1. 10.1 © 2010 by Prentice Hall E-Commerce: Digital Markets, Digital Goods

2. 10.2 © 2010 by Prentice Hall LEARNING OBJECTIVES Identify the unique features of e-commerce, digital markets, and digital goods. Describe how Internet technology has changed business models. Identify the various types of e-commerce and explain how e-commerce has changed consumer retailing and business-to-business transactions. Evaluate the role of m-commerce in business, and describe the most important m-commerce applications. Identify the principal payment systems for electronic commerce.

3. 10.3 © 2010 by Prentice Hall Electronic Commerce and the Internet E-commerce Use of the Internet and Web to transact business Digitally enabled transactions History of e-commerce Began in 1995 and grew exponentially; still growing at an annual rate of 16 percent Rapid growth led to market bubble While many companies failed, many survived with soaring revenues E-commerce today the fastest growing form of retail trade in U.S., Europe, Asia

4. 10.4 © 2010 by Prentice Hall Retail e-commerce revenues have grown exponentially since 1995 and have only recently “slowed” to a very rapid 16 percent annual increase, which is projected to remain the same until 2010. The Growth of E-Commerce

5. 10.5 © 2010 by Prentice Hall Eight unique features of e-commerce technology 1.Ubiquity Internet/Web technology available everywhere. It make possible to shop from desktop at work, home, etc., and anytime. Market place extended beyond traditional boundaries and remove temporal and geographical location. Reduce transaction cost. 2.Global reach The technology permits commercial transactions to cross cultural and national boundaries far more conveniently and cost effectively than traditional commerce. Electronic Commerce and the Internet

6. 10.6 © 2010 by Prentice Hall Eight unique features (cont.) 3.Universal standards One set of technology standards: Common Internet standards shared by all nations around the world and enable any computer to link any other computer regardless of the technologies differ from one nation to the next. Ensure lower market cost- the merchants pay simply to bring good to market. At the same time universal standards reduce search cost. 4Richness Web makes it possible to deliver rich message with text, audio, and video simultaneously to largely numbers of people 5.Interactivity It allow both way communication. The technology works through interaction with the user Electronic Commerce and the Internet

7. 10.7 © 2010 by Prentice Hall Eight unique features (cont.) 6Information density Vast increases in information density—the total amount and quality of information available to all market participants. E-commerce reduce collection, storage, processing, and communication costs while greatly increasing currency, accuracy, and timeliness of information. Ensure price cost, transparency. 7Personalization/Customization: Technology permits modification of messages, goods 8Social technology The technology promotes user content generation and social networking Electronic Commerce and the Internet

8. 10.8 © 2010 by Prentice Hall Key concepts in e-commerce Digital markets reduce Information asymmetry : One party in transaction has more information than other party. Flexibility & efficiency ensure lower search and transaction cost, lower Menu cost ( merchants'’ cost of changing price), also price discrimination. Digital markets enable Dynamic pricing, the price of a product varies depending on the demand characteristics of the customer or the supply situation of the seller Disintermediation : remove organizational process layer for intermediary steps in value chain. Electronic Commerce and the Internet

9. 10.9 © 2010 by Prentice Hall 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. The Benefits of Disintermediation to the Consumer

10. 10.10 © 2010 by Prentice Hall Key concepts in e-commerce (cont.) Digital goods Goods that can be delivered over a digital network E.g., Music tracks, video, software, newspapers, books Cost of producing first unit almost entire cost of product: marginal cost of producing 2 nd unit is about zero Costs of delivery over the Internet very low Marketing costs remain the same; pricing highly variable Industries with digital goods are undergoing revolutionary changes (publishers, record labels, etc.) Electronic Commerce and the Internet

11. 10.11 © 2010 by Prentice Hall Internet business models Social Network Expanding the number of one’s business or social contacts by making connections through individuals. Link people through their mutual business or personal connection, enabling them to mine friends for sales leads, job-hunting tips, awareness program or new friends etc. Online meeting place Social shopping sites Can provide ways for corporate clients to target customers through banner ads and pop-up ads Online marketplace: Provides a digital environment where buyers and sellers can meet, search for products, display products, and establish prices for those products Electronic Commerce and the Internet

12. 10.12 © 2010 by Prentice Hall Content provider Providing digital content, such as digital news, music, photos, or video, over the Web. Games.com, iTunnes etc. Online syndicators: Aggregate content from multiple sources, package for distribution, and resell to third-party Web sites Service provider Photo-bucket for photo-sharing, youtube for video sharing, Xdrive for storage facilities. Portal “Supersite” that provides comprehensive entry point for huge array of resources and services on the Internet. Yahoo, MSN etc Electronic Commerce and the Internet

13. 10.13 © 2010 by Prentice Hall Virtual storefront: Sells physical products directly to consumers or to individual businesses. amazon.com Information broker: Provides product, pricing, and availability information to individuals and businesses. Kbb.com Transaction broker: Saves users money and time by processing online sales transactions and generating a fee for each transaction. Etrade.com Electronic Commerce and the Internet

14. 10.14 © 2010 by Prentice Hall Types of Electronic Commerce Business-to-consumer (B2C) : Involves retailing products and services to individual. Amazom.com Business-to-business (B2B) Involves sales of goods and services among business. chemconnect.com which buy & sale gas liquid and refined and intermediate fuels, chemicals. Consumer-to-consumer (C2C) Involves consumers selling directly to consumers. Ebay.com

15. 10.15 © 2010 by Prentice Hall Interactive marketing and personalization Clickstream tracking tools: Collect data on customer activities at Web sites The tools record the site visited, where the users go when they leave the site. Also record the specific pages visited, the time spent, what the visitor purchased or downloaded. Firms analyze the information about customer interests and behavior to develop precise profiles of existing and potential customers. Collaborative filtering: A technique for web personalization that Compares customer data to other customers to make product recommendations Achieving customer Intimacy

16. 10.16 © 2010 by Prentice Hall E-commerce Web sites have tools to track a shopper’s every step through an online store. Close examination of customer behavior at a Web site selling women’s clothing shows what the store might learn at each step and what actions it could take to increase sales. Web Site Visitor Tracking

17. 10.17 © 2010 by Prentice Hall Blogs Personal web pages that contain series of chronological entries by author and links to related Web pages Has increasing influence in politics, news Corporate blogs: New channels for reaching customers, introducing new products and services Blog analysis by marketers Customer self-service Web sites and e-mail to answer customer questions or to provide customers with product information Reduces need for human customer-support expert

18. 10.18 © 2010 by Prentice Hall Electronic data interchange (EDI) Computer-to-computer exchange of standard transactions such as invoices, purchase orders Transactions are automatically transmitted from one information system to another through a network, eliminating the printing and handling of paper at one end and the inputting of data at the other EDI standards that define structure and information fields of electronic documents for that industry. More companies increasingly moving away from private networks to Internet for linking to other firms B2B e-commerce: New efficiencies and relationships

19. 10.19 © 2010 by Prentice Hall 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. Electronic Data Interchange (EDI)

20. 10.20 © 2010 by Prentice Hall Private industrial networks (private exchanges) Large firm using extranet to link to its suppliers, distributors and other key business partners Owned by buyer Permits sharing of: Product design and development Marketing Production scheduling and inventory management Unstructured communication (graphics and e-mail) Electronic Commerce

21. 10.21 © 2010 by Prentice Hall A private industrial network, also known as a private exchange, links a firm to its suppliers, distributors, and other key business partners for efficient supply chain management and other collaborative commerce activities. A Private Industrial Network

22. 10.22 © 2010 by Prentice Hall Net marketplaces (e-hubs) Single market for many buyers and sellers Industry-owned or owned by independent intermediary Generate revenue from transaction fees, other services Use prices established through negotiation, auction, RFQs, or fixed prices May focus on direct or indirect goods May support long-term contract purchasing or short-term spot purchasing

23. 10.23 © 2010 by Prentice Hall Net marketplaces are online marketplaces where multiple buyers can purchase from multiple sellers. A Net Marketplace

24. 10.24 © 2010 by Prentice Hall M-Commerce M-commerce services and applications Although m-commerce represents small fraction of total e-commerce transactions, revenue has been steadily growing Location-based services Banking and financial services Wireless Advertising Games and entertainment

25. 10.25 © 2010 by Prentice Hall M-commerce sales represent a small fraction of total e-commerce sales, but that percentage is steadily growing. Global M-commerce Revenue 2000-2012

26. 10.26 © 2010 by Prentice Hall Limitations in mobile’s access of Web information Data limitations Small display screens Lower memory capacity M-Commerce

27. 10.27 © 2010 by Prentice Hall Types of electronic payment systems Digital wallet DW make paying for purchase over web more efficiently by eliminating the need shoppers to enter their address and card info repeatedly each time the buy something. Software that resides on a buyer's computer and holds digital cash, and a digital certificate with a digital signature, as well as billing, shipping, and payment information for online transactions is called Digital wallet. Google Checkout is an example Accumulated balance digital payment systems Systems enabling users to make micro-payments and purchases on the Web, accumulating a debit balance that they pay periodically on their credit card or telephone bills. Electronic Commerce Payment Systems

28. 10.28 © 2010 by Prentice Hall Electronic Commerce Payment Systems Stored value payment systems Enable consumers to make instant online payments to merchants and other individuals based on value stored in online digital account. Like peer-to-peer as PayPal. Digital checking As PayByCheck Extend functionality of existing checking accounts to be used for online payments. Electronic billing presentment and payment systems Are used for Paying monthly bills through electronic fund transfers or credit cards

29. 10.29 © 2010 by Prentice Hall Digital payments systems for m-commerce Three types of mobile payment systems Stored value system charged by credit cards or bank accounts Mobile debit cards (Tied with personal Bank Account) Mobile credit cards In the U.S., the cell phone has not yet evolved into a mobile payment system Electronic Commerce Payment Systems