1. Chapter 11:
E-Commerce

2. 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. Learning Objectives
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. 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. What Is E-Commerce?
E-commerce: Act of doing business transactions over the Internet or similar communications technology
Has existed for years via private networks (electronic funds transfers, etc.)
Now typically performed via the Internet
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 is also on the rise

6. Advantages of E-Commerce
For businesses:
Reduced costs
Dot-coms are less expensive than brick-and-mortar stores because there is no physical storefront to maintain
Increased customer satisfaction
If shopping experience is convenient (open all the time, no driving, etc.)
Broader customer base (less geographical restrictions)
More effective sales and marketing tools (personalized s, customer relationship management tools, etc.)
Potentially higher sales

7. Advantages of E-Commerce
For 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
Customized products

8. Advantages of E-Commerce

9. Disadvantages of E-Commerce
For businesses:
Pressure to be always open, site always working
Lost business due to some customer hesitation to shop online
Risk of fraudulent credit card transactions
Ease of entry for competitors

10. Disadvantages of E-Commerce
For customers:
Fraud and other potential security problems
Buyer protection programs and using credit cards can help
Not being able to see or touch the goods
3D online stores may help
Possible expense of returning merchandise

11. Types of E-Commerce Web Sites
Manufacturer and e-tailer Web sites: Sell products and services directly to the end user

12. Types of E-Commerce Web Sites
Brokerage sites: Bring buyers and sellers together and earn revenue by charging commissions on sales made via the site
Online auction sites: Allow individuals to 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

13. Types of E-Commerce Web Sites

14. Types of E-Commerce Web Sites
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. E-Commerce Business Models
Business model: The policies, operations, and technologies used by a business in order to generate revenue
E-commerce business model: Description of the types of buyers and sellers in an e-commerce company, such as 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 (consumer-to-government - C2G)
Intermediary hub model
Vertical hub
Horizontal hub

16. Implementing Web-Based E-Commerce
Step 1: Select appropriate business models and types of Web sites
More than one can be selected
Some businesses add additional types later on
Some business models are patented
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

17. Implementing Web-Based E-Commerce

18. Implementing Web-Based E-Commerce
Step 3: Develop procedures for handling electronic financial transactions
Need to determine which types will be accepted
Most sites accept credit cards; debit cards too

19. Implementing Web-Based E-Commerce
Customers can use virtual account numbers, and prepaid credit cards to limit risk and liability
Digital cash options include:
Electronic checks: Funds come out of customer’s checking account
Online payment accounts (such as PayPal): 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
Some transactions require a fee
Can add or remove funds as needed
Electronic gift certificates, gift cards, and coupons: Appropriate codes are entered into the Web site at time of purchase

20. Implementing Web-Based E-Commerce

21. Implementing Web-Based E-Commerce
Smart cards: Can hold a cash value
For Web purchases, typically read by readers attached to a PC
Many credit cards and campus IDs are smart cards
Many can be used with NFC technology
Smart card readers may become common on vending machines, in taxis, and other public locations

22. Implementing Web-Based E-Commerce
Digital wallet: Electronic file that holds information to speed online transactions
Can hold credit card numbers, passwords, address, etc. to be used in e-commerce transactions
Third-party digital wallets: Standalone programs that automatically or manually transfer necessary information 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

23. Implementing Web-Based E-Commerce

24. Implementing Web-Based E-Commerce
Special B2B considerations because of the volume of B2B transactions
B2B transaction processing
Allows merchants to customize their payment processing plans to fit their needs
Credit card, debit card, check, and digital cash settlement
Credit checking
Expense tracking
Electronic billing
Payment settlement compatible with other widely used systems
Consolidation and reconciliation services
Escrow services

25. Implementing Web-Based E-Commerce
Order-fulfillment companies
Take care of physically filling orders for a business including:
Order management
Distribution
CRM services
Marketing tools
E-fulfillment strategic planning
Integration with existing systems

26. Implementing Web-Based E-Commerce
Step 4: Design and develop an effective Web site
Sites should be carefully designed, developed, and tested
Sites should use adequate security measures
Should be attractive, fast loading, and easy to use
Make checkout process easy to use to reduce shopping cart abandonment
Consider adding statements to encourage trust
E-commerce features can be created 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

27. Implementing Web-Based E-Commerce

28. Implementing Web-Based E-Commerce

29. Implementing Web-Based E-Commerce
Step 5: Implement appropriate sales and marketing strategies
Include adequate customer service features
Collect taxes from customers only 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

30. Implementing Web-Based E-Commerce
Promote your Web site sufficiently
Use appropriate meta tags (description, keywords)

31. Implementing Web-Based E-Commerce
Submit your site to search sites
Consider paying for sponsored listings on search sites
Consider using banner ads
Use of rich media ads is growing
Can display sponsor banner ads on site
Can place banner ads on other sites
Use of behavioral (targeted) ads is growing
Update your site regularly and consider adding incentives for return visits (contests, coupons, etc.) 31

32. Implementing Web-Based E-Commerce

33. 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)

34. Summary What Is E-Commerce? Types of E-Commerce Web Sites
E-Commerce Business Models
Implementing Web-Based E-Commerce
Security Issues