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

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CSC 601Management Information Systems

Chapter 10

e-Commerce

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Topics

• Introduction

• e-Commerce

• m-Commerce

• Payment systems

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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

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

The Growth of e-Commerce

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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

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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

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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

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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

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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

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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

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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

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The Benefits of Disintermediation to the ConsumerThe 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.

Disintermediation

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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

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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

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Internet Business Models

1. Virtual storefront

2. Information broker

3. Transaction broker

4. Online marketplace

5. Content provider

6. Online service provider

7. Virtual community

8. Portal

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1. Virtual storefront– Sell physical goods– www.amazon.com

2. Information broker– Provides product, pricing, availability information– Generates revenue from ads– E.g. www.edmunds.com

3. Transaction broker– Online sales transactions on behalf of other businesses– Generates revenue from transaction fees– www.expedia.com

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4. Online marketplace– Provides digital environment where buyers and sellers can

transact– Generates revenue from transaction fees– www.ebay.com

5. Content provider– Sells digital content (images, music, news, video etc)– www.itunes.com

6. Online service provider– Provides online services– Generates revenue from subscription fees, ads etc– www.salesforce.com

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7. Virtual community– Provides online meeting place– Generates revenue from ads– www.ivillage.com

8. Portal– Provides initial point of entry to the web– Generates revenue from ads– www.yahoo.com

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Topics

• Introduction

• e-Commerce

• m-Commerce

• Payment systems

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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

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Achieving Customer Intimacy

1. Interactive marketing & personalization

2. Corporate blogs

3. Customer self-service

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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

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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.

Website Personalization

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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

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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

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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.

Customer Self-Service

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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

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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.

EDI

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Topics

• Introduction

• e-Commerce

• m-Commerce

• Payment systems

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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

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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

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

Global m-Commerce Revenue

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m-Commerce

• Challenges– 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

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Topics

• Introduction

• e-Commerce

• m-Commerce

• Payment systems

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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

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In-Class Exercise (Q)

What type of payment systems do the following companies offer?

a) PayPal.com

b) CheckFree.com

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Links & Resources

• E-Commerce Journal– http://ecommerce-journal.com/categories/payment_systems

• PayPal Buyer Protection– www.paypal.com/cgi-bin/webscr?cmd=_pbp-info-outside

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Video Case

• Lands’ End Information Systems

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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

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

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