4.1.6 Uses of ICT in Business/2 Computer-based shopping systems Learning Outcomes: You will be able to: Explain how computer based shopping systems work. 2. Understand the different methods of payment. 3. Explain the benefits and drawbacks of e-commerce We will look at the way ICT is used in the retail enviroment. This is one of the most competitive businesses, and shops need to react quickly to changes in customer shopping habits in order to remain competitive. The huge rise of shopping on the internet has placed many demands on shops. Most have websites were customers can place orders online.

Name as many computer based shopping systems as you can Starter: List Name as many computer based shopping systems as you can

Task: Research and Share You will split up into groups each looking at: Payment Methods - EFT ( Customers/Stores Perspective) Online Shopping - E-commerce EPOS (POS Terminals, Bar Code Recognition) Automatic Stock Control JIT Stock Control Systems Pricing Human-Computer Interfaces Loyalty Cards Make Sure you look at advantages and disadvantages of each one

Payment Methods

Main: Payment Methods Electronic funds transfer (EFT) This is where payment is made by transferring funds from one account to another. EFT payments can include: Credit and debit cards Payments via an intermediary such as PayPal or Nochex Electronic purse (where money is credited to a card before use) Payments made from one bank account to another using online banking. (e.g. Next, just need the sort code and account number).

Payment Methods: Electronic Funds Transfer (EFT) Advantages for the store Payment is immediate so cash flow is improved EFT is integrated with accountancy systems so fewer staff needed and less business costs. Don’t receive cheques that bounce (ie. Returned because the customer doesn’t have enough money in their account). Faster delivery – improving turnover Advantages for customers Faster reciept of goods or services (cheques don’t have to clear) Quicker to enter card details than post a cheque Credit card companies offer to take up complaints you may have with the store.

Payment Methods: Electronic Funds Transfer (EFT) Disadvantages for store’s Stores have to pay a commission for electronic payments to the company being used to make the payment (e.g. the credit/debit card company – typically 3.1%). The seller of goods or services has to bear the cost of fraudulent transactions. Procedures need to be in place to ensure the privacy of customers’ data and their card details. Quite expensive to set up. Disadvantages for customers Payments are easy so impulse purchases may be made. Tendancy to spend too much on credit cards. Danger that the card details will fall into the wrong hands (fraud). May not have internet/computer access at hom Erosion of privacy (more companies hold data about you and what you buy).

E-Commerce

Main: Online Shopping Online shopping was first popular for CDs, DVDs, books and groceries, but more people are now using the Internet to buy virtually anything. Ease of access to computers and the Internet Faster Internet connections

Main: E-commerce Means all the activities needed for the successful running of a business, typically: Buying Distributing Marketing Selling Paying. If some or all of these are performed using electronic systems such as the Internet or computer networks then the business can be said to be involved in e-commerce. E-commerce uses the latest communication and technologies such as: Internet Mobile phones Extranets E-mail Databses It is about selling products as well as services and involves such technologies as: Online marketing Electronic funds transfer (EFT) Just in time control systems/supply chain management On-line transaction processing Electronic data interchange (EDI) Automatic stock control systems Automated data entry systems The way people work and play has been changed by e-commerce. People can now shop and bank from the comfort of their homes and have a global marketplace to pick their goods and services from. Some businesses would not exist without e-commerce technology e.g. such as low cost airlines (operating costs can be kept low)

Main: The main parts of an e-commerce system A catalogue of products that includes a search facility and a link to the stock control system. A shopping cart/basket Checkout Payment (credit/debit card details are encrypted and validated)

Main: Benefits of e-commerce Always accessible (24/7) Low start-up and running costs (all you need is a computer connected to the internet and something to sell – running costs are small as no premises) Easily updated (with different prices for different countries) Search facilities Low distribution costs (can promote via the internet) Global marketplace (can find the cheapest product in the world) Competitive edge (cheaper prices as lower running costs for the business. This is eroded as more and more people start up internet businesses). Gathering customer information (in store the company will gather little information from you with e-commerce you have to enter personal details such as name and address and it is therefore easy for companies to contact you with newsletters and emails about promotions). Alternative income sources (banner adverts for other companies, links to other websites, links to other businesses, commission from other companies when a user visits your site and follows a link to a website of one of your trading partners).

Main: Drawbacks of e-commerce Unemployment (computers automate many of the administrative tasks performed by people) Lack of interaction with people (for some going shopping provides a way of interacting with others) Lack of exercise Problems when things go wrong (faulty goods are harder to exchange via post) Lack of customer trust (bogus websites, credit card fraud) Problems with international legislation (goods from abroad can be more expensive due to customs duty) Goods bought from abroad mean that the profits stay abroad (the general economy suffers as a result) Security problems (people are scared about inputting their credit card details when they are paying for goods online).

Electronic point of sale (EPOS)

Main: Electronic point of sale (EPOS) POS terminals There are a variety of input devices used with a POS terminal and these include: Touch screen displays Keyboards Magnetic strip readers Bar code readers (Chip and Pin?)

Main: Electronic Point of sale Bar code recognition Involves a series of light and dark bars of differing widths to enter a code which is usually printed underneath the bar code. Using the code, the system can determine from a product database the country of origin, the manufacturer, the name o fhte product, the price etc. They are used for: Recording goods in supermarkets Warehouse and stock control systems Parcel tracking systems Linking books to borrowers in libraries Labeling luggage at airports Advantages of bar code input: Fast Accurate Low printing costs Disadvantages of bar code input: Can only be used to input numbers Expensive

Others

Main: Other methods of data entry Other input devices used by stores: Hand-held input devices (used for stock-tacking in stores. Uses wireless communication to send the data to the main computer system). Magnetic strip readers (credit/debit/reward cards. Chip and pin readers are used to read credit/debit card details, magnetic strip readers are still used to read the magnetic strips on reward cards. There are fewer errors, added security, very quick, reduces liklehood of fraud) Chip and pin reader (replaced magnetic strip readers for the reading of credit/debit card details)

Main: Automatic stock control Stock needs to be controlled for the following reasons: Keeping large quantities of stock is expensive, if the quantity can be decreased then the resources released (money, staff, space) can be put to better use in the organisation. If insufficient stock is kept customers’ requirements may not be met and they may choose to shop elsewhere. Many stock items are perishable (they have a limited shelf life) Costs associated with keeping stock: Buying it Premises to house the stock Staffing of people needed to find and move stock Higher wastage due to damage or goods done off Main objectives of an automatic stock control system: To maintain adequate stock to meet customer demand To re-order goods automatically when stock falls below a minimum level To monitor and adjust stock levels To produce stock valuations for accountancy and audit purposes To provide managemnt with up-to-date and accurate stock informaiton.

Just in time stock control systems Goods are delivered to the stores as fast as they are being sold. Cutting the stocks of products in each store by about one fifth and freeing up some staff who would normally be putting extra goods on the shelves. It allows individual stores to respond to changing demand throughout the day automatically. The old system placed orders that depended on the average deman for the products over the previous five days and prevented the opportunity to respond to unexpected rushes on products. E.g. the system will ensure that they do not run out of items like ice-cream during hot weather. There are 4-5 deliveries per day instead of one large one in the morning. Advantages of JIT stock control: Smaller stores can be used because not as much stock is held. Store is able to respond to chanigng demand thoruhg the day Easier to cope with several small deliveries than one large one They do not run out of fast-selling items. Disadvantage of JIT stock control: Expensive to introduce More admin staff needed True stock may differ due to theft and damages

Main: Pricing Prices of goods change regularly and shops are often charged more by their suppliers. They need to pass this price increase onto the customers. The database of all goods will contain the price, which may be altered by a computer in the store. The bar code on the goods links the item to the correct record in the database. Once the price is changed the bar code links to the new price. The store then prints out a new shelf label which contains details of the goods, a bar code and the price. The method of fluid pricing enables the stores to pass price increased from their suppliers onto their customers increasing the profitability of the store.

Main: Human Computer Interfaces (HCI) Staff working in stores need to be protected agaisnt some of the medical problems caused by the use of ICT systems such as: Eye strain Back ache Repetitive strain injury Stress Stores have moved away from keyboards and towards laser scanners and touch screens for data entry.

Main: Loyalty cards E.g. Tesco club card Encourage customers to shop regularly at the store. To be able to communicate with customers you need their addresses. Each time the card is used, points are added. When the number of points earned reaches a certain value, customers are given vourchers. Loyalty cards case study p74

Practice Question Many supermarkets make use of ‘just in time’ for stock control. Explain how a ‘just in time’ stock control system works and discuss the advantages and disadvantages it offers to the store. (8) Many stores have a loyalty scheme to enable stores to find out more information about their customers. Explain how a loyalty card scheme works. (4) Give the name of the hardware device needed to read the information off the customer’s loyalty card. (1) The use of loyalty cards raises a number of security and privacy issues. Explain: One security issue One privacy issue (2)

Practice Questions 3. Bar coding is used extensively in stores for the recording of stock and purchases. Explain what a bar code is and how it is used in stores to record stock and sales (3) Explain three advantages to the store in using bar codes to record sales. (3) Explain one disadvantage in the store using bar codes (1) 4. Disucess the range of input devices used in supermarkets and other stores. In your discussion you should mention the hardware used, the data recorded and the information output and the relative merits and disadvantages compared to alternative methods of inputting the data (10).

Performing stock control linking to the POS terminal: When goods are scanned at checkout with the barcode they are deducted form stock. They are then automatically re-ordered from the warehouse using the sales-based information. E.g. if 200 tins of Beans were sold in one day then 200 would automatically be reordered and delivered the following day.