Presentation on theme: "E-Commerce: Digital Markets, Digital Goods"— Presentation transcript:
1 E-Commerce: Digital Markets, Digital Goods Chapter4E-Commerce: Digital Markets, Digital Goods
2 Describe how Internet technology has changed business models. Management Information SystemsChapter 4 E-Commerce: Digital Markets, Digital GoodsLEARNING OBJECTIVESIdentify 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 E-commerce History of e-commerce Management Information Systems Chapter 4 E-Commerce: Digital Markets, Digital GoodsElectronic Commerce and the InternetE-commerceUse of the Internet and Web to transact businessDigitally enabled transactions between organizations and individualsHistory of e-commerceBegan in 1995 and grew exponentially; still growing at an annual rate of 16 percentRapid growth led to market bubbleWhile many companies failed, many survived with soaring revenuesE-commerce today the fastest growing form of retail trade in U.S., Europe, AsiaThis slide discusses what e-commerce is, and what the state of e-commerce is today. The text states that e-commerce history mirrors those of other technology innovations. What other innovations is e-commerce similar to?The book discusses new trends in e-commerce. Ask the students to describe some of these trends.
4 The Growth of E-Commerce Management Information SystemsChapter 4 E-Commerce: Digital Markets, Digital GoodsElectronic Commerce and the InternetThe Growth of E-CommerceThis graphic illustrates the continuing growth of e-commerce. The dot-com bubble burst in March 2001.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.Figure 10-1
5 Eight unique features of e-commerce technology Management Information SystemsChapter 4 E-Commerce: Digital Markets, Digital GoodsElectronic Commerce and the InternetEight unique features of e-commerce technologyUbiquityInternet/Web technology available everywhere: work, home, etc., and anytimeGlobal reachThe technology reaches across national boundaries, around EarthUniversal standardsOne set of technology standards: Internet standardsRichnessSupports video, audio, and text messagesThis slide discusses reasons why e-commerce has grown so quickly – because of the unique nature of the Internet and e-commerce, which are richer and more powerful than previous technology revolutions like radio and TV.Ask students what the effects are of the four features listed on this slide.Ubiquity: Marketplace removed from temporal, geographic locations to become “marketspace”. Enhanced customer convenience and reduced shopping costsGlobal reach: Commerce enabled across cultural and national boundaries seamlessly and without modification. Marketspace includes, potentially, billions of consumers and millions of businesses worldwide.Universal standards: Disparate computer systems easily communicate with each other. Lower market entry costs—costs merchants must pay to bring goods to market. Lower consumers’ search costs—effort required to find suitable products.Richness: Possible to deliver rich messages with text, audio, and video simultaneously to large numbers of people. Video, audio, and text marketing messages can be integrated into single marketing message and consumer experience.
6 Eight unique features (cont.) Management Information SystemsChapter 4 E-Commerce: Digital Markets, Digital GoodsElectronic Commerce and the InternetEight unique features (cont.)InteractivityThe technology works through interaction with the userInformation densityVast increases in information density—the total amount and quality of information available to all market participantsPersonalization/Customization:Technology permits modification of messages, goodsSocial technologyThe technology promotes user content generation and social networkingThis slide continues the discussion of the unique features of the Internet and e-commerce.Ask students what the effects are of the four features listed on this slide.Interactivity: Consumers engaged in dialog that dynamically adjusts experience to the individual. Consumer becomes co-participant in process of delivering goods to market.Information density: Greater price transparency. Greater cost transparency. Enables merchants to engage in price discrimination.Personalization/Customization: Personalized messages can be sent to individuals as well as groups. Products and services can be customized to individual preferences.Social technology: New Internet social and business models enable user content creation and distribution, and support social networks.
7 Key concepts in e-commerce Digital markets reduce Management Information SystemsChapter 4 E-Commerce: Digital Markets, Digital GoodsElectronic Commerce and the InternetKey concepts in e-commerceDigital markets reduceInformation asymmetrySearch costsTransaction costsMenu costsDigital markets enablePrice discriminationPrice and cost transparencyDynamic pricingDisintermediationThis slide introduces digital markets and discusses the effects of digital markets on the ways companies conduct business. Ask students to define the terms listed here, and also to explain how each of these effects (lowered information asymmetry, etc.) are created by digital markets.Information asymmetry: when one party in a transaction has more information that is important for the transaction than the other partySearch costs: The effort to find suitable productsTransaction costs: The cost of participating in a marketMenu costs: Merchants’ costs of changing pricesPrice discrimination: Selling the same goods, or nearly the same goods, to different targeted groups at different prices.Dynamic pricing: The price of a product varies depending on the demand characteristics of the customer or the supply situation of the sellerDisintermediation: The removal of organizations or business process layers responsible for intermediary steps in a value chain
8 The Benefits of Disintermediation to the Consumer Management Information SystemsChapter 4 E-Commerce: Digital Markets, Digital GoodsElectronic Commerce and the InternetThe Benefits of Disintermediation to the ConsumerThis graphic illustrates how disintermediation reduces prices to consumers. It also allows manufacturers to earn more profit for the product.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.Figure 10-2
9 Key concepts in e-commerce (cont.) Digital goods Management Information SystemsChapter 4 E-Commerce: Digital Markets, Digital GoodsElectronic Commerce and the InternetKey concepts in e-commerce (cont.)Digital goodsGoods that can be delivered over a digital networkE.g., Music tracks, video, software, newspapers, booksCost of producing first unit almost entire cost of product: marginal cost of producing 2nd unit is about zeroCosts of delivery over the Internet very lowMarketing costs remain the same; pricing highly variableIndustries with digital goods are undergoing revolutionary changes (publishers, record labels, etc.)This slide continues the discussion of key concepts in e-commerce, looking at digital goods and how these compare with traditional goods.Ask students how their purchases of digital goods have changed over the past five years. Are digital goods equal in value to their traditional counterparts? What benefits and drawbacks do they have?
10 Internet business models Management Information SystemsChapter 4 E-Commerce: Digital Markets, Digital GoodsElectronic Commerce and the InternetInternet business modelsPure-play modelsClicks-and-mortar modelsSocial NetworkOnline meeting placeSocial shopping sitesCan provide ways for corporate clients to target customers through banner ads and pop-up adsOnline marketplace:Provides a digital environment where buyers and sellers can meet, search for products, display products, and establish prices for those productsThis slide and the next several slides discuss new business models that are enabled by the Internet and e-commerce. While many of the new business models are pure-play, some, especially in the retail industry, are clicks-and-mortar.Some of the new models take advantage of the Internet’s communication capabilities, such as the social networking sites. Ask students what other sites take advantage of the Internet’s communication abilities.Ask students to differentiate between banner ads and popup ads.
11 Content provider Service provider Portal Management Information SystemsChapter 4 E-Commerce: Digital Markets, Digital GoodsElectronic Commerce and the InternetContent providerProviding digital content, such as digital news, music, photos, or video, over the WebOnline syndicators: Aggregate content from multiple sources, package for distribution, and resell to third-party Web sitesService providerProvides Web 2.0 applications such as photo sharing and interactive maps, and services such as data storagePortal“Supersite” that provides comprehensive entry point for huge array of resources and services on the InternetThis slide continues the discussion of new Internet business models. Ask students to give examples of these business models. Ask how these business models create revenue.Content provider – Access fees, advertisingPortal – AdvertisingService provider – subscription, advertising
12 Virtual storefront: Information broker: Transaction broker: Management Information SystemsChapter 4 E-Commerce: Digital Markets, Digital GoodsElectronic Commerce and the InternetVirtual storefront:Sells physical products directly to consumers or to individual businessesInformation broker:Provides product, pricing, and availability information to individuals and businessesTransaction broker:Saves users money and time by processing online sales transactions and generating a fee for each transactionThis slide continues the discussion of Internet business models. Ask students how each of these models creates revenue and ask them to provide an example of that business model.
13 Types of Electronic Commerce Management Information SystemsChapter 4 E-Commerce: Digital Markets, Digital GoodsElectronic CommerceTypes of Electronic CommerceBusiness-to-consumer (B2C)Business-to-business (B2B)Consumer-to-consumer (C2C)Mobile commerce (m-commerce)This slide introduces the types of e-commerce. B2C, B2B, and C2C e-commerce are categorized according to the nature of the participants. M-commerce is a category based on the nature of the connection to the Internet. Ask students to provide examples of the different types of e-commerce listed here.
14 Interactive marketing and personalization Management Information SystemsChapter 4 E-Commerce: Digital Markets, Digital GoodsElectronic CommerceInteractive marketing and personalizationWeb sites are bountiful source of details about customer behavior, preferences, buying patterns used to tailor promotions, products, services, and pricingClickstream tracking tools: Collect data on customer activities at Web sitesUsed to create personalized Web pagesCollaborative filtering: Compares customer data to other customers to make product recommendationsThis slide introduces the use of Internet-based techniques for achieving greater customer intimacy. Ask students for examples of clickstream tracking and collaborative filtering tools in action (Amazon’s recommendations for new products). Ask students to describe the types of information that can be gleaned about their habits from a web site.
15 Web Site Visitor Tracking Management Information SystemsChapter 4 E-Commerce: Digital Markets, Digital GoodsElectronic CommerceWeb Site Visitor TrackingFigure 10-3This graphic illustrates how clickstream tracking works and what the store can tell about the activities of a shopper on their Web site. Extensive metrics exist for various types of user behavior, from the time spent on a Web page to the number of products ordered and placed in a shopping cart but not purchased.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.
16 Web Site Personalization Management Information SystemsChapter 4 E-Commerce: Digital Markets, Digital GoodsElectronic CommerceWeb Site PersonalizationThis graphic illustrates some of the types of personalization that clickstream tracking can make possible. Have students found suggestions made by a Web site useful in their experience?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.Figure 10-4
17 Customer self-service Management Information SystemsChapter 4 E-Commerce: Digital Markets, Digital GoodsElectronic CommerceBlogsPersonal web pages that contain series of chronological entries by author and links to related Web pagesHas increasing influence in politics, newsCorporate blogs: New channels for reaching customers, introducing new products and servicesBlog analysis by marketersCustomer self-serviceWeb sites and to answer customer questions or to provide customers with product informationReduces need for human customer-support expertThis slide continues the discussion of Internet-based techniques for enhancing customer intimacy. Ask students to explain why marketers are looking to analyze blog content, and content from chat rooms and message boards. Ask students to describe and evaluate their experiences in using any Web-based customer self-services, such as FedEx or UPS package tracking.
18 B2B e-commerce: New efficiencies and relationships Management Information SystemsChapter 4 E-Commerce: Digital Markets, Digital GoodsElectronic CommerceB2B e-commerce: New efficiencies and relationshipsElectronic data interchange (EDI)Computer-to-computer exchange of standard transactions such as invoices, purchase ordersMajor industries have EDI standards that define structure and information fields of electronic documents for that industryMore companies increasingly moving away from private networks to Internet for linking to other firmsE.g., Procurement: Businesses can now use Internet to locate most low-cost supplier, search online catalogs of supplier products, negotiate with suppliers, place orders, etc.This slide looks at changes brought to B2B e-commerce by Internet technologies. Note that the Internet and Web technology enable businesses to create new electronic storefronts for selling to other businesses with multimedia graphic displays and interactive features similar to those for B2C commerce. Alternatively, businesses can use Internet technology to create extranets or electronic marketplaces for linking to other businesses for purchase and sale transactions.
19 Electronic Data Interchange (EDI) Management Information SystemsChapter 4 E-Commerce: Digital Markets, Digital GoodsElectronic CommerceElectronic Data Interchange (EDI)This graphic illustrates how EDI is used by firms and their suppliers to automate transactions for both B2B e-commerce and continuous replenishment.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.Figure 10-5
20 Private industrial networks (private exchanges) Management Information SystemsChapter 4 E-Commerce: Digital Markets, Digital GoodsElectronic CommercePrivate industrial networks (private exchanges)Large firm using extranet to link to its suppliers, distributors and other key business partnersOwned by buyerPermits sharing of:Product design and developmentMarketingProduction scheduling and inventory managementUnstructured communication (graphics and )This slide continues the discussion of ways the Internet and Web technologies have changed B2B e-commerce. One way is in using an extranet to link to the firm’s suppliers. The text provides the example of VW Group Supply, which links the Volkswagen Group and its suppliers. VW Group Supply handles 90 percent of all global purchasing for Volkswagen, including all automotive and parts components.
21 A Private Industrial Network Management Information SystemsChapter 4 E-Commerce: Digital Markets, Digital GoodsElectronic CommerceA Private Industrial NetworkThis graphic illustrates a private industrial network, and how it can link to both suppliers and distributors.Figure 10-6A 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.
22 Net marketplaces (e-hubs) Management Information SystemsChapter 4 E-Commerce: Digital Markets, Digital GoodsElectronic CommerceNet marketplaces (e-hubs)Single market for many buyers and sellersIndustry-owned or owned by independent intermediaryGenerate revenue from transaction fees, other servicesUse prices established through negotiation, auction, RFQs, or fixed pricesMay focus on direct or indirect goodsMay support long-term contract purchasing or short-term spot purchasingMay serve vertical or horizontal marketplacesThis slide continues the discussion of ways the Internet and Web technologies have changed B2B e-commerce, in this case by the ability to create Net marketplaces. Ask students to distinguish between and provide examples of direct and indirect goods. (Direct goods are goods used in a production process, such as sheet steel for auto body production. Indirect goods are all other goods not directly involved in the production process, such as office supplies or products for maintenance and repair.)Ask students to distinguish between vertical and horizontal marketplaces.
23 A Net Marketplace Management Information Systems Figure 10-7 Chapter 4 E-Commerce: Digital Markets, Digital GoodsElectronic CommerceA Net MarketplaceThis graphic illustrates a net marketplace, and the functions that it can provide to participants in managing their transactions. The text provides the example of Exostar, an aerospace and defense industry-sponsored Net marketplace that focuses on long-term contract purchasing relationships and on providing common networks and computing platforms for reducing supply chain inefficiencies. More than 16,000 trading partners in the commercial, military, and government sectors use Exostar’s sourcing, e-procurement, and collaboration tools for both direct and indirect goods.Figure 10-7Net marketplaces are online marketplaces where multiple buyers can purchase from multiple sellers.
24 Exchanges Management Information Systems Chapter 4 E-Commerce: Digital Markets, Digital GoodsElectronic CommerceExchangesIndependently owned third-party Net marketplacesConnect thousands of suppliers and buyers for spot purchasingTypically provide vertical markets for direct goods for single industry (food, electronics)Proliferated during early years of e-commerce; many have failedCompetitive bidding drove prices down and did not offer long- term relationships with buyers or services to make lowering prices worthwhileThis slide continues the discussion of ways the Internet and Web technologies have changed B2B e-commerce, in this case by the ability to create exchanges. The text provides the example of FoodTrader.com, which automates spot purchases among buyers and sellers from more than 180 countries in the food and agriculture industry.
25 M-commerce services and applications Management Information SystemsChapter 4 E-Commerce: Digital Markets, Digital GoodsM-CommerceM-commerce services and applicationsAlthough m-commerce represents small fraction of total e-commerce transactions, revenue has been steadily growingLocation-based servicesBanking and financial servicesWireless AdvertisingGames and entertainmentThis slide introduces m-commerce, the use of wireless mobile devices for purchasing goods and services. M-commerce is especially well-suited for specific types of applications and services. Ask students what applications and services they use with their cell-phones. Have any purchased games or entertainment, and from what companies?
26 Global M-commerce Revenue 2000-2012 Management Information SystemsChapter 4 E-Commerce: Digital Markets, Digital GoodsM-CommerceGlobal M-commerce RevenueThis graph illustrates the steady growth of m-commerce sales. Have any of the students purchased something using their cell phone or mobile laptop computer?Figure 10-8M-commerce sales represent a small fraction of total e-commerce sales, but that percentage is steadily growing.
27 Limitations in mobile’s access of Web information Data limitations Management Information SystemsChapter 4 E-Commerce: Digital Markets, Digital GoodsM-CommerceLimitations in mobile’s access of Web informationData limitationsSmall display screensWireless portals (mobile portals)Feature content and services optimized for mobile devices to steer users to information they are most likely to needThis slide continues the discussion of m-commerce. Ask students what their experience is of the data limitations and display screens for their mobile phones. Do any use wireless portals, and if so, which ones?
28 Types of electronic payment systems Digital wallet Management Information SystemsChapter 4 E-Commerce: Digital Markets, Digital GoodsElectronic Commerce Payment SystemsTypes of electronic payment systemsDigital walletStores credit card and owner identification information and enters the shopper’s name, credit card number, and shipping information automatically when invoked to complete a purchaseAccumulated balance digital payment systemsUsed for micropayments ($10 or less)Accumulating debit balance that is paid periodically on credit card or telephone billsThis slide introduces the types of electronic payment systems used to pay for goods on the Internet. Ask students which of these payment systems they have used, and to evaluate the system’s ease of use.
29 Stored value payment systems Management Information SystemsChapter 4 E-Commerce: Digital Markets, Digital GoodsElectronic Commerce Payment SystemsStored value payment systemsEnable online payments based on value stored in online digital accountMay be merchant platforms or peer-to-peer (PayPal)Digital checkingExtend functionality of existing checking accounts to be used for online paymentsElectronic billing presentment and payment systemsPaying monthly bills through electronic fund transfers or credit cardsThis slide continues the look at the different types of electronic payment systems. Have any students used electronic billing?
30 Digital payments systems for m-commerce Management Information SystemsChapter 4 E-Commerce: Digital Markets, Digital GoodsElectronic Commerce Payment SystemsDigital payments systems for m-commerceThree types of mobile payment systems in use in JapanStored value system charged by credit cards or bank accountsMobile debit cardsMobile credit cardsIn the U.S., the cell phone has not yet evolved into a mobile payment systemThis slide looks at payment systems used in m-commerce. Note that in Europe and Asia, phones are integrated into a large array of financial institutions, while in the U.S. cell phone service resides behind a “walled garden” of telephone providers.