1 Chapter 11 Understanding Computers, 11 th Edition 11 E-Commerce TODAY AND TOMORROW 11 th Edition CHAPTER

2 Chapter 11 Understanding Computers, 11 th Edition Learning Objectives Explain what e-commerce is and describe some of the benefits and risks involved with implementing e- commerce. Discuss the types of Web sites that can be used to implement e-commerce. Identify a variety of e-commerce business models and discuss their similarities and differences.

3 Chapter 11 Understanding Computers, 11 th Edition Learning Objectives, Cont’d List several strategies for implementing e-commerce using the Web, including some of the decisions that need to be made, the options available for accepting payments, and the process of designing and developing an effective Web site. Outline some sales and marketing strategies that can be used in conjunction with an e-commerce Web site. Discuss some security issues related to e-commerce transactions

4 Chapter 11 Understanding Computers, 11 th Edition Overview This chapter covers: Potential advantages and disadvantages of e-commerce Types of e-commerce Web sites and e-commerce business models Steps for implementing Web-based e-commerce Sales and marketing strategies for e-commerce Web sites E-commerce security issues

5 Chapter 11 Understanding Computers, 11 th Edition What Is E-Commerce? E-commerce: act of doing business transactions over the Internet or similar technology E-commerce in the U.S. has continued to grow at a steady pace M-commerce (mobile commerce) is growing U-commerce (universal commerce) trend being strongly supported by Visa is on the rise

6 Chapter 11 Understanding Computers, 11 th Edition Advantages of E-Commerce To businesses Reduced costs Dot-coms are less expensive than brick-and- mortar store because there is no physical storefront to maintain Increased customer satisfaction If shopping experience is convenient (open all the time, no driving, etc. More effective sales and marketing tools (personalized s, customer relationship management tools, etc.) Potentially higher sales

7 Chapter 11 Understanding Computers, 11 th Edition Advantages of E-Commerce, Cont’d To customers Convenience Easier comparison shopping Higher number of merchants to choose from Geographical location is not an issue Shopping bots and other comparison shopping tools are available Higher degree of selection Potential cost savings

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9 Disadvantages of E-Commerce To businesses Pressure to be “always open” Lost business due to customer hesitation to shop online Risk of fraudulent credit card transactions Ease of entry for competitors

10 Chapter 11 Understanding Computers, 11 th Edition Disadvantages of E-Commerce, Cont’d To customers Fraud and other potential security problems Not being able to see or touch the goods Possible expense to the customer of returning merchandise

11 Chapter 11 Understanding Computers, 11 th Edition Types of E-Commerce Web Sites Manufacturer and e-tailer sites: sell products and services directly to the end user

12 Chapter 11 Understanding Computers, 11 th Edition Types of E-Commerce Web Sites, Cont’d Brokerage sites: sites that bring buyers and sellers together Online auction sites: sites where individuals auction products to other individuals Buyers bid and highest bidder at the time the auction closes buys the item Seller pays a listing fee and a selling fee based on the final price Sellers set the starting bid and can specify a minimum sales price Many sites bid automatically for each bidder up to his or her maximum stated price

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14 Chapter 11 Understanding Computers, 11 th Edition Types of E-Commerce Web Sites, Cont’d Brokerage sites, cont’d Financial brokerage sites (allow individuals to sell stocks, bonds, etc. Market and commodity exchange sites (match up buyers and sellers of commodities, such as equipment, energy, cattle, etc.

15 Chapter 11 Understanding Computers, 11 th Edition E-Commerce Business Models Business model: description of how a company does business E-commerce business model: description of the types of buyers and sellers in an e-commerce company, such B2B, B2G, and so forth Business-to-consumer (B2C) model Business-to-business (B2B) model Consumer-to-consumer (C2C) model Business-to-government (B2G) model Intermediary hub model Vertical hub Horizontal hub

16 Chapter 11 Understanding Computers, 11 th Edition Implementing Web-Based E-Commerce Step 1: Select appropriate business models and types of Web sites More than one model and type of Web site can be selected Some businesses at additional types later on Step 2: Select the desired e-commerce applications Determine electronic customer relationship management (eCRM) activities to be included Determine which other business systems the Web site will be linked to

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18 Chapter 11 Understanding Computers, 11 th Edition Implementing Web-Based E-Commerce, Cont’d Step 3: Develop procedures for handling electronic financial transactions Need to determine which types will be accepted Most sites accept credit cards

19 Chapter 11 Understanding Computers, 11 th Edition Implementing Web-Based E-Commerce, Cont’d Other digital cash options include: Electronic checks: funds come out of customer’s checking account Online payment accounts (such as PalPal): funds can be transferred to others from the customer’s account Can transfer funds ahead of time or have money transferred from a credit card or bank account as needed

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21 Chapter 11 Understanding Computers, 11 th Edition Implementing Web-Based E-Commerce, Cont’d Other digital cash options, cont’d Electronic gift certificates, gift cards, and coupons Appropriate codes are entered into the Web site at time of purchase Smart cards: holds a cash value Typically read by readers attached to a PC Smart card readers may become common on vending machines, in taxis, and other public locations

22 Chapter 11 Understanding Computers, 11 th Edition Implementing Web-Based E-Commerce, Cont’d Other digital cash options, cont’d Digital wallets: electronic file that holds information to speed online transactions Can hold credit card numbers, passwords, address, etc. to be automatically or manually transferred to an online order form as needed Site-specific digital wallets store this information for each customer on a business’ Web server for use with purchases on that site only

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24 Chapter 11 Understanding Computers, 11 th Edition Implementing Web-Based E-Commerce, Cont’d Special considerations for B2B financial transactions: because of the volume of transactions businesses may consider using: B2B transaction processing Can take care of transaction processing for a business, including processing payments, electronic billing, etc. Order-fulfillment companies Take care of physically filling orders for a business including order management, distribution, CRM services, etc.

25 Chapter 11 Understanding Computers, 11 th Edition Implementing Web-Based E-Commerce, Cont’d Step 4: Design and develop an effective Web site Sites should be carefully designed Can consider using: Storefront software: facilitates the creation of an online store (either packaged or Web- based) Shopping cart software: designed to add only ordering capabilities to an existing Web site

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27 Chapter 11 Understanding Computers, 11 th Edition Implementing Web-Based E-Commerce, Cont’d Step 5: Implement appropriate sales and marketing strategies Include adequate customer service features Collect taxes from customers if required by law Display a privacy policy and security statement Use an appropriate domain name and URL URL should be easy to remember and type Visitors should not have to type a page name (such as index.html) to view the home page of the site

28 Chapter 11 Understanding Computers, 11 th Edition Implementing Web-Based E-Commerce, Cont’d Step 5: Implement appropriate sales and marketing strategies, cont’d Promote your Web site sufficiently Use appropriate meta tags Submit your site to search sites Consider paying for sponsored listings on search sites Consider using banner ads on other sites Update your site regularly and consider adding incentives for return visits (contests, coupons, etc.)

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30 Chapter 11 Understanding Computers, 11 th Edition Implementing Web-Based E-Commerce, Cont’d Step 5: Implement appropriate sales and marketing strategies, cont’d Data warehousing and mining Data warehouse: a collection of data about a company and its customers Data mining: the use of intelligent software to analyze a data warehouse to find patterns and relationships that would not otherwise be obvious

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32 Chapter 11 Understanding Computers, 11 th Edition Security Issues Security is essential for e-commerce Web sites Some guidelines for e-commerce sites: Secure financial transactions (use a secure Web server) Secure sensitive documents and files (use encryption) Authenticate online business partners (use digital certificates and digital signatures)

33 Chapter 11 Understanding Computers, 11 th Edition Summary What Is E-Commerce? Types of E-Commerce Web Sites E-Commerce Business Models Implementing Web-Based E-Commerce Security Issues