1. Electronic Commerce: Applications and Issues
Class 3
Dr. Zakariya Belkhamza

2. LEARNING OBJECTIVES
Describe electronic commerce, including its scope, benefits, limitations, and types.
Distinguish between pure and partial electronic commerce.
Understand the basics of how online auctions work.

3. LEARNING OBJECTIVES (continued)
Differentiate among business-to- consumer, business-to-business, consumer-to-consumer, business-to- employee and government-to-citizen electronic commerce.
Describe the major e-commerce support services, specifically payments and logistics.
Discuss some ethical and legal issues relating to e-commerce.

4. 6.1 Overview Electronic Commerce (E-Commerce, EC) E-Business
Electronic commerce (e-commerce, EC) describes the buying, selling, transferring or
exchanging of products, services or information via computer networks, including the Internet.
E-business is a broader definition of EC, including buying and selling of goods and services,
and also servicing customers, collaborating with partners, conducting e-learning and conducting
electronic transactions within an organization.

5. Overview (continued)
Pure versus Partial Electronic Commerce depends on the degree of digitization involved.
Brick-and-mortar organizations
Virtual organizations
Click-and-mortar organizations
Pure vs. Partial EC
--The product can be physical or digital.
--The process can be physical or digital.
--The delivery agent can be physical or digital.
Brick-and-mortar organizations are purely physical organizations.
Virtual organizations are companies that are engaged only in EC. (Also called pure play)
Click-and-mortar organizations are those that conduct some e-commerce activities, yet their
business is primarily done in the physical world. i.e. partial EC.

6. Bricks and Mortar, Partial EC, and Pure EC
Order physical book from Amazon:
partial EC
Order and download book from Amazon: pure EC
Buy books at university bookstore:
bricks and mortar

7. Types of E-Commerce Business-to-Consumer (B2C)
Business-to-Business (B2B)
Consumer-to-Consumer (C2C)
Business-to-Employee (B2E)
E-Government
Mobile Commerce (m-commerce)
Business-to-consumer (B2C): the sellers are organizations and the buyers are individuals.
Business-to-business (B2B): both the sellers and buyers are business organizations.
B2B represents the vast majority of e-commerce.
Consumer-to-consumer (C2C): an individual sells products or services to other individuals.
Business-to-employee (B2E): An organization uses e-commerce internally to provide information
and services to its employees. Companies allow employees to manage their benefits, take training classes electronically as well as buy discounted insurance, travel packages, and event tickets.
E-Government: the use of Internet Technology in general and e-commerce in particular to deliver
information about public services to citizens (called Government-to-citizen [G2C EC]), business partners
and suppliers (called government-to-business [G2B EC]),
Mobile Commerce (m-commerce) refers to e-commerce that is conducted in a wireless environment.
For example, using a cell phone to shop over the Internet.

8. E-Commerce Business Models (continued)
Product customization
Deep discounters
Membership
Product customization: customers use the Internet to self-configure products or services.
Sellers then price them and fulfill them quickly.
Deep discounters: company offers deep price discounts.
Membership: only members can use the services provided.
Note: clicking on the images above will take you to the respective Web pages.
(We address Electronic marketplaces and exchanges in later PowerPoints.)

9. Major E-Commerce Mechanisms
Auctions Forward Auctions Reverse Auctions
An auction is a competitive process in which either a seller solicits consecutive
bids from buyers or a buyer solicits consecutive bids from sellers.
Sellers use a forward auction as a channel to many potential buyers. Note that
Sotheby’s uses forward auctions.
In reverse auctions, one buyer, usually an organization, wants to buy a product
or a service. The buyer posts a request for quotation (RFQ) on its Web site
or on a third-party Web site. The RFQ contains detailed information on the
desired purchase. Suppliers study the RFQ and submit bids, and the lowest
bid wins the auction.
Slides of electronic storefronts, electronic malls, and electronic marketplaces are in subsequent sections

10. Forward and Reverse Auctions
Bid price
Bid price
In general, forward auctions result in higher prices over time, where
reverse auctions result in lower prices over time.
Time
Time
Forward Auction
Reverse Auction

11. Benefits of E-Commerce
Benefits to organizations
Makes national and international markets more accessible
Lowering costs of processing, distributing, and retrieving information
Benefits to customers
Access a vast number of products and services around the clock (24/7/365)

12. Benefits of E-Commerce (continued)
Benefits to Society
Ability to easily and conveniently deliver information, services and products to people in cities, rural areas and developing countries.

13. Limitations of E-Commerce
Technological Limitations
Lack of universally accepted security standards
Insufficient telecommunications bandwidth
Expensive accessibility
Non-technological Limitations
Perception that EC is unsecure
Unresolved legal issues
Lacks a critical mass of sellers and buyers

14. Business-to-Consumer (B2C) Electronic Commerce
Electronic storefronts
Electronic malls
An electronic storefront is a Web site that represents a single store.
Electronic malls are collections of individual shops under a single Internet address.
Note: clicking on the images above will take you to the respective Web sites.

15. Online Service Industries
A key issue is disintermediation
Online service involves customers accessing services via the Web.
Intermediaries or middlemen provide information and/or provide value-added services.
When the function(s) of these intermediaries can be automated or eliminated, this
process is called disintermediation.

16. Issues in E-Tailing Channel conflict Order fulfillment
Channel conflict occurs when manufacturers disintermediate their channel partners,
such as distributors, retailers, dealers, and sales representatives, by selling
their products directly to consumers, usually over the Internet through electronic
commerce.
Multichanneling is a process in which a company integrates its offline and online channels.
Order fulfillment involves finding the product to be shipped; packaging the product; arrange
for speedy delivery to the customer; and handle the return of unwanted or defective products.

17. Online Advertising Advertising Online Advertising methods Banners
Pop-up ad
Pop-under ad
Permission marketing
Viral marketing
Advertising is an attempt to disseminate information in order to influence a
buyer-seller transaction.
Banners are simply electronic billboards.
Pop-up ad appears in front of the current browser window.
Pop-under ad appears underneath the active window.
Permission marketing asks consumers to give their permission to voluntarily accept online advertising and .
Viral marketing refers to online “word-of-mouth” marketing.

18. A closer look at Online Advertising
“We must accept the fact that there is no ‘mass’ in ‘mass media’ anymore.” Jim Stengel, Global Marketing, Proctor & Gamble.
“TV networks face upheaval because of ever- increasing incursions from digital media like Internet sites.” Jeff Zucker, chief executive of the NBC Universal Television Group.
“We never know where the consumer is going to be at any point in time, so we have to find a way to be everywhere. Ubiquity is the new exclusivity.” Linda Kaplan Thuler, Chief Executive at the Kaplan Thaler Group, a New York ad agency.

19. Drivers of today’s online advertising
The emergence of “communitainment.”
The increasing popularity of Usites.
Mainstreaming of the Internet.
Declining usage of traditional media.
Fragmentation of content consumption.
Consumers are multitasking and they do not like ads.
PiperJaffray is an investment bank. See PiperJaffray at
Source: PiperJaffrey

20. Communitainment
PiperJaffray, an investment bank, defines communitainment as the blending of community, communication, and entertainment into a new form of online activity driven by consumers.  
The bank predicts that consumers will shift more than 50% of their content consumption over the next decade to communitainment formats (e.g., social networking, video, and photo sharing sites), displacing traditional forms of media content like TV, magazines, and large Internet sites. 
This trend presents a major challenge for advertisers.

21. Eight Types of Web sites for Advertising
Portals: most popular; best for reach but not targeting
Search: second largest reach; high advertising value
Source: PiperJaffray

22. Eight types of sites (continued)
Commerce: high reach; not conducive to advertising
Entertainment: large reach; strong targetability
Mall of Hawai’i

23. 6.3 Business-to-Business (B2B) Electronic Commerce
In B2B e-commerce, the buyers and sellers are organizations.

24. B2B Sell-Side Marketplace
Key mechanisms: electronic catalogs and forward auctions
In the sell-side marketplace, organizations sell their products or services to other organizations
Electronically from their own Web site and/or from a third-party Web site.
This model is similar to the B2C model in which the buyer comes to the seller’s site, views
catalogs, and places an order. In the B2B sell-side marketplace, the buyers are organizations.

25. B2B Buy-Side Marketplace
Key mechanism: reverse auctions
The buy-side marketplace is a model in which organizations buy needed products and
services from other organizations electronically.

26. Electronic Exchanges
Exchanges have many buyers and many sellers.

27. 6.4 Electronic Payments
Electronic payment systems enable you to pay for goods and services electronically.
Electronic checks (e-checks)
Electronic credit cards
Purchasing cards
Electronic cash
Stored-value money cards
Smart cards
Person-to-person payments
Electronic checks (e-checks) are similar to paper checks and are used mostly in B2B.
Electronic credit cards allow customers to charge online payments to their credit card account.
Purchasing cards are the B2B equivalent of electronic credit cards and are typically used for unplanned B2B purchases.
Electronic cash
Stored-value money cards allow you to store a fixed amount of prepaid money and then spend it as necessary.
Smart cards contain a chip called a microprocessor that can store a considerable amount of information and are multipurpose – can be used as a debit card, credit card or a stored-value money card.
Person-to-person payments are a form of e-cash that enables two individuals or an individual and a business to transfer funds without using a credit card.

28. How E-Credit Cards Work

29. Ethical and Legal Issues
Ethical Issues
Privacy
Disintermediation
Privacy: ecommerce provides opportunities for businesses and employers to track individual activities on the WWW using cookies or special spyware. This allows private/personal information to be tracked, compiled, and stored as an individual profile. This profile can be used or sold to other businesses for target marketing or by employees to aide in personnel management decisions (i.e., promotions, raises, layoffs).
Disintermediation: middlemen or intermediaries (1) provide information, and (2) perform value-added services such as consulting. The first function can be fully automated, and the second can be partially automated through e-marketplaces and portals for free thereby causing job loss among intermediaries.

30. Legal Issues Specific to E-Commerce
Fraud on the Internet Domain Names Domain Tasting Cybersquatting Taxes and other Fees Copyright
Fraud on the Internet i.e. stocks, investments, business opportunities, auctions.
Domain Names problems with competition.
Domain Tasting is a practice of registrants using the five-day "grace period" at the beginning of a domain registration to profit from pay-per-click advertising.
Cybersquatting refers to the practice of registering domain names solely for the purpose of selling them later at a higher price.
Taxes and other Fees when and where (and in some cases whether) electronic sellers should pay business license taxes, franchise fees, gross-receipts taxes, excise taxes, …etc.
Copyright protecting intellectual property in e-commerce and enforcing copyright laws is extremely difficult.