1. CSC 601 Management Information Systems
Chapter 10
e-Commerce

2. Topics
Introduction
e-Commerce
m-Commerce
Payment systems

3. e-Commerce Today
Digitally enabled commercial transactions between and among organizations and individuals, primarily over Internet
Began in 1995 with Netscape.com’s acceptance of ads
Rapid growth led to dot-com bubble (burst in 2001)
Current growth 25% annually
Today e-Commerce revenues picture is very positive
E.g. Number of people who have purchased something online expanded to about 106 million in 2007

4. The Growth of e-Commerce
Retail e-commerce revenues have grown exponentially since 1995 and have only recently “slowed” to a 25% annual increase.

5. Unique Features of e-Commerce
1. Ubiquity
Internet technology available anytime and everywhere: work, home, mobile devices
Business significance:
Marketplace is extended beyond traditional boundaries and is removed from temporal and geographic location
Creates marketspace: Marketplace extended beyond traditional temporal, geographical boundaries
Shopping can take place anywhere - customer convenience is enhanced, shopping costs are reduced

6. Unique Features of e-Commerce
2. Global reach
Technology reaches across national boundaries, around earth
Business significance:
Commerce enabled across cultural and national boundaries seamlessly, without modification
Marketspace includes potentially billions of consumers and millions of businesses worldwide

7. Unique Features of e-Commerce
3. Universal Standards
There is one set of Internet technology standards
Business significance
Disparate computer systems can easily communicate
Brings lower market entry costs (costs merchants pay to bring goods to market)
Lowers search costs for consumers

8. Unique Features of e-Commerce
4. Richness
Video, audio, text messages are possible
Business significance: Video, audio, text integrated into single marketing message and experience
5. Interactivity
Technology works through interaction with user
Business significance: Consumers engaged in dialog that adjusts to individual; consumer is co-participant in delivering goods to market

9. Unique Features of e-Commerce
6. Information density
Technology reduces information costs and raises quality
Business significance:
Information becomes plentiful, cheap, and more accurate
Increases price transparency and cost transparency
Enables price discrimination

10. Unique Features of e-Commerce
7. Personalization/customization
Technology allows personalized messages to be delivered to individuals as well as groups
Permits customization - changing delivered product or service based on user’s preferences or prior behavior
Business significance
Personalization of marketing messages and customization of products and services are based on individual characteristics

11. Key Concepts in e-Commerce
Internet enables disintermediation
Disintermediation:
Removal of organizations or business process layers responsible for intermediary steps in value chain
Enables selling direct to consumer

12. The Benefits of Disintermediation to the Consumer
The typical distribution channel has several intermediary layers, each of which adds to the final cost of a product, such as a sweater. Removing layers lowers the final cost to the consumer.

13. Digital Goods Goods that can be delivered over network
E.g. Music tracks, video, e-books, software
Cost for producing first unit is nearly total cost of product. Cost for producing additional units very low
Impact of Internet on market for digital goods is revolutionary
Video rental services
Hollywood studios
Record label companies
Newspapers and magazines

14. Types of Internet Business Models
Pure-play
Based purely on Internet
Do not have bricks-and-mortar portion of business
E.g. Amazon.com, eBay.com, YouTube.com
Clicks-and-mortar
Internet presence is extension of bricks-and-mortar businesses
E.g. L.L.Bean, Office Depot, Wall Street Journal

15. Internet Business Models
Virtual storefront
Information broker
Transaction broker
Online marketplace
Content provider
Online service provider
Virtual community
Portal

16. Internet Business Models
Virtual storefront
Sell physical goods
Information broker
Provides product, pricing, availability information
Generates revenue from ads
E.g.
Transaction broker
Online sales transactions on behalf of other businesses
Generates revenue from transaction fees

17. Internet Business Models
Online marketplace
Provides digital environment where buyers and sellers can transact
Generates revenue from transaction fees
Content provider
Sells digital content (images, music, news, video etc)
Online service provider
Provides online services
Generates revenue from subscription fees, ads etc

18. Internet Business Models
Virtual community
Provides online meeting place
Generates revenue from ads
Portal
Provides initial point of entry to the web

19. Topics
Introduction
e-Commerce
m-Commerce
Payment systems

20. e-Commerce Categories
Business-to-Consumer (B2C)
E.g. Barnesandnoble.com
Business-to-Business (B2B)
E.g. ChemConnect.com
Consumer-to-Consumer (C2C)
E.g. eBay.com

21. Achieving Customer Intimacy
Interactive marketing & personalization
Corporate blogs
Customer self-service

22. Achieving Customer Intimacy
1. Interactive marketing and personalization
Enabled by gathering customer data from Web site registrations or activities
Clickstream tracking tools
Web pages can be tailored to customer preferences or interests
Collaborative filtering
Compares user information to data about other customers to make recommendations based on assumed interests

23. Website Personalization
Firms can create unique personalized Web pages that display content or ads for products or services of special interest to individual users, improving the customer experience and creating additional value.

24. Achieving Customer Intimacy
2. Corporate blogs:
Used as new channel for reaching customers, maintaining existing customers
Provide personal and conversational way for businesses to present information to the public and prospective customers about new products and services

25. Achieving Customer Intimacy
3. Customer self service:
Answer customer questions or to provide product information, reducing need for human customer-support experts
New software products can integrate Web with customer call centers
E.g. by directing representative to phone user regarding query

26. Customer Self-Service
Calculate delivery costs and track shipments.
Web sites for customer self-service are convenient for customers and help firms lower their customer service and support costs.

27. B2B e-Commerce New efficiencies and relationships
EDI (Electronic Data Interchange)
Automated exchange of standard business documents (e.g. invoices)
Each major industry has EDI standards
Internet used increasingly for EDI instead of private networks
Internet broadens circle of trading partners
E.g. For procurement, firms can use Internet to locate most low-cost suppliers

28. EDI
Companies use EDI to automate transactions for B2B e-commerce and continuous inventory replenishment. Suppliers can automatically send data about shipments to purchasing firms. The purchasing firms can use EDI to provide production and inventory requirements and payment data to suppliers.

29. Topics
Introduction
e-Commerce
m-Commerce
Payment systems

30. m-Commerce
Use of handheld wireless devices for purchasing goods and services from any location
m-Commerce services and applications
Popular for services that are time-critical, that appeal to people on the move, or that accomplish task more efficiently than other methods
Especially popular in Europe, Japan, South Korea, and countries where fees for conventional Internet usage are very expensive

31. m-Commerce Services & Applications
Content and location-based services
e.g. checking train schedules, searching for local businesses
Banking and financial services
e.g. wireless alerts about changes in account information
Wireless advertising
e.g. wireless service providers including advertising for local restaurants, movie theaters on cell phones and Wi-Fi devices
Games and entertainment
e.g. downloading ringtones, movie clips

32. Global m-Commerce Revenue
m-Commerce sales represent a small fraction of total e-Commerce sales, but that percentage is steadily growing.

33. m-Commerce Challenges m-Commerce will benefit from:
Keyboards and screens tiny and awkward to use
Data transfer speeds (2G networks) slow compared to Internet connections for PCs
Time-based connection fees
Limited memory and power supplies
m-Commerce will benefit from:
3G networks and other broadband services
Standardized mobile payment systems

34. Topics
Introduction
e-Commerce
m-Commerce
Payment systems

35. Electronic bill presentment & payment
Payment Systems
Payment System
Description
Digital credit card
Secure services for credit card payments
Digital wallet
Software that stores credit card and other information (i.e. Google Checkout)
Accumulated balance
Accumulates micropayment (less than $10) purchases as a debit balance that must be paid periodically
Stored value
Enables consumers to make instant payments to merchants through a digital account (i.e. a smart card) (also for micropayments)
Digital cash
Digital currency that can be used for micro or larger purchases
Peer-to-peer
Sends money using the Web to individuals or vendors who are not set up to accept credit card payments
Digital checking
Electronic check with a secure digital signature
Electronic bill presentment & payment
Used for paying routine monthly bills from bank or credit card accounts

36. In-Class Exercise (Q)
What type of payment systems do the following companies offer?
PayPal.com
CheckFree.com

37. Links & Resources E-Commerce Journal PayPal Buyer Protection
PayPal Buyer Protection

38. Video Case
Lands’ End Information Systems

39. Key Terms B2B B2C C2C Clicks-and-mortar Customization Digital goods
Disintermediation
e-Commerce
EDI
Electronic payment systems
Internet business models
m-Commerce
Micropayment
Personalization
Podcasting
Pure play
Self-service
Syndicators