Bob Travica
MIS 2000
Information Systems for Management
Instructor: Bob Travica
Class 17
Strategizing with IS: Electronic Commerce
Updated 2016
Bob Travica
Outline
• Electronic commerce (E-commerce)
• Business-to-Consumer (B2C) E-Commerce
• Business-to-Business (B2B) E-Commerce
• Summary
2
Bob Travica
Concept of E-commerce
• E-commerce is the area of commerce that is conducted via
computer networks and information systems.
• E-commerce started among businesses (supply markets), and
expanded into consumer markets when Internet moved to
businesses and homes in the mid-1990.
• Moving into B2C or B2B is an important strategy leading to
increasing market share, integrating supply chains, improving
financial results.
3
Bob Travica
Two Domains of E-commerce
B2B
Supplier
Organization
Supplier
Organization
sell
B2C
sell
buy
buy
offer, sell
Web storefront
demand, buy
Consumer
Classical company
• Business-to-Consumer (B2C), retail on the Internet via
Web storefronts: Chapters.com; “click and mortar” or “pure
click”
• Business-to-Business (B2B), buying & selling between firms
• via e-markets (Covisint, Freelancer.com)
• directly (private networks or Internet; Dell, shipping ind.)
4
Bob Travica
Business Models for B2C E-commerce
•
•
Web Retail (also called Web Storefront, Web Store, Online Store)
•
Sells many goods & services online
•
Example: Amazon.com – “pure click”, no physical stores
•
Amazon started as a bookstore and initiated the trend of web retail.
•
Amazon keeps improving business processes (sales, inventory) to
increase up-selling and cross-selling.
•
Global presence; Interactive Marketing and Personalization.
Bestsellers in Web storefronts:
– 10-25% of purchases: DVD, CD, books, computer hardware &
software
– Below 10% of purchases: A/V equipment, clothes, music… anything
5
More
Bob Travica
Business Models for B2C E-commerce
• Portal: Initial point of entry to Web, provides Internet search
service for free; advertising revenues, may sell some services*
& content (Google, Yahoo)
• Customer: Global Internet user
• Revenue: Advertising, some search services, mobile tech.
(Google)
• Broker: Middleman models mediating between buyers and
sellers
• Customer: Global Internet user
• Revenue: Fixed fees, Referral fees (advertising)
6
Bob Travica
E-commerce Expands Customer Data
Customer
Product
ProductID
Category
Maker
Customer ID
CustomerType
IP-Address
Tel-Number
Catalog Search
Customer ID
Terms Searched
Customer Comparison
Customer Movement
Customer ID
Web Pages Visited
Screen Items Clicked
Tracking
consumer
behavior
Match Product Purchased
Support to
cross-selling
Other Online
Purchases
ProductCategory
New data, do not exist in classical marketing
7
Bob Travica
B2C E-commerce Systems
Browse products
Web Store- front
Product catalog
Buy
Sales sys.
Pay
Ordering & Payment systems
Customer profiling
Product
promotion
Clearing houses,
Banks
More
8
Bob Travica
B2C E-commerce
• Boom 1994-2000, crash in 2001; pure vs. hybrid models
• Share in total retail in 2014:
Globally 6%, Canada 4.9%, UK 13%
U.S.A. 6.5% (second largest), China 10% (nominally largest)*
Benefits
• Firm’s benefits:
- Global reach & 24/7 sales
- Savings on physical stores
- Direct marketing (customer profiling via clickstream
or search tracking systems*; personalized Web storefronts)
- Cross selling (automatic matching of customer profiles via systems)
• Consumer: Convenience, selection, some savings
9 of 14
Bob Travica
B2C E-commerce Costs
• Firm:
- IS investments
- Delivery, Logistics
- Payment security
- Legal boundaries
- Competition increase
- Invisible customer
- Electronic branding
• Consumer:
- Shipping & handling expenses
- Privacy
- Payment anxiety
- Product testability & return
10
Bob Travica
B2B E-Commerce
• Larger part of e-commerce (1/3 of all B2B sales in US; ~5% in CA*)
• Complex processes (inter-org.), connections, & systems
• 2 business models:
1. Direct model
Production
Scheduling
Inventory
Buyer
Purchasing
Bank
2. Mediated
model
Sales
Supplier
E-market
Bank
Bank
11 of 14
Bob Travica
Mediated Model: E-Market
•
Also called e-Exchange, e-Hub, Market maker
•
Can be controlled by Buyer or Seller
•
Within an industry (plastics, metals, etc.)
•
Across industries (Covisint, B2BQuote, Alibaba*, more**)
•
Revenue: Membership fee, Transaction charge, Financial services,
Product catalogue creation, Order fulfillment
E-Market
12
Bob Travica
B2B E-Commerce Benefits & Costs
• Benefits:
- Larger market
- Savings from efficiencies in supply chain
- Better coordination in supply chain
- Dynamic pricing (auctions)
- 24/7 business (via e-marketplaces)
• Costs:
- Increased competition
- Volatile business relationships (partner
switching)
- Costs of private networks
- Costs of intermediaries (e-markets)
- Legal boundaries (e.g., anti-monopoly
pressures on buyers-driven e-markets)
More
13
Bob Travica
Summary
•
E-commerce is buying and selling via electronic means, and these can
transpire between businesses (B2B; older segment), and between
business and consumers (B2C, newer segment).
•
Models of B2C e-commerce include portal, web store, and broker.
•
Two main models of B2B e-commerce are direct company-to-company
and e-marketplace.
•
B2C e-commerce enriches the customer profile.
•
B2B e-commerce is bigger part of e-commerce and has certain future.
•
Both B2B and B2C has certain benefits and costs.
14