1 Information Systems Electronic CommerceChapter 5

2 Chapter Overview E-Commerce Overview, Statistics and ModelsBusiness To Consumer E-Commerce Keys To Success in B2C E-Commerce Business To Business E-Commerce Disintermediation Payment Systems and Security

3 E-Commerce & E-BusinessE-Commerce: commerce that is accelerated and enhanced by IT, in particular the Internet. E-Business: a broader definition of E- Commerce 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

4 E-Commerce Growth: % of overall retail salesSource:

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6 E-commerce Shopping StatisticsWhat percentage of your gifts do you anticipate buying online this year? 0% (nothing) 16% Less than 10% 25% 10% - 20% 22% 21% - 50% 20% 51% - 80% 13% 81% - 100% 4% Source: ACNielson 2004 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

7 Advertising Follows EyeballsSource: comScore 2011 US Digital Year in Review FACEBOOK DELIVERS 1 OF EVERY 4 ONLINE DISPLAY ADS Among the many beneficiaries of the growth and innovation in display advertising are web publishers. The leading U.S. publisher of display ads in 2011 was Facebook with more than 1.3 trillion impressions (27.9 percent market share), more than double that of #2 publisher Yahoo! Sites at 529 billion impressions. Microsoft Sites followed as the third largest display ad publisher with more than 215 billion impressions, while Google Sites delivered billion impressions, the majority of which were seen on YouTube. Advertising on Facebook, which combines many of the attributes of search such as granular targeting, small ad formats and self-purchased ad buys, presents a unique offering for many marketers looking to bridge their search and display advertising.

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10 Top 15 Smartphone Apps

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12 The strong correlation between mobile share of dollars and total digital commerce growth highlights just how important mobile commerce is as a growth driver in today’s online retail market

13 Languages of The ‘Net

14 E-Commerce Terms E-tailer: an Internet retail siteElectronic 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)

15 Types of OrganizationsBrick-and-Mortar organizations: old-economy corporations that perform most of their business off-line, selling physical products by means of physical agents Clicks-and-mortar retailers (bricks-and-clicks): 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.

16 Types of OrganizationsVirtual (pure-play) organizations: Internet retailers such as 1800Flowers.com that have no physical stores. Conduct business activities solely online.

17 Primary E-Commerce Models

18 E-Commerce Models B2B is where most of the money isB2C 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

19 B2C E-Commerce AdvantagesShopping can be faster and more convenient. Offerings and prices can change instantaneously. Anytime / anywhere shopping. What are disadvantages when buying online?

20 Keys To Success In B2C E-Commerce Digital Products Are the Best of AllBecause… They are commoditylike products. They can be mass-customized and personalized. They can be delivered at the time of purchase. They foster disintermediation. They have global reach.

21 Keys To Success In B2C E-Commerce Digital Products Are the Best of AllMicro-payments - techniques to facilitate the exchange of small amounts of money for an Internet transaction.

22 Keys To Success In B2C E-Commerce Give customers exactly what they wantMass 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)

23 Keys To Success In B2C E-Commerce Attracting and Retaining CustomersMarketing 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: Registering with search engines Online ads and viral marketing Affiliate programs Selling to existing customers

24 Keys To Success In B2C E-Commerce You Must Execute WellExecuting 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 acknowledgement of the order, containing all of the order details and an estimated ship date.

25 Order Acknowledgement EmailThanks for your order with CD Baby! This is just a happy automated to let you know a real person will 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 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 # Monday, November 22nd 2004, 09:34 - (PLEASE READ!) 1 of: SPOTTISWOODE: ugly love  ($15.00 each) SHIPPING: $2.25 GRAND TOTAL: $ US Dollars. SHIPPING ADDRESS: Deleted BILLING ADDRESS: Deleted Deleted IF ANYTHING LOOKS WRONG, PLEASE REPLY TO THIS AND LET US KNOW! Or you can always call us at: (California time) THANK YOU!! CD Baby, the cutest little record store on the web NE 80th Ave - Portland, OR phone: <--- new CDs added every day!

26 Product Delivery EmailThanks for your order with CD Baby! Shipping Address - Deleted 1 of: SPOTTISWOODE: ugly love  ($15.00 each) SHIPPING: $2.25 GRAND TOTAL: $ 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:  

27 Keys To Success In B2C E-Commerce Watch the CompetitionRetaining 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.

28 Business to Business E-CommercePurchasing applications are usually divided into three segments: Purchasing of indirect materials (MRO) Purchasing of direct materials Purchasing of services

29 MRO – Indirect MaterialsMaintenance, 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

30 MRO – Indirect MaterialsBuyers 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

31 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

32 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

33 B2B: Horizontal and Vertical E-MarketplacesHorizontal 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

34 E-Marketplaces

35 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

36 Disintermediation BenefitsCost / Sweater $48.50 $40.34 $20.45 Manufacturer Distributor Customer Retailer

37 B2C Payment Systems Credit cards Financial cybermediaries - PaypalElectronic checks - online banking Bitcoins

38 B2B Payment Systems Business customers… Make large purchasesWill not pay with credit card or financial cybermediary Use financial EDI Pay for many purchases at once (perhaps the end of the month)

39 Electronic Data Interchange (EDI)The direct computer-to-computer transfer of transaction information contained in standard business documents such as invoices and purchase orders, in a standard format.

40 Security Security is very important when moving moneyCommon security measures Encryption Secure Sockets Layers

41 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

42 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)

43 Barriers of EC Security Trust and risk Lack of qualified personnelLack of business models Culture User authentication and lack of public key infrastructure Organization Fraud Slow navigation on the Internet Legal issues