Information Systems
Electronic Commerce
Chapter 5
Chapter Overview

E-Commerce Overview, Statistics and
Models

Business To Consumer E-Commerce

Keys To Success in B2C E-Commerce

Business To Business E-Commerce

Disintermediation

Payment Systems and Security
E-Commerce & E-Business


E-Commerce: commerce that is accelerated
and enhanced by IT, in particular the Internet.
E-Business: a broader definition of ECommerce which also includes non-financial
transactions.
–
–
–
–
buying and selling of goods and services
servicing customers
collaborating with business partners
conducting electronic transactions within an
organization
Why should you care
about E-Commerce?



E-Commerce is rapidly growing with consumer
spending up 14% in 2013.
More and more users (customers) are utilizing
broadband and mobile connections to the Internet.
The Internet is becoming more diverse. In other
words, the market you can sell to is growing and
changing.
comScore 2011 Digital
Year in Review Highlights





9 out of 10 U.S. users now visit a social networking
site in a month, and the average Internet user spends
more than 7 hours on these sites each month
Nearly 1 out of every 6 minutes online is spent on
Facebook
US users viewed 4.8 trillion display ads in 2011
More than 100 Million Americans watched online
video content on an average day - up 43% from 2010
In 2011, smartphones accounted for the majority of
new mobile phone purchases for the first time
comScore 2014 Digital
Future in Focus






In 2013, multi-platform users became the majority of
the digital population
Online video reaches 85 Million daily viewers.
Video ads account for 5.7% of total viewing time.
Mobile-commerce comprises 12% of online spending.
Half of all time spent on digital retail sites is on
mobile.
“Advertising follows eyeballs”
E-Commerce Growth:
% of overall retail sales
E-Commerce Holiday
Sales Statistics
Online Advertising Statistics
Languages of The ‘Net
E-commerce Shopping Statistics
What percentage of your gifts do you
anticipate buying online this year?
Why do you plan on shopping online?
Saves time
78%
Better prices
51%
More selection
43%
Easier shipping
40%
Ability to find a more
personalized gift
28%
More information available about
the products
20%
Other
8%
Source: ACNielson 2004
0% (nothing)
16%
Less than 10%
25%
10% - 20%
22%
21% - 50%
20%
51% - 80%
13%
81% - 100%
4%
Source: ACNielson 2004
E-Commerce Terms



E-tailer: an Internet retail site
Electronic market (e-marketplace): online
marketplace where buyers and sellers meet to
exchange goods, services, money, or
information
Pure vs. Partial E-Commerce: degree of
digitization of the product (service) sold; the
process; the delivery agent (or digital
intermediary)
E-Commerce Terms


Virtual (pure-play) organizations: Internet
retailers such as Amazon.com that have no
physical stores. Conduct business activities
solely online.
Clicks-and-mortar retailers (bricks-andclicks): Conduct some EC activities, but do
primary business in the physical world. An
example is Nordstrom, which has both an
Internet presence and many physical stores.
E-Commerce Terms

Brick-and-Mortar organizations: oldeconomy corporations that perform most of
their business off-line, selling physical products
by means of physical agents
Primary E-Commerce Models
E-Commerce Models


B2B is where most of the money is
B2C is the most well-known
–

Amazon, eBay, etc.
B2B and B2C differences require that
you know your customers well, develop
the right marketing mix, and move
money easily
E-Commerce Models


B2B is where most of the money is
B2C is the most well-known
–

Amazon, eBay, etc.
B2B and B2C differences require that
you know your customers well, develop
the right marketing mix, and move
money easily
B2C E-Commerce Advantages





Shopping can be faster and more convenient.
Offerings and prices can change
instantaneously.
Call centers can be integrated with the Web
site.
Broadband telecommunications will enhance
the buying experience.
What are disadvantages when buying online?
Keys To Success In B2C
E-Commerce
Digital Products Are the Best of All
Because…
1. They are commoditylike products.
2. They can be mass-customized and
personalized.
3. They can be delivered at the time of purchase.
4. They foster disintermediation.
5. They have global reach.
Keys To Success In B2C
E-Commerce
Digital Products Are the Best of All


Micro-payments - techniques to facilitate
the exchange of small amounts of money
for an Internet transaction.
Cellular ringtones, 99 cent song
downloads, possibly integrated in Xbox
Live
Keys To Success In B2C
E-Commerce
Give customers exactly what they want

Mass customization – the ability of an
organization to give its customers the
opportunity to tailor its products or
services
–
–
Dell – customized computer purchases
Apple iTunes – only the music you want (not
necessarily the whole album)
Keys To Success In B2C
E-Commerce
Attracting and Retaining Customers


Marketing mix - the set of marketing tools
that the firm uses to pursue its marketing
objectives in the target market.
Additional techniques for attracting Internet
customers include:
1.
2.
3.
4.
5.
Registering with search engines
Online ads
E-Mail and viral marketing
Affiliate programs
Selling to existing customers
Keys To Success In B2C
E-Commerce
You Must Execute Well


Executing well simply means that when a
customer places an order on your Web site,
you have to follow through and execute the
necessary business processes to get the right
item to the customer in a timely fashion.
A good B2C site immediately sends an e-mail
acknowledgement of the order, containing all
of the order details and an estimated ship
date.
Order Acknowledgement Email
Thanks for your order with CD Baby!
This is just a happy automated email to let you know a real person will email you as soon as
your package is sent, and you will also receive a paper receipt with your order in the mail.
Please save this email in case you have any questions about your order.
** NOTE: if any of the info below looks wrong, please hit REPLY now to let us know!
---------------------------------------ORDER # 123456 - Monday, November 22nd 2004, 09:34 - (PLEASE READ!)
1 of: SPOTTISWOODE: ugly love ($15.00 each)
SHIPPING: $2.25
GRAND TOTAL: $17.25 - US Dollars.
SHIPPING ADDRESS: Deleted
BILLING ADDRESS: Deleted
EMAIL: Deleted
---------------------------------------IF ANYTHING LOOKS WRONG, PLEASE REPLY TO THIS EMAIL AND LET US KNOW!
Or you can always call us at: 1-800-448-6369 (California time)
THANK YOU!!
CD Baby, the cutest little record store on the web
5925 NE 80th Ave - Portland, OR 97218-2891
phone: 1-800-448-6369
email: cdbaby@cdbaby.com
http://www.cdbaby.com <--- new CDs added every day!
Product Delivery Email
Thanks for your order with CD Baby!
Shipping Address - Deleted
1 of: SPOTTISWOODE: ugly love ($15.00 each)
SHIPPING: $2.25
GRAND TOTAL: $17.25 - US Dollars.
Your CD has been gently taken from our CD Baby shelves with sterilized contamination-free
gloves and placed onto a satin pillow. A team of 50 employees inspected your CD and polished
it to make sure it was in the best possible condition before mailing.
Our packing specialist from Japan lit a candle and a hush fell over the crowd as he put your CD
into the finest gold-lined box that money can buy. We all had a wonderful celebration
afterwards and the whole party marched down the street to the post office where the entire
town of Portland waved 'Bon Voyage!' to your package, on its way to you, in our private CD
Baby jet on this day, Monday, November 22nd.
I hope you had a wonderful time shopping at CD Baby. We sure did. Your picture is on our
wall as 'Customer of the Year'. We're all exhausted but can't wait for you to come back to
CDBABY.COM!!
Thank you once again,
Derek Sivers, president, CD Baby
the little CD store with the best new independent music
phone: 1-800-448-6369 email: cdbaby@cdbaby.com http://www.cdbaby.com
Keys To Success In B2C
E-Commerce
Watch the Competition


Retaining customers is one of the keys
to e-commerce success.
Spend time on the Web surfing around
seeing what’s going on in your
competitive space by looking at the Web
sites of known competitors.
Business to Business
E-Commerce

Purchasing applications are usually
divided into three segments:
1.
Purchasing of indirect materials (MRO)
2.
Purchasing of direct materials
3.
Purchasing of services
MRO – Indirect Materials

Maintenance, repair, and operations
(MRO) materials (indirect materials) –
materials necessary for running a
company but do not relate to the
company’s primary business activities
–
Office supplies, repair parts, lubricating oils
32
MRO – Indirect Materials


Buyers in B2B make large purchases
and can then demand a discount (not
true in B2C)
Can also team up with other buyers to
create demand aggregation - combining
purchase requests from multiple buyers
which justifies a larger discount
33
Direct Materials

Direct materials – materials that are
used in production in a manufacturing
company or are placed on the shelf for
sale in retail environments
–
–
Relate directly to a company’s primary
business activities
Quality, quantity, and delivery timing are
important
34
Direct Materials

Buyers can participate in reverse
auctions for direct materials – process in
which a buyer posts its interests in
buying items and sellers compete by
submitting successively lower bids
–
The lowest bidder wins
35
B2B: Horizontal and
Vertical E-Marketplaces

Horizontal e-marketplace: connects
buyers and sellers across industries
–
–

Primarily for MRO materials
All industries need office supplies, travel, etc.
Vertical e-marketplace: connects buyers
and sellers in a given industry
–
–
Primarily for direct materials
Each industry has unique direct material
needs
36
E-Marketplaces
37
Disintermediation
• Intermediaries: specialist companies that
provide services better than their client
companies can themselves - Order fulfillment,
payment processing
• Disintermediation: The removal of
organizations or business process layers
responsible for certain intermediary steps in a
value chain
• Reintermediation: Shifting of the intermediary
role in a value chain to a new source
Disintermediation Benefits
Cost/
Sweate
r
Manufacturer
Manufacturer
Manufacturer
Distributor
Retailer
Customer
$48.50
Retailer
Customer
$40.34
Customer
$20.45
B2C Payment Systems





Credit cards
Financial cybermediaries - Paypal
Electronic checks - online banking
Electronic Bill Presentment and
Payment – Checkfree.com
Smart cards
40
B2B Payment Systems

Business customers…
–
–
–
–
Make large purchases
Will not pay with credit card or financial
cybermediary
Use financial EDI
Pay for many purchases at once (perhaps
the end of the month)
41
Electronic Data
Interchange (EDI)

The direct
computer-tocomputer transfer of
transaction
information
contained in
standard business
documents such as
invoices and
purchase orders, in
a standard format.
Security


Security is very important when moving
money
Common security measures
–
–
Encryption
Secure Sockets Layers
43
Encryption


Encryption – scrambles the contents of
a file so that you can’t read it without
having the right decryption key
Often through public key encryption
(PKE) – uses two keys: a public key for
everyone and private key for only the
recipient of the encrypted information
44
Secure Sockets Layers

Secure Sockets Layer (SSL)…
–
–
–

Creates a secure connection between a
Web client and server
Encrypts the information
Sends the information over the Internet
Denoted by lock icon on browser or
https:// (notice the “s)
45
Barriers of EC





Security
Trust and risk
Lack of qualified
personnel
Lack of business
models
Culture





User authentication
and lack of public
key infrastructure
Organization
Fraud
Slow navigation on
the Internet
Legal issues