09 ecommerce
TRANSCRIPT
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Chapter 9:
Electronic Commerce
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E-Commerce / E-Business
Electronic Commerce: buying and selling ofproducts, services and information viacomputer networks, primarily the Internet
Electronic Business: a broader definition that
includes buying and selling, plus servicing customers collaborating with business partners conducting electronic transactions within an
organization
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Types of E-Commerce
Business-to-business EC (B2B) Collaborative commerce (c-commerce) Business-to-consumer EC (B2C)
Consumer-to-businesses (C2B) Consumer-to-consumer (C2C) Intrabusiness (intraorganizational) commerce Government-to-citizens (G2C) and others Mobile commerce (m-commerce)
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E-Commerce History and
Scope History Began in the early 1970s (long before the Internet was open
to commercial use) Limited to large businesses initially Electronic Fund Transfer (EFT) and Electronic Data
Interchange (EDI) Scope Today Includes
advertising home banking shopping in electronic stores and malls buying stocks
finding a job conducting an auction collaborating electronically with business partners around
the globe providing customer service
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E-Commerce Framework
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EC Benefits to Organizations Increased customer base:
Broaden markets
Find niche markets (e.g. www.dogtoys.com)
Reduced cost: Reach a large number ofcustomers at little cost
Procure material and services from other companies at less cost Allow lower inventories by facilitating pull-type supply chainmanagement
Shorten marketing distribution channels and reduce marketing costs
Decrease the cost of creating, processing, distributing, storing, andretrieving paper-based information
Lower telecommunications costs because the Internet is much cheaperthan value-added networks (VANs)
Reduced cycle time: Procure material and services from other companies rapidly
Reduce the time between the outlay of capital and the receipt of productsand services
Helps small businesses compete against large companies
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EC Benefits to Customers Choice
Consumers can select from many vendors and many more products thanthey could locate otherwise
Consumers can get customized products, from PCs to cars, atcompetitive or bargain prices
Consumers can find unique products and collectors items throughvirtual auctions that might otherwise require them to travel long distances toa particular auction place at a specific time
Convenience Consumers can conduct online quick comparisons to find less expensive
products and services
Customers can shop or make other transactions 24 hours a day, year
round, from almost any location Product information immediately available 24 hours a day, year round,
from almost any location
Consumers can interact with other consumers in electronic communitiesand can exchange ideas as well as compare experiences
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EC Benefits to Society Convenience
Enables more individuals to work at home and to do lesstraveling
Access Allows some merchandise to be sold at lower prices - less
affluent people can buy more and increase their standard ofliving
Enables people in less developed countries and rural areasto enjoy products and services that otherwise are notavailable to them
Facilitates delivery of public services, such as governmententitlements, reducing the cost of distribution and fraud, andincreasing the quality of the social services, police work,health care and education
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Technical Limitations of EC A few technical challenges remain for organizations
wishing to conduct EC:
Lack of universally accepted standards for quality, security,and reliability
Insufficient telecommunications bandwidth Still-evolving software development tools
Difficulties in integrating the Internet and EC software withsome existing (especially legacy) applications anddatabases
Need for special Web servers in addition to the networkservers (added cost)
Expensive and/or inconvenient Internet accessibility formany people
All of these will diminish over time
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Non-Technical Limitations of
EC Legal and economic concerns: Many legal issues are yet unresolved
Lack of national and international regulations and standards
Difficulty in measuring benefits of EC and justifying EC
Insufficient number (critical mass) of sellers and buyersexists for profitable EC operations
Cultural resistance: Distrust of the new: Many sellers and buyers are waiting for
EC to stabilize before they take part
Customer resistance to the change from a physical to virtualstores
Perception that electronic commerce is expensive andunsecured, so many do not want even to try it
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Business-to-Consumer EC
Electronic Storefronts and Malls
Electronic retailing can be conducted viasolo storefront or as a part of cybermall
Issues of e-tailing May be channel conflict and conflict with
existing stores
Difficult to fulfill large quantity of very smallorders
Incorrect business model (advertisingrevenue versus profitable sales)
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Business-to-Consumer EC
(continued) Services Online Banking (www.sfnb.com)
Securities trading (Schwab Online)
Job markets (Monster Board)
Travel (Expedia.com)
Real estate (Realtor.com)
Auctions (eBay.com)
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Business-to-Consumer EC
(continued) Personalization ability to customizeproduct, service, advertisement, or customerservice
B2C EC enables personalization at low cost Internet enables marketing research
Questionnaires Usually involve some inducement
Direct behavior observation Cookies or site tracking services
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Business-to-Consumer EC
(continued) Use of intelligent agents Help customers determine what to buy
Search for and compare vendor prices
Collect information and develop customer profiles Online advertising
Banners
Keyword banners
Random banners
Direct email
Pop-up windows
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Business-to-Consumer EC
(continued) Advertising Approaches and Issues Permission marketing offer incentives to consumers to
receive advertising
Viral (advocacy) marketing online word of mouth
advertising (send this ad to a friend and get
) Customizing ads base ads on consumersprofile
Interactive marketing tailor ads based on stored customerdata
Attracting visitors to a site
Making the top list of a search engine
Online events, promotions, and attractions
Electronic catalogs / customized catalogs
Coupons online
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Business-to-Consumer EC
(continued) Providing Customer Service
Help customer determine needs
Help customer acquire product or service
Support customer during ownership ofproduct or service
Help customer dispose of product orservice
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Business-to-Business EC Composes the majority of EC volume
Enables organizations to form electronicrelationships
Covers all activities along the supply chain
Business Models: Sell-Side Marketplace
Organizations sell products to other organizationselectronically.
Buy-Side Marketplace
Buyers post needs; sellers submit bids
Electronic Exchanges Electronic marketplaces link many buyers and many
sellers
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Business-to-Business EC
(continued) Collaborative Commerce non-buying/selling activities betweenbusinesses
Planning and scheduling Design
New product information
Product content management
Order management Sourcing and procurement
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Electronic Commerce
Innovations E-Government deliver information and
public services to citizens and members ofthe public sector
M-Commerce use of wireless devices todeliver mobile e-commerce
Consumer-to-consumer EC directinteraction facilitated by auctions, classifieds,
and bartering Intrabusiness EC business units interact
or employees interact with employers
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Electronic Commerce
Requirements Infrastructure hardware, software, and networksneeded to conduct transactions, communicate, andcollaborate
Electronic Payment Mechanisms
Electronic checks Customer opens account with a bank
the customer e-mails an encrypted electronic checksigned with a digital signature
the merchant deposits the check in his or her account;
money is debited in the buyers account and credited tothe sellers account
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Electronic Commerce
Requirements Electronic Payment Mechanisms (continued) Electronic credit cards
Unencrypted payments - the buyer e-mails her or his creditcard number to the seller on the Internet
Encrypted payments - credit card details encrypted for security
Electronic cash in PC bank provides special software to consumer customer buys electronic money from the bank through
software the bank sends electronic money note to this customer,
endorsing it with a digital signature
the money is stored on the buyers PC and can be spent in anyelectronic store that accepts e-cash
the software is also used to transfer the e-cash from the buyerscomputer to the sellers computer
the seller either deposits the e-cash in a bank or uses the e-cash to make purchases elsewhere
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Electronic Commerce
Requirements Electronic Payment Mechanisms (continued) Electronic payment cards with e-cash
Credit cards using magnetic strips
Card holds information about prepaid cash which can be
used to make payments Smart cards
Cards with microprocessors can hold much moreinformation
Person-to-person payment systems
Transfer of funds between individuals (PayPal) EFT
Electronic wallets
Purchasing cards
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Electronic Commerce
Requirements Security Authentication - assurance regarding the identity of the
parties who are involved in the deal
Integrity - assurance that data and information (orders, replyto queries, and payment authorization) are not accidentallyor maliciously altered or destroyed during transmission
Non-repudiation - Protection against the customersunjustifiable denial of placing an order; buyer needsprotection against the vendor denial of shipment, or sendingwrong order
Privacy - many customers want their identity to beundisclosed
Safety - assurance that it is safe to provide a credit cardnumber on the Internet
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Electronic Commerce
Requirements Security (continued) Encryption - a process of making messages
indecipherable except by those who have an authorizeddecryption key
Single-key encryption Public/private key encryption
Public key infrastructure
Electronic Certificates
Secure Socket Layer (SSL)
Secure Electronic Transaction Protocol(SET)
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Electronic Commerce
Requirements Order Fulfillment
Find, assemble, and pack product
Ship product to customer Collect customer payment
Arrange for returns if needed
Provide on-going support (e.g.,
animated assembly instructions) EC is a pull operation hard to
forecast demand and prepare to fulfillorders
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Electronic Commerce Issues Buyer Protection
look for reliable brand names at sites like Wal-Mart Online, DisneyOnline, and Amazon.com
search any unfamiliar selling site for companys address and phoneand fax number
check out the seller with the local Chamber of Commerce and/orBetter Business Bureau
investigate how secure the sellers site is by reading the postedprivacy notice, and evaluate how well the site is organized
examine the money-back guarantees, warranties, and serviceagreements
compare prices to those in regular stores (suspect the too cheap
sites) ask friends what they know about the vendor
find out what your rights are in case of a dispute
consult the National Fraud Information Center
check www.consumerworld.org for a listing of useful resources
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Electronic Commerce Issues
Seller Protection Need protection against consumers who refuse to
pay or pay with bad checks and buyers claims
that the merchandise did not arrive
Need protection against the use of their name by
others as well as use of their unique words and
phrases, slogans and Web address
Need legal recourse against customers who
download copyrighted software and/or knowledgeand sell it to others
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Electronic Commerce Issues
Ethics Privacy
most electronic payment systems know whothe buyers are; therefore, it may be necessary
to protect the buyers identity Web Tracking
by using sophisticated software it is possible totrack individual movements on the internet
Disintermediation the use of EC may result in the elimination ofsome of a companys employees as well asbrokers and agents
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Electronic Commerce Issues Legal Concerns
Domain Names several companies that have similar or same
names (in different countries) compete over a
domain name that is not a registered trademark Taxes and Other Fees
Federal, state, and local taxing authorities aretrying to figure out how to impose taxes on
Internet sales Copyright
intellectual property is protected by copyrightlaws and cannot be used freely