integration of big data technology, artificial intelligence technology, Internet of Things technology and other technologies. The study of engineering ecology brings many opportunities for innovation, such as the need to deploy the entire shopping environment online in the process of realizing the virtual shopping environment, reconstructing merchants and users in 3D in the virtual environment at the same time, and implementing an “online offline” shopping strategy. This gives rise to the innovative e-commerce model of O2On . In the new shopping environment, intelligent customer service replaces offline shoppers and manufacturers’ salesmen. In addition, the application of natural language processing, computer vision and other technologies can realize automatic dialogue with users according to their information. Through communication with intelligent customer service, consumers no longer have to pay in the form of cash or swipe cards but use mobile payment tools to make quick payments. After the user pays, the information-based logistics system behind e-commerce begins to operate, generating innovative needs such as research on adaptive logistics distribution algorithms and research on intelligent adaptive dynamic grouping path planning. The enrichment of e-commerce social ecology, engineering ecology and innovation ecology has put forward higher requirements for e-commerce talent training. In this context, it is important to build an e-commerce application curriculum system. This involves multiple disciplines: management engineering, finance, accounting, computer, law and other cross-application fields. According to the statistics of the E-commerce Teaching Steering Committee of Higher Education Institutions of the Ministry of Education, as of 2020, 592 colleges and universities in China have offered e-commerce majors, conferring degrees in engineering, economics or management. E-commerce and engineering, economics and first-level disciplines of management, as well as basic disciplines such as mathematics, have a certain degree of intersection (see Fig. 1.5). The Ministry of Education has proposed and stressed the need to promote the construction of “new engineering, new liberal arts, new medicine and new agriculture” to serve the needs of social development and improve the national strength in all aspects.28 Figure 1.6 shows the four new disciplines and summarizes the focus and characteristics of the four new constructions, which represent the development of the country at different levels. New engineering is the growth pole of national power, new liberal arts is the growth pole of national cultural soft power, new medical science is the growth pole of national health power, and new agricultural science is the growth pole of national ecological growth power. They can comprehensively improve the 28

Department of Higher Education, Ministry of Education of the People’s Republic of China. Main points of work of the Department of Higher Education of the Ministry of Education in 2021[EB/OL].http://www.moe.gov.cn/s78/A08/tongzhi/202102/W020210205296023179639.pdf.

1.2 The Economic Ecology of E-Commerce

23

Fig. 1.5 E-commerce cross-disciplinary construction

national strength. In the process of development, e-commerce has integrated technologies and knowledge from many different fields to adapt to the development of the times, so it is very cutting-edge and cross-cutting. However, e-commerce has entered a deep construction period, facing many opportunities and challenges, and the wide application of the industry also means that more talents with comprehensive ability are needed. The combination of e-commerce and the construction of the four new disciplines is also an inevitable trend. Under the background of “four new constructions”, the goal of the discipline construction of e-commerce is to build a theoretical system with the introduction of

Fig. 1.6 Overview of four new disciplines

24

1 Background of E-Commerce

e-commerce as a whole, the structure of the e-commerce system as architecture, the principles of e-commerce as the basic theory, and the e-commerce science as the top-level design. During the construction of the theoretical system, it is necessary to build a basic knowledge system with the specialty of e-commerce and form a basic knowledge system with the characteristics of e-commerce (including a crossdisciplinary knowledge system): a mathematical knowledge group, an information knowledge group, a management knowledge group, a financial knowledge group, and a legal knowledge group.

1.2.4.1

E-Commerce and New Engineering

New engineering mainly refers to the new specialties that arise from the transformation of the existing traditional engineering specialties through the use of information technology, intelligence and cross-fertilization of other disciplines for the needs of industrial development.29 In the context of the construction of new engineering, it will respond to the needs of the fourth industrial revolution and strengthen the cultivation of strategically needed talent. The innovative technologies corresponding to these new engineering specialties are also closely related to e-commerce. The integration of e-commerce and new engineering is reflected in three aspects of new technology application. First, new technologies can help e-commerce companies better handle data. Ecommerce applications need to handle massive amounts of network information while facing high concurrent user access. Technologies such as cloud computing can solve the corresponding problems. Second, new technologies can help e-commerce platforms develop appropriate marketing strategies. By using new technologies, information on e-commerce platforms can be analyzed, mined and counted automatically, thus adjusting marketing strategies to maximize benefits as much as possible. Finally, the new technology makes e-commerce and knowledge intelligence efficiently integrated. Through the new technology, we can build a knowledge map, design emerging marketing methods, and precisely match the personalized needs of customers. At the same time, we can design and customize special products in a targeted manner according to market changes. To efficiently integrate e-commerce with new technologies and establish a special e-commerce engineering knowledge group under the background of new engineering construction, the e-commerce knowledge system must be designed. For example, in terms of common basic courses, the curriculum system of e-commerce in the context of new engineering is based on basic mathematical and communication courses such as Calculus, Linear Algebra, Probability Theory, Statistics, English, Physics, Sociology, and Writing and Communication; in terms of professional basic courses, Software Culture, Programming, Information Management, Game Theory, Operations Research, Data Structure, Data Management, and Information Management are 29

See ref. [16].

1.2 The Economic Ecology of E-Commerce

25

set. They explain the basic software engineering knowledge, programming methods, statistical analysis methods, etc., and pave the way for in-depth research on the application of new technologies such as big data, cloud computing, artificial intelligence, and blockchain in e-commerce in subsequent professional core courses. In terms of core courses, Advanced Database Technology introduces data storage and management in the context of big data and introduces NoSQL, NewSQL, etc. On the basis of traditional relational databases, deep learning introduces neural network technology, deep learning technology and its application in e-commerce, especially its application in the field of recommendation; in addition, programming courses around Spark, Hadoop and other platforms are introduced to study the application of new technologies in e-commerce from a specific practical perspective.

1.2.4.2

E-Commerce and New Liberal Arts

New liberal arts refers to the intersection of arts and sciences through the integration of information technology, thus forming a comprehensive interdisciplinary model and achieving the purpose of expanding knowledge and cultivating innovative thinking. In summary, the new liberal arts has the following characteristics: (1) it is multidisciplinary and thus more suitable for the needs of modern society; (2) it integrates information technology and reshapes the way of thinking; (3) it changes the mode of cultivating talents and builds a solid foundation of knowledge; and (4) it does not always tend to be new and does not abandon the essence of “literature”. The development of science and technology and changes in the world landscape have brought about changes in all aspects of society. To adapt to these changes, new liberal art is proposed, and the talents it developed can help e-commerce adapt to the changes while injecting new vitality into it. First, globalization has closely integrated individuals and markets all over the world. Cross-border e-commerce is also developing. It calls for more international talents. The construction of new liberal arts can cultivate talents with international vision and cross-cultural communication ability, which can help e-commerce enterprises go international more actively and successfully. Second, the integration of e-commerce into society can influence society to a great extent, affecting people’s production and lifestyle as well as their mode of thinking. E-commerce is an effective way to interchange and disseminate information, and negative information will inevitably have a certain negative impact on society due to the intricate information. The construction of new liberal arts can cultivate talents with a firm stance, who can take up the important task of advocating justice and defending social conscience and guide e-commerce in the right direction. Finally, cutting-edge technologies such as big data, cloud computing and the Internet of Things are constantly changing people’s lives. Digitalization and mobile payment have brought about innovations in business models. E-commerce, which must move to the forefront, poses challenges to the innovation, adaptability and learning ability of talents. The new discipline, which emphasizes the cultivation

26

1 Background of E-Commerce

of holistic thinking and multidimensional expansion, can provide new vitality for innovation in e-commerce. To better ensure the mutual promotion of e-commerce and social development, a special e-commerce liberal arts knowledge group is established under the construction background of “new liberal arts”. New revelations, for example: The goods circulating in e-commerce marketplaces are no longer limited to physical goods. There are also virtual goods. (see 4.2.1 for details). The lower marginal cost of virtual goods has given rise to many new pricing strategies, such as pay what you want30 and crowdfunding.31 In addition, two-sided markets in e-commerce32 have become more mature, resulting in a variety of e-commerce models. It further generates the integration of online and offline, resulting in innovative e-commerce models such as O2On (see Chap. 3 for details). Therefore, the design of courses such as Fundamentals of Economics, Fundamentals of Management and Internet Marketing can be updated with relevant contents.

1.2.4.3

E-Commerce and New Agriculture

New agriculture refers to the new agricultural science or the specialty that transforms the original agricultural science, which integrates artificial intelligence and electronic and information technology. Specifically, modern science and technology are used to transform the agricultural science-related specialty. It focuses on the cultivation of science and technology ethics to respond in a timely manner to the new ethical issues that arise with the development of information technology. The combination of new agriculture and e-commerce is an important research point at present, and there are relevant policies to promote e-commerce into rural areas.33 This shows that this is an important opportunity for both e-commerce and rural and agricultural development. First, the construction of new agricultural science can help agriculture in rural information and communication, agricultural product processing and quality standardization, storage and logistics system to provide technical and human resources support, providing a good environmental foundation and technical support for the development of rural e-commerce, so that the e-commerce platform can also provide more abundant and fresh products for consumers to choose. This will attract more consumers with agricultural product needs. Second, the combination of new agriculture and e-commerce can transform the agricultural development mode and further help the policy of precise poverty alleviation. For example, the promotion and packaging of online platforms can enhance the visibility of agricultural products. Then, it can promote the production and sales of 30

See ref. [17]. See ref. [18]. 32 See ref. [19]. 33 Notice on Carrying out the Comprehensive Demonstration Work of E-commerce in Rural Areas in 2021.http://www.gov.cn/zhengce/zhengceku/2021-05/19/content_5608643.htm. 31

1.2 The Economic Ecology of E-Commerce

27

local special agricultural products. At the same time, the direct connection between the consumer demand and production supply of agricultural products can be realized, which greatly reduces the spatial distance of agricultural products to various consumer markets and reduces the transaction cost and risk of agricultural products. To better ensure the mutual promotion of e-commerce and social development, new insights into the design of e-commerce courses in the context of the construction of “new agricultural science” have emerged. Examples are as follows. Agricultural specialties, with their unique properties of “fresh” products, realize the docking of producers and sellers in the process of e-commerce development. The goods are sold by sellers to consumers, forming a new e-commerce model, which is an application case of model configuration transformation (see Chap. 3 for details). Basic courses such as Introduction to e-commerce can be expanded.

1.2.4.4

E-Commerce and the New Medicine

New medical science is a cross-fertilization of science, humanities and engineering. It is a discipline that cultivates interdisciplinary talents to adapt and serve medical research and medical practice in the information age.34 In recent years, people’s medical treatment has been based on offline face-to-face diagnosis with doctors, and many diagnostic and examination processes are also more cumbersome. Against the background of information technology, the equipment in hospitals is constantly upgraded. The medical treatment process is also simplified by moving some services online. The construction of new medical science can accelerate the upgrading process of hospitals and improve the degree of information technology in hospitals. Similar to new agriculture, the construction of new medicine can provide a knowledge base and technical support for the combination of e-commerce and medicine and cultivate composite talents who know both medicine and service. At the same time, e-commerce can provide a new working platform for new medicine and serve society in the form of business, market behavior and medical means to diagnose and ask for diseases. The two promote each other and develop together. At present, with the improvement of people’s living standards, China’s health industry is developing rapidly and has risen to the height of the national strategy. For example, the Central Committee of the Communist Party of China and the State Council issued the “Health China 2030” planning outline in 2016,35 and in 2019, the “Health China Action (2019–2030)” was released.36 Big Health requires the implementation of comprehensive, whole-process, and all-element care for health. Not only pursuing physical health but also pursuing spiritual and psychological 34

China Education Information Network: “What is New Medicine”. https://www.ict.edu.cn/html/ lzmwy/jyforum/n20190711_62105.shtml. 35 “Healthy China 2030” Planning Outline, website of the Central People’s Government of the People’s Republic of China, http://www.gov.cn/zhengce/2016-10/25/content_5124174.htm. 36 “Healthy China Action (2019–2030)”, website of the Central People’s Government of the People’s Republic of China, http://www.gov.cn/xinwen/2019-07/15/content_5409694.htm.

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1 Background of E-Commerce

health. An important prerequisite for realizing the development of the big health industry is to change the traditional development model of the medical industry, that is, from a single treatment model to a whole-process, comprehensive, and allelement integrated model of “prevention-treatmentsupport”. As shown in Fig. 1.7, the participants in the big health industry, such as the online drug sales platform, online consultation platform, etc., are all e-commerce related services. It applies the marketing concept of e-commerce, which can drive the reform of the medical system and help medical treatment. Large-scale equipment sharing plays a key role in the big health industry. The sharing of medical equipment will inevitably bring about the circulation and sharing of information in the medical process, which poses a great challenge to the privacy of patients. In the context of “new medicine”, this has brought inspiration to the curriculum of e-commerce, and courses such as E-commerce Law, Big Data Privacy Protection, Information Ethics and others can be expanded.

Fig. 1.7 The main participants of the big health industry

1.3 Engineering Ecology of E-Commerce

29

1.3 Engineering Ecology of E-Commerce The changing social ecology determines the need for engineering ecology. Research on engineering ecology has led to many opportunities for innovation, and e-business engineering ecology has evolved with business needs. There are numerous new engineering technology application scenarios in the field of e-commerce, such as platform construction, transaction mode, interconnection, and data sharing. With the development of information technology, these application scenarios have gradually formed an engineering ecology around the five new technologies of big data, cloud computing, IoT, artificial intelligence, and blockchain.

1.3.1 Big Data Ecology 1.3.1.1

Basic Concept of Big Data

In December 2012, British scholar Victor Mayer-Schönberg introduced the concept of “big data”37 in his book “The Age of Big Data,” which refers to the massive, highgrowth, and diverse information assets that require new processing models to provide more significant decision-making, insight, and process optimization. Big Data is a massive, high-growth, and diverse information asset that requires new processing models for more significant decision-making, insight, and process optimization.38 For the characteristics of big data, the “5 V” characteristics of big data proposed by IBM are highly recognized by the industry39 : 1. Volume: Big data volume. In terms of units of measurement, the unit of big data volume is at least P (1000 T) and will even reach E (1 million T) or Z (1 billion T). The big data volume makes the data collection, storage, and computation processes change significantly. 2. Variety: Diversification of data types and data sources. Data types include structured, semistructured, and unstructured data, and data sources include web logs, audio, video, images, geolocation information, etc. The diversity of data types requires higher processing power. 3. Value: Lower data value density. Low data values relative to large data volumes place higher demands on data value mining. 4. Velocity: Data growth is fast, and timeliness is needed. Recommendation algorithms such as the one that will be mentioned later in this book require real-time recommendations. 5. Veracity: The accuracy and trustworthiness of the data, that is, the quality of the data. 37

See ref. [20]. See ref. [21]. 39 https://www.ibm.com/blogs/watson-health/the-5-vs-of-big-data/. 38

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1.3.1.2

Application of Big Data in E-Commerce

As technology advances, the use of e-commerce continues to increase. The development of Internet technology has led to an increasing proportion of online platforms in retail, gradually forming an e-commerce model with B2C and C2C as the core. Along with the development of mobile Internet technology, the O2O model gradually began to take shape. The increase in users and data sources has made e-commerce face a larger volume of data processing, rising progressively from the GB scale to the PB scale. Since the 2010s, the development of new technologies such as big data, cloud computing, big IoT, artificial intelligence, and blockchain has gradually blurred the boundary between online and offline, which in turn has given birth to e-commerce models such as O2On . From the perspective of e-commerce development, B2C, that is, the retail mode of merchants offering products to customers, is one of the most basic e-commerce models. Retailing is an essential process in the B2C model of e-commerce, so the three elements of retailing, “people, goods, and places,” are also reflected in this model. The “people” in e-commerce mainly refers to e-commerce enterprises and ecommerce consumers, the “goods” mainly refers to e-commerce products, and the “field” mainly refers to the e-commerce platform. A directed graph G(V, E) can be used to represent the relationship between these elements, where V is the element node. E-commerce enterprises, consumers, products, and platforms are denoted as v1 , v2 , v3 , v4 , respectively. E is the set of big data application relationships between elements, and vi , v j |i /= j ) ∈ E is defined as a directed edge between two nodes. (v1 , v2 ) denotes the analysis process of enterprises to users, and (v1 , v3 ) denotes the process of enterprises to select a specific product on the shelf. (v1 , v4 ) indicates that the enterprise chooses a certain e-commerce platform to open an online store. (v2 , v1 ) indicates that the user compares different merchants when choosing a certain product. (v2 , v3 ) indicates that the consumer buys a certain product, and (v4 , v1 ) suggests that the e-commerce platform evaluates the online stores of each enterprise on it and sets different traffic entrances. As shown in Fig. 1.8. As shown in Fig. 1.8, each relationship between elements (vi , v j ) is an important process in marketing. The application of big data can bring significant changes to each relationship. (v1 , v2 ) can help companies grasp the characteristics of consumer groups and study their shopping preferences. To better analyze users, to better outline target users, and to connect user demands with design products, a new method has been proposed: user portraits. According to the data of CNNIC, China Internet Network Information Center, as of December 2020, the scale of cell phone online shopping users in China reached 780 million people.40 The organization and summarization of this user information enable intelligent systems to learn to analyze and understand users from a stream of data bits. If the user’s information is divided into several classes C = {c1 , c2 , c3 }, where c1 is the basic information of the user, c2 is the consumption information of the user, 40

http://cnnic.cn/gywm/xwzx/rdxw/20172017_7084/202102/t20210203_71364.htm.

1.3 Engineering Ecology of E-Commerce

31

Fig. 1.8 E-commerce retail relationship diagram

and c3 is the social information of the user. The N1 basic information of the user includes age, gender, birthday, current country, city and region, hometown country, city, and region. The dimension corresponding to each piece of information is di1 . The N2 kinds of consumption information of users include consumption preference domain, consumption preference category, consumption preference price range, consumption frequency, recent consumption frequency, recent consumption category, recent consumption amount, used devices, credit limit, etc., and the dimension corresponding to each information is noted as d 2j . The N3 types of social information of the user include the user’s social preference domain, the user’s common social software, the user’s active time, the user’s number of followers and the number of followers on different platforms, and the dimension corresponding to each piece of information is dk3 . Then, the amount of static data storage du f for each user profile at a certain moment is shown in Eq. (1.1). du f =

N1 Σ i=0

di1 +

N2 Σ

di2 +

i=0

N3 Σ

di3

(1.1)

i=0

Note that an e-commerce enterprise u j has the number of users n j . ; then, the storage of data portraits on the platform of this enterprise du j is shown in Eq. (1.2). du j = n j ∗ du f .

(1.2)

Due to the demand for accurate marketing of e-commerce platforms, the portrayal of user portraits is required to be high, so each user has various types of information

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1 Background of E-Commerce

Ni '' 10. The amount of user portrait data of e-commerce enterprise u j is described below. Each piece of information in the basic information c1 n be represented by a number; then, the average dimension di1 can be written as 1. The consumption information c2 includes two parts: one part is the static information of user preferences, and the other part is the consumption information of user history. Compared with the latter, the former requires a smaller amount of data, and the data volume accounts mainly for the consumption information of user history. Given that there are N2 ≈ N2 kinds of historical consumption information of users, the amount of consumption Σ 2 2 ΣN2 2 information data is N di . Let the historical consumption information i i di ≈ be information such as goods purchased in the last month; then, the average dimension di2 = 30. Two parts are also included in the user’s social information c3 , one part is the status description information, and the other part is the social relationship dynamic information. Compared with the latter, the former requires less data volume, and the data volume is mainly the social relationship dynamic information. Given that there are N3 ≈ N3 kinds of social relationship dynamic information, the data volume Σ N3 3 Σ N 3 3 di . Suppose the dynamic information of a social relationship is the i di ≈ i number of followers or fans of a platform with the average dimension (di3 ) =100. According to the above approximation, the storage volume du f for each user profile on enterprise u j is shown in Eq. (1.3). Λ

Λ

Λ

Λ

Λ

du f =

N1 Σ i=0

di1 +

N2 Σ i=0

Λ

di2 +

N3 Σ

di3

(1.3)

i=0

According to Eq. (1.3), the static storage data volume du f '' 60 in bytes for each user portrait at a certain point in time. If the number of online shopping users of this e-commerce enterprise u j is n j = 1e108 , the storage volume of data portraits on the whole enterprise platform du j '' 131GB. Except for the basic information c1 , other user-related information changes dynamically, and the data volume of user portraits may reach the petabyte level in one cycle. If the data volume of user profiles on a platform reaches petabytes in a single cycle, the scale of data will be even larger in the whole ecological process of e-commerce. As the so-called “quantitative change generates qualitative change,” the e-business model and e-business architecture will change, as discussed in Chaps. 3 and 4.

1.3 Engineering Ecology of E-Commerce

33

Fig. 1.9 Cloud computing architecture schematic

1.3.2 Cloud Computing Ecology 1.3.2.1

Basic Concept of Cloud Computing

On August 9, 2006, Eric Schmidt, the then CEO of Google, introduced the concept of “cloud computing” at SES San Jose 2006.41 The National Institute of Standards and Technology defines cloud computing as follows. A schematic of the cloud computing architecture is shown in Fig. 1.9.

1.3.2.2

Application of Cloud Computing in E-Commerce

As an important part of the digital economy, e-commerce is also one of the core drivers of its development. The economic innovation driven by it has gained wide attention worldwide. According to relevant information, the single-day sales of Alibaba, a Chinese e-commerce platform company, were 35 billion yuan on November 11, 2013, creating the world’s first single-day sales. As shown in Fig. 1.10, this figure has been growing year by year since 2014. This is closely aligned with the formation of the “new retail” social ecology. A basic equation can be derived from the above definition of cloud computing, where cloud computing is denoted as E 1 , the configurable shared pool of computing resources is denoted as a1 , and the convenient access condition is denoted as a2 , as shown in Eq. (1.4). E 1 = a1 ∗ a2

41

https://www.seroundtable.com/archives/004366.html.

(1.4)

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1 Background of E-Commerce

Fig. 1.10 2013 Double 11 shopping festival turnover42

In the application of e-commerce, convenient access to a2 in eq. (1.1) requires consideration of two important factors: one is the “real-time nature of the transaction,” and the other is the “accuracy of the transaction,” which are recorded as s1 and s2 , as shown in Eq. (1.5), as shown in Eq. (1.5). E 1 = a1 ∗ (s1 + s2 )

(1.5)

The average order volume in 2020 is 0.2 million per second, and the peak order volume on “double 11” is 583,000 per second, which is nearly 300 times the average order volume. In a traditional minicomputer deployment, for example, assuming one minicomputer can support 0.2 million transactions per second of computing, it would require the purchase of 299 more minicomputers to cope with the pressure when the peak comes. This can lead to higher depreciation and costs of equipment, as well as pressure on the enterprise’s fiscal year. In response to this situation, the “configurable shared pool of computing resources”a1 in Eq. (1.4) can realize the elastic computing capacity of the platform. First, e-commerce companies can acquire low-cost PC servers as computing nodes. Virtualize different service containers on the compute nodes to provide computing support for business requirements. For the dynamic allocation of service containers on each compute node as well as the dependent network and storage resources, control nodes are designed. In addition, the network node is designed to be responsible for the communication between each node within the cloud computing platform and the outside, and the storage node is designed to be responsible for additional storage. This is shown in Fig. 1.11. According to the business demand, the control nodes adjust the required resources dynamically. When the business demand is high, all computing nodes are assigned multiple virtual service containers to provide services. When the business demand is low, a number of service containers are closed to ensure “transaction real-time” using distributed computing. Data synchronization of multiple computing nodes is an important issue and a key part of ensuring “transaction accuracy.” However, to ensure data security, e-commerce platform enterprises often adopt “dual-active”, “multi-active” or even “off-site multi-active” data disaster recovery solutions, which enhances the difficulty of data synchronization. This makes data synchronization more difficult.

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http://www.199it.com/archives/285573.html.

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Fig. 1.11 Cloud computing topology diagram

If we calculate the propagation time delay of 5 milliseconds per 1000 km of fiber, add the delay of multiplexing, demultiplexing, and relaying, with more than 1000 km round trip, message delivery is 30 milliseconds. For users, if it is only an increase of 30 milliseconds, the user’s feeling is not very obvious. However, when a user sees a product on the product page and clicks “Buy Now,” there are more than 100 back-end interactions behind the page, and if all 100 interactions are done across geographies, it means the response time of the page will increase by 3 seconds. For the 3 seconds of time increase, the user will have obvious feelings. In reality, 3 seconds is already a timeout, and many pages cannot be loaded. This is the first impact of “off-site multi-active” on the user experience of “real-time.” The second point of impact on “real-time” is when the system response time increases, which means that the annual “double 11” increase in QPS will be more costly. The distance problem has a greater impact on latency. Typically, the solution to the distance problem is to use multi-point writing. The multi-write application brings a second complication, which is more difficult to accept than the first latency problem. While the latency problem only causes the platform page to open slower, the multi-write operation will lead to data conflicts. Such as the appearance of this visit in the A data center to write data, and then revisit to the B data center to write another piece of data. If the two data cannot be merged together, the most intuitive feeling for the user is that the user may have paid for something, but the platform shows that he or she did not pay for it. Or simply purchase an item. The platform did not generate an order. If there is a multi-point writing operation to bring the “transaction accuracy” problem, this is the most fatal to the e-commerce platform.

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The cause of this situation is the single-point problem, as shown in Fig. 1.12. In a single-point scenario, the use of multi-point writing technology can result in data conflict problems. The solution to this problem is “unitization,” where a unit in a unitized structure is a fully functional single-point station with all applications deployed. The difference with multi-point operation is that each unit is not full but can only operate on a portion of the data. In a unitary architecture, services are still hierarchical, with the difference that any node in each layer belongs to only one unit. Only the nodes within the unit are selected when the upper layer calls the lower layer. A unit is a scaled-down version of a whole site with all the functions, and it is all-powerful because all applications are deployed. However, it is not the full amount because only a part of the data can be manipulated. Systems that can be unitized are easy to deploy in multiple server rooms because it is easy to deploy several units in one server room and several others in other server rooms. By having a traffic dispenser at the service entrance, the ratio of service traffic between units can be adjusted. This is shown in Fig. 1.13. Cloud computing’s features enable real-time and accurate e-commerce transactions in the context of big data. It supports the high record of hundreds of billions of

Fig. 1.12 Single point problem

Fig. 1.13 Unitized structure

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sales in traditional e-commerce marketing and the intensive traffic brought by new e-commerce models such as live e-commerce.

1.3.3 Internet of Things Ecology 1.3.3.1

Basic Concepts of the IoT

In 1995, Bill Gates mentioned the prototype of the Internet of Things concept in his book “The Way of the Future.” Then, in 1999, MIT established the Auto-ID Global Research Center, which proposed the basic idea of the Internet of Things: to connect all objects to the Internet through information sensing devices such as radio frequency identification to achieve intelligent identification and management.43 In the report of the same name released by the International Telecommunication Union (ITU) in 2005, the definition and scope of the Internet of Things (IoT) have changed. Its coverage has been expanded and no longer refers only to the concept of IoT based on RFID technology but adds another dimension to the concept of the world of information and communication technology. Its original concept of interconnection with anyone anywhere at any time has been added to the dimension of interconnection with anything.44 China also introduced the concept of sensor networks in 1999, and the Chinese Academy of Sciences made sensor networks one of the five key projects in its research report on information and automation in the pilot area direction study of the Knowledge Innovation Project.45 Through information sensing equipment such as radio frequency identification, infrared sensors, global positioning systems, laser scanners, etc., any item is connected to the Internet according to an agreed protocol for information exchange and communication to realize a network concept of intelligent identification, positioning, tracking, monitoring, and management. As the concept of IoT has been introduced, countries have set up information technology strategies related to IoT and have made considerable progress in technology research and business. The U.S. programs in recent years are as follows: From 1999–2001, DARPA funded the “Smart Dust” project at the University of California, Berkeley. In 2005, the project was officially listed as a research priority by the U.S. Department of Defense.46 From 2010–2015, Vivek Kundra, Chief Information Officer of the U.S. Federal Government, signed and issued government documents on the adoption of cloud

43

http://autoid.mit.edu/. https://www.itu.int/osg/spu/publications/internetofthings/. 45 http://www.bulletin.cas.cn/zgkxyyk/ch/reader/view_abstract.aspx?file_no=20000104. 46 https://people.eecs.berkeley.edu/~pister/SmartDust/. 44

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computing by government agencies, as well as the Federal Cloud Computing Strategy white paper.47 The H.R. 1668 or the IoT Cybersecurity Improvement Act of 2020 was officially issued in 2020.48 China’s plans in recent years are as follows: The Chinese government pointed out in the 2010 government work report that “the Internet of Things is the third wave of the world’s information industry after computers, the Internet and mobile communication networks, and has been officially listed as one of the country’s five emerging strategic industries, and the industry is expected to enter the fast lane of growth in the future.”49 The Ministry of Industry and Information Technology’s “Information and Communication Industry Development Plan IoT Sub-book (2016–2020)” states, “Currently, the Internet of Things is entering a new phase of cross-border integration, integrated innovation, and large-scale development, ushering in significant development opportunities.50 In May 2020, the General Office of the Ministry of Industry and Information Technology issued the “Notice on Deepening the Comprehensive Development of Mobile Internet of Things,” stating: “Accurately grasp the evolutionary trend of global mobile IoT technology standards and industry patterns, promote the migration of 2G/3G IoT services to the network, establish a comprehensive ecosystem of NB-IoT (narrowband IoT), 4G (including LTE-Cat1, i.e., 4G network with rate category 1) and 5G synergistic development of mobile IoT integrated ecosystem, on the basis of deepening 4G network coverage and accelerating 5G network construction, to meet most of the low-rate scenario demand with NB-IoT, medium-rate IoT demand and voice demand with LTE-Cat1 (Cat1 for short), and higher-rate and low latency networking demand with 5G technology”.51

1.3.3.2

Application of IoT in E-Commerce

IoT ecology is the bridge connecting “e-commerce” online to offline and is an important technical guarantee for the formation of the closed-loop of e-commerce transactions. The IoT represents the transfer of information between objects through an Internet connection. Denote the e-commerce IoT as E 2 and denote a graph by G(V,E) with the point set represented by V, where each object is used as a node and the network connections between objects are used as edge sets E, as shown in Eqs. (1.6) and (1.7), which visually explain the basic concepts of IoT in the previous section. 47

https://obamawhitehouse.archives.gov/sites/default/files/omb/assets/egov_docs/federal-cloudcomputing-strategy.pdf. 48 https://www.congress.gov/bill/116th-congress/house-bill/1668. 49 http://www.gov.cn/2010lh/content_1555767.htm. 50 http://www.cvtech.com.cn/uploadfile/ExcelFile/2017-06/file2017062910124939188.pdf. 51 http://www.gov.cn/zhengce/zhengceku/2020-05/08/content_5509672.htm.

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Fig. 1.14 IoT ecological schematic

E 2 = G(V , E)

(1.6)

V = {v1 , · · · , vn }, E = {e1 , · · · , em }

(1.7)

The IoT ecosystem is based on a combination of multiple elements of the basic IoT architecture, including the basic “things,” which represent devices and deployed embedded systems. The connections between “things” and “things” represent communication infrastructure and communication devices. The management platform of “things” indicates the activation, authentication, billing, and communication management of “things.” The analysis of “things” indicates analyzing and processing the data collected from “things.” The results can be used to form service products or provide optimization for the deployment and management of IoT devices and communication devices. Based on the analyzed data, the service of “things” provides services to top-level users. It can be seen as a hierarchical structure. As shown in Fig. 1.14. Note that the IoT is E 2 ; then, A = G(V,E) is used to represent the graph structure of the IoT. The types of graphs can be classified as undirected graphs, directed graphs, cyclic graphs, acyclic graphs, weighted graphs, unweighted graphs, sparse graphs, and dense graphs, as shown in Fig. 1.15. The graph structure types in Fig. 1.15 are for static graphs, and for an IoT E2 , there may be changes in nodes and edges. For example, if a monitoring sensor in a wastewater treatment plant suddenly fails, the node will disappear. Conversely, the deployment of a sensor will bring about the appearance of nodes and corresponding edges, at which point Eq. (1.7) can be updated to Eq. (1.8), expressed as a dynamic graph. E 2 = G(V , E), V = {(v, ts , te )}, E = {(u, v, ts , te )}

(1.8)

where t s , t e denotes the point in time when the node appears and disappears, and t s < t e . u and v denote two nodes, and t s , t e denote the point in time when the edge appears and disappears.

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Fig. 1.15 Schematic diagram of different diagram structures

The dynamic diagram can be represented in four ways depending on the granularity of time t: 1 Static graphs: static graphs can be considered a type of dynamic graph. 2 Edge-weighted: a static weighted graph can be labeled by the weights of the edges with the most recent active time of each edge. 3 Discrete: a discrete dynamic graph can be constructed as a sequence of static graphs at different moments. 4 Continuous: Continuous dynamic graphs increase the complexity of the model as the time granularity increases. This can be expressed as Eq. (1.9) for discrete dynamic diagrams. } { DG = G 1 , G 2 , . . . , G T

(1.9)

where each element of DG is a snapshot of the dynamic graph at a certain moment, i.e., Gi , where I is taken as an integer between 1 and T and T is the selected time period. A continuous-type dynamic diagram can be expressed as Eq. (1.10). C G = {e1 , e2 , . . .}

(1.10)

where each edge ei , denoted as ei = (ui , vi , t i , d i ), with d i taken as −1 or 1, represents whether edge ei is joined or deleted at the current moment t i . The process of representing, computing, and updating the dynamic graph is shown in Fig. 1.16. In the logistics industry, the scale of the logistics market continues to expand, and in 2018, China’s total social logistics reached 2.83 million yuan. Nevertheless,

52

https://openreview.net/pdf?id=HyePrhR5KX.

Fig. 1.16 The process of representing, calculating, and updating dynamic graphs52

1.3 Engineering Ecology of E-Commerce 41

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Fig. 1.17 A company logistics IoT layered structure

the total social logistics cost to GDP ratio was as high as 14.8%. The smaller the value is, the higher the level of logistics development in a country. As measured at the 2018 level, China’s total social logistics costs are higher than those of developed countries in Europe and the United States. Therefore, to solve the problems of high logistics cost, low logistics efficiency, and low digitalization, various large domestic enterprises have introduced new technologies such as the Internet of Things and artificial intelligence for construction. Taking a logistics enterprise as an example, according to the hierarchical structure of Fig. 1.14, a hierarchical structure of the logistics system of this company can be derived, as shown in Fig. 1.17. In the base layer, “things” can be divided into three categories: storage, transportation, and distribution. Note that storage, transportation, and distribution are C 1 , C 2 , and C 3 . Each node belongs to a category, and the number of goods is recorded as the weight of the edge. Then, the dynamic diagram of recording a cycle T is shown in Eq. (1.11). } { DG = G 1 , G 2 , . . . , G T

(1.11)

Then, the graph G for each cycle is shown in Eq. (1.12). G = G(Vc , E), vc ∈ Vc , c{ C1 , C2 , C3 }

(1.12)

For a node vc in Vc , c is the type of the node, which belongs to one of the three classes C 1 , C 2 , and C 3 . At the level of object-to-object connectivity, communication can be carried out through wireless networks. The commonly used wireless communication technologies can be divided into two categories: near-range wireless communication technologies and long-range wireless communication technologies. Near-range wireless communication technologies include Zig-Bee, Bluetooth, wireless broadband, UWB, and NFC. Long-range wireless communication technologies include GPRS/CDMA, digital radio, spread-spectrum microwave, wireless bridge, satellite communication, shortwave communication technologies, etc.

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In the platform layer, intelligent scheduling, intelligent order distribution, and intelligent dispatching mainly deal with three scenarios in the logistics field: warehousing, transportation, and distribution. Intelligent scheduling mainly serves the warehousing field, mainly regulating the crossbelt sorter system, unmanned forklifts, and RFID scanning and reading equipment. The crossbelt sorter system automates the supply of packages and the accurate scanning of goods on six sides. The unmanned forklift performs automatic loading, unloading, obstacle avoidance, and load detection, while the RFID scanning and reading equipment identifies and charges shipping orders. In the analysis layer, the main focus is to improve the efficiency of warehousing, transportation, and distribution links and optimize the structure. Specifically, in the major scenarios of logistics, cargo layout optimization, warehouse network planning, logistics whole chain site selection, and network path optimization are carried out. At the service level, for the logistics system, it is a series of inbound, storage, picking, sorting, transportation, and distribution operations that support the operation of the logistics system. The IoT technology solves the problem of “connecting things to things,” which enables the participants on the e-commerce platform to obtain a clear position and guarantee a smooth transaction. At the same time, the application and development of IoT technology accelerate the evolution of the O2O model to O2On , an integrated online and offline model.

1.3.4 Artificial Intelligence Ecology 1.3.4.1

Basic Concepts of Artificial Intelligence

In 1956, the “Summer Research Project on Artificial Intelligence” at Dartmouth was widely regarded as the birth of artificial intelligence. The workshop was attended by John McCarthy, Marvin Lee Minsky, Nathaniel Rochester, Claude Shannon, and others. A proposal was presented at the workshop that advanced a definition of “artificial intelligence”: trying to determine how to make machines use language, form abstractions and concepts, solve problems that humans cannot solve now, improve themselves, and so on. The primary problem for AI today is to make machines as intelligent as humans can be.53 In the course of its development since then, AI has experienced several ups and downs, as shown in Fig. 1.18. Each decline was due to a bottleneck in algorithms and platform computing power, but each time a technological breakthrough was

53

http://www-formal.stanford.edu/jmc/history/dartmouth/dartmouth.html#:~:text=%20A%20% 20PROPOSAL%20FOR%20THE%20DARTMOUTH%20SUMMER%20RESEARCH,animal% 20can%20only%20adapt%20to%20or...%20More%20.

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Fig. 1.18 History of artificial intelligence

achieved, a new peak would be ushered in. Currently, with powerful computing power and massive data support, AI is again showing an explosive trend. Currently, one of the core components of the AI ecosystem is machine learning algorithms. Machine learning is a very rigorous mathematical problem and is a function containing a large number of parameters, also known as a “model”. This function has a fixed input and output. By giving a part of the input and output examples and then by adjusting the parameters of the function so that the function learns the law, it has the ability to make judgments. The key to machine learning algorithms is to find better functional forms and to learn better parameters. In the field of machine learning, there are several functional forms to characterize data. One of them is deep learning, which is a method of learning to characterize data using deep neural networks. The relationship between artificial intelligence, machine learning, and deep learning is shown in Fig. 1.19.

1.3.4.2

Application of Artificial Intelligence in E-Commerce

An important application of artificial intelligence in e-commerce is the recommendation system. Without a recommendation system, 70% of the products cannot be browsed by users. With the rapid development of the Internet, people spend increasing time online every day, and the importance of recommendation systems is increasing. The role of the recommendation system is to match the most interesting content for users from the massive data and save the time of users’ queries. As mentioned above, with the rapid development of the Internet, the volume of data on the Internet is very amazing. Naturally, users cannot obtain the information they are interested in from such a large volume of data. Therefore, the recommendation system greatly improves the efficiency of online services. The research target of the recommendation system is the user and the items, and the user is matched with items of interest based on the user’s interaction history. That is, new interaction records are predicted. Next, three key concepts are introduced: item i, user u, and interaction record r. First, we introduce item i. An item is an object that is recommended in a recommendation system. The e-commerce domain refers explicitly to items in e-commerce

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Fig. 1.19 The relationship between artificial intelligence, machine learning, and deep learning

websites. The portrayal of an item depends on its attributes, such as category, name, picture, etc. Different items are portrayed in different ways and play different roles in different contexts. A successful recommendation algorithm needs to be able to describe its items accurately and effectively. Next is user u. The user is the subject of the recommendation system, and the essential task of the recommendation system is to recommend customized items to different users. Actual users may have very rich and variable emotions and preferences, and the differences in preferences between users may be considerable. For example, young people may like to look at electronic products when shopping online, while older people are likely to pay more attention to health products. In a recommendation system, users can be portrayed in a way that is based on past behavior. For example, a user is represented as all the items he has purchased or the scores he has previously rated different items. In addition, it can also be attribute-based, such as giving a user’s age, gender, occupation, education experience, etc., using demographic information. The data that can be observed and utilized in the recommendation task are the interaction records, which are the various types of behaviors that occur between the user and the item. Generally, these behaviors can be divided into “explicit feedback” and “implicit feedback”. “Explicit feedback” generally refers to the user’s explicit attitude toward the item, such as the user’s rating and evaluation of the item after

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purchasing it. On the other hand, implicit feedback usually does not directly reflect user preferences, such as user clicks, browsing, favorites, purchases, viewing time, etc. Compared with “explicit feedback”, “implicit feedback” is closer to the actual evaluation indicators, such as whether users buy a certain product or not . Based on this information, the user-item interaction matrix is Mui , as shown in Eq. (1.13). ⎞ ru 1 i1 (I ) · · · ru 1 i N (I ) ⎟ ⎜ .. .. .. Mui = ⎝ ⎠ . . . ru M i1 (I ) · · · ru M i N (I ) ⎛

(1.13)

As seen in Eq. (1.13), the interaction record can be abstracted into the form of an interaction matrix. Each row represents a user in this matrix, and each column represents an item. The interaction between user u m and item i n is denoted as ru m in (I ). In the “explicit feedback” matrix, the value of ru m in (I ) is in the range [0, K ], K ∈ N + , which corresponds to the user’s evaluation score of the item. In the matrix of “implicit feedback,” the values of ru m in (I ) are in the domain of {0,1}, where 1 means that user u m and item i n have interacted, and 0 means that user u m and item i n have not interacted. In addition to the interaction matrix, the interaction record can be abstracted into an interaction diagram, as shown in Fig. 1.20. Such a graph is a diagram in graph theory and can be viewed as a dotted line graph. Users and items can be viewed as nodes. If a user and an item have interacted, there is an edge connection. Otherwise, there is no edge connection. The recommended task is to predict the missing edges based on the existing edges. A very distinctive feature in interaction graphs is that user nodes are not connected to each other, and item nodes are not connected to each other. Only users and items are connected to each other. Such graphs are called bipartite graphs. In addition to the three key concepts, another concept is multimodal information mi. Multimodal information is additional data in the recommendation task in addition to interaction records, which is defined as resources with social and cultural significance and usually refers to data such as images, text, voice, and video in the recommendation task. Multimodal information can provide more information, and

Fig. 1.20 Interaction diagram

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Fig. 1.21 Observations in the recommended system

the model can better model and analyze user preferences through this rich information to accurately recommend products for users. Figure 1.21 shows a user’s review that contains the four basic concepts mentioned above. First, each review is a comment made by a user about an item and thus contains information about the user and the item’s ID. Second, each comment represents an interaction and is, therefore, an interaction record. Finally, comments are textual information, and item pictures are image information, so the data are multimodal information. The field of recommendation systems has accumulated a large number of successful and efficient recommendation algorithms for matching items to users. One of the most popular and widely used algorithms is the collaborative filtering recommendation algorithm. The core idea of “collaboration” is to use the behavior of other users (group wisdom) to assist the current user in making decisions. “Filtering” means selecting the right items from a large number of candidates. The basic assumption of this algorithm is that “users with similar interests in the past will maintain similar interests in the future.” Specifically, collaborative filtering algorithms are divided into “memory-based methods” and “model-based methods.” The memory-based approach can be subdivided into two types: user-based and item-based, as shown in Fig. 1.22. In the user-based approach, to calculate a user u’s preference for item i, it is necessary to find the K users who are “most like” u and then infer u’s interest in item i based on the scoring behavior or implicit feedback of these K users on the target item i. There are various ways to calculate the similarity between users here. A typical method is to represent the items that each user has interacted with as a vector and then calculate the degree of similarity between users using techniques such as cosine similarity or Pearson’s correlation coefficient. The advantage of this method is that it reflects the preferences of the user group. Nevertheless, it would be very time-consuming to calculate the “most similar” K users with too many users in the system. In addition, there is no way to calculate his similarity to other users for a new user because there is no behavior record yet, so it is impossible to find relevant items for him accurately. The item-based approach is actually very similar to the user-based approach. The difference is that the item-based approach first finds the K most similar items to the target item i and then calculates user u’s interest in i based on his or her preference for these K items. When calculating the similarity of items, each item can be first represented as a vector, where each bit marks whether a user has purchased the item or

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Fig. 1.22 User-based CF and item-based CF

not. The degree of correlation between items can be easily calculated using methods such as cosine similarity between vectors or Pearson’s correlation coefficient. The advantage of this approach is that since the variation degree of the item vector is much smaller than that of the user vector, the similarity of items can be calculated offline in advance when actually deploying the recommendation system, thus saving the computation time online and improving the efficiency of recommendation. In addition, this method is better explained for recommended results. The shortcomings of this method are similar in that it does not handle new items on the shelves well. Model-based approaches typically train a machine learning model on user-item interaction data and then predict the user’s rating of the item based on this model. One of the most popular and common approaches is the matrix decomposition model, which is usually based on the “low-rank assumption.” Intuitively, while the number of users and items may be in the thousands, there may be few factors that determine the final rating result. For example, in e-commerce platforms, people may only consider “price", “quality”, “style” and “popularity” when buying something. Based on this intuitive idea, a large user-item rating matrix can be represented as a multiplication of two low-dimensional user sub-matrices and item sub-matrices. Among them, the user sub-matrix and item sub-matrix represent the user’s preferences and the characteristics of the item, respectively, while the product between them indicates the user’s interest in the item (i.e., scoring), as shown in Fig. 1.23. Although such algorithms have achieved good results in practical applications, the linearity assumptions in the models are too far-fetched, which makes them only model relatively simple user behavior patterns and does not reflect the real interests of users well. In recent years, with the breakthroughs in deep learning, recommendation models have been able to leverage the powerful representational learning capabilities of deep models to better discover user behavior patterns and item attribute information and better handle multimodal information. For example, both graphical information and user review information are fed into the model to assist the model in learning better representations. Recommendation systems are just one of the many applications of AI in e-commerce. The application of artificial intelligence in e-commerce is actually very wide; for example, the combination of artificial intelligence with vision

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Fig. 1.23 Matrix decomposition model

technology and virtual reality technology can bring changes to the e-commerce consumption scene (see 1.3.1 for details).

1.3.5 Blockchain Ecology 1.3.5.1

Basic Concepts of Blockchain

In early storage systems, all data existed in a central node. Once the data in the central node were tampered with, it had a major impact on the storage system, which was devastating in areas such as finance. 2008 economic crisis, Satoshi Nakamoto designed blockchain-based Bitcoin to solve the inflation problem and limited the total number of coins to 21 million.54 There is no longer the concept of “center” in the blockchain design, and all nodes store data. In Satoshi Nakamoto’s text, each node stores a ledger, and each ledger is recorded as ci , so the whole system Sb is shown in Eq. (1.14). Sb = {ci |i = 1, · · · , N }

(1.14)

Since each node stores the ledger, if the number of nodes N increases, when a new message b1 enters the system, various situations can occur, such as (1) some nodes are not networked or not started at that moment, and (2) there is a contradictory message b2 with b1 that has already been received by the node. To solve the consistency problem of different nodes’ ledgers, the system allows each node to verify the message b j ; see 2.2.3 and 2.2.4. When a node verifies the accuracy of message b4 , it updates ledger ci , packages the message into a block, and chains it to the end of the blockchain. The updated blockchain is shown in Fig. 1.24. This node broadcasts this block to various nodes of the system.

54

Bitcoin: A Peer-to-Peer Electronic Cash System, https://bitcoin.org/bitcoin.pdf.

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Fig. 1.24 Structure of the blockchain

However, when there are too many system nodes, there may be two clusters G 1 and G 2 , and messages are delivered slowly between the two clusters. When both nodes c1 ∈ G 1 and c2 ∈ G 2 broadcast messages, it may lead to {ci |ci ∈ G 1 , i /= 1} node sets and {ci |ci ∈ G 2 , i /= 2} node sets that store different blockchains. One of the simplest ways to mitigate this phenomenon is to extend the block generation time through arithmetic limits when this time is longer than the propagation time of the message between two clusters. Even if there are already two different blockchains, when the next block is created, it will be linked to the correct blockchain, which is longer than the other blockchain. Only the correct blockchain will be preserved according to the “trust the long-chain” principle. As can be seen, to tamper with the data of the blockchain, one node needs to have an arithmetic power stronger than the sum of the arithmetic power of the other nodes, which is almost impossible to occur in practice, and thus the data security is very high. This high-security feature gives blockchain great potential for commodity tracking and transaction verification in e-commerce.

1.3.5.2

Application of Blockchain in E-Commerce

1. Blockchain in e-commerce payment applications The application of blockchain in e-commerce payments is mainly in the form of digital currency. At present, there is no unified definition of digital currency internationally. The Bank for International Settlements considers digital currencies to be virtual currencies based on distributed ledger technology with decentralized payment mechanisms. The International Monetary Fund considers digital currencies to be digital expressions of value. The digital currency issued by the People’s Bank of China, on the other hand, is a digitalized RMB. Its use of RMB as the value underlying has monetary properties. Digital currencies represented by Bitcoin and Ether use blockchain technology to achieve a decentralized ledger, which this book calls cryptocurrency. As of 2021, cryptocurrencies are not yet legal tender in China and do not have monetary properties.55 Given that there are no major e-commerce platforms in the world that can support cryptocurrency payments for their full range of products. There

55

See ref. [22].

1.3 Engineering Ecology of E-Commerce

51

are significant differences in the regulation of cryptocurrency in various countries. This book will not discuss the payment function of cryptocurrency. 2. Blockchain in e-commerce storage applications Blockchain has a wide range of applications in e-commerce storage applications, mainly utilizing the tamper-evident nature of blockchain in the process of data preservation, such as logistics traceability. In terms of logistics traceability, e-commerce platform enterprises can use blockchain technology for product logistics tracking and supply chain management to ensure logistics information accuracy and product supply safety. Among them, blockchain technology can be used to create a transparent and traceable cross-border food supply chain and build a safer food market. Figure 1.25 shows the application of blockchain in a chicken supply chain. The production date, shelf life, raw material origin, cultivation method, and production process of the video can be retrieved on the computer. Blockchain technology makes it significantly more expensive and difficult to tamper with data. Platform companies also use blockchain for product anti-counterfeiting and traceability. Figure 1.26 shows the application of blockchain in the diamond supply chain. For example, suppose a customer buys a necklace through blockchain technology. In that case, he or she can check not only the source of raw materials and the various stages of production but also the authenticity. Only the private key of the company to which the necklace belongs can generate this blockchain. This allows consumers to purchase a safe and secure product. The implementation of the “tamper-evident” of blockchain is closely related to the { } storage system. The storage system S can be represented as a set of nodes vi=1,··· ,N , with N representing the total number of nodes. As the name suggests, centralized storage means that all the storage in the system is concentrated in one node, which may contain multiple devices. The most important feature is that all data flows into

Fig. 1.25 Using blockchain technology for food traceability

Fig. 1.26 Anti-counterfeiting using blockchain

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1 Background of E-Commerce

Fig. 1.27 Centralized storage system

the storage node through a unified portal. Then, the centralized storage Sa can be represented as {vi |i = 1, · · · , N }, where the first node v1 is the storage node vs , and the specific structure is shown in Fig. 1.27. Obviously, this single entry would make the storage server a bottleneck in system performance, and would also greatly affect reliability and security, and would not meet the needs of large-scale storage applications. Therefore, distributed storage was born. It uses multiple storage nodes to share the storage load and uses location servers to locate the stored information. It not only improves the reliability, availability, and access efficiency of the system but is also easy to scale. Distributed storage Sd can be expressed as Eq. (1.15). Sd = {vi |i = 1, · · · , N }

(1.15)

The first node v1 refers to the node vn that stores the location information, also known as the management node, which stores the metadata. The subsequent K-1 nodes {vi |i = 2, · · · , K }} denote the storage node vs of the file. If a client needs to read data from a file, it first obtains the location of the file (specifically in which storage node) from the location node and then obtains the specific data from that location. The simplified structure is shown in Fig. 1.28.

1.3 Engineering Ecology of E-Commerce

53

Fig. 1.28 Distributed storage systems

In this architecture, location nodes are usually deployed as primary and backup nodes, while storage nodes form a cluster with a large number of nodes. Since metadata access frequency and access volume are much smaller compared to data, location nodes usually do not become performance bottlenecks, while data node clusters can disperse client requests. Therefore, the number of storage nodes can be horizontally scaled in a distributed storage architecture to increase the carrying capacity. Although distributed storage has the ability to scale dynamically, there is still a central node. In e-commerce, “centralization” is still a hidden problem. In a centralized scenario, the buyer is p1 , the seller is p2 , and the third-party institution responsible for holding the funds is pm . Then, the security of the transaction is entirely dependent on the credit of pm , which can cause hidden problems in the transaction. Therefore, a decentralized blockchain based on distributed storage is considered an important solution to this problem. In simple terms, it is to have all three nodes, p1 , p2 , and pm , record the buyer transfer information and seller shipment information by broadcasting56 REF _Ref84791495 \r \h \* MERGEFORMAT 错误!未找到引用 源, and the corruption of any node will not cause the transaction to fail. Blockchain storage system Sb can be represented as {vi = vs |i = 1, · · · , N } with no central node. With the point-to-point network and proof of work, the possibility of all nodes being corrupted or tampered with is significantly reduced. This makes blockchain technology have greater business value and application potential in e-commerce applications.

56

See ref. [23].

54

1 Background of E-Commerce

1.4 Innovation Ecology The changing social ecology of enterprises determines the needs of engineering ecology and brings many opportunities for innovation in the study of engineering ecology. In the era without e-commerce, users can only use the offline route to purchase goods. The main process can be represented by a triplet {v, b, c}, where v denotes seeing the goods, b denotes trading, and c denotes picking up the goods. The times of the three processes are denoted as tv , tb , and tc , and this approach is applied to offline transactions, excluding the time of arrival at the mall, which is faster overall. At the beginning of the 21st century, e-commerce had just emerged, but it was not widely used. Because the development of logistics at that time was far less than now, the pickup time tc was long. Currently, users can even enjoy a “seven days no reason” return service on various e-commerce platforms, while at that time, users may take close to half a month to return and exchange a product. Therefore, the pickup time tc may turn from instant offline to days or even weeks. In addition, the viewing time tv is also long at that time. Suppose the seller launches a product containing N products. If the buyer is not informed of the details and corresponding numbers of N products in advance, the transaction process will be challenging. In the 2G era, both parties to a transaction identified the product to be purchased over the phone. Buyers specified a product by describing its shape, color, and texture, and sellers relied on their understanding of the buyer’s description to retrieve and ship the product from their own product warehouse, which resulted in excessive viewing time tv . In the process, the entire transaction process may need to be repeated again in the event of a mistake. With the birth and development of the Internet, some merchants have built individual portals where users can browse the pictures on the website to select products and place orders for shopping. This experience is not good for users because the shortening of the viewing time tv does not meet the requirements of users due to technical limitations. For example, around the year 2000, domestic users accessed the Internet through a “56K modem” (modem) device. As the name implies, the speed of the Internet was only “56K”. In 2000, digital cameras entered the era of 2 megapixels. For a true color picture, one pixel takes 24 bits, so a 2 megapixel picture is 5.72 MB in size without compression. In the actual operation of the system, the JPEG compression format is usually used to reduce the storage consumption, and the JPEG compression ratio is usually one-third to half. If the JPEG compression rate is 1/3, the size of a picture is approximately 1.90 MB, which is an order of magnitude difference from “56 K”. A user who clicks on a product has to wait several seconds to see the image, which leads to a poor user experience. A good illustration of this is the case of boo.com, which was founded in late 1999 to sell products in the category of clothing. After 6 months, the company lost almost 100 million pounds and executed a bankruptcy liquidation. While it is true that the promotional process was too long and the product was launched too late, one of the main reasons for the company’s bankruptcy was that the website used

1.4 Innovation Ecology

55

Flash to display clothes in 3D and provided a virtual store assistant “Miss Boo” to serve users. Under the conditions of Internet development at that time, these features could not be conveyed to users smoothly. The concepts of “3D” and “virtual” are not outdated now, and this “ahead of its time” concept was not able to provide users with a satisfactory experience at 56 Kbps network speed. Therefore, the user traffic within a few months of launch was very poor, and the cost was difficult to recover. With the rapid development of the Internet, the time to see goods t_v has decreased dramatically. Take a Chinese e-commerce platform as an example. In the 2010s, the product information on the platform was still picture-based. A few years later, a video of the main image of no more than 50 MB was allowed to be uploaded. By 2021, the industry has constructed a product information system that includes four short video categories: main image video, business detail video, store video, and instruction manual video, and the size of the main image video file has been liberalized to 100 MB. With “pictures, text, video, and audio,” multimodal information for product displays has now become the standard for e-commerce platforms, and many ecommerce platforms have even launched “intelligent” shopping assistants. However, the user’s perception of goods still has a large gap with the offline physical stores. Whether online or offline, the essence of the shopping environment is still a selling behavior. Based on this behavior, the entity-relationship diagram of the shopping management system can be drawn, as shown in 1-29. Both online and offline shopping management systems require “goods” and “consumers,” which are related by the act of “selling” (Fig. 1.29). The virtual shopping environment is a virtualization of the physical shopping environment. The purpose is to establish a one-to-one mapping from offline products to online displays, with a tuple representing the composition of the virtual shopping environment (G, C, A, O), where G represents the administrator, C represents the customer service, A represents the settlement receipt, and O represents others. The administrator is responsible for storing the goods in the warehouse,

Fig. 1.29 Shopping management system sales entity relationship diagram

56

1 Background of E-Commerce

displaying them in the online store in the form of product pictures and videos, and delivering the goods to the buyer via logistics according to the order. Customer service helps the buyer select goods and answer their doubts. The settlement receipt receives the buyer’s payment, generates transaction records, and docks with the platform’s finances to complete the transaction and fund the account. Other components related to e-commerce transactions, such as shopping carts, are included. Knowledge about the virtual shopping environment will be specifically developed in Chap. 2. This section provides the following discussion: for the whole e-commerce innovation ecology, the virtual reality of the shopping environment is discussed. Intelligent delivery and distribution are discussed for administrators who need to handle offline goods. Intelligent customer service is discussed for store customer service. Mobile payment is discussed for settlement and receipt.

1.4.1 Realization of the Virtual Environment E-commerce relies on the virtual Internet, so customers’ shopping activities are always inseparable from the virtual shopping environment. In recent years, ecommerce enterprises have paid much attention to the realization of the virtual environment. The purpose of virtual shopping environment realization is to make users in front of the screen feel the offline store environment to obtain the real experience. The act of “selling” connects two entities: the “merchant” and the “customer.” The object of virtual reality is the two sides of the transaction: on the one hand, the merchant’s products and environment in the form of the three-dimensional virtual world to show, on the other hand, the customer itself from the real world into the three-dimensional virtual world, with the feeling of “immersive.” Two technologies, 3D reconstruction technology and virtual human technology, are used here. Among them, the 3D reconstruction technology starts from the merchant, converting the merchant’s store and the products on the shelves from physical objects or pictures to the 3D virtual world, that is, looking to provide an immersive experience for the user. Virtual human technology starts from the customer, integrating the real-world customer into the three-dimensional virtual world, allowing the customer to get the “trial” feeling of the product and enhance the user experience. This approach greatly enhances the satisfaction of both merchants and users and reduces unnecessary promotion and logistics costs. Specifically, both the 3D reconstruction technique and the virtual human technique aim to learn a mapping function F that inputs a picture and outputs the 3D features of this picture, as shown in Eq. (1.16). ) ( P x, y, z, d p = F(I (x, y, di ))

(1.16)

where x,y,z denote the coordinate value of a point, I (x, y, di ) indicates that the input is a two-dimensional image, di denotes the number of feature channels, and for a non-indexed RGB image without transparency channels, di = 3, , and the value of

1.4 Innovation Ecology

57

Fig. 1.30 Effect of the thesis in PF-AFN57

( ) each channel is taken in the interval [0,255]. Similarly, P x, y, z, d p denotes the output 3D model, and d p denotes the number of 3D model feature channels. Therefore, the essence of both is to present two-dimensional images in the same three-dimensional virtual space so that customers can obtain the same experience as shopping offline. The optimization goal of the mapping function F is to make the generated scene as close as possible to the real scene, but there are still difficulties. Taking the rendering of people’s daily clothes as an example, the online penetration rate of “clothing, shoes and boots,” a major category of goods, was 27% in 2018, lower than that of the “household appliances” category (31%) and the “consumer electronics” category (32%), which is related to the fact that there are still many defects in online clothing fitting. In recent years, papers on the topic of “virtual dress fitting” have been frequently presented at the IEEE Conference on Computer Vision and Pattern Recognition (CVPR), one of the top computer vision conferences. In work presented at the 2021 IEEE International Conference on Computer Vision and Pattern Recognition, the authors of the paper propose a method that does not require the annotation of individual parts of a human image, which converts the existing method to learn the relationship between the appearance of a real human body and the target clothing to extract the appearance between the human image and the clothing image, facilitating the discovery of a dense correspondence between the two and thus generating high-quality images. The generated results are more realistic, as shown in Fig. 1.30. The explosion of COVID-19 in 2020 caused a prolonged stagnation in the entire offline sales channel, with a precipitous drop in turnover, which, coupled with high laying costs and labor costs, led to a drastic shrinkage of profits for offline stores. As the physical stores were not profitable, the major stores were also unable to gain revenue. This has largely created a social demand for realistic virtual shopping environments, resulting in the emergence of virtual stores based on virtual reality technology (VR technology). What connects the “virtual store” and offline users is

57

See ref. [24].

58

1 Background of E-Commerce

the “logistics” of delivery to the users, and the application of “intelligent delivery and distribution” in logistics is discussed below.

1.4.2 Intelligent Logistics Logistics is an important link between sellers and buyers in e-commerce transactions. With the increase in the scale of e-commerce transactions, e-commerce logistics have also seen rapid development. The traditional “in-store” distribution has gradually become an “in-home” distribution, and technologies such as cloud computing, the Internet of Things, artificial intelligence, and blockchain have been combined and applied in the process of intelligent delivery and distribution, realizing the informatization of logistics, the mechanization of storage and the intelligence of distribution.

1.4.2.1

Logistics Informatization

Logistics informatization is the inevitable trend of visualization and transparency throughout the logistics industry. At present, it has been developing continuously on a global scale. The perfect engineering ecology of e-commerce has largely improved the level of informatization and digitalization of the logistics industry. IoT and cloud computing technologies enable the timely and accurate acquisition and collation of data on the origin of any item, the warehouse where it is stored, the vehicles that carry it, and the corresponding moments between production and sale to customers. Using these data, price forecasting and routing decisions can be realized. To ensure the transparency of information between the two sides of the transaction and guarantee the credit of both sides of the transaction, it can be realized by blockchain technology. The previous section in the discussion of IoT ecology introduced only one perspective of IoT application in logistics. In fact, through the comprehensive use of multiple technologies, the whole logistics information industry forms a closed loop around logistics data, as shown in Fig. 1.31. This closed loop will make the logistics industry cooperation and collaboration, intelligent decision-making, and information transparency greatly improved and will also significantly reduce labor costs. The following section will discuss the application of intelligent technology in the shipping and receiving ends of distribution from two perspectives: warehousing mechanization and distribution intelligence.

1.4.2.2

Intelligent Warehouse

Warehouse management has always been the core of logistics and distribution, and improving warehouse management efficiency and reducing warehouse management

1.4 Innovation Ecology

59

Fig. 1.31 Logistics information technology closed loop diagram

costs are key issues. With escalating labor costs, robots have gradually assumed the important role of warehouse management. Robot R has several components, including the main body Rm , the drive system Rd , the control system Rc , and the end detection and actuation device Rv , which are used to support the overall structure of the robot, provide the robot’s power, control the robot’s action and perform the robot’s functions, as shown in Eq. (1.17). R = {Rm , Rd , Rc , Rv }

(1.17)

Each of these parts is essential for the robot, where Rv contains complex machinery such as visual perception modules and fine motor modules to help the robot accomplish its designed functions. Equation (1.17) is only a conceptual abstract representation, and there can be other components, such as human-robot interaction modules, depending on different functional requirements. In the warehouses of e-commerce companies, there is a class of robots called handling robots that are responsible for the handling of goods in the warehouses. Transportation scheduling and path planning during the handling of these robots are much more necessary in warehouses with an inch of space. Suppose a warehouse space model is constructed, as shown in Fig. 1.32. Denote the set of shelves as A = {ai |i = 1, · · · , n a }, the set of stocking ports as B = {b j | j = 1, · · · , n b }, the set of vertical roads as C = {cm |m = 1, · · · , n c }, and the set of horizontal roads as D = {dn |n = 1, · · · , n d }. For the convenience of processing, both the lateral road and the longitudinal road are one-way. For a robot = {rk |k = 1, · · · , n r } in a robot

60

1 Background of E-Commerce

Fig. 1.32 Storage space model

rk , its task can be expressed as transporting from a shelf ai ∈ A to some stocking port b j ∈ B, and after the goods are processed, delivering to a shelf location ai ∈ A. For a robot rk , the time tk to complete the task is shown in Eq. (1.18). tk = tk1 + tk2

(1.18)

where tk1 indicates the time for rk to move from the current position to the starting shelf ai , and tk2 indicates the time for rk to move from the starting position to the stocking port and then return to the other position. The scheme of the storage robot scheduling is noted as a k-dimensional vector w. Then, the objective of the optimal scheduling scheme is shown in Eq. (1.19). w ∗ = argmin wt w

(1.19)

Through intelligent scheduling optimization, the storage robots are able to operate efficiently, significantly improving the efficiency of storage and freight transportation and reducing logistics costs.

1.4 Innovation Ecology

1.4.2.3

61

Intelligent Distribution

Similar to warehouse mechanization, distribution intelligence is also applied to the end scenario of logistics. The distribution problem is also known as the “last mile problem.” At present, the solution to this problem is to deliver goods from the receiving warehouse to the customer by hand. With the development of technology, the unmanned delivery and distribution technology represented by drones is gradually developing. Allowing many UAVs to deliver goods requires more sophisticated path planning algorithms. The path planning algorithm for UAVs is a nonlinear optimization problem that aims to find a path from the starting position to the final position and can be transformed into a function optimization problem under the constraints. First, the states of the UAV are described, the coordinate positions of the UAV’s fuselage, and the internal states of the fuselage. The external position of the fuselage has six states, denoted as {x, y, z, u, v, w}. where x, y, and z represent the position of the UAV on the three axes, and u, v, and w represent the velocity on the three axes. The internal position of the fuselage also has six states, noted as {a, b, c, p, q, r}, where a, b, c denotes the angle of the UAV’s traverse, pitch, and yaw, and p, q, r denotes the corresponding angular velocity. According to the description system of the UAV and the constraints of the no-fly area, danger area, and obstacle, various costs of UAV passage, such as ascent cost, danger cost, length cost, and fuel replenishment cost, can be calculated, denoted as Ji (w), where w denotes the flight path. Then, the optimization objective of smart delivery by UAVs is shown in Eq. (1.20). w ∗ = argmin w w

s.t.

N Σ

N Σ

ki Ji (w)

i=1

(1.20)

ki = 1

i=1

Due to legal restrictions, drone delivery has not yet become popular on a large scale. However, the concept of “unmanned delivery” has certain significance for solving the “last mile problem” and improving user experience.

1.4.2.4

Intelligent Customer Service

Intelligent customer service is used to replace the role of human customer service. Its purpose is to generate solutions based on the customer’s problems and help them make a final decision. Intelligent customer service can perform many tasks, such as product recommendations and after-sales problem resolution. The solution is usually a dialogue, and there are two main types of dialogues available: text and voice. The form of dialogue is shown in Fig. 1.33, where the downward dashed arrow indicates the advancement of time. The customer considers whether

62

1 Background of E-Commerce

Fig. 1.33 Intelligent customer service dialogue form

he or she is interested in buying by asking questions in succession, and the customer service gradually reinforces the customer’s willingness to buy by answering. This is a simple example of a conversation that may consist of different parts. The customer is asking about the difference between Product A and Product B. The customer may have already consulted Product A and Product B separately. A complete conversation D can contain multiple Q&A sessions t = {c1 , c2 , · · · , cn }, where each Q&A session ci contains multiple Q&A pairs, i.e., {(q1 , a1 ), (q2 , a2 ), · · · , (qm , am )}, where qt denotes the customer’s question and at denotes the customer service’s answer. The purpose of intelligent customer service is to infer an answer at that satisfies the customer based on q 0, ' C NT 2 (n) > 0. As the E-commerce transaction negotiation is carried out through the Internet, various elements of the negotiation process have changed, m E < m T ,n E < n T , then: C NT E = C NT 1 (m E ) + C NT 2 (n E ) < C NT T

(5.34)

5.2 Principles of E-Commerce Transaction

349

3. Implementation Cost C TI Implementation cost C IT is the warehousing and logistics cost and store shelf costs when the transactions do not occur simultaneously. In e-commerce transactions, both parties can complete real-time transactions and real-time delivery through the Internet, which greatly reduces or even avoids warehousing and logistics costs and store shelf placement costs, namely: C ITE < C ITT placement

(5.35)

In conclusion, the transaction costs in the e-commerce mode are as follows: C ET = C STE + C NT E + C ITE < C TT

(5.36)

We can see that e-commerce transactions with interactivity, instantaneity, globality and lower costs break through the traditional business and transaction mode and are no longer limited by time and region. The process realizes transaction virtualization, improves transaction efficiency, and greatly reduces transaction costs.

5.2.2 Transaction Credit Risk of E-Commerce There are various risks in the process of e-commerce transactions, which can mainly be classified into three categories: management risk, legal risk, and credit risk. Management risk refers to the risk of the transaction process and business technology management, such as the wrong management and behindhand network information security technology (network payment technology, data storage technology, etc.). Legal risk refers to the constraints of the market trading environment and the main institutional body, including the protection of legitimate rights and interests from both buyers and sellers, such as the protection of personal privacy and intellectual property rights. The above two types of risks are mainly external factors of transaction risks. Credit risk is the internal factor of transaction subject risk; the information asymmetry in the network environment intensifies the trust crisis between the two parties in the virtual environment, thus causing transaction obstacles. The credit compliance or default behavior of both parties in the transaction process becomes random decision behavior. The market economy is a credit commodity economy. In the tide of economic globalization, credit acts as the passport of the international market. It is the basis for the existence and development of e-commerce as a new commercial activity. The trust between the two sides of the transaction plays a much more important role in e-commerce than in traditional transactions. Therefore, we focus on the analysis of credit risk. E-commerce transactions can be viewed as a game. In the transaction process, both the buyer and the seller can act in good faith or fraudulently; credit risk will

350

5 Basic Operating Principles of an E-Commerce System

occur if at least one side commits fraud. We attempt to analyze strategy selection and credit risk prevention in the process of e-commerce transactions from the perspective of game theory. To simplify the analysis, we make the following assumptions: (1) There are two subjects in an E-commerce transaction: buyer A and seller B, both of whom have complete information and behave rationally; (2) The strategies of the transaction }progress U A = } of both parties { { behavioral IntergrityU AI , FraudU AC , U B = IntergrityU BI , FraudU BC . Suppose that during the transaction, buyer A chooses to behave with integrity with the probability of PAI = p1 , and seller B chooses to behave with integrity with the probability of PBI = p2 ; then, PAC = 1 − p1 , PBC = 1 − p2 . (3) During the transaction, the following parameters are set: Barter value V , transaction cost C1 , gross profit π , social cost C2 , punishment S and reward W ; Where V > π ≥ 0, π ≥ C1 ≥ 0, V ≥ C2 ≥ 0, C1 ≥ 0, C2 ≥ 0, S ≥ 0;

5.2.2.1

Completely Unrestrained

Completely unconstrained means that both parties of the transaction are free from restraint. Behavioral strategy selection ignores social costs, punishments, and rewards, and there are no extra benefits or costs to keeping one’s word or breaking it. Assume that both parties will adopt mixed strategies to obtain maximum benefits. The credit game matrix is shown in Table 5.1. If the probability of buyer A choosing to behave with integrity PAI = p1 is established: (1) When seller B chooses to behave with integrity U BI , B’s expected return R BI is: R BI = p1 (π − C1 ) + (1 − p1 )(−V − C1 ) = p1 (π + V ) − V − C1

(5.37)

(2) When seller B chooses to behave with fraud U BC , B’s expected return R CB is: R CB = p1 (V − C1 ) + (1 − p1 )(−C1 ) = p1 V − C1

(5.38)

Due to 0 ≤ p 1 ≤ 1, V > π ≥ 0, then p1 (π + V ) − V − C1 < p1 V − C1 Table 5.1 Credit game matrix under completely unconstrained conditions

(5.39)

Seller B

Buyer A Integrity ( p1 )

Fraud (1 − p1 )

Integrity ( p2 )

π − C1 , π − C1

−V − C1 , V − C1

Fraud (1 − p2 )

V − C1 , −V − C1

−C1 , −C1

5.2 Principles of E-Commerce Transaction Table 5.2 Credit game matrix with social costs and reward and punishment mechanisms

351

Seller B

Buyer A Integrity ( p1 )

Fraud (1 − p1 )

Integrity( p2 )

π + W − C1 ,π + W − C1

W − V − C1 ,V − C1 − C2 − S

Fraud(1 − p2 )

V − C1 − C2 − S,W − V − C1

−C1 − C2 − S,−C1 − C2 − S

that is R BI < R CB

(5.40)

Therefore, there is no mixed strategic Nash equilibrium and only a pure strategic Nash equilibrium.8 Seller B always chooses the “fraud” strategy; similarly, buyer A has the same strategy. In summary, both parties involved in the transaction will choose the "fraud" strategy under completely unconstrained conditions.

5.2.2.2

Existence of Social Costs and Reward and Punishment Mechanism Constraints

Incorporate social costs and reward and punishment mechanisms into transaction behavior and take them into account. In this state, both parties of the transaction will consider adopting a mixed strategy to obtain the maximum benefits. The credit game matrix is shown in Fig. 5.2 (Table 5.2). If the probability of buyer A choosing to behave with integrity PAI = p1 is established: ∗ (1) When seller B chooses to behave with integrity U BI , B’s expected return R BI is: ∗

R BI = p1 (π + W − C1 ) + (1 − p1 )(W − V − C1 ) = W + p1 (π + V ) − V − C1

(5.41) ∗

(2) When seller B chooses to behave with fraud U BC , B’s expected return R CB is: ∗ R CB

(

−C1 − C2 − = p1 (V − C1 − C2 − S) + (1 − p1 ) S = p1 V − C 1 − C 2 − S

If there is a mixed strategy Nash equilibrium, then there is: 8

Luo [8].

)

(5.42)

352

5 Basic Operating Principles of an E-Commerce System ∗

R BI = R CB

∗

(5.43)

that is: W + p1 (π + V ) − V − C1 = p1 V − C1 − C2 − S

(5.44)

which results in p1 =

V − W − S − C2 π

(5.45)

When V − W − S − C2 ≥ π , namely, p1 ≥ 1, there is only a pure strategic Nash equilibrium, and seller B will adopt a “fraud” strategy; When 0 < V − W − S − C2 < π , namely, 0 < p1 < 1, there is a mixed strategy Nash equilibrium, and seller B will adopt an “honest” strategy with the probability of V −W −S−C2 2 and will adopt a “fraud” strategy with the probability of 1 − V −W −S−C ; π π When V − W − S − C2 ≤ 0, namely, p1 ≤ 0, there are only pure strategic Nash equilibria, and seller B will adopt an “honest” strategy. Similarly, buyer A has the same strategy. In summary, with cost constraints and reward and punishment mechanisms, when V − W − S − C2 ≥ π , both parties of the transaction will adopt a “fraud” strategy; when 0 < V − W − S − C2 < π , both sides will adopt an “honest” strategy with 2 and will adopt a “fraud” strategy with the probability the probability of V −W −S−C π V −W −S−C2 ; when V − W − S − C2 ≤ 0, both sides will adopt an “honest” of 1 − π strategy.

5.2.2.3

Prevention of the Transaction Credit Risk of E-Commerce

The above analysis shows that in the process of e-commerce transactions, the condition of both parties choosing to behave with an integrity is V − W − S − C2 ≤ 0. As the value of the transaction V is established, it is necessary to improve the social cost in the process of e-commerce transactions and perfect the reward and punishment mechanism of the trading platform to prevent the credit risk of e-commerce transactions.

5.2.3 E-Commerce Transaction Platform An e-commerce trading platform is a virtual network trading space based on the Internet that plays a key role in integration and promotes the efficient flow of “three flows” (information flow, logistics flow, and capital flow). The e-commerce trading platform provides merchants and consumers with merchandise exhibitions and queries, propaganda promotion, inquiry and bargaining, payments and purchases,

5.2 Principles of E-Commerce Transaction

353

Fig. 5.11 Traditional e-commerce transaction process

and other shared resources and supporting service facilities, helping merchants and consumers to conduct transactions and business activities with low cost and high efficiency.

5.2.3.1

Traditional E-Commerce Transaction Platform

Traditional e-commerce involves making online transactions on e-commerce platforms through the Internet. Malls, consumers, products, and logistics constitute the four elements of traditional e-commerce. Merchants display product information through e-commerce platforms to provide high-quality and inexpensive goods. Then, consumers can search for merchants, browse commodities, and make price consultations and purchase orders for target products. E-commerce platforms try to attract merchants and consumers, promote business settlement, guide consumption, and facilitate transactions. After that, the logistics service provider conducts the transportation and distribution of the product, which is transported from the merchant to the consumer. After receiving and confirming the goods, the payment service provider will solve the problem of cash flow and settlement. The payment service provider solves cash flow and settlement problems. Figure 5.11 shows the traditional e-commerce transaction process.

354

5 Basic Operating Principles of an E-Commerce System

Fig. 5.12 Cross-border e-commerce transaction process

5.2.3.2

Cross-Border E-Commerce Transaction Platform

Cross-border e-commerce is a commercial trade activity in which market subjects use a cross-border e-commerce platform to carry out cross-border business. It can be divided into broad and narrow categories according to the transaction objects and business service coverage. Cross-border e-commerce, in a broad sense, applies ecommerce in the field of international trade, also known as foreign trade e-commerce. Using network technology, modern communication technology, and computer technology, transaction objects in different broaders complete the traditional import and export trade of goods displays, commercial negotiations, contract signing, and order payments and carry out customs clearance and distribution to complete crossborder trade activities.9 Cross-border e-commerce in the narrow sense, also known as cross-border retail, refers to trade activities in which transaction subjects in different customs broaden complete transaction processes such as online trading and payment and directly connect with overseas consumers through express delivery, parcels, and other modes of transportation. Figure 5.12 shows the cross-border e-commerce transaction process. Cross-border logistics play an extremely important role in cross-border ecommerce transactions. At present, there are three logistics modes of imported cross-border e-commerce, as shown in Fig. 5.13: (1) Overseas direct-mail mode. After cross-border e-commerce enterprises receive orders, the order information will be sent to overseas suppliers at the same time. The operations of picking, packing, and shipping will be uniformly completed by the logistics centers of overseas suppliers, forming a “single” order, which 9

Qin [9].

5.2 Principles of E-Commerce Transaction

355

Fig. 5.13 Logistics model of imported cross-border e-commerce

will be transported domestically by mail or express in the form of a single parcel and will be directly delivered to consumers after centralized customs clearance. (2) Bonded stock mode. Merchants purchase goods from overseas, and then the goods enter by air or sea and are prepared to the bonded warehouse. Use electronic customs clearance and complete veneering sheets and packaging in the bonded warehouse when receiving orders and then directly carry out domestic distribution after passing inspection. (3) Transshipment mode. After the purchase and ordering operation of domestic consumers is completed, the goods will be sent to the transport company and then packaged and pasted. Then, they are collected and airlifted to home for customs clearance, and the domestic logistics enterprises will carry out the distribution. There are seven main export cross-border e-commerce logistics modes: (1) International air express mode. The logistics provider collects goods at home and transports goods to the country of destination by international air freight of the first distribution. After customs clearance and payment of customs duties, the goods are sent to the overseas warehouse, and the terminal service provider will complete the final distribution. (2) International ocean freight mode. It can be divided into maritime-truck transportation and maritime-express transportation according to the types of end distribution. The ocean freight shipping mode includes FCL, where the whole container of goods is sent to the same address, and the final process is finished by truck, and LCL, which means. LCL refers to the mode in which a small batch of goods is collected by domestic freight and arranged shipment after integration

356

(3)

(4)

(5)

(6)

(7)

5 Basic Operating Principles of an E-Commerce System

and FCL, and then devanning and distribution are carried out in the overseas warehouse. International express mode. The four giants of international express delivery at present are UPS, DHL, FedEx, and TNT. Through their own infrastructure network or joint operation network, they complete the collection of goods and customs declaration in the country of origin and arrange their own fleet and flights for the initial air transport. After arrival, the delivery service provider will handle the import customs clearance procedures and transshipment at the transit point. International post administration. Goods are transported by international mail routes, collected domestically, sorted and packed according to channel requirements, then bagged and sent to postal processing centers, transshipped through the UPU member mail routes network, and finally distributed. International special line delivery. This mode is mainly targeted at B2C ecommerce small packages. The logistics providers complete the operation of cargo collection, sorting, and packing, and goods are transported by air freight of the first distribution. B2C commercial customs clearance will be carried out after the arrival of goods, and the final process is finished by domestic service providers. International railroad delivery. It can be divided into railroad-truck transportation and railroad-express transportation, has a similar internal operating logic to the ocean freight mode and includes FCL and LCL. The transport agent of ocean freight is “cargo vessel + container”; however, that of railroad delivery is “train + container”. International truck delivery. Namely, CEIbs or CEIBs. The mode transports goods from home to Europe by container trucks and has FCL and LCL, two types.

For companies, cross-border e-commerce has further promoted the construction of a new mode of international trade, formed a new pattern of open, multidimensional, and tridimensional cooperation, provided a new strategy for foreign trade enterprises to enter the international market, further optimized the allocation of international resources, and achieved a win–win situation. For consumers, cross-border e-commerce has responded to domestic consumers’ demand for a higher quality of life, enriched domestic and foreign consumers’ choices, and improved their welfare.

5.2.3.3 1.

New Retail E-Commerce Transaction Platform

The Emergence of New Retailing

In recent years, the rapid development of the Internet has caused user growth and traffic dividends to gradually shrink and slowed the development speed of traditional e-commerce. Meanwhile, the online consumption experience of traditional ecommerce cannot meet consumers’ increasingly upgraded demand for high-quality, personalized, and multiexperience consumption and gradually falls into a bottleneck

5.2 Principles of E-Commerce Transaction

357

stage of development. In this case, a new model called “new retailing e-commerce” comes into existence, which promotes the upgrading of consumption experience and the transformation of consumption mode. Moreover, this mode has restructured the retailing channel and has become an innovative attempt on the way of traditional e-commerce reform. New retailing e-commerce refers to a new retail model relying on the Internet that applies emerging technologies, including artificial intelligence, big data, and cloud computing, to integrate online services, offline experience, and modern logistics, realize multiscene fusion, reconstruct the three elements of "personnel + goods + environment” and improve retail efficiency. Figure 5.14 shows the architecture of new retailing e-commerce. The difference between new retailing e-commerce and traditional e-commerce lies in intrinsic impetus, consumption scenario, and consumption experience. In terms of intrinsic impetus, the development of traditional e-commerce cannot occur without the support of the Internet, which mainly solves the problem of the connection between transaction supply and demand. In contrast, new retailing e-commerce companies rely more on new technology support and focus more on deepening the supply chain to improve industry efficiency. In terms of the consumption scenario, traditional e-commerce mainly focuses on online transactions, while new retailing e-commerce is a complete closed loop of “online + offline + intelligent logistics”. In terms of the consumption experience, traditional e-commerce does not allow consumers to truly feel the attributes of goods, and it takes a long time to receive goods. However, new retailing e-commerce can realize online browsing, offline

Fig. 5.14 Framework of new retailing E-commerce

358

5 Basic Operating Principles of an E-Commerce System

experience, pick up goods, and more three-dimensional experience. Therefore, new retailing e-commerce has four characteristics: ecological, unbounded, intelligent, and experiential. 2.

New Development of New Retailing—Live-Streaming E-commerce

The COVID-19 epidemic in 2020 indirectly promoted the rapid development of new e-commerce. Therefore, with the gradual improvement of the live streaming industry, the development of live streaming e-commerce is particularly rapid. The industry has transitioned from pure traffic bonus digging to the whole ecology bonus digging, especially through refined operation and supply chain penetration to achieve new increments. Live streaming e-commerce refers to a new form of e-commerce in which anchors introduce products to viewers through livestreaming and recommend them to purchase to realize the integration of “quality and effect”. Compared with traditional e-commerce, brand owners in the mode of live-streaming e-commerce can hire network anchors to make live streaming, produce and share on the content platform of each channel or e-commerce platform and realize direct interaction with consumers through live streaming. It is a deep integration of e-commerce and live broadcasting in the digital era and is characterized by strong interactivity, strong IP attributes, and a high degree of decentralization.10 Live-streaming e-commerce is actually a process of connecting online and offline, which effectively realized new retailing factor reconstruction of “personnel”, “goods”, and “environment” with the natural advantages in improving user interaction experience, activating public domain and private domain traffic, and creating real-time shopping scenes. It is one of the important pointcuts of new retail. Thus, livestreaming e-commerce is not simply a combination of live streaming and e-commerce but also a combination of upstream manufacturers, suppliers, offline physical stores, and consumers. It is a landing practice and exploration of new retailing e-commerce. Figure 5.15 shows the transaction process of live-streaming e-commerce. There are three main forms of “live streaming + e-commerce” in the strict scene. The first is to add live streaming features to the e-commerce platform as an accessory of the platform. In the early stage, the streaming traffic is mainly driven by the flow of the e-commerce platform, and in the later stage, the streaming traffic feeds the traffic of the e-commerce platform. The second is the mode of short video live streaming, which hatches livestreaming through short video platforms and establishes links with e-commerce platforms through commodity links. The third is the content e-commerce platform based on live streaming, which introduces an e-commerce transaction function on the basis of the original production of live content. This mode is live streaming e-commerce in the real sense. In the mode of live streaming e-commerce, the e-commerce platform and the live streaming platform are the core of the whole operation chain, providing marketing promotion services and technical support for the whole transaction process. At the same time, the interconnected cooperation between platforms promotes the transformation between the public domain traffic of major platforms and the private domain traffic of anchors and merchants, 10

Guo [10].

5.2 Principles of E-Commerce Transaction

359

Fig. 5.15 Transaction process of live-streaming e-commerce

further improving the economic benefits of traffic. Live-streaming e-commerce has the characteristics of real-time and rich media, as well as the advantages of strong interactivity, strong professionalism, and a high conversion rate, which further enrich the shopping experience of consumers. At present, live-streaming e-commerce has formed a complete industrial chain with the support of multiple service providers, as shown in Fig. 5.16. The rapid development of live-streaming e-commerce is inseparable from the transformation and upgrading of the supply and demand sides. On the supply side, diversified brand value demands promote the hierarchical upgrading of livestreaming forms. The form of live streaming e-commerce shows a trend of diversified development, which is mainly reflected in the types of livestreaming, the types of anchors and cargo groups, and the forms of livestreaming, as shown in Fig. 5.17. In addition, the integration of external resources in the supply chain and C2M’s ability to direct the production of live-streaming e-commerce have built a demand-driven supply chain, and demand prediction and feedback can be carried out more accurately and quickly. On the demand side, the structure of user behavior and decisions promotes the iterative upgrading of traditional e-commerce traffic distribution methods, content ecology becomes an important part, and the combination marketing mode of “imagetex + short video + livestreaming” is highlighted. In addition, consumers pursue the ultimate cost performance, which promotes the upgrade of the quality effect of goods. Cultivating users’ consumption habits of live streaming and exploring the demand become the key to future development.

360

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Fig. 5.16 Industrial chain diagram of livestreaming e-commerce

Fig. 5.17 Diversification of live-streaming e-commerce types

5.3 Principles of E-Commerce Circulation

361

5.3 Principles of E-Commerce Circulation 5.3.1 Traditional Composite Circulation Mode Commodity circulation (CC) refers to the exchange of commodities, namely, on the basis of money as the medium, the transfer process of commodities or services from production to consumers constitutes the foundation and main part of the tertiary industry, which involves various fields, such as the catering industry, communication industry, transportation industry, postal industry, warehousing industry, wholesale and retail industry, etc. Commodity circulation is the extension and expansion of commerce and a process of gradual industrialization. In this section, readers should pay attention to the following: first, the existence of money is a necessary and sufficient condition for the process of commodity circulation. Second, the whole process of commodity exchange can be called commodity circulation. The “Continuous Whole”.11 The circulation process of commodities is essentially a process from commodities to money and then to commodities. Since commodity transactions involve the transfer of ownership or use rights, they include the following change processes: first, the movement process of commodity value, i.e., Market distribution (D M ) refers to the change in commodity ownership and value form in the transaction process. The second is the physical distribution process of commodities, namely, physical distribution (D P ), which refers to the change in the spatial position of physical commodities or the virtual commodities reaching consumers through virtual physical distribution. If CC is regarded as a set, the set contains two elements, namely, D M and D P , expressed as: } { CC = D M , D P

(5.46)

The main body undertaking various commodity exchange activities in the circulation process is the commercial business organization, which also constitutes the basis of market distribution and physical distribution and plays a great role in promoting the change process of commodity value form (i.e., the change process of W − G and G − W ) and promotes the transfer of commodities and services from production to consumers. From a vertical perspective, every commercial business organization is a link in the circulation process, and these links together form a commodity circulation channel.12 Therefore, understanding various commodity circulation channels plays a key role in mastering the circulation principles of e-commerce, which will be described in turn below.

11 12

Ji [11]. Ji [12].

362

5 Basic Operating Principles of an E-Commerce System

5.3.1.1

Traditional Commodity Circulation Channels

1. Direct Channel of Traditional Commodity Circulation (C C Td ) CC dT is also called the traditional direct selling mode. The typical formula of this channel is: Traditional Producer PTr → Traditional Consumer C Tr , expressed in an ordered set, i.e., } { CC dT = PTr , C Tr

(5.47)

In this circulation channel (CC dT ), the direct connection between producers and consumers is realized. The producer of commodities is also the merchant of commodities. The commodities are not distributed through traditional sales channels such as shopping malls, supermarkets and so on, without the participation of intermediaries and the formation of any commercial links, which is the direct circulation channel. Here, PTr refers to a set containing m traditional{ producers, and C Tr }refers to containing n }traditional consumers, where PTr = prT 1 , prT 2 , . . . , prT m , C Tr = {a set r a Boolean matrix RT to express the relationship between cT 1 , crT 2 , . . . , crT n( . Using ) them, then RT = riTj ( riTj =

m×n

, of which:

0, Direct circulation channel between the i and jth traditional producer 1, No direct circulation channel between the i and jth traditional producer

2. Indirect Channel of Traditional Commodity Circulation (C C Ti ) Commodity exchange takes commerce as the medium. With the development of the internal division of labor in commerce, the social division of labor continues to extend in the field of commercial circulation and gradually forms an indirect circulation with the separation of production and marketing. First, it is divided into Wholesaler W s and Retailer R t . Second, Wholesaler W s is internally divided into Origin Purchase Wholesaler W p , Selling Place Wholesaler W l and Transfer Place Wholesaler W t . Only by combining these links to form a complete business and realize the operation can we finally complete the function of media commodity exchange. Similarly, using the ordered set to represent the indirect channels of traditional commodity circulation, there are: } { CCTi1 = PTr , Rt , CrT , i.e., PTr → Rt → CrT } { CCTi2 = PTr , Ws , Rt , CrT , i.e., PTr → Ws → Rt → CrT { } T CC i3 = PTr , W p , W t , W l , R t , C Tr , i.e., PTr → W p → W t → W l → R t → C Tr } { T CC i4 = PTr , W p , W l , C Tr , i.e., PTr → W p → W l → C Tr

5.3 Principles of E-Commerce Circulation

363

Fig. 5.18 Indirect channels of traditional commodity circulation

} { T CC i5 = PTr , W p , W t , W l , C Tr , i.e., PTr → W p → W t → W l → C Tr It is known that each link of the indirect circulation channel has one or more participants, and each link can be expressed as a matrix. Assuming that all links are connected by matrices in the form of W and b, as shown in Fig. 5.18, the specific form of the indirect circulation channel can be expressed by the matrix operation: From traditional producer PTr to origin purchasing wholesaler W p : W p = PTr × W1 + b1

(5.48)

From origin purchasing wholesaler W p to transit wholesaler W t : W t = W p × W2 + b2

(5.49)

From transit wholesaler W t to selling place wholesaler W l : W l = W t × W3 + b3

(5.50)

From selling place wholesaler W l to retailers R t : R t = W l × W4 + b4

(5.51)

From retailers R t to traditional consumers C Tr : C Tr = R t × W5 + b5

(5.52)

364

5 Basic Operating Principles of an E-Commerce System

According to formula (5.48) ~ formula (5.52), the whole process of indirect circulation of traditional commodities can be expressed as: CC iT

=

PTr

×

5 n

Wi + δ

(5.53)

i=1

The direct circulation channel CC dT shown in formula (5.47) and the indirect circulation channel CC iT shown in formula (5.53) together constitute the traditional commodity circulation channel CC T . It is the common existence and mutual support of the two channels that make {the market } economy flourish. For a certain distribution channel CC ∗T , when CC ∗T ⊇ PTr , C Tr , it is proven that there is an intermediary in the circulation channel, which is an indirect circulation channel; otherwise, it is a direct circulation channel.

5.3.1.2

Limitations of Traditional Circulation Mode

Due to the change in production mode and industry, the disadvantages of traditional commodity circulation channels are becoming increasingly prominent. Low circulation efficiency, difficult storage and management of commodities, fragmentation of circulation and capital flow, formation of price bubbles and asymmetric information gradually appear. The limitations of the traditional commodity circulation mode are as follows. First, the traditional concept of commodity circulation is compatible with the seller’s market situation, which cannot meet the needs of commodity sales in the leading position of social reproduction in economic development. Second, the competition concept of producers and operators in the traditional commodity circulation mode cannot adapt to the new market environment in which the trading parties realize social reproduction integration through cooperation. Third, the traditional operation mode of physical distribution, information flow and capital flow passing level by level along the circulation chain has caused an increase in transaction cost, information distortion and consumption asymmetry, resulting in unsalable products and inventory backlog, which hinders the improvement of circulation efficiency.

5.3.2 E-Commerce Circulation Mode 5.3.2.1

E-Commerce Circulation Channel

Currently, the e-commerce circulation channel CC E and traditional commodity circulation channel CC T mentioned above have essentially obvious distinctions,

5.3 Principles of E-Commerce Circulation

365

mainly including the following five aspects. First, openness. The e-commerce circulation channel CC E is no longer limited to the traditional mode. With the construction of a new pattern of comprehensive opening up, circulation products show diversity, and circulation transactions show a trend of globalization. The second is directness. Based on the Internet, e-commerce provides a more direct, efficient and timely transaction and circulation system for producers and consumers. The third is professionalism. The degree of specialization of circulation channels is constantly improving, and the circulation efficiency is also increasing daily. Fourth, flexibility. E-commerce circulation companies have constantly innovated their business models in the development process and have demonstrated strong adaptability in development and changes. Fifth, informativeness. Information is an indispensable part of e-commerce channels. The movement of information is conducive to the participants in the channels to plan the flow of commodities.13 The e-commerce circulation channel C E is a new commodity circulation channel. This section discusses the retail channel of the “X E 2C rE ” mode. X E refers to the link experienced by commodities before reaching consumers in the circulation process. Such channels include not only the direct circulation channel CC dE that eliminates the direct connection of traditional middlemen to consumers but also the indirect cybercirculation channel CC iE that connects consumers through the intervention { of } E E E E in an ordered set, i.e., CC = CC ∪ CC = X , C rE ., mediary M I , expressed d i { } { } X E = X dE ∪ X iE = PEr ∪ PEr , M I , X dE and X iE refer to the links experienced by commodities in direct and indirect circulation channels before reaching consumers, respectively. In the e-commerce circulation channel of the “X dE 2C rE ” mode, producer PEr can choose not to use the cyber-mediary M I and directly use the online network, computer communication and digital interactive media to contact consumers. This circulation mode that bypasses all intermediary links is the direct circulation channel of the “B − C” mode, also known as the “network direct sales mode”, namely, “Er r commerce producer } E → E-commerce consumer C E ”, expressed in an ordered { r rP E set: CC d = PE , C E . Relying on the direct circulation channel of the Internet has played an important role in boosting industrial upgrading, driving brand innovation and promoting the efficient allocation of upstream capacity resources. At the same time, the Internet-based network direct selling mode points out a new direction for the reform and innovation of the company’s internal information system and external logistics network: using big data analysis technology to realize the digitization of production decisions, adapting to the current online shopping demand by dispersion distribution and upgrading reverse logistics. In the e-commerce circulation channel of the “X iE 2C rE ” mode, due to the intervention of the cyber-mediary M I , producer PEr obtains the connection with consumers C rE through the online shopping platform, forming the indirect circulation channel { of the “B}− B − C” mode, which is also expressed in an ordered set: CC iE = PEr , M I , C rE . As shown in Fig. 5.19: 13

Ji and Yan [13].

366

5 Basic Operating Principles of an E-Commerce System

Fig. 5.19 E-commerce circulation channel

In such circulation channels, due to the existence of the cyber-mediary M I , the circulation process of commodities is based on the Internet platform and completed in the virtual market, so it can also be called the network circulation channel. It can not only provide network direct sales channels for commodities but also organize, control and supervise third-party logistics.

5.3.2.2

Characteristics of the E-Commerce Circulation Mode

The e-commerce circulation mode has formed a new circulation channel relying on the Internet directly connecting consumers or taking the cyber-mediary as the intermediary platform. The modern circulation mode composed of its special form and operation principles has the following characteristics.14 (1) The e-commerce circulation mode realizes the cross-space interaction between producers and consumers, builds a network platform for direct communication between manufacturers and consumers, and fully expresses the subjective will of consumers. (2) The e-commerce circulation mode adopts the combination of production and marketing and the integration of supply chain management to realize “rapid response” and “instant production” between producers and consumers. (3) The e-commerce circulation mode is based on the Internet or LAN Platform and centered on the cyber-mediary, which not only increases the flattening of the circulation framework but also improves the circulation efficiency. (4) The e-commerce circulation mode realizes the “three flows in one”, uses Internet technology to integrate the data of physical distribution, information flow and capital flow, simplifies the intermediate links of commodity circulation, and shortens the distance of commodity circulation.

14

Li [14].

5.3 Principles of E-Commerce Circulation

367

(5) The e-commerce circulation mode has broken through the space limitation of the company’s transactions, formed a global e-commerce transaction platform and informational physical distribution support system and adapted to the trend of economic globalization.

5.3.3 Impact of E-Commerce on Commodity Circulation E-commerce integrates Internet resources and commodity circulation resources, establishes a commodity trading network between transaction parties and other participants centered on e-commerce activities, and integrates supply chain resources such as fund flow, information flow and logistics flow, which has a very positive impact on the operation reform of “Three Flows”, the reconstruction of the commodity circulation field, the reduction of cost and the improvement of efficiency.

5.3.3.1

Reform of “Three Flow” Operation

Any complete transaction of E-commerce includes several basic “flows”, namely, information flow, fund flow and logistics flow. Information flow refers to commodityrelated information, capital information, etc. Fund flow mainly refers to the transfer process of funds such as payment and transfer. Logistics flow refers to the flow process of material entities (commodities or services). The Internet characteristics of e-commerce have differentiated economic behavior in the field of circulation. Compared with traditional commodity circulation, information flow (F I ), fund flow (F F ) and logistics flow (F L ) also have new characteristics. First, traditional offline commodities and services usually have a relatively fixed physical space, and their service range is limited. At the same time, consumers’ search ability for commodities and services is also limited. The information flow of traditional commodities and services (F TI ) is usually spread in a (small ) range, which means the transmission range of traditional information flow S FTI = S0 , S0 is a constant greater than zero. Based on the Internet, e-commerce separates the information flow of commodities and services from the traditional market. Information flows through the network platform, which not only overcomes the time and space constraints of traditional information flow but also overcomes the hierarchical constraints of information transmission to realize direct transmission and information sharing. If the ( point-to-point ) spread range S FEI of the e-commerce information flow is regarded as an infinite matrix, i.e., ( ) ( ) ⎤ S11 FEI S12 FEI · · · ( I) ( I) ⎥ ⎢ = ⎣ S21 FE S22 FE · · · ⎦ .. .. .. . . . ⎡

( ) ) ( )) S FEI = Si j FEI ∞

(5.54)

368

5 Basic Operating Principles of an E-Commerce System

Fig. 5.20 Fund flow of the traditional circulation mode and the e-commerce circulation mode

( ) where Si j FEI refers to the information sharing and transmission between the ith manufacturer and the jth consumer. Second, the fund flow F F of traditional commerce usually adopts cash settlement or bank card transfer settlement, while the fund flow of e-commerce is more circulated through the network, gradually breaking away from the traditional market, and the wide use of e-payment settlement subverts the traditional face-to-face fund flow transaction. E-commerce fund flow exists in the form of digital symbols and depends on the network platform for payment, which has the characteristics of digitization, globalization, standardization, directness and transparency. It has a wider scope of fund flow, higher turnover efficiency and lower cost. The fund flow under the two modes is shown in Fig. 5.20. Finally, e-commerce logistics flow FEL no longer completely depends on the unified distribution mode of traditional logistics flow FTL but appears to have new characteristics of informatization, networking and automation. The core of logistics flow is “The flow of commodities”. It is not simply “commodity transportation” but also includes the time state and space state of commodities. Modern e-commerce logistics flow closely combines all links of transportation, storage and distribution through informatization, networking and automation to realize the efficient integration of logistics flow chains. Informatization refers to the standardization and coding of logistics information collection, storage, processing and transmission on the basis of using information technology TE to make logistics information feedback timely and improve the service level of the company. Networking is the continuous L L L , storage FE2 , sale FE3 integration of logistics functions such as procurement FE1 L and distribution FE4 within the logistics company on the basis of informatization to realize the integration of upstream and downstream, online and offline of the supply chain, and finally achieve the whole supply chain. Automation refers to the use of automation technology to realize labor-saving and unmanned logistics, develop their own production capacity, improve labor productivity, expand business scope, reduce business problems, etc. The relationship between e-commerce logistics flow FEL and traditional logistics flow FTL is expressed by the following function: ( ) { L } L L L FEL = A E TE (FTL ) = FE1 , FE2 , FE3 , FE4 ,···

(5.55)

5.3 Principles of E-Commerce Circulation

369

Therefore, e-commerce logistics flow can not only create time value, space value and form value but also create information value and enable value-added value.15

5.3.3.2

Reconstruction of the Commodity Circulation Field

While differentiating economic behavior in the field of commodity circulation, ecommerce also reconstructs a new commodity circulation mode to adapt to new economic development. On the one hand, the business process of the circulation company is reconstructed. Different from the business process B P T of traditional circulation companies, such T T as acceptance receipt B P 1T , manual { } sorting B P 2 , settlement delivery B P 3 …, i.e., T T T T B P = B P1 , B P2 , B P3 , · · · . However, e-commerce circulation companies have widely applied artificial intelligence technology and information technology TE to commodity circulation and are actively exploring the application of blockchain and cloud computing technology. The business process B P E of the e-commerce circulation company has completed the transformation from manual to information and is changing to digitization and intelligence, i.e., B P E = TE (B P T ). On the other hand, the composition of the circulation market is reconstructed. The vigorous development of the Internet makes the traditional market position decline, and the role of logistics flow gradually highlights and plays an important role in the circulation process. With the gradual separation of information flow and fund flow from the traditional market, logistics flow has broad development prospects. Artificial intelligence technology and big data technology are widely used in commodity circulation, and the commodity circulation mode is changing to digitization and intelligence. In the future, blockchain technology and cloud computing technology will also be actively used in the field of commodity circulation. In the e-commerce environment, the operation of “three flows” has collaborative interaction, real-time dynamics and operational integrity, which can realize the effective allocation of resources and maximize benefits.

5.3.3.3

Cost Reduction and Efficiency Improvement

The development of e-commerce makes the circulation remove the redundant links in the original supply chain, which not only reduces the cost of commodity circulation but also improves the efficiency of commodity circulation. The cost of commodity circulation includes time cost C TC , information cost C IC and fund cost C FC , i.e., Circulation cost C C = Time cost C TC + Information cost C IC + Fund cost C FC (5.56)

15

Wei et al. [15].

370

5 Basic Operating Principles of an E-Commerce System

Among them, time cost C TC , information cost C IC and fund cost C FC have positive correlation effects on circulation cost C C . In the traditional commodity circulation channel CC T , CC Cti refers to the time spent in the i-th circulation link, and the time cost of all circulation links is CtC = { CtiC , i = 1, 2, . . . , while the E-commerce circulation channel CC E is based on Internet services, which realizes direct connection between consumer C rE and commodity producer PEr and omits the lengthy links such as agency, wholesale and C C C = CtWholesale = CtRetail = · · · = 0. Then, the circulation time retail, i.e., CtAgency CE cost Ct in E-commerce ≪ the circulation time cost CtC T in traditional commerce, thus the number of links of commodity circulation is further reduced, which greatly reduces the time cost CtC E of E-commerce circulation and greatly improves the circulation efficiency. At the same time, e-commerce realizes point-to-point direct transmission and information sharing, as shown in formula (5.54). Therefore, in the process of commodity transaction and circulation in e-commerce, transaction subjects such as manufacturers, circulation companies, consumers and payment platforms can directly and efficiently realize information exchange and communication and even successfully complete the transaction process online. Consumers can obtain commodities through offline physical distribution links and can query logistics information through the logistics network platform at any time. This point-to-point transaction between the supply and requisitioning parties reduces the information cost of commodity circulation C IC . In addition, the commodity logistics flow of e-commerce has the advantage of scale. On the one hand, it reduces the prices raised by circulation channels that are too long. According to formula (5.56), fund cost C FC is still positively correlated with time cost C TC and information cost C IC . Therefore, the reduction of circulation links and information sharing will greatly reduce the logistics flow fund cost. On the other hand, the fund cost C FC is related to its circulation speed v F and total circulation g F , i.e., Fund Cost C FC = C F (v F , g F )

(5.57)

Therefore, in the E-commerce circulation channel, with the reduction of backlog funds in the process of commodity circulation and the acceleration of fund circulation speed, the fund cost of logistics flow will be reduced. Moreover, in the Internet environment, the reduction of the number of circulation links makes the new commodity circulation mode respond quickly to the changes of the demand market and make reasonable planning. There is no need to carry out a large amount of commodity inventory in the intermediate link as in the traditional circulation mode. This point-to-point circulation mode produces higher circulation efficiency.

5.3 Principles of E-Commerce Circulation

371

5.3.4 E-Commerce Circulation Organization Innovation Circulation organization is the specific executor of logistics flow, information flow and fund flow movement.16 Its daily business activities are about the operation of "Three Flows". The innovation of circulation organizations is mainly reflected in the change in the organizational form of the circulation industry, which is the organizational support of system innovation and technological innovation. The evolution of circulation organization changes with the development of commodities and markets on the one hand and develops with the development of production division on the other hand.17 In the process of e-commerce connecting production and consumption, the development of network information technology has accelerated the reform of circulation organization and evolved new circulation formats. The innovation of circulation organization is reflected in the whole process of commodity circulation. This section will introduce it from three aspects: production company, cyber-mediary and logistics organization.

5.3.4.1

Production Company

Under the environment of e-commerce, Internet technology solves the problem of asymmetric information, improves the rate of information transmission, reduces the cost of information acquisition, and reduces the status of traditional wholesalers and retailers in the circulation market. The trend of deintermediation and flattening of the circulation organizational structure is obvious, showing a zero-level organizational structure. The circulation organization in the channel plays an externalized role in the internal division of labor of the production company and blurs the business boundary of the production company. The new network direct selling mode based on the Internet supports direct contact between manufacturers and consumers and makes a more direct, timely and accurate understanding, judgment and timely response to market demand. In addition, the production company makes full use of this way to realize flexible manufacturing and obtain greater profits in the value chain.

5.3.4.2

Cybermediary

E-commerce has a subtle impact on the functions of middlemen organizations. On the one hand, it is reflected in the impact of e-commerce on the traditional functions of middlemen in channels; on the other hand, it is also embodied in the innovation of middlemen functions in the e-commerce environment. Under the condition that the market is not fully informationized, as long as the transaction cost between producers and consumers is not zero, intermediary organizations must exist but have different missions at different times. 16 17

Li [16]. Xu [17].

372

5 Basic Operating Principles of an E-Commerce System

E-commerce gave birth to the emergence of new network intermediaries, such as network distributors and network agents. The main business of network distributors is to sell commodities to consumers through the network platform to realize online transactions. They can also open up new sales markets for commodities and meet the needs of consumers to the greatest extent. Network agents use network technology to transmit information, turn traditional marketing into an online marketing scheme, and realize the purpose of selling products. In addition, there are other Internet-based middlemen, such as content providers, virtual markets, online financial institutions and intelligent agents, which provide richer channels and even complete transaction support for information transmission.

5.3.4.3

Logistics Flow Organization

With the vigorous development of e-commerce, the status of logistics flow organizations has gradually become prominent, the outsourcing of organizations has been growing, and the shortcomings of the existing supply chain in this environment have become increasingly prominent. Hence, the fourth-party logistics flow comes into being and is in a leading position in the logistics flow system. The fourth-party logistics flow is more like the organizational manager of the supply chain; although there are no physical logistics flow resources, it can allocate and manage all resources, technologies and facilities, provide a relatively perfect solution for the whole supply chain and can also assemble all programs through e-commerce to provide consumers with more value-added services. The fourth-party logistics flow has the characteristics of intensification, informatization and comprehensiveness. In addition, the fourthparty logistics flow can build an efficient and flexible business innovation mode through modular innovation, give full play to its advantages of service specialization, and provide material innovation conditions for manufacturers under supply-side reform, which is an important innovation of the circulation organization mode in the e-commerce environment.18

5.4 Principles of E-Commerce Consumption Consumption is the behavior of consumption subjects who consciously consume material and nonmaterial materials for the purpose of continuing to develop themselves. Consumption usually includes three interrelated activity processes: the activity process of need generation, the activity process of commodity purchase and the activity process of commodity experience.19

18 19

Feng [18]. Fei and Chen [19].

5.4 Principles of E-Commerce Consumption

373

5.4.1 Consumer Behavior Analysis With the continuous development of the commodity economy, consumer behavior has become a socioeconomic phenomenon. Therefore, to analyze network consumers is to analyze their consumption behavior. When a company develops its marketing strategy, the first consideration is consumer psychology and the resulting behavior, which is also the basic starting point for the company to choose the target market and determine the market positioning. E-commerce has brought about earthshaking changes in consumers’ consumption objects, consumption methods, and consumption processes.

5.4.1.1

Consumer Demand

When consumers have a desire for a certain commodity or service, the lack of physical or psychological state can be called consumer demand. Consumer demand is the basic condition for the occurrence of consumer behavior. Only when consumers generate consumer demand are corresponding consumer behaviors. However, consumer demand is different, and even there are differences between levels. Regarding the different levels of consumer demand, the American psychologist Maslow proposed Maslow’s Hierarchy of Needs, which divides demand into five levels from low to advanced: physiological needs, safety needs, belongingness and love needs, esteem needs and self-actualization needs. There are differences between the levels of demand. Unmet demand determines individual behavior. The most urgent demand of consumers will become the main reason and motivation to stimulate their actions. Based on Maslow’s Hierarchy of Needs and e-commerce characteristics, this book proposes the E-commerce Consumption Hierarchy of Needs for discussion. Consumer demand in e-commerce consumption can also be divided into five levels: price needs H1N , quality needs H2N , social needs H3N , personalized customization needs H4N and self-actualization needs H5N . The specific meaning of each need is shown in Figs. 5.21 and 5.22. Similar to Maslow’s Hierarchy of Needs, the E-commerce Consumption Hierarchy of Needs also has the following three characteristics: (1) Only when consumers meet their own low-level basic needs will there be a higher level of need. That is, when the consumer demand D ⊃ HkN , D = H1N ∪ · · · ∪ HkN ,1 ≤ k ≤ 5. (2) When consumers cannot meet high-level needs, they will rely on the false pleasure brought by second-level needs. That is, consumers will try their best to meet the highest needs within their ability. At this time, the utility brought by this level of need is the greatest. There is U1N < U2N < U3N < U4N < U5N . (3) Compared with meeting low-level needs in an all-around way, consumers are more willing to try their best to meet high-level needs. That is, the time spent by consumers at the HmN level is tmN , and the time spent at the HnN level is tnN . If m < n, then U N (HmN &tmN ) < U N (HnN &tnN ). That is, tmN ≫ tnN .

374

5 Basic Operating Principles of an E-Commerce System

Fig. 5.21 E-commerce consumption hierarchy of needs

Fig. 5.22 Processes of network consumption

5.4.1.2

Processes of Network Consumption

Network consumption is a new consumption method in which consumers use the Internet as a technical means to meet their own consumption needs through ecommerce platforms. The processes of network consumption are the whole link from the generation of needs to the satisfaction of needs by consumers, which mainly includes five stages: confirming needs, collecting information, evaluating choices, making decisions and postpurchase behaviors.20 1.

Stage of Confirming Needs S(1)

When consumers generate transactions to improve their lack of status, they will enter the stage of confirming need S (1) . 2.

Stage of Collecting Information S(2) (2)

Consumers obtain product information I}S , and they need to meet their needs in { (2) (2) (2) = S (2) (D). various ways. That is, I S = ITS , I ES 20

Qu [20].

5.4 Principles of E-Commerce Consumption

3.

375

Stage of Evaluating Choices S(3)

Consumers make a comparative evaluation of the product information they have (3) (2) obtained, C S = S (3) (I S ). 4.

Stage of Making Decisions S(4)

Developing a criteria B S

(4)

for decision-making, B S

(4)

(3)

= S (4) (C S ).

5. Stage of Postpurchase Behaviors S(5) After consumption, consumers will evaluate their purchasing behavior according to whether the purchased goods or services meet their expected psychological (5) (4) goals. Evaluation ES = S(5) (BS ). In addition, consumers can not only evaluate the purchased products but also share and disseminate the evaluation, thereby affecting other potential consumers. (Record method ) this postpurchase (sharing ( (5) )) ( (5) ) S(5) S(5) S S = Sij Es = as Es , record the share scope as S Es , and S Es ∞ ( (5) ) ( (5) ) ⎤ ⎡ S11 EsS S12 EsS ··· ⎥ ( ⎢ ( (5) ) ( (5) ) ) (5) ⎥ ⎢ S S · · · ⎥.Sij EsS S22 Es refers to the impact of consumer i’s ⎢ S21 Es ⎦ ⎣ .. .. .. . . . evaluation sharing on consumer j. In summary, the overall processes of online consumption can be described as follows: ES

5.4.1.3

(5)

( ) = S(5) S(4) (S(3) (S(2) ( D)))

(5.58)

Consumer Behavior

With the continuous expansion of e-commerce consumer groups, research on consumer behavior has become a popular direction. The research on influencing factors of consumer behavior can be roughly divided into two categories. One is based on the premise of classical models and theories, such as the Stimulus-OrganismReponse Model (SOR), Theory of Reasoned Action (TRA), and Technology Acceptance Model (TAM). Another is the transformation or construction of past classic behavior models. This book will use the stimulus-organism-response model as an example to discuss consumer behavior in an e-commerce environment. In 1974, Russell et al. proposed the Stimulus-Organism-Reponse Model based on environmental psychology. This model believes that consumer behavior is the consumer’s response to stimuli and advocates studying consumer behavior from the relationship between consumers and stimuli. Environmental stimuli (S E ) can be divided into three categories: platform characteristic factors (S 1E ), such as platform popularity, platform operation convenience,

376

5 Basic Operating Principles of an E-Commerce System

platform payment security, etc. The second is product characteristic factors, such as product price, product quality, product discount, etc. The third is scenario characteristic factors, such as the number of transactions, transportation timeliness, interaction timeliness, social factors, after-sales service, etc. When consumers are stimulated by these external environments, corresponding emotions and feelings will be generated in the body. Using a function to express this process, there is: O = I

F1S O R (S E )

=

F1S O R

( 3 {

) ωiS SiE

+δ

S

(5.59)

i=1

ω Oj is the weight of the influence of the state of the body on the final response of consumers, and δ O is the error term. The above process shows that consumers have different emotions and experiences due to certain stimuli from the Internet and then make corresponding behavioral responses. That is, the final consumer behavior. In the Stimulus-Organism-Reponse Model, changes in various external conditions need to affect consumer behavior by evoking emotional reflexes. These two factors, as reactive factors, cannot exert influence independently, and both need to play their role through changes in conditions.

5.4.2 The Impact of E-Commerce on Consumption Before the emergence of e-commerce, the traditional consumption model was that consumers search for product or service information and purchasing channels based on their own consumption needs and then go to the store to negotiate and check the product and make a purchase after multiple comparisons offline, as shown in Fig. 5.23. All links of the traditional consumption model are carried out offline, and consumers need to spend much time, energy and money moving, searching commodities and comparing prices. At the same time, due to space constraints, consumers only have a small range of choices, and the matching of demand preferences is low, which easily reduces the utility level. In addition, information flow efficiency, transparency and shareability are very low, making it difficult to develop consumer trust and consumer loyalty. The innovation of information technology has led to the emergence of ecommerce, which has brought about great changes in people’s consumption methods. E-commerce aggregates various types of information to help consumers complete the steps of searching, inquiring, comparing prices, and confirming consumption on the e-commerce website or platform, as shown in Fig. 5.24. E-commerce is more comprehensive and detailed in information transmission, and it realizes transactions across space, which solves problems such as information asymmetry and tries to tap and meet the needs of consumers as much as possible. The advantages of e-commerce mainly include the following four aspects:

5.4 Principles of E-Commerce Consumption

377

Fig. 5.23 Traditional consumption model

Fig. 5.24 E-commerce consumption model

5.4.2.1

Reducing Consumption Costs

E-commerce reduces consumption costs from three aspects. One is the search cost. Since the development of e-commerce is based on Internet technology, consumers can obtain a large amount of information related to their own demands at almost no cost, which greatly reduces the cost of finding and comparing. The second is the acquisition cost. Because e-commerce reduces the links in the circulation channel, shortens the circulation process, reduces the circulation cost, and removes the cost of the retail terminal, it can even provide services such as express storage and door-to-door delivery, which reduces costs and improves consumers’ shopping satisfaction. The third is the payment cost. The widespread use of new electronic payment platforms promotes the diversification and convenience of payment methods and improves payment efficiency.

378

5.4.2.2

5 Basic Operating Principles of an E-Commerce System

Eliminating the Time and Space Limitations

The e-commerce platform adopts the “24-h business” mode, which can provide services to consumers around the clock, and consumer behavior is no longer restricted by business hours. At the same time, e-commerce breaks through the restrictions of geographical space. Consumers can select products from around the world at home to fully meet their own demands.

5.4.2.3

Sharing Consumer Reviews and Enhancing Consumer Trust

In addition to the influencing factors of consumer behavior, word of mouth and consumer evaluation are also important factors. Therefore, e-commerce can make full use of word-of-mouth and evaluation information to attract more consumers. First, e-commerce can be interconnected with social networking, using word-ofmouth marketing to anchor core customers, lock in potential consumers, and promote more consumption. Second, e-commerce can collect consumer evaluations, classify and display them by merchants or commodities, provide a purchase reference for potential consumers, increase consumers’ trust in target commodities in a virtual environment, and then influence final consumer decision-making.

5.4.2.4

Utilizing the Long Tail Effect and Enriching Consumer Supply

E-commerce eliminates the spatial barriers of traditional business behaviors and further expands market boundaries. In addition, e-commerce produces an agglomeration effect, gathering the personalized demands of many consumers and forming a personalized market. It releases the consumption power of the long tail part of the demand curve and enriches the commodity categories in the market. Figure 5.25 shows the distribution of mainstream products and long-tail products in the demand curve. The long-tail part on the right side of the curve shows the part where e-commerce scales the niche personalized market. Fig. 5.25 Long tail effect

5.4 Principles of E-Commerce Consumption

379

Fig. 5.26 Consumption characteristics in the E-commerce era

5.4.3 Consumption Characteristics in the E-Commerce Era As the consumption society matures, e-commerce consumers are advancing among all ages, genders and social classes. The influence of the principle of happiness is gradually strengthened. Consumers begin to pursue individuality. The diversification of consumption has become the most basic feature of the market. The focus is on the three aspects of consumption diversification, consumption personalization and consumption short cycle. At the same time, consumption in the e-commerce era is not restricted by time and space, and fragmentation of the market emerges. Ecommerce consumption has gradually formed six characteristics: conceptualization, fragmentation, communityization, mobile informatization, quality and segmentation, as shown in Fig. 5.26.

5.4.3.1

Contextualization

Consumption in the e-commerce era is no longer restricted by space, so e-commerce can predict consumer behavior on the basis of studying consumer psychology and establish corresponding scenarios to make consumers substitute into the psychological state of consumption. A consumption scene can be a picture, an article, a video, and a certain event or atmosphere in reality.

380

5.4.3.2

5 Basic Operating Principles of an E-Commerce System

Fragmentation

Life in the Internet age has formed a fragmented pattern. Fragmentation and hypermedia make people pursue efficiency and immediacy, which will have a certain impact on consumer psychology and give birth to consumers’ fragmented demands. Fragmented scenes such as the opening of a movie, ordering at a restaurant, and taking a bus to work have become natural opportunities for e-commerce consumption.

5.4.3.3

Communityization

The communityization of e-commerce consumption usually refers to a new community that integrates virtual communities and physical communities. The emergence of communityization is the in-depth interpretation process of e-commerce applications, which enables consumers to share products online and offline at the same time and brings benefits to each other.

5.4.3.4

Mobile Informationization

Different from traditional commerce, mobile-based e-commerce has the characteristics of being identifiable, accessible and feedbackable. Compared with traditional commerce, it is more precise and differentiated in selecting target customers. The growth of mobile e-commerce users is the most obvious manifestation of mobile informationization. From 2014 to 2020, the number of mobile e-commerce users increased from 236 to 788 million, and the number will continue to expand in the future.

5.4.3.5

Quality

With the gradual maturity of e-commerce, consumers’ attitudes toward online shopping have gradually changed from a curious mentality to a daily habit, and they have also changed from the pursuit of lower prices to the pursuit of higher quality. It is precisely because of the change in consumer demand that e-commerce continues to develop and progress, moving closer from “quality” to “selection”. In the future, selection will become the development direction of e-commerce service quality upgrades.

5.5 Summary

5.4.3.6

381

Segmentation

The era of e-commerce provides consumers with more choices. Young consumers begin to pay attention to the sense of self-identity brought byproducts. Self-identity, personalized trends and experience become particularly important. To meet the personalized consumption needs of consumers, the degree of product segmentation will also continue to deepen.

5.5 Summary E-commerce has injected new vitality into the four fields of production, transaction, circulation and consumption, and the internal operation elements have undergone tremendous changes and innovations. In the production link, enterprises rely on emerging technologies such as modern communication technology, digital technology, and network technology and use tools such as big data, cloud computing, and the Internet of Things to achieve self-innovation of e-commerce production models and product iterative innovation, satisfying consumers’ individuality. In the transaction link, e-commerce platforms are interconnected with various technical service providers, building new information bridges and transaction channels for producers and consumers. At the same time, technological integration continues to give birth to new e-commerce transaction models, and the e-commerce ecosystem continues to expand. In the circulation link, e-commerce reshapes the circulation link, changes the “three-stream” model, promotes the innovation of the circulation organization, and the cost reduction and efficiency increase in the circulation link are obvious. In the consumption link, the new e-commerce model promotes the maturity of consumer society, changes consumer psychology, and forms new consumption characteristics. At the same time, technological progress promotes the innovation of consumption patterns and changes traditional consumption behavior. The two changes work together on the production side and put forward new requirements for production models and products. In summary, e-commerce economic activities form a closed loop. Under the background of “dual circulation”, as an accelerator of “dual circulation”, e-commerce has profoundly changed the circulation pattern of domestic trade and the operation mode of foreign trade. Only by deeply understanding the basic principles of e-commerce, mastering the operation mode of e-commerce, and giving full play to the characteristics and advantages of e-commerce can we ensure the unimpeded production, transaction, circulation and consumption in economic activ-

382

5 Basic Operating Principles of an E-Commerce System

ities, complete the reconstruction of the industrial foundation and the innovation of the industrial chain, and truly promote the reform and innovation of the supply side, upgrade of intermediate links, and quality improvement and capacity expansion on the demand side. As shown in Fig. 5.27. This chapter mainly uses mathematical theories such as set theory, matrix theory, probability theory, and game theory to discuss the four links of production, transaction, circulation, and consumption in economic activities. See the literature for the mathematical tools used in this chapter. Chapter Structure

Fig. 5.27 Operation of E-commerce economic activities

5.5 Summary

383

384

5 Basic Operating Principles of an E-Commerce System

Appendix

E-commerce system

电子商务系统

5.1 Principles of e-commerce production E-commerce products

电子商务产品

Tangible products

有形产品

Intangible products

无形产品

The three levels of product

产品三层次理论

Core product

核心产品

Formal product

有形产品

Extra product

附加产品

Customer utility

消费者效用

Consumer demand

消费者需求

The five levels of product

产品五层次理论

Extension product

延伸产品

Potential product

潜在产品

Product innovation

产品创新

Stages of product concept

产品概念阶段

Stages of product definition

产品定义阶段

Stages of product design

产品设计阶段

Stage of sample development

样品研制阶段

Stage of test and promotion

试验推广阶段

Stage of finished product promotion

成品促销阶段

Prototype design

原型设计

Forward design

正向设计

Reversal design

逆向设计

Internet of things (IoT)

物联网

Big data

大数据

Cloud computing

云计算

Tangible E-commerce products

有形电子商务产品

Intangible E-commerce products

无形电子商务产品

Digital products

数字产品

Digital format

数字格式

Digital technology

数字技术

Digitalization

数字化

Production models

生产模式

Traditional production mode

传统生产模式

Mass production mode

大规模生产模式 (continued)

Appendix

385

(continued) E-commerce system

电子商务系统

Mass customization mode

大规模定制模式

Mass personalization production mode

大规模个性化生产模式

Industrial economy

工业经济

Customized products

定制产品

E-commerce production management

电子商务生产管理

Informatization production management

信息化生产管理

Digitalization production management

数字化生产管理

Intelligentizing production management

智能化生产管理

Artificial intelligence (AI)

人工智能

Intelligent sensor

智能传感

Numerical control (NC)

数控技术

Flexible manufacturing system (FMS)

柔性制造系统

Distributed digital control

分布式数字控制

Rapid prototyping manufacturing (RPM)

快速成型制造技术

Manufacturing execution system (MES)

制造执行系统

Computer networks

计算机网络

5.2 Principles of E-commerce Transaction Traditional commerce

传统商务

Transaction process

交易流程

Stages of transaction preparation

交易准备阶段

Stages of transaction negotiation

贸易磋商阶段

Stage of contract signing

合同签订阶段

Stage of payment and clearing

支付清算阶段

E-commerce platform

电子商务平台

Production costs

生产成本

Transaction costs

交易成本

Circulation costs

流通成本

Consumption costs

消费成本

Credit risk

信用风险

Management risk

管理风险

Legal risk

法律风险

Nash equilibrium

纳什均衡

Pure strategy Nash equilibrium

纯战略纳什均衡

Mixed strategy Nash equilibrium

混合战略纳什均衡

Cross-border E-commerce

跨境电商

New retailing

新零售

Intelligent logistics

智能物流 (continued)

386

5 Basic Operating Principles of an E-Commerce System

(continued) E-commerce system

电子商务系统

Live-streaming E-commerce

直播电商

Network anchor

网络主播

5.3 Principles of E-commerce Circulation Commodity circulation

商品流通

Market distribution

商流

Physical distribution

物流

Direct circulation channel

直接流通渠道

Indirect circulation channel

间接流通渠道

Wholesaler

批发商

Retailer

零售商

E-commerce circulation channel

电子商务流通渠道

Traditional circulation channel

传统流通渠道

Cyber-mediary

网络中间商

Asymmetric information

信息不对称

Network distributor

网络经销商

Network agent

网络代理商

Content provider (CP)

内容提供商

Virtual market

虚拟市场

Internet financial institutions

网络金融机构

Intelligent agent

智能代理

Fourth party logistics (4PL)

第四方物流

Module

模块化

Continuous whole

连续进行的整体

Commercial business organization

商业经营组织

Origin purchase wholesaler

产地采购批发商

Selling place wholesaler

销售地批发商

Transfer place wholesaler

中转地批发商

The third-party logistics

第三方物流

Information flow

信息流

Fund flow

资金流

Logistics flow

物流

Fund cost

资金成本

Business process

业务流程

Acceptance receipt

验收入库

Manual sorting

人工分拣

Settlement delivery

结算出库

Deintermediation

去中间化 (continued)

References

387

(continued) E-commerce system

电子商务系统

Middlemen organization

中间商组织

Intermediary organization

中介组织

Logistics flow organization

物流组织

5.4 Principles of E-commerce consumption Network consumer

网络消费者

Commodity economy

商品经济

Consumer behavior

消费者行为

Maslow’s hierarchy of needs

马斯洛需求层次理论

Physiological needs

生理需求

Safety needs

安全需求

Belongingness and love needs

归属和爱的需求

Esteem needs

尊重需求

Self -actualization needs

自我实现需求

E-commerce consumption demand hierarchy theory

电子商务消费需求层次理论

Stimulus-organism-reponse

刺激-机体-反应

Theory of reasoned action (TRA)

理性行动理论

Technology acceptance model (TAM)

技术接受模型

Long tail effect

长尾效应

Mobile e-commerce

移动电子商务

Dual circulation

双循环

References 1. Bai D, Yue Y (2016) Introduction to e-commerce [M]. Posts and Telecom Press 2. Philip K, Gary A [US] (2019) Principles of marketing, 16th edn [M]. Tsinghua University Press, Beijing 3. China National Committee for Terms in Sciences and Technologies (2016) Management science and technology terms [M]. Science Press 4. Shapiro C, Varian HR (2017) Information rules: strategic guidance for the network economy [M]. China Renmin University Press, Beijing 5. Joseph Pine B (2000) Mass customization: the new frontier of enterprise competition [M]. China Renmin University Press 6. Zhongyi J, Wainwright K (2006) Basic methods of mathematical economics [M]. Peking University Press, Beijing 7. Yang X (2019) Development economics: supermarginal and marginal analysis (revised edition) [M]. Social Science Academic Press, Beijing 8. Luo Y (2020) Game theory tutorial (second edition) [M]. Tsinghua University Press, Beijing Jiaotong University Press 9. Qin Z (2002) E-commerce and international trade [M]. Posts and Telecom Press, Beijing

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10. Guo Q (2020) Development motivation, status quo, and trend of live broadcast e-commerce in China [J]. News Writ 08:84–91 11. Ji B (2016) Business economics course [M]. China Renmin University Press 12. Ji B, Lijuan X (2018) Re-examination of commodity circulation channels in the new era [J]. Econ Theory Bus Manag 07:31–47 13. Ji B, Yan W (2000) Commodity circulation under e-commerce [J]. Econ Theory Bus Manag 04:35–40 14. Li J (2002) Innovation of circulation mode in e-commerce environment [J]. China Bus Mark 05:40–43 15. Wei J, Yan J, Zhang K (2017) E-commerce logistics [M]. Posts and Telecom Press 16. Li J (2005) Circulation organization innovation in the e-commerce era [M]. China Commerce and Trade Press, Beijing 17. Xu C (2011) Circulation Innovation and Construction of Modern Producer Service System [M]. China Renmin University Press 18. Feng J (2017) Design of the fourth party logistics modular service innovation model under the supply-side reform [J]. China Bus Mark 31(03):71–78 19. Fei X, Chen L (2019) Consumer psychology [M]. Nanjing University Press 20. Qu P (2019) Internet marketing (Fifth Edition) [M]. Higher Education Press, Beijing

Chapter 6

Theory Application and Case Analysis of E-Commerce

Everything is the product of times, and e-commerce is no exception. The emergence, development and evolution of e-commerce are inseparable from the influence of the economy, technology and national strategies in a specific era. The economic form creates the demand environment for e-commerce, scientific and technological achievements provide the basis for the development of e-commerce, and the national strategy determines the development direction of e-commerce. The e-commerce cases selected and referenced in this chapter are all classic summaries of the development and innovation of e-commerce in China under a specific historical background. They are of the times, innovative and futuristic. It is believed that there will be more typical cases in the theoretical research system of this book in future research. At present, this book only focuses on these cases, with the purpose of expounding the specific application of the knowledge theory system in this book and verifying the relationship between the knowledge theory system and the development of social practice. This research method has important theoretical and practical significance for the development and combination of e-commerce theory. On the whole, the cases in the three parts of this chapter represent Chinese ecommerce enterprises in different eras, different types and different social needs. JD.com (JD) was born in the early initial period of China’s e-commerce and is one of the earliest companies to explore e-commerce in China. Xiaohongshu is one of the cross-border e-commerce enterprises for meeting people’s overseas shopping needs in the maturity period of China’s e-commerce. The new retail e-commerce companies represented by Meituan represent the proper development of e-commerce in China and even the world in the next period. As described in the first chapter of this book, the emergence and development of e-commerce is inseparable from a specific social ecology, engineering ecology and innovation ecology. These three types of enterprises are the products of different social ecology, engineering ecology and innovation ecology. Each specific case part is based on the theoretical system of this book and can be roughly divided into three parts: 1. an overview of the development of the enterprise; © Xi’an Jiaotong University Press 2022 Z. Qin et al., E-Commerce, Advanced Studies in E-Commerce, https://doi.org/10.1007/978-981-19-6438-1_6

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2. the commerce operation of the enterprise; and 3. the commerce innovation of the enterprise. The “Development Overview” part focuses on expounding and helping readers understand the specific ecological contexts that arise from the various types of e-commerce businesses in the first chapter of this book. Although the three types of enterprises were born in different historical periods of e-commerce development, they are all inseparable from the support of social ecology, engineering ecology and innovation ecology. The “Commerce Operation” and “Cusiness Innovation” parts are based on the knowledge theory in Chaps. 2, 3, 4 and 5 of this book. The “Commerce Operation” part will interpret and verify the specific application of the basic theoretical knowledge of e-commerce and explain the basic structure of e-commerce operations. For example, the operation of any e-commerce is inseparable from the choice of the basic model of e-commerce, and e-commerce companies usually choose one or more of the six basic models introduced in Chap. 3 of this book. The operation of any e-commerce enterprise is also inseparable from the basic knowledge of e-commerce in Chaps. 2, 4 and 5 of this book. Of course, every e-commerce enterprise will not only use the a priori theories and technologies formed in these societies during the development process but will also create a commerce innovation system with a unique enterprise style based on it. These commerce innovations may be innovative applications of existing theories or explorations of new theories and methods. In the process of e-commerce development, innovation is one of the life sources of enterprise development and industry upgrading. The “Commerce Innovation” part will sort out and interpret the commerce innovation points of various enterprises and the substantive promotion of China’s e-commerce.

6.1 Classic E-Commerce: JD Both commerce theory and commerce practice show people a cruel reality: the new commerce form in a certain period will gradually decline and eventually become the object of innovation. Since the original retail store, the retail industry has gone through more than 3,000 years. However, for the vast majority of the time, the retail industry has been flat and not much changed. However, the industrial revolution two hundred years ago broke this tranquility, and the retail industry has embarked on the road of innovation. The first retail revolution marked by department stores, the second retail revolution marked by supermarkets and the third retail revolution marked by chain stores accelerated the modernization of traditional offline physical businesses. At the beginning of this century, with the popularization of the Internet and the advancement of technology, e-commerce gradually emerged and subversively reshaped the entire business ecosystem. After experiencing EDI e-commerce, Internet e-commerce, e-concept e-commerce and whole-process e-commerce, e-commerce entered the era of intelligent e-commerce. In China, the Internet economy represented by e-commerce also began to rise at the beginning of this century, and many enterprises began to explore e-commerce. After more than 20 years of development, China’s e-commerce has gradually led

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the development of the world’s e-commerce in a new round of retail reform. In this process, a large number of classic e-commerce companies have emerged in China. JD.com (JD) is one of them. In 2021, JD entered the Fortune Global 500 List for the sixth time, ranking 59th. It is the third largest e-commerce company in the world after Amazon and Alphabet.

6.1.1 JD’s Corporate Overview At the beginning of this century, the Internet economy represented by B2C ecommerce emerged in China. In 2003, JD fully catered to the trend of commercial development and tried to explore e-commerce. In 2004, JD officially entered the e-commerce business. In 2005, the State Council issued the Recommendations on Accelerating the Development of E-commerce, which elevates the development of e-commerce to the height of the national strategy. Against this background, JD announced its entry into Shanghai in January 2006 and established a wholly owned subsidiary in Shanghai. In the next year, JD made every effort to develop the South China market and established a wholly owned subsidiary in Guangzhou. In 2007, JD officially established itself in China’s B2C market with a new look. It is in this year that JD built three logistics systems in Beijing, Shanghai and Guangzhou, with a total logistics area of more than 50,000 square meters, which has also shaped JD’s e-commerce operation model, “e-commerce+logistics”. The increasingly competitive Chinese e-commerce market shows that the development of e-commerce companies cannot be limited to high-quality and low-cost goods, and high-quality service and abundant goods are also essential. Therefore, in February 2009, JD tried to launch the door-to-door service, which became an important breakthrough in exploring B2C value-added services and another attempt to diversify products. In June 2010, JD supported the door-to-door pickup service nationwide, which completely solved the after-sales worries of online shopping. In November, JD began to sell book products, gradually realizing the transformation from a 3C vertical retailer to a comprehensive online retailer. With the development of computer technology, especially mobile Internet and terminal equipment, smartphones have begun to appear. JD sharply turned its vision to the development of mobile clients. In 2011, JD mobile client was launched, which means JD officially launched the mobile Internet strategy. In February, the JD platform integrated the geographic information system (GIS), which enables users to know and track the transportation and delivery information of the goods they purchase. In July, JD began to enter the B2C online pharmaceutical market, providing consumers with online shopping services for medical and health care products. Immediately after that, many Internet services were launched one after another, such as the hotel reservation business launched in 2012. E-commerce in China has experienced nearly ten years of development and entered a mature period approximately 2013. In April of that year, JD announced

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that its registered users had officially exceeded 100 million. At the end of that year, JD officially obtained the virtual operator license. On May 22, 2014, JD was listed on NASDAQ in the United States, which was the largest Chinese IPO in the United States at that time. In July 2015, the State Council issued the Guiding Recommendations on Actively Promoting the “Internet +” Action, which was an important measure to promote the expansion of the Internet from the consumption field to the production field, accelerate the improvement of the level of industrial development, enhance the innovation capabilities of various industries, and build new advantages and new momentum for economic development. With the “Internet +” proposed at the national level, JD began to increase strategic cooperation with other companies. In October 2015, JD and Tencent jointly launched a new strategic cooperation project called the “Jingteng Plan”. In 2018, JD signed cooperation agreements with iQiyi, Vipshop, Google, Walmart, Intel, Xiaomi Youpin and many other merchants to further expand business areas and overseas business. In 2019, JD and Kingenta signed a strategic cooperation agreement to further promote and explore “Internet+Agriculture”. After nearly two decades of exploration and development, JD has become one of the leading e-commerce companies in China. With the rapid development of the digital economy today, the development of any e-commerce is inseparable from the support of high-tech. JD has always attached great importance to the application of technology in e-commerce. With the support of high-tech, JD’s business has now covered retail, technology research and development, medical and health care, insurance and other fields. Among them, retail is the foundation and core of JD. In this field, JD.com has completed the coverage of all categories, and its advantageous categories, such as consumer goods, 3C, and home appliances, have been leading the Chinese market year round. In addition, as early as 2015, the State Council issued the Guiding Recommendations on Accelerating the Promotion of “Internet+Government Services”. Therefore, JD has continuously cooperated with the government and relevant units by leveraging its own advantages in the supply chain and relying on high-tech technologies such as artificial intelligence, cloud computing, big data, and the Internet of Things.

6.1.2 JD’s Commerce Operations 6.1.2.1

Business Strategy

With the popularization of the Internet and computers, e-commerce is a part of people’s daily lives worldwide. Online shopping is no longer synonymous with fashion and Avant-garde. The improvement of living standards makes people have more expectations for shopping, and people’s requirements for consumption are no longer limited to price and quality. An increasing number of consumers hope to receive good service and a pleasant shopping experience, which leads e-commerce companies to expand from the original price competition to service competition. After

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experiencing fierce competition among e-commerce companies, JD has become one of the leaders in China’s e-commerce industry. On the one hand, JD’s success benefits from the dividends of the times and the support of policies; on the other hand, JD’s success also benefits from its reasonable development concept and business strategy. Precise business positioning and appropriate business strategy are the premise and foundation for the steady development of e-commerce enterprises. Since the rise of e-commerce, many B2C e-commerce platforms have been active in China’s e-commerce market. In the market, in addition to the competition of local Chinese enterprises, there is also the impact of foreign e-commerce giants. To improve the enterprise’s resource integration ability and make itself rapidly developing, JD started vertical B2C business with 3C products as the entry point, which not only caters to the needs of the e-commerce market but also enables JD to concentrate on development and exploration in this field. Compared with the comprehensive B2C model, the vertical B2C model has obvious advantages. First, in terms of operations, the comprehensive B2C model has far more requirements on goods types than the vertical B2C model. Vertical B2C only needs a single category of goods, while comprehensive B2C requires multiple categories or even all categories of goods. Second, in terms of management, the management difficulty of the comprehensive B2C model is much greater than that of the vertical B2C model. Various types of goods in the comprehensive B2C model will have great differences in performance, quality, service, and transportation, so a relatively extensive and professional management and service team is needed. The goods typy of vertical B2C is single, and goods with the same or similar categories have similarities in management and service, so the management cost is relatively small and the management is relatively simple. Finally, in terms of the supply chain, the supply chain of the comprehensive B2C model is more complicated. The comprehensive B2C model has a wide variety of goods, so the number of upstream merchants will also be large, which makes it difficult for merchants to choose and integrate resources. The vertical B2C model with a single product type is relatively simple in terms of merchant selection and resource integration. The precise business positioning of JD, focusing on vertical B2C, makes it quickly occupy the market in the 3C field and has accumulated considerable experience in e-commerce operations. Based on this, JD began to apply its operating concept and experience in the 3C field to other categories of goods and then transformed it into a comprehensive B2C model. Today, the construction of JD’s comprehensive B2C model is successful. Through strong supply chain, technology and marketing capabilities, JD’s B2C self-operated shopping has covered all categories, such as computers, mobile phones, home appliances, consumer goods, home furnishing, fresh food, life services, and industrial products. Now JD has millions of SKU of goods. Although there are B2B, B2C, G2G, C2C, O2O, O2On and other models in the basic model of e-commerce, it should be noted that B2C is the most common and basic business model in the current e-commerce field. To some extent, e-commerce’s purpose o is selling goods to consumers, and B2C is the ultimate purpose or foundation of other e-commerce models. Precisely judging this point, JD began to expand to other e-commerce models on the basis of B2C. For example, with the advantages

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6 Theory Application and Case Analysis of E-Commerce Comprehensive B2C Mode: JD Chaoshi'JD Worldwide....... Vertical B2C Mode: JD Fashion'JD Finance....... C2C Mode:

O2O Mode:

PPReuse'JD Paimai......

JD Daojia'JD Fresh......

JD Platform

Fig. 6.1 JD platform business mode

of online platforms, JD launched C2C e-commerce services such as PPRense and JD Paimai; taking advantage of the online platform and self-built logistics system, JD launched O2O e-commerce services such as JD Daojia and JD Fresh. Today, JD has completely broken through its original B2C model and has developed into a comprehensive e-commerce platform integrating B2C, C2C, O2O and other basic e-commerce models (Fig. 6.1).

6.1.2.2

Marketing Strategy

Marketing in e-commerce is mainly based on Internet marketing. In terms of purpose and essence, Internet marketing is not much different from traditional marketing, both of which are corporate and product promotion for the purpose of goods sales. However, the Internet marketing of e-commerce pays more attention to the starting point and orientation of consumers. On the Internet, consumers are completely autonomous and free. Online shopping is completely dominated by consumers. Therefore, only by formulating marketing strategies from the consumer’s standpoint can companies cater to the characteristics of e-commerce and achieve ideal results. Compared with the traditional marketing concept, the marketing concept in the ecommerce environment should be changed. On the one hand, the marketing concept of e-commerce should be tilted from goods-based to consumer-based. The traditional marketing concept is based on the controllable factors in the marketing process. This marketing strategy is often referred to as the “4P strategy” (Product, Price, Place, Promotion). Traditional marketing focuses on the product. E-commerce marketing

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should focus on consumers, and enterprises should pay more attention to consumers’ shopping experience. Therefore, e-commerce companies should adopt a “4C strategy” (consumer, cost, convenience, communication) that takes into account the interests of the company and consumers. The 4C strategy strives to meet the needs of each consumer and maximize the benefits of the enterprise, which is the goal pursued by e-commerce marketing. On the other hand, the marketing concept of e-commerce should pay more attention to the harmony between enterprises and consumers. In traditional business, what enterprises pursue is the maximization of profits, but what consumers pursue is the high quality and low price of goods. The antagonisms pursued by companies and consumers often create tension in their relationship. In e-commerce, consumers pursue both material and spiritual satisfaction, so enterprises should establish a good product and service system with consumers as the center. Therefore, e-commerce should establish a new harmonious shopping and living atmosphere, dilute the commercial purpose, and try to obtain consumers’ recognition of the company and products as much as possible. The new marketing concept of e-commerce also determines that enterprises should formulate a consumer-oriented marketing strategy. For e-commerce marketing strategies, the more common methods include goods strategy, price strategy and promotion strategy (Fig. 6.2). Goods strategy is critical for e-commerce. First, in e-commerce, consumers cannot access the physical goods, so merchants need to introduce the quality, characteristics, uses and other commodity information as detailed as possible on the sales page of the goods in the form of text, images, videos, etc. Second, in e-commerce, consumers cannot determine the source of goods, so they have great doubts about the quality of products, especially the authenticity. In response to these problems, JD introduces the goods information as detailed as possible in the product details of the goods link in the form of text, images, videos, etc. In addition, JD also launches a series of Fig. 6.2 Internet marketing strategy of JD

. Detailed Goods Goods Strategy

Introduction . Genuine Guarantee

Price Strategy

Promotion strategy

. “JD Price″

. JD Shopping Festival

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product quality assurance services. For self-operated products, JD promises to be authorized by brand owners and to guarantee the quality and authenticity of goods. Especially for cross-border imported goods, importers on JD Worldwide promise to sell 100% genuine overseas original goods. For some self-operated fresh goods, if customers find that there are individual deaths of fresh goods after receiving goods, JD will provide corresponding subsidies or refunds immediately. In e-commerce, consumers have a wider choice of e-commerce merchants and goods. They tend to shop around and choose cost-effective goods. Therefore, the price strategy is the most important way for enterprises to carry out Internet marketing. In the formulation of goods prices, JD never refers to the prices of its peers but increases the gross profit by 5% on the basis of the purchase price of goods, which is the “JD Price”. This price is often 10–20% cheaper than other e-commerce platforms and 10–30% cheaper than the manufacturer’s guide price. Today, “JD Price” has become the main reference for other retailers in the retail industry to evaluate goods pricing. The widespread of “JD Price” also makes JD bring consumers an intuitive feeling of high quality and low price, which will undoubtedly greatly increase consumers’ recognition of JD’s brand. Promotion strategies are the most common marketing methods in e-commerce. The core of Internet marketing is to strengthen the emotional exchange and cultural exchange between enterprises and consumers, dilute the profit intention of commercial activities, and let consumers feel and recognize their own benefits. However, the promotion methods of advertising campaigns and hard sales in traditional business often cause discomfort and even disgust to consumers. In recent years, Internet promotions on e-commerce platforms have been very frequent and popular, such as Tmall and Taobao’s “Double 11”, Amazon’s “Black Friday”, store celebrations and shopping festivals on various e-commerce platforms. Similarly, JD has also been rolling out promotions. JD’s “618” has become one of the largest and most popular promotions in China. In addition, JD also often carries out promotional activities during the school season, Mother’s Day, Father’s Day and other festivals and important time points. Continuous Internet promotions in various ways and publicity have gradually formed a consumer culture and become an important “festival” for consumers to shop. This kind of promotion culture largely dilutes the business essence of e-commerce enterprises, thereby shortening the distance between enterprises and consumers and making consumers more trusting and reliant on them.

6.1.3 JD’s Commerce Innovation 6.1.3.1

Payment Facilitation

With the popularity of e-commerce in China, the Internet has become a part of people’s daily lives, especially young people. For today’s e-commerce, convenience and efficiency have become one of the shopping goals pursued by consumers. Therefore, high-quality e-commerce not only guarantees high quality and low price but

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also needs to be based on a convenient payment system and an efficient logistics system. How to be consumer-centric and sell high-quality goods in a convenient way, with high-quality services and low prices, is the core task of today’s B2C ecommerce companies. With the advancement of technology, convenient consumption is an important factor that every e-commerce enterprise should consider. Through exploration in recent years, JD has continuously applied many achievements of digital innovation to various aspects of e-commerce to pursue a convenient consumption experience for consumers. Among the many links in e-commerce, for consumers, payment facilitation is the link that best reflects the convenience of consumption. In terms of payment methods, JD provides customers with a variety of payment modes, including online payment, pay on delivery and corporate transfers. For online payments, JD has realized multiple online payment systems by cooperating with many payment platforms. Users can choose JD Pay, WeChat Pay, UnionPay, Apple Pay, Huawei Pay and other channels for payment when placing an order on the JD platform. In terms of specific payment plans, JD also launched JD Baitiao, an Internet credit payment product. Users can enjoy the consumption experience of “consume first, pay later”. JD Baitiao is a credit payment service for users with high credit ratings and consumption needs. When paying with JD Baitiao, users can enjoy a deferred payment period of up to 30 days or an installment payment of up to 24 installments. At present, JD Baitiao has opened up O2O, global shopping and other fields in the JD system, gradually extending from credit purchase services to providing credit consumption loans, covering more life scenarios, and providing credit consumption services for more consumers. With the promotion of JD Baitiao’s services, JD has cooperated with many online and offline merchants, covering industries such as life entertainment, tourism and travel, education and training, communications and leasing. The electronic account “Baitiao Quickpay”, which is cobranded with banks, expands Baitiao payment to offline through NFC technology and further expands the usage scenarios of Baitiao payment by binding WeChat payment. In traditional e-commerce based on the virtual Internet, consumers lack an intuitive shopping experience that can be touched, felt, visible and audible when shopping offline, so it is difficult to confirm the quality of goods. In addition, the secrecy of the Internet often makes it inconvenient for buyers and sellers to verify, which makes consumers not absolutely assured of online transactions. To dispel this misgiving, JD has launched a “pay on delivery” payment model. Users can place an order on the JD platform first, and after the goods are delivered, users can pay for the goods by cash, POS machines, check payments, etc. Under the “pay on delivery” mode, when customers receive the goods, they can first open the box and inspect the goods to check whether the description of the goods is different from the purchased goods, the authenticity of the goods, the quality of the goods, and whether there is any damage during the delivery and then decide whether to sign and pay according to the specific situation. The “pay on delivery” method can increase the customer’s sense of security, win the trust of the enterprise, and then expand the target customer area.

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Company transfer is a payment method for users to settle payments through corporate online banking or offline remittances. It is mainly used for nonpersonal purchases. Diversified payment methods greatly facilitate consumer shopping. The reason why JD is favored by many consumers is the facilitation of payment.

6.1.3.2

Warehousing, Delivery and Service

With the improvement of living standards, people’s consumption motivation is no longer simply to satisfy material needs but to pay more attention to the fun and spiritual satisfaction brought by the shopping activity itself. Therefore, the development of modern enterprises is inseparable from the enhancement of service awareness. For traditional e-commerce, its biggest disadvantage is that it lacks the considerable and tactile intuitive feeling and all-round service and after-sales guarantee in offline physical business activities. In addition, there is often a long distance between consumers and products in e-commerce, which also greatly hinders the promotion of e-commerce. In this case, the warehousing, delivery and service of e-commerce enterprises are particularly important (Fig. 6.3). Unlike most e-commerce companies in China, JD is a modern e-commerce company with its own logistics system. After years of exploration, JD’s advantages in warehousing, delivery and service have become one of its core competitiveness. For e-commerce, especially self-operated e-commerce, strong warehousing capacity is the foundation and guarantee of business activities. At present, JD has more than 30 “Asia No. 1” large-scale smart warehouses in China. In addition, JD Logistics has established international routes covering more than 220 countries and regions and has more than 30 bonded warehouses and overseas warehouses. Strong warehousing capacity has become a solid foundation for JD’s global business layout. Logistics has become an integral part of modern business. Both in traditional offline physical business and online e-commerce, logistics is an important way of

Warehousing • Large-scale Smart Warehouses • Bonded Warehouses • ......

Delivery • 211 Limitedtime Delivery • Next-day Delivery • Extremely Fast Delivery • ......

Fig. 6.3 Warehousing, delivery and service of JD

Service • Return in 7 Days without Reason • Collection from Domicile • 100-minutes After-sales Service • ......

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goods circulation. Efficient and safe logistics are not only a powerful guarantee for enterprise production but also an important support for goods sales. From the perspective of consumers, the service and efficiency of logistics directly affect the shopping experience of consumers. To satisfy customers as much as possible, JD has launched a series of delivery services, such as 211 Limited-time Delivery, Nextday Delivery, and Extremely Fast Delivery. In terms of delivery time, relying on a strong logistics system, JD strives to deliver within 24 days. According to the delivery promise of “211 Limited-time Delivery”, spot orders submitted by consumers before 11:00 am on the day of shopping can be delivered on the same day; orders submitted before 11:00 pm can also be delivered before 15:00 the next day. At present, most of JD’s self-operated orders can achieve “limited-time delivery”. Even for some remote areas or areas with inconvenient transportation, JD can almost achieve the next-day delivery of goods. In addition, for some fresh and urgently needed goods, JD can even deliver within 1 h. In terms of specific delivery time and methods, JD also provides diversified and humanized services as much as possible. For example, to meet customers’ needs for delivery in different time periods, JD has launched a timed service. Customers can choose a specific delivery time period when placing an order. For some office workers, JD launched an evening delivery service. Customers can choose the delivery time between 19:00 and 22:00 when placing an order, and JD will try its best to arrange delivery staff to deliver the goods at the time selected by the user. In addition, to improve delivery efficiency and facilitate customers, JD also uses drones, self-pickup cabinets and other equipment to complete the transportation and delivery of goods. At present, self-pickup cabinets can be seen everywhere in China, which can provide users with 24-h service. Users only need to select the self-service delivery method when placing an order, and the purchased goods can be delivered to the self-pickup cabinet. After verification or payment is completed, customers can pick up the goods from the counter. Self-pickup cabinets can not only satisfy customers’ autonomy in receiving goods according to their convenience but also improve delivery efficiency. To improve users’ shopping experience, in addition to traditional after-sales services such as “Return in 7 days without Reason”, JD has also launched unique after-sales service projects. For example, in terms of after-sales methods, JD has launched the “Collection from Domicile” service. Within 15 days of purchasing JD’s self-operated goods, JD will pick up the goods for free if they need to return or exchange the goods due to quality problems. In terms of specific handling, JD has launched the “100-Minutes After-sales Service”. Within 15 days of purchasing self-operated products on JD.com, if goods go faulty, JD.com promises to process the customer’s problem within 100 min from the time it receives the faulty goods and determines that it is a quality failure. The methods of processing include submitting replacement orders for customers, reissues goods, compensation or refunds, etc. Additionally, for some products. JD also provides door-to-door service. Within one year after the goods are sold, if there is a quality problem, JD will provide free door-to-door pickup and original authorized repair services. In fact, compared with the traditional business model, the greatest misgiving of consumers for e-commerce is the after-sales service, especially the product quality

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and after-sales maintenance of large-scale products. In this respect, the series of aftersales services launched by JD may largely eradicate such misgivings of consumers and eliminate the inherent insufficiency of “after-sales troubles” in e-commerce. Through services such as “Return in 7 days without Reason”, “Collection from Domicile” and 100-Minutes After-sales Service”, JD can achieve the same effect of protecting consumer rights and interests as offline sales or even surpass the service effect of offline sales. Fast, high-quality logistics and considerate, thoughtful after-sales service have obviously become one of the core competitiveness of JD, which not only fills the congenital defects of e-commerce but also makes the advantages of e-commerce more obvious. E-commerce in the new era requires not only global warehousing and logistics but also customer-centric after-sales and service.

6.2 Cross-Border E-Commerce: Xiaohongshu With the further development of digital technology and computer technology, advanced digital technology, widespread computers and robust Internet provide necessary basic support for the virtualization of the real physical world. Around 2010, the platform economy began to spread around the world. While the economic form is expanding to the platform, it also drives the transformation of people’s lifestyle to the platform. Traditional offline communication has gradually transformed into online communication, and a series of social platforms have begun to enter the public eye. The electronic community based on the Internet gradually integrates into people’s daily lives and has become an extension of people’s real lives. The virtual Internet community makes people’s way of life more diverse and the content richer. Throughout human history, there is no technology that has ever influenced and changed people’s way of life as profoundly as the Internet. In China, the improvement of living standards makes an increasing number of people pay attention to their own quality of life. Overseas travel and shopping are gradually integrated into people’s lives. However, for the vast majority of people, traveling abroad and shopping abroad are unfamiliar. Due to the lack of sufficient information and experience, people will inevitably feel overwhelmed in the process of traveling and spending abroad. It is precisely because of this social demand that a number of cross-border e-commerce companies, such as Xiaohongshu, have been conceived, born and grown.

6.2.1 Xiaohongshu’s Corporate Overview Xiaohongshu is one of the first companies in China to explore cross-border ecommerce. Unlike other e-commerce companies, Xiaohongshu started from a community platform. In 2013, Xiaohongshu took the lead in launching an overseas

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shopping sharing community. In this community, users can share their overseas travel and shopping strategies. These strategies are completed by Xiaohongshu contacting consumers who have extensive overseas travel or shopping. In the face of a huge market, once the community was launched, it had a large number of users. In the platform economy, a large number of users is often the key to the success of the platform. At the same time, the large number of users also contains huge commercial value and commercial potential. Therefore, in 2014, Xiaohongshu began to build an e-commerce platform. At the end of the year, Xiaohongshu’s e-commerce platform “Welfare Agency” was officially launched, which marked the transformation of Xiaohongshu from a community platform to an e-commerce platform. The dual-core drive of the Community and the Welfare Agency has established a business operation model of Xiaohongshu that combines life sharing and online shopping. From the perspective of the development history of China’s e-commerce, Xiaohongshu was born in a relatively mature period of China’s e-commerce. Compared with JD and Taobao at that time, Xiaohongshu is very weak. However, at that time, the vast majority of China’s e-commerce companies mainly engaged in domestic e-commerce, while Xiaohongshu mainly focused on cross-border e-commerce with B2C as its business model. The distinctive business decisions and positioning have enabled Xiaohongshu to have its own development space and market. However, the greatest obstacle to cross-border e-commerce is the high cost and time consumption caused by the inconvenient transportation of goods. To reduce the cost of goods transportation as much as possible and realize that customers can receive goods as soon as possible, Xiaohongshu began to deploy and build domestic bonded warehouses. In January 2015, Xiaohongshu Zhengzhou self-operated bonded warehouse was officially put into operation. This measure has largely dispelled consumers’ misgivings about the difficulty in distinguishing between true and false and the long transportation time when overseas shopping. As a result, Xiaohongshu has attracted countless users and has become one of the leading enterprises in China’s crossborder e-commerce. In half a year, Xiaohongshu’s zero advertising sales exceeded 200 million yuan. In June of the same year, Xiaohongshu Shenzhen’s self-operated bonded warehouse was also put into operation, and the area of the bonded warehouse jumped to second place in the national cross-border e-commerce ranking. In 2015, China put forward the concept of “Internet+”, striving to promote the integration of the Internet, cloud computing, big data, and the Internet of Things with modern manufacturing; promote the healthy development of e-commerce, the industrial Internet and Internet finance; and guide Internet companies to expand the international market. Xiaohongshu has also begun to use high-tech technologies, such as cloud computing and big data, as breakthroughs to achieve platform upgrades. At the beginning of 2016, Xiaohongshu changed the mode of manual operation to the mode of machine distribution in the community platform, thus realizing the accurate matching of platform content to the corresponding users through big data and artificial intelligence. This not only improves the performance of machine learning but also optimizes the user experience. On the sales platform, Xiaohongshu began to expand third-party platforms and introduce brand merchants. In one year, Xiaohongshu’s featured product SKUs increased from 10,000 to 150,000, and its user base also

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increased significantly. Facts have proven that the continuous absorption of high-tech achievements is the development direction of e-commerce platforms and the key to maintaining core competitiveness. After technological changes, Xiaohongshu has achieved rapid commercial development. For example, in June 2017, Xiaohongshu launched its third "66th Anniversary" promotion. It broke 100 million yuan in sales within 2 hours of its launch, ranking first in the shopping download category of the Apple App Store, and the number of users exceeded 50 million. At the end of that year, Xiaohongshu was awarded the “China Brand Award” representing China’s consumer technology industry by People’s Daily. One year later, Xiaohongshu was selected as the “2018 Forbes China 50 Most Innovative Companies”. In January 2019, Xiaohongshu users exceeded 200 million. At this time, to further enhance the vitality and influence of the platform, the Xiaohongshu platform has also begun to add a third-party merchant entry model. In March of that year, Xiaohongshu launched a new business “Brand Account”, which officially opened up the entire chain from community to transaction. A year later, Xiaohongshu upgraded the “Brand Account” to “Enterprise Account” and realized the upgrade in data insight, application tools, fan interaction and offline connection. The greatest advantage of Xiaohongshu, a social e-commerce, lies in the construction of a community platform. In the online community, users are the leaders of the platform, and Xiaohongshu only plays the role of platform formation and management. Only by the better service for users can it maintain the vitality of platform users. Only moderate platform regulation can realize the long-term stability of the platform. Therefore, in 2020, Xiaohongshu launched the creator center. Users who have more than 5,000 fans, have published 10 or more notes with a natural reading volume of more than 2,000 in the past 6 months, and have no violations can apply for creation in the app User center access rights. In April 2021, Xiaohongshu’s “Community Convention” was launched, which stipulates the user’s community code of conduct in terms of sharing and interaction. It requires bloggers to actively declare their interests relationship if they are sponsored or facilitated by merchants in the process of sharing and creation.

6.2.2 Xiaohongshu’s Commerce Operations 6.2.2.1

Cross-Border Goods Sales

The “platform” in the platform economy is both a phenomenon and a means. The reason why it is called a phenomenon is that the platform economy is an inevitable product of the development of the digital economy to a certain period. The widespread use of digital technology, computer technology and the Internet has enabled digital platforms to emerge and become a place for commercial activities. The superiority of digital platforms enables an increasing number of commercial activities to be integrated online, thus forming a platform economy. However, the current digital economy is based on digital platforms, so the platform is also a means.

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Fig. 6.4 Cross-border transactions of Xiaohongshu

Different from the traditional physical platform, the largest feature of the digital platform relying on the Internet is its wide area. On the platform, merchants and consumers in different countries and regions can exchange information and sell goods, which also enables the realization of cross-border e-commerce. It is by relying on the digital platform that Xiaohongshu can cooperate with overseas sellers and then carry out cross-border e-commerce (Fig. 6.4). In recent years, Xiaohongshu has reached strategic cooperation with Australia’s Blackmores, Swisse and Japanese Kirindo, Panasonic, Casio, Tiger and many other brands. With the increasing influence of the Xiaohongshu platform, an increasing number of merchants have settled in Xiaohongshu. Xiaohongshu sells overseas goods to domestic consumers through the parallel sales method of brand authorization and brand direct sales. With the continuous advancement of the initiative “One Belt and One Road”, Xiaohongshu can not only “bring in” foreign goods but also help domestic goods “go out”. At present, Xiaohongshu has become a link between excellent foreign sellers and Chinese consumers. Through Xiaohongshu, Chinese consumers can learn more about foreign brands. At the same time, Xiaohongshu also helps domestic sellers develop overseas business by introducing high-quality domestic products into the platform and recommending them to foreign users.

6.2.2.2

Cross-Border Warehousing and Logistics

Compared with domestic e-commerce, the biggest problem of cross-border ecommerce is warehousing and logistics. Although digital platforms can realize the online exchange of digital information, physical goods still need to be transported offline across borders. To do this, Xiaohongshu has established professional overseas warehouses in nearly 30 countries and has built Zhengzhou self-operated bonded warehouses and Shenzhen self-operated bonded warehouses in China, with a warehouse area of more than 50,000 square meters. To ensure the quality of goods and

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Fig. 6.5 Process overseas direct delivery and bonded warehouse delivery

dispel customers’ doubts about overseas goods, Xiaohongshu also has a product inspection laboratory in the bonded warehouse. If users have doubts about goods quality, source, etc., Xiaohongshu will directly send the goods to a third-party scientific research institution for spectral testing, thereby minimizing the risk from the source. In terms of specific goods delivery, Xiaohongshu provides two logistics service methods, overseas direct delivery and bonded warehouse delivery. For overseas direct delivery, Xiaohongshu established the international logistics system, REDelivery, in 2017 to ensure that every step of international logistics can be traced. Users can even determine which flight the goods arrived in China from the logistics information (Fig. 6.5). Although the current international logistics industry is very developed and Xiaohongshu has established a relatively complete international logistics system, Xiaohongshu still has bonded warehouses in China. Compared with overseas direct delivery and other methods, bonded warehouse delivery has many advantages. First, bonded warehouse delivery can shorten the distance between customers and goods and reduce logistics time. If choosing overseas direct delivery, users often need to wait for a long time to receive the goods due to the need for inventory, inspection, customs declaration and other procedures. For bonded warehouse delivery, customs clearance procedures can be completed in advance, and customers can receive the goods approximately two or three days after placing the order. Second, bonded warehouse delivery can dispel customers’ misgivings about product quality. The goods in the bonded warehouse can only be released after being tapped, inspected, declared and paid by the customs. Therefore, bonded warehouse delivery can avoid the situation in which the quality of the goods is inaccurate through other illegal transportation channels. Finally, delivery of large quantities at the same time can also save freight, dilute costs, and reduce the price of goods. After removing the middle price and cross-border shipping costs, the Xiaohongshu platform can keep the sold price of the goods basically the same as the price of the source and sometimes even lower than the local price due to export tax rebates and other reasons.

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Construction of Social E-Commerce Platform

Although Xiaohongshu is also an e-commerce platform based on the B2C model, it is not the same as JD and Taobao. In contrast, Xiaohongshu is more entertaining, and this entertainment is more derived from the interaction between different users. Therefore, Xiaohongshu has also become one of the life platforms that young people prefer today. At Xiaohongshu, users can record life moments through short videos, pictures and texts, share life experiences, and form interactions based on interests. This is also the social advantage of the Xiaohongshu platform. Xiaohongshu’s “social contact+shopping” commerce model mainly benefits from the construction of its social e-commerce platform. At present, the Xiaohongshu platform mainly consists of three modules: Community, Welfare Agency and Enterprise Account. Through the organic linkage of the three modules, Xiaohongshu has realized a closed business loop of finding goods, sharing experience and buying goods (Fig. 6.6). The Community is the life sharing and interaction module of Xiaohongshu. It is used to share shopping experience, travel experience and other life experiences and their interactions. The content of Community covers many areas, such as fashion, personal care, makeup, food, travel, entertainment, reading, fitness, and baby care. At present, the community generates more than 7 billion note exposures every day, of which more than 95% are from UGC users. The Welfare Agency is the self-operated e-commerce module of Xiaohongshu. Welfare Agency is a B2C e-commerce platform. It is through this module that Chinese consumers can buy foreign goods, and foreign consumers can also buy Chinese goods. The Welfare Agency has a very ingenious connection with the Community. Some popular goods in the Community will be preferentially introduced to the Welfare Agency. In the goods details of Welfare Agency, there will also be a link to the goods sharing in the Community for users’ reference. In addition, Xiaohongshu also encourages users to associate with the goods in the Welfare Agency when publishing notes in Community, which can realize a positive interaction between the social platform and the shopping platform. Fig. 6.6 Xiaohongshu’s operating mode

Share Experience

Buy Goods

Find Goods

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Fig. 6.7 The composition of the Xiaohongshu platform

Enterprise Account is the latest product launched by Xiaohongshu in March 2019, which was originally named Brand Account. This product integrates Xiaohongshu’s resources from community marketing to closed-loop transactions to connect consumers and sellers. It can also help companies complete one-stop closedloop marketing on the Xiaohongshu platform and provide full-chain services. Enterprise Accounts can help merchants obtain official certifications and invite brand partners to publish notes. In the enterprise account, merchants can also directly configure the brand flagship store to facilitate transaction conversion (Fig. 6.7).

6.2.2.4

The Profit Model of Social E-Commerce Platform

Xiaohongshu is a typical social e-commerce platform, so it has both the characteristics of an e-commerce platform and the advantages of a social platform. As an e-commerce platform, to realize the diversity of goods and services, Xiaohongshu adopts the commerce model of “self-operated+merchants”. Users can buy domestic and foreign goods not only in self-operated Welfare Agencies but also in merchants’

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third-party stores. In general, Xiaohongshu’s profit point has two parts: one is goods profit. Xiaohongshu conducts commercial cooperation with domestic and foreign merchants, obtains goods at relatively low prices, and delivers goods to users. The middle price difference generated by the price advantage in purchase, transportation and other links is an important source of income for Xiaohongshu. The second is service revenue. Third-party merchants must pay a certain platform fee to settle in Xiaohongshu, which is also one of Xiaohongshu’s sources of income. In addition, Xiaohongshu’s social platform has also brought considerable profit growth to commercial sales. On the one hand, Xiaohongshu can judge the popularity of products in advance through the notes, comments and likes posted by users and then “targeted purchases”. In this way, the cost input caused by inventory, distribution and other links will be greatly reduced. On the other hand, social platforms can retain customers for Xiaohongshu. Through the guidance of community content and customer demand for domestic and foreign products, the goods on Xiaohongshu are more competitive in terms of price and quality. Customers’ trust and reliance on the platform will greatly increase users’ stickiness, which in turn will greatly increase the repurchase rate of customers.

6.2.3 Xiaohongshu’s Commerce Innovation 6.2.3.1

Content E-Commerce

Different from most e-commerce platforms, Xiaohongshu is shaping a new ecommerce model of “social contact+shopping”. JD and Taobao are typical transactional e-commerce companies, while Xiaohongshu belongs to the category of content e-commerce. In the era of fragmented Internet information, e-commerce companies can use live broadcasts, short videos, small videos and other means to stimulate users’ interest and desire to shop through the dissemination of excellent content, which forms content e-commerce. With the popularization of social software and the Internet, consumers’ shopping paths are no longer limited to walking into shopping malls or searching for the goods they need on e-commerce platforms. In the process of watching live broadcasts and browsing posts, consumers unknowingly become interested in certain goods and make purchases, even if the goods are not what consumers originally intended to buy. In the Internet era, although consumers have absolute freedom to browse the Internet and dominance in decision-making, merchants can integrate product marketing into online content, thereby attracting and guiding users to consume. Therefore, the core of content e-commerce lies in concealing the means of directly selling commodities and directly or indirectly influencing consumers’ purchasing decisions and purchasing behaviors based on the content spread on the Internet. It is precisely through its own community platform that Xiaohongshu realizes commercial marketing that guides user consumption with platform content.

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In transactional e-commerce such as JD, the consumption motivation of consumers is not very different from that in the traditional offline sales model. Therefore, the marketing core of e-commerce companies is often focused on traffic, hot goods, sales, praise, cost-effectiveness, Web design and promotions, etc. Content e-commerce shows the characteristics of ecology, diversification, life and fashion. Content e-commerce such as Xiaohongshu guides consumers based on changes in the consumption environment and consumers’ inner needs and then completes the business closed loop of development, attraction and transaction. Compared with transactional e-commerce, content e-commerce has more obvious characteristics and advantages. First, in the transactional e-commerce environment, consumers tend to actively search, so they are more sensitive to information about the goods they want to buy. When users browse the Xiaohongshu community, they often passively receive goods information. Attracted by the content, consumers have the desire to buy. Therefore, content e-commerce more easily attracts consumers, is more able to realize that consumers are dissolved in daily life, and dilutes business intentions. Second, the commodities in transactional e-commerce are evaluated jointly, and consumers tend to shop around rationally. The introduction of products in the Xiaohongshu community is a separate evaluation, and consumers often consume because of their subjective identification with goods design, concepts, feelings, etc., so they are more emotional. This means that in the content e-commerce environment of Xiaohongshu, consumers pay more attention to the emotional identity of the goods or brand rather than the cost performance. In turn, this recognition of products or brands is also more conducive to enhancing user stickiness. Third, in transactional e-commerce, consumers tend to be more demanding toward goods and usually focus on the inadequacies, defects and negative feedback of goods. In Xiaohongshu, users are often in a state of relaxation and recreation. They are not very defensive about goods, and their main energy is also focused on the social evaluation of goods. In this way, brands and goods will not be completely denied due to some inconclusive defects, and users focus on the comprehensive and fair evaluation of products in the community. Finally, in transactional e-commerce platforms, isolated products and huge data make it difficult for consumers to quickly compare and evaluate goods, so they are often less likely to receive recommendations from merchants. Xiaohongshu has a wide variety of goods, and consumers choose what they need. Due to the reduced need for cognitive closure, consumers are also more likely to receive relatively complex decision-making information and community recommendations. Therefore, some novel, difficult-to-compare parameters of goods are also easier to sell. In addition, the greatest advantage of content e-commerce is that community members are both viewers and producers of community content, so it is easier to recognize and trust the authenticity and accuracy of community content. This sense of trust is the most basic factor in determining consumer purchases. From this point of view, the content e-commerce represented by Xiaohongshu is a socialization of

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business. In the past, the development of e-commerce has the characteristics of “ecommerce is logistics, and logistics is e-commerce”. Today, the development of e-commerce shows the trend of “content with e-commerce and e-commerce with content”.

6.2.3.2

Short Video Marketing and Word-of-Mouth Marketing

For e-commerce platforms such as JD, the way of marketing mostly revolves around products, prices and promotions. In Xiaohongshu, a social e-commerce platform, the advantages of social platforms can be used to diversify marketing methods. (1) Short Video Marketing In the eyes of many people, Xiaohongshu is not only an e-commerce platform but also a sharing and communication platform. In 2020, Xiaohongshu had more than 250 million users, and the most active users were 20-35 years old. These users prefer to record their daily life through short videos, pictures and texts, and they are willing to spend time exploring high-quality goods on the platform and share with other users. The large number of users and the new life and consumption habits of young people make the UGC model more suitable for the construction and development of the Xiaohongshu platform. Short video is an important expression of the UGC mode. Different from long videos and pictures, short videos emphasize lightweight expression and content consumption, which can bring users an intuitive feeling and match the characteristics of the Xiaohongshu platform in terms of goods form and user experience. Short video marketing has well absorbed the convenience advantages brought by the Internet, showing the characteristics of flexible interaction and convenient communication. Almost all short videos can realize one-way, two-way or even multiway interaction and communication. This interactive marketing model can not only improve the user’s communication and shopping experience but also help Xiaohongshu obtain user feedback information to improve and optimize the platform and goods in a more targeted manner. In addition, Xiaohongshu’s short video marketing also has the advantages of “low cost and high efficiency”. Compared with traditional advertising and marketing, which may cost millions of dollars, the production cost, communication cost and maintenance cost of short video marketing are relatively low. Whether a short video can spread quickly and widely does not depend on the investment but on the content of the short video. Whether the content can meet the needs of users and whether it can attract users’ attention is the determining factor for whether a short video can achieve the desired effect. Xiaohongshu’s short video marketing not only inherits the advantages of video marketing but also has its own unique characteristics that meet the needs of the fastpaced era, which can better empower the platform and drive goods sales. In the view of Xiaohongshu, the use of short videos to occupy high-frequency usage scenarios of users, enrich the content ecology and further enhance the brand’s commercialization

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and monetization ability is the key to the success of the application in the context of the peak of the traffic dividend and the entry of smart terminals into the stock era. (2) Word-of-Mouth Marketing The essence of Internet marketing is to accurately connect target customers with minimal investment and achieve strong word of mouth with perfect ideas to influence target groups. The continuous real consumption experience of users has made Xiaohongshu the world’s largest consumer word-of-mouth database, and it is also regarded as a “think tank” valued by brands. Stéphane Wilmet, Chief Consumer Officer (CCO) of L’Oréal China, once said, “At Xiaohongshu, we can directly listen to the real voices of consumers. Real word-of-mouth is the most solid link between the brand and consumers” (Fig. 6.8). Currently, social contact media has been widely popularized in China and has gradually become a part of the daily life of many netizens. This reliance on social contact media has also led to the growing importance of word-of-mouth in the use of e-commerce platforms today. Once there is a positive word of mouth, the number of users will likely grow exponentially. If an e-commerce platform wants to increase the number of users and make users trust and rely, the safest way is to rely on real Fig. 6.8 User word-of-mouth area of L’Oréal goods in Xiaohongshu Welfare Agency

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word-of-mouth. In the Internet age, the marketing effect of positive word-of-mouth goes far beyond traditional marketing methods such as advertising. Xiaohongshu is an e-commerce platform, but it is also a sharing platform, an online community, and a word-of-mouth tank. On the Xiaohongshu platform, users can publish relevant shopping notes based on their real experience, and these shopping notes will be accurately published to potential customers who are interested in it through big data, cloud computing and other means. To some extent, Xiaohongshu’s “word-of-mouth advertising” is taken from users and used for users, which greatly increases users’ trust in Xiaohongshu’s word-of-mouth advertising. The decentralization of the Xiaohongshu platform encourages each user to express their own shopping experience, which can enhance user activity and improve the credibility of the evaluation content and the affinity of the platform. At present, the massive shopping notes on the Xiaohongshu platform have covered all aspects of clothing, food, housing and transportation. Users can seek different information and goods according to their needs, which makes the advantages of decentralization more obvious, and almost all goods will be left as footprints and comments by users. The method of word-of-mouth marketing can not only greatly reduce the marketing cost for Xiaohongshu but also maximize the customer’s trust in the goods and product.

6.3 New Retail E-Commerce: Meituan After more than ten years of rapid development, China’s e-commerce has gradually passed through the mature life cycle. User growth and traffic dividends brought about by the popularization of the Internet and mobile Internet terminals are gradually shrinking. Traditional e-commerce began to encounter development bottlenecks. According to statistics, in 2014, China’s national online retail sales reached 2,789.8 billion yuan, a year-on-year increase of 49.7%. In 2015, the national online retail sales were 3,877.3 billion yuan, and the year-on-year increase fell to 33.3%. In 2016, the figure dropped to 26.2%.1 In addition, with the change in the consumption environment and consumption concept, the inherent deficiencies of traditional e-commerce are becoming increasingly prominent. Although e-commerce companies try to solve these problems through many means, it is difficult to fundamentally compensate for the insufficiency of online shopping. Traditional e-commerce has had difficulty meeting people’s demand for high-quality and heterogeneous consumption. In October 2016, China first proposed the concept of new retail. Since then, a new round of retail reform marked by new retail has officially begun. New retail is the development direction of e-commerce in the future. It is a developed commerce form that realizes the trinity of online, offline and logistics. It belongs to the e-commerce of the O2On business model. At present, O2On new retail is still in the exploratory stage and has not been widely popularized. Thus, China is still one of 1

The data comes from the official website of the National Bureau of Statistics of China: China Statistical Yearbook (2014)(2015)(2016), http://www.stats.gov.cn/tjsj/tjgb/ndtjgb/.

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the leading countries in the development of new retail in the world. Chinese companies were exploring O2O e-commerce before 2016. Although O2O e-commerce is also the integration of online and offline, compared with O2On e-commerce, there are still some differences. It is undeniable that O2O e-commerce already has some O2On characteristics. Therefore, to some extent, O2O e-commerce is the initial stage of new retail e-commerce. Among the many e-commerce companies in China that are exploring new retail, Meituan is one of the earlier companies involved in O2O e-commerce. The Meituan platform has become one of the more advanced O2O e-commerce platforms in China.

6.3.1 Meituan’s Corporate Overview The impact of online communities and online platforms on people’s daily lives is enormous. However, the performance of the Internet economy and platform economy is not limited to the transformation of people’s lifestyles from offline physical life communities to online virtual life communities but is also reflected in the onlineoffline integration based on the Internet and platform. This integration is a commerce operation model based on a network platform. In fact, in the Internet-based platform economy, the platform is just an intermediary and a tool. The aggregation of digital information in the platform enables people to understand the merchants and realize consumption through the network platform. Therefore, in the platform economy, the construction of the platform is very important. In 2010, the platform economy was booming around the world, and so was in China. An emerging commerce model that has emerged in the retail sector and is gradually gaining popularity among Chinese consumers, especially young people, is “group buying (In Chinese: Tuan Gou)”. It was in that year that Meituan was established. In less than a year, Meituan Shanghai Station, Meituan Wuhan Station, Meituan Xi’an Station, Meituan Guangzhou Station, Meituan Wuxi Station, Meituan Nanjing Station, and Meituan Shijiazhuang Station have been launched. Subsequently, China’s group buying platforms emerged as a tide, and a large number of group buying platforms, such as Dazhong Dianping, Baidu Nuomi, and JD Tuangou, flooded into the market. At that time, the scene of “hundred regiments war” appeared in the Chinese group buying market. With $50 million financing from Alibaba and Sequoia Capital in July 2011, Meituan was able to survive the fierce competition from China’s so many group buying platforms at the time. In December 2011, Meituan was selected as one of the “Top Ten Online Shopping Brands” and won the title “Best Group Buying Website of the Year”, which has won a good reputation for Meituan. Different from the traditional B2C business model, Meituan has created an O2O business model that uses an online platform to connect users and merchants. Compared with traditional offline retail, one of the great advantages of online platform sales is that it can rely on the platform for business expansion. Under the platform economy, user traffic is the key to the development of the platform. More

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diversified service items can expand the profit points and profit channels of the platform and attract more users to the platform. As a result, after establishing itself in the group buying field, Meituan began to expand into diversified business areas. In 2012 and 2013, Meituan launched an online movie ticket purchase, hotel reservation and food takeout service. In 2014, Meituan launched a tourism and travel ticket booking service. The expansion of diversified businesses has further strengthened Meituan. In 2014, Meituan’s annual transaction volume exceeded 46 billion yuan, an increase of more than 180% over 2013, and its market share accounted for more than 60%, an increase of 7 percentage points over 2013. It was also after China announced the national strategy of “Internet+” in 2015 that e-commerce companies began to continuously explore the development path of platform technology and focus on the development layout of business cooperation. In July 2015, Meituan claimed to have wholly acquired Kuxun, an online travel search engine company. After the acquisition of Kuxun, Meituan began to deploy hotels and tourism to further improve the industry chain. In October, Meituan and Dazhong Dianping announced their merger, aiming to build a leading platform in China’s O2O field. In 2016, the Meituan and China Resources Enterprise Alliance Fund established a comprehensive strategic cooperation to jointly explore the new format of “Internet+retail” in the field of takeout platforms. In September, Meituan acquired Qiandai, a third-party payment company, and obtained a third-party payment license. In April 2018, Meituan Travel and UnionPay International reached an in-depth cooperation to deepen exploration in technology, big data and shopping experience, striving to make travel and shopping more favorable and convenient. In the same month, the "UnionPay International Brand Pavilion" jointly built by the two parties officially landed on Meituan Travel. In 2017, eight departments, including NDRC, CAC and MIIT, jointly issued the Guiding Recommendations on Promoting the Development of the Sharing Economy. As the top-level design of China’s sharing economy development, this document plays an important role in promoting and guiding the development of China’s sharing economy. In 2018, Meituan began to enter the sharing economy field and acquired Mobike, a sharing transportation company. Subsequently, Meituan launched a series of sharing products, such as shared power banks. In June 2019, Meituan officially launched a new brand, “Meituan Delivery”, and announced the opening of its delivery platform. This shows that Meituan Delivery will open a number of capabilities to partners in terms of technology platform, transportation capacity network, upstream and downstream of the industrial chain, etc., to help enterprises improve operational efficiency, reduce social logistics costs, and help the development of the real economy. To further enhance the instant delivery capability under the new retail model, in 2020, Meituan and Valeo, a French auto parts supplier, launched the first electric unmanned delivery vehicle, which realized “contactless delivery”. One month later, Meituan cashier upgraded the "mobile phone ordering" function and realized “contactless ordering” and “contactless meal pickup”. Today’s e-commerce in China is by no means the state of “logistics is e-commerce, and e-commerce is logistics” more than ten years ago. High-tech has been continuously integrated into China’s e-commerce development. Whether JD.com, which

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has been around since the early days of China’s e-commerce growth, or Xiaohongshu, which was born in the mature period of China’s e-commerce development, they are both exploring the research and integration of high-tech, so is Meituan. In July 2021, Meituan announced that the Tencent subscription had been completed, and approximately $400 million of the proceeds would be used for technological innovation.

6.3.2 Meituan’s Commerce Operations 6.3.2.1

The Concept of New Retail

The core of new retail e-commerce is to establish a new commerce model integrating online and offline to satisfy consumers’ pursuit of a higher consumption experience. New retail is a new stage in the current development of e-commerce. The scientific development concept is the starting point and the end point of the new retail commerce model. Compared with traditional e-commerce, the establishment of a new retail requires not only the support of high-tech but also the renewal of commerce concepts (Fig. 6.9). In the era of the digital economy, especially in the construction of the platform economy, digital platforms are the most important foundation. Therefore, the primary concept of new retail is to focus on the construction of a smart platform. In an Internetbased commerce model, digital platforms are an important hub connecting various commercial entities. The development of new retail is inseparable from the construction of smart platforms. Although the new round of the information revolution is just Fig. 6.9 The composition of new retail

Online Platform

New Retail

Offline Entity

Logistics

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getting started, the technological achievements that have initially appeared, such as big data and cloud computing, are enough to prove that this commerce revolution represented by new retail will be subversive. The new technology will create a new commerce model and provide a broader space for the development of new retail. It is from this concept that Meituan continues to integrate high-tech into its platform. For example, Meituan uses its own big data advantages to deploy artificial intelligence (AI) and deeply integrate artificial intelligence (AI) with its operations. At present, Meituan has built an O2O instant delivery intelligent scheduling system that can realize millisecond-level scheduling and optimal delivery path selection. After receiving an order from a user, the scheduling system can formulate an optimal solution for each order after taking hundreds of millions of operations into consideration, comprehensively considering factors such as road conditions, weather conditions, the time of the merchants’ meal delivery, and the expected delivery time of consumers. It can greatly shorten the delivery time and improve the efficiency of food delivery to realize the promise of delivery within 30 min. In addition, the purpose of new retail is to use digital platforms to realize the expansion of offline entities to online sales channels. Therefore, another concept of new retail is to focus on the integration of online and offline, which requires that offline entity enterprises should not ignore the expansion of online business while developing. Enterprises should establish an integrated construction model instead of deliberately distinguishing between online and offline. New retail is a natural organism and a highly self-consistent commerce model rather than a simple two parallel sales method. This highly self-consistent commerce model includes an online part and an offline part, which complement each other and are indispensable. This concept of new retail makes traditional offline entities have to consider transforming to online. For example, in the catering industry, Meituan has absolute discourse power with its powerful e-commerce platform, and many offline restaurants have also cooperated with Meituan to explore the integration of online and offline restaurants. At present, Meituan is using its “smart restaurant” service to improve the operational efficiency of catering merchants. The Meituan platform has been used in many links, such as queuing, reservation, ordering and checkout. Users can make remote queues on the Meituan platform, thereby alleviating the problems of queuing and waiting in popular restaurants. The Meituan platform can also use big data to analyze and predict queuing time and recommend high-quality restaurants for users, which may influence consumers’ decision-making. In addition, users can also book a table online through the Meituan platform and go to the store to dine and consume within the agreed time period. In the ordering link, Meituan can also implement online recommendation and online ordering of dishes. Meituan’s intelligent cash register system can not only complete online checkout but also realize the connection between the front hall and the back kitchen when ordering, thereby greatly improving the operational efficiency of catering merchants.

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The Construction of the New Retail

If the new round of information revolution represented by artificial intelligence, big data, cloud computing and other high-tech technologies can realize the integration of physical space, cyberspace and biological space, this integration will be fully reflected in the retail revolution targeting new retail. In the new retail model, people can complete the transmission of information in the virtual network and complete the shopping experience in the real physical space. The use of technology enables people to travel between physical space and cyberspace. Therefore, the construction of new retail is inseparable from the support of high-tech. High-tech will also run through the entire development of new retail. In essence, new retail is an organic combination of online platforms, offline entities and logistics, and it is the integration of information flow, capital flow and logistics. Therefore, the construction of new retail should be carried out in three dimensions: online, offline and logistics. First, in terms of the online dimension, the mature e-commerce system has proven that the advantages of online platforms are very prominent, so attention should be given to the construction of a smart platform. The online platform based on the Internet is the main place to realize business digitization and informatization. In the construction of the entire new retail system, the online platform should give full play to its advantages as much as possible and show multi-faceted functional value. No matter how the commerce model develops, it cannot change the essence that its primary task is selling goods. Under the new retail model, online platforms will be the most important sales channels. It is an important platform for transmitting commodity information, conducting business negotiations, and signing electronic contracts. At the same time, the online platform can also connect with electronic payment platforms to realize electronic payment for goods. In fact, the new retail online platform is not only rooted in the Internet era but also has the natural genes of the Internet platform, so it is essentially the same as the traditional e-commerce platform. It is just that with the development of information and communication technology, more high-tech will be integrated into the online platform, thereby further promoting the electronic and facilitation of transactions. Only by further improving the intelligence level of the digital platform can the organic linkage among the online platform, offline entities and logistics be realized. At present, many companies in China have carried out preliminary explorations of new retail to meet the basic expectations of consumers for new retail. In addition to the intelligent optimization of digital platforms by e-commerce platforms such as Meituan, many traditional offline retail companies have also transformed to new retail by creating online platforms, such as Walmart, Wumart, and Shopin. This exploration is very meaningful. It not only realizes multi-channel purchase methods and payment methods but also creates a new business form with the same quality and service online and offline. The online platform in new retail should follow the development of technology to optimize itself and create a comprehensive shopping platform that integrates entertainment, leisure, shopping, and social interaction. At present, some companies have integrated VR technology into the construction of online platforms to realize immersive online shopping for consumers.

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Second, in terms of the offline dimension, compared with the traditional offline entities that regard sales as the primary purpose, the transformation of new retail to offline entity platforms is multi-faceted. First, in terms of sales channels, offline entities should create dual channels of online and offline. For a long time in the past, offline retail platforms have been the main or even the only sales channel for many merchants. Under new retail, online channels will also become one of the important sales channels. In essence, Meituan’s O2O commerce model uses its own digital platform to expand online sales channels for users. In terms of functional positioning, offline entities should undertake certain experience functions. In offline physical stores, merchants can interact with consumers by creating scenes, allowing consumers to participate, thereby enhancing consumers’ understanding of products and improving consumers’ satisfaction with products. At the same time, the wordof-mouth and experience of the physical stores will also be displayed on the online platform, which in turn determines the choice of consumers. For example, the reviews of merchants on the Meituan platform are the main basis for consumers to choose merchants and products. In addition, some companies have launched offline experiential shopping. For example, IKEA, Apple, Xiaomi, Huawei and other companies have also launched their own experience stores. Consumers can enter the experience store to experience products and then purchase products online or offline. Finally, in terms of logistics, whether traditional offline commerce or online ecommerce, logistics is an important way of goods circulation. Efficient and safe logistics is not only a powerful guarantee for enterprise production but also an important support for goods sales. In new retail, an efficient and fast logistics system is an important basis for realizing online and offline intelligent sales. In traditional commerce, enterprises need to carry out the unified warehousing of goods. In new retail, enterprises can store products scattered in more convenient warehouses and realize unified management and deployment of different warehouses through online platforms. This requires the logistics industry to establish a complete and mature network system to meet the needs of production and circulation in new retail. Meituan also relies on its powerful distribution system to meet customer needs and expand business. It can be said that Meituan’s O2O new retail model is always based on its powerful instant delivery system.

6.3.3 Meituan’s Commerce Innovation 6.3.3.1

Instant Delivery

Instant delivery is a new logistics model that can achieve fast and punctual delivery. In the new round of commerce transformation represented by new retail, consumption upgrading and online-offline integration will inevitably become a trend. The new retail centered on consumer experience urgently needs a high-quality, convenient and diversified service system. Instant delivery is driven by technology and ecology and realizes the overall upgrade of the traditional logistics system through

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the reconstruction of all elements, scenes and processes of logistics. In addition, instant delivery also realizes the rapid connection between logistics and commerce through the implementation of digitalization and informatization, thereby forming a convenient and fast delivery mode. In terms of process, instant delivery omits intermediate warehousing and directly realizes the “door-to-door” logistics service. At present, China’s instant delivery is mainly item-based logistics in the form of intra-city delivery and small-item delivery, focusing on serving corporate users, mainly catering foods and supermarket goods. In the future, instant delivery will gradually expand to consumer users. At the Internet Conference held in November 2016, Meituan emphasized the importance and prospect of instant delivery, a new type of logistics service. In that year, the number of orders in the instant delivery industry exceeded 5.6 billion yuan, with a month-on-month increase of 102.2%. By 2017, this figure has been further improved, breaking through 9 billion yuan. In recent years, China’s instant delivery industry has achieved leaps in both volume and quality and has a large market development space. At present, Meituan has become one of the mainstream instant delivery companies in China. Both in the exploration of commercial applications and the investment in scientific and technological research, Meituan actively participates. Instant delivery has also become one of Meituan’s core competencies. At present, Meituan already has a strong instant delivery system. In terms of specific business, Meituan mainly promotes delivery services within 3 kilometers within 30–60 min. Even if it exceeds 3 kilometers, it can be delivered in 30–90 min within 8 kilometers. In addition, logistics under the new retail should meet the personalized service needs of different industries and customers. For this purpose, Meituan has developed a series of instant delivery solutions that match various industries (Fig. 6.10). Medicine and medical supplies

1. It is difficult to deliver at night; 2. Long-distance delivery is difficult; Delivery is not timely.

Fig. 6.10 Meituan instant delivery service project

1. 24-hour service: provide 24hour service at core locations with reasonable price to meet the needs of users; 2. Differentiated service products: provide differentiated delivery service products according to different distances to ensure the timeliness of contract performance; 3. A variety of delivery modes: adopt mixed delivery mode，combine special delivery with crowdsourcing.

6.3 New Retail E-Commerce: Meituan Industry Type Food and drink

Shopping malls and supermarkets

Fig. 6.10 (continued)

419 Industry Difficulties 1. The scope of delivery is limited; 2. Delivery is not timely; 3. The delivery equipment is not professional; 4. The operational capacity is lacking.

1. It is difficult to delivery large and heavy goods; 2. The cost of delivery is high; 3.The freshkeeping requirements of commodities are high; 4.The frequency of goods damages and returns is high.

Meituan Instant Delivery Solution 1. Extensive delivery coverage: cover 2,800 cities and counties in China; 2. Flexible delivery dispatching: realize millisecond-level intelligent dispatching to meet the scientific and rational delivery dispatching during peak and idle hours; 3. Professional materials and equipment: equipped with professional delivery equipment to support hot and cold separation delivery; 4. Cooperation empowerment: improve business operation efficiency to achieve win–win cooperation. 1. Large and heavy goods delivery: make the exclusive delivery plan, upgrade the bearing capacity of the bracket and delivery box, and improve the delivery capacity of oversized goods; 2. Dynamic delivery optimization: through dynamic aging and intelligent collection of orders, rationally allocate transportation capacity to improve efficiency and reduce costs; 3. Ensuring temperature and fresh-keeping throughout the delivery: provide professional fresh-keeping delivery boxes, thermostats, incubators, ice boards and other equipment to meet the fresh-keeping requirements of goods; 4. Guarantee user experience: provide professional operation team, one-to-one customer service, door-to-door return and other special services to ensure the good experience.

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Fresh fruits and vegetables

1. Delivery is not timely; 2.Cargo damage is frequent; 3.Special goods cannot be delivered; 4.The cost of delivery is high.

1. Exclusive delivery for business districts: based on the attributes of business districts, optimize online and offline promotion strategies and key delivery factors to improve overall timeliness; 2. Optimize operation and reduce goods damage: according to the characteristics of fresh fruits and vegetables, formulate standardized operation procedures from picking up to delivery to reduce goods damage; 3. Special goods delivery: provide customized solutions for users' requirements for the delivery of special goods such as fresh and frozen products; 4. Optimize delivery costs: improve efficiency and optimize the cost through the combination of different transportation modes.

Flowers and plants

1. Order delivery time is

1. Refine delivery area： in view of the centralized characteristics of the delivery period of flower orders, divide the delivery area into road areas, and use the road area number to centrally sort and

concentrated； 2. delivery mode is simple； 3. The service experience is unstable.

Fig. 6.10 (continued)

delivery orders，to improve the accuracy and efficiency of order delivery within the road area; 2. Customized delivery mode: according to the particularity of flower delivery, it supports appointment and delivery at fixed time； 3. For the gift attribute of flowers, ensure the safety of flowers during the delivery process while ensuring the delivery on time.

6.4 Summary

6.3.3.2

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New Retail and Sharing Economy

In the new retail with the O2O model, the digital platform is at the core. The sharing economy is also based on a powerful digital platform. Therefore, the developments of new retail and the sharing economy are inseparable. The business model of new retail is complementary to the development of the digital economy, network economy, platform economy, and especially the sharing economy. The essence of the sharing economy is to realize the separation of resource ownership and use rights, realize the exchange of resources and information through Internet technology, and replace “exchange value” with “sharing value” to make the best use of things. In recent years, the business model of new retail has been continuously integrated into the development of the sharing economy and has been applied in the fields of sharing transportation, sharing space, and sharing logistics. In particular, sharing logistics also plays a very important role in the construction of new retail. On the one hand, new retail pursues the trinity of online, offline and logistics, so new retail includes logistics construction. Efficient, energy-saving and convenient sharing logistics are naturally a part of new retail construction. On the other hand, logistics, as an important link connecting online platforms and offline entities, is an important support for new retail. Meitua Takeout, the most important business sector of Meituan, relies on Meituan’s powerful instant delivery. Takeout delivery sharing is the first step in Meituan’s exploration of the sharing economy. In 2018, under the guidance of the China Federation of Logistics and Purchasing (CFLP), life service merchants such as Meituan Takeout, UU Paotui and Flash Shansong jointly initiated the establishment of the Sharing Delivery Working Committee and established the Sharing Delivery Alliance. At present, Meituan has expanded its sharing business model to many fields, such as homestay, transportation, education, and items (Fig. 6.11). At present, China’s sharing economy is in a leading position in the world. In addition to the abovementioned fields covered by Meituan, the sharing economy also involves fields such as medical care, finance, and housekeeping. For example, in the field of sharing medical care, at the end of 2020, JD.com launched the commercial sector of JD Health based on the creation of an O2O health care business platform with the supply chain as the core, medical services as the content, and online and offline integration. At present, JD Health has achieved a comprehensive and complete layout of “Internet+Medical Health”, and its business scope covers the pharmaceutical supply chain, Internet medical care, health management, smart medical care, etc.

6.4 Summary The wide application of the Internet has promoted the high integration of digital industrialization and industrial digitization. E-commerce has become an important driving force to promote social and economic development and change people’s lives.

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6 Theory Application and Case Analysis of E-Commerce Commercial Areas Sharing Logistics

Sharing Space

Sharing Transportation

Sharing Education

Sharing Items

Fig. 6.11 Meituan sharing business sector

Introduction to Sharing Mode Sharing logistics can promote the optimal allocation of resources, reconstruct the supply and demand structure, reduce logistics costs and improve the overall efficiency of the system through the sharing of logistics information resources, logistics infrastructure, logistics distribution resources, logistics technology and equipment resources. Sharing space can maximize the space value of accommodation space, office space and other fields through sharing. With the concept of sharing, the sharing space can use digital platforms to breakdown information barriers, achieve information symmetry between supply and demand, and help both parties quickly establish contacts and facilitate transactions. Sharing transportation refers to the way of renting idle bikes, cars and other transportation tools to others to improve the utilization rate of these transportation tools. In addition, sharing taxis, sharing driving, etc., also belong to the category of sharing transportation. At present, sharing transportation is the most widely promoted sharing economy model in the world. Sharing education refers to the sharing of educational resources and knowledge through digital platforms for more users to share, learn and use. Sharing education can break the limitations of time and space, enabling users to learn the knowledge they are interested in anytime and anywhere. Sharing items refer to the realization of the sharing of books, power banks, umbrellas and other common items through digital platforms, to reduce the transaction costs of both supply and demand sides, and improve the efficiency of social resource docking and allocation. At present, sharing items can be seen everywhere in China, especially in densely populated areas such as living areas and shopping malls.

Business Sector Meituan Takeout； Meituan Maicai

Meituan Homestay

Mobike； Meituan Dache

Meituan University

Meituan Power-bank

Appendix

423

The Chinese government has always attached great importance to the development of e-commerce. In the competition of world e-commerce, China has surpassed and gradually led the development of world e-commerce. Although the development of science and technology has diversified the forms and modes of e-commerce, it is still inseparable from the essence of business, and it is difficult or even impossible to escape the basic principles and basic framework of e-commerce theory. E-commerce needs development and innovation and ultimately needs to serve to satisfy people’s yearning for a better life. The foundation of the development and innovation of e-commerce is the basic theoretical knowledge of e-commerce formed and summarized at present. With this as the cornerstone, ecommerce can continue to innovate and achieve in-depth integration with agriculture, manufacturing and other fields. Both in the self-innovation of traditional e-commerce to new retail and the extensive application of e-commerce, new formats and new theories will definitely be innovated. This innovation in practice and theory will further enrich the knowledge system of e-commerce. Times are developing, technology is developing, and e-commerce is also developing. Judging from the current global digital transformation, the development space of e-commerce is huge. With the development of globalization, digitization and informatization, the theory of e-commerce will be more abundant, and the cases will be more exciting.

Appendix JD. com, JD

京东

Vertical B2C

垂直类 B2C

Comprehensive B2C

综合类 B2C

Internet marketing

网络营销

Goods Strategy

产品策略

Price Strategy

价格策略

Promotion strategy

促销策略

JD Baitiao

京东白条

Baitiao Quickpay

白条闪付

Warehousing

仓储

Delivery

配送

Cross-border E-commerce

跨境电子商务

Xiaohongshu

小红书

Logistics

物流

Welfare Agency

小红书福利社

Community

小红书社区 (continued)

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(continued) Enterprise Account

小红书福利号

Content E-commerce

内容电商

Short Video Marketing

短视频营销

Word-of-Mouth Marketing

口碑营销

New Retail E-commerce

新零售电子商务

Meituan

美团

Online Platform

线上平台

Offline Entity

线下实体

Instant Delivery

即时配送

Sharing Logistics

共享物流

Sharing Space

共享空间

Sharing Transportation

共享交通

Sharing Education

共享教育

Sharing Items

共享物品

Meituan Power-bank

美团充电宝