Bob Travica Class 17 Strategizing with IS: Electronic Commerce MIS 2000 Information Systems for Management Instructor: Bob Travica Updated 2014

Bob Travica 2 Outline Electronic commerce (E-commerce) Business-to-Consumer (B2C) E-Commerce Business-to-Business (B2B) E-Commerce Summary

Bob Travica 3 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. Supplier Organization Retailer/ Producer Web store Supplier Organization Consumer sell buy offer, sell demand, buy

Bob Travica Two main domains: - Business-to-Consumer (B2C), retail on the Internet via Web storefronts: Chapters.com - music, electronics; online sales process (outsourced)* is an addition to physical store - “click and mortar”.Chapters.com - Business-to-Business (B2B), buying & selling b/w firms via e-marketplaces/e-markets (Covisint, Freelancer.com)CovisintFreelancer.com directly (linking via EDI**, private nets or Internet; Dell, Cisco & shipping industry) Either can use mobile devices (mobile commerce) Domains of E-commerce Supplier Organization Web storefront Supplier Organization Consumer sell buy offer, sell demand, buy B2C B2B 4

Bob Travica 5 Web Retail (also called Web Storefront, Web Store, Online Store) Sells many goods & services online * Example: Amazon.com – “pure click”, no physical storesAmazon.com Amazon started as a bookstore and initiated the trend of web storefronts. Amazon was not profitable for years. Amazon captured large market share, increased product & service offerings, and became profitable. Amazon keeps improving business processes (sales, inventory) that are largely electronic (rested on various IS). Amazon’s customers are consumers with access to Internet around globe. Uses Interactive Marketing and Personalization.** Business Models for B2C E-commerce More

Bob Travica 6 Portal: Initial point of entry to Web, provides Internet search service for free; advertising revenues, may sell some services* & content (Google, Yahoo)GoogleYahoo 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) Business Models for B2C E-commerce

Bob Travica E-commerce Expands Customer Data 7 Customer Customer ID CustomerType IP-Address Tel-Number Catalog Search Customer ID Terms Searched Customer Movement Customer ID Web Pages Visited Screen Items Clicked Product ProductID Category Maker Customer Comparison Match Product Purchased Other Online Purchases ProductCategory New data, do not exist in classical marketing Tracking consumer behavior Support to cross-selling

Bob Travica 8 Boom , crash in 2001; pure vs. hybrid models About 15% of total retail sales in U.S. 2012, somewhat less in Canada * 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**) B2C E-commerce Benefits Web Store- front Browse products Buy Pay Product catalog Sales sys. Billing & Pay- ment systems Customer profiling Offering Clearing houses, Banks More

Bob Travica 9 Firm’s costs: - IS investments - Delivery, Logistics - Payment security - Legal boundaries - Competition increase - Invisible customer - Electronic branding Consumer’s costs: - IT have-nots - Privacy - Payment anxiety - Product testability & return B2C E-commerce Costs See footnote…

Bob Travica B2B E-Commerce 10 of 14 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: Inventory Buyer Purchasing Bank Production Scheduling Production Scheduling Supplier E-market Sales 1. Direct model 2. Mediated model

Bob Travica 11 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, more)CovisintB2BQuotemore Revenue: Membership fee, Transaction charge, Financial services, Product catalogue creation, Order fulfillment Mediated Model: E-Market

Bob Travica Firm’s Benefits: - Larger market - Savings from efficiencies in supply chain - Better coordination in supply chain - Dynamic pricing (auctions) - 24/7 business (via e-marketplaces) 12 B2B E-Commerce Benefits & Costs More See footnote… Firm’s 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)

Bob Travica 13 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.