Back to Table of Contents

The Nature of E-Commerce Chapter 2 The Nature of E-Commerce Section 2-1 Characterizing E-Commerce in Business Section 2-2 Conducting Business on the Web 2

Section 2-1 Why It’s Important E-commerce has impacted the economy in countless ways. Successful e-commerce entrepreneurs are aware of the specific advantages and disadvantages of conduction business online and plan accordingly. Section 2-1 3

Section 2-1 Key Terms e-business brand loyalty mass customization value chain elastic demand Section 2-1 4

E-Commerce Environment Business in the old economy focused almost exclusively on manufacturing physical goods. Today, in the new, electronic economy, knowledge production is the primary business driver. Section 2-1 5

E-Commerce versus E-Business In Chapter 1 you learned that e-commerce is business conducted via electronic methods.   E-commerce also refers to electronic transactions involving the transferring of ownership of goods or services. The buyer and seller have to agree on an exchange, whether monetary or non-monetary. Section 2-1 6

E-Commerce versus E-Business Government, not-for-profit organizations, and corporations all conduct e-business. e-business any process a business conducts over a computer network Section 2-1 7

Benefits and Characteristics of E-Commerce In the era of e-commerce, the number of potential buyers is limitless. Section 2-1 8

Benefits and Characteristics of E-Commerce The electronic marketplace is open 24 hours a day, 7 days a week. In this respect, it has made the retail marketplace more customer-focused.   All-hours e-commerce poses various challenges to businesses, which must now be able to operate effectively at any time. Section 2-1 9

Benefits and Characteristics of E-Commerce E-commerce offers businesses a multitude of effective and inexpensive ways to reach new and existing customers. Section 2-1 10

Benefits and Characteristics of E-Commerce Web sites enable businesses to track customers’ purchasing habits. Section 2-1 11

Benefits and Characteristics of E-Commerce If a customer will not accept a substitute, even when there are many other comparable products available, he or she is demonstrating brand loyalty. brand loyalty refers to a customer’s preference for a particular product Section 2-1 12

Benefits and Characteristics of E-Commerce Online retailers may be able to bypass many difficult decisions regarding inventory.   Customers can not shoplift from a virtual store. Section 2-1 13

Benefits and Characteristics of E-Commerce With e-commerce, there is a trend toward mass customization. mass customization the production of goods that offer specialized choices to mainstream buyers Section 2-1 14

Benefits and Characteristics of E-Commerce Mass customization influences all aspects of the value chain. value chain the sequence of design, production, and marketing efforts a business conducts to deliver its products at the right price and time When a company streamlines its value chain, productivity and profitability generally increase. Section 2-1 15

Benefits and Characteristics of E-Commerce A virtual storefront is much faster, easier, and cheaper to set up than a bricks-and-mortar store.   Online businesses can also be grown quickly, whether through alliances with other e-businesses or by offering additional goods and services. Section 2-1 16

Benefits and Characteristics of E-Commerce The e-commerce environment fosters elastic demand. elastic demand when pricing changes create a change in the amount of goods or services consumers are willing to buy at a certain price Section 2-1 17

Section 2-1 Review 1. What does it mean for a company to “manage” its inventory? How is an online company’s inventory easier to manage than that of a bricks-and-mortar business? How can a company streamline its value chain? Why is it difficult to charge a higher price for an item than your competitors in the e-commerce marketplace? 2. Section 2-1 Review Managing inventory means keeping a sufficient amount of product in stock to fill the potential demand. With online businesses, stock is usually ordered and sent directly from the manufacturer to the customer. A company can streamline its value chain by offering customers a wide assortment of products at a range of prices. On the Internet, customers can comparison shop with ease by conducting online searches or referring to specialized Web sites designed to pinpoint a product’s best price. 3. Section 2-1 18

Section 2-2 Why It’s Important There are a variety of business models available for online businesses to follow. You can maximize your chances for e-commerce success by familiarizing yourself with the models and using them to your advantage. Section 2-2 19

Section 2-2 Key Terms business model business-to-business business-to-consumer consumer-to-consumer consumer-to-business business-to-government government-to-consumer Section 2-2 20

The Process of Buying and Selling Online The rest of this chapter explores the different types of business models common in e-commerce. Section 2-2 21

E-Commerce Business Models If you plan to launch a business on the Web, you’ll want to pay close attention and select the best business model for your e-commerce venture. business model a system of policies, operations, resources, and technologies used to generate revenue Section 2-2 22

E-Commerce Business Models business-to-business (B2B) business-to-consumer (B2C) intermediary hub Common Business Models consumer-to-consumer (C2C) government-to-consumer (G2C) consumer-to-business (C2B) business-to-government (B2G) Section 2-2 23

E-Commerce Business Models The oldest and fastest-growing form of e-commerce, business-to-business (B2B) allows e-business to collaborate, partner, and share research and complex data with other businesses. business-to-business (B2B) business model that applies when a business transacts information, goods, or services with another business Section 2-2 24

E-Commerce Business Models Turning browsers into buyers, building customer loyalty, and fulfilling customer orders in a timely and satisfactory way are all concerns for business-to-consumer (B2C) sites. business-to-consumer (B2C) business model that applies to any business or organization that uses the Internet to sell its products or services to consumers Section 2-2 25

E-Commerce Business Models Online auctions are the most common forum for consumer-to-consumer (C2C) e-commerce. consumer-to-consumer (C2C) business model that allows consumers to interact with one another online to transact goods and services Section 2-2 26

E-Commerce Business Models A consumer-to-business (C2B) model uses a reverse-auction scenario: The business responds to the consumer’s requested product and its price. consumer-to-business (C2B) business model in which the customer initiates the transaction, posting an intent or desire to buy a certain product at a certain price Section 2-2 27

E-Commerce Business Models Businesses that bid on government contracts use the business-to-government (B2G) business model. business-to-government (B2G) business model that connects the private sector to the government marketplace Section 2-2 28

E-Commerce Business Models The government-to-consumer (G2C) business model allows citizens to interact with government agencies online. government-to-consumer (G2C) business model that allows consumers to easily access relevant information from government agencies Section 2-2 29

E-Commerce Business Models Some businesses don’t buy or sell products or purchase services themselves. Instead they act as an intermediary, bringing buyers and sellers together.   An intermediary hub is a business that acts as a third party or go-between in moving products from the manufacturer to the end user. Section 2-2 30

Section 2-2 Review 1. Why do e-commerce businesses strive to keep potential customers on their sites as long as possible? What are some key challenges facing the B2C model? How might the G2C model be helpful to the average consumer? 2. Section 2-2 Review Studies have shown that the longer a visitor stays on a business’s site, the more likely it is that he or she will make a purchase. Key challenges include the need to turn browsers into buyers, build and maintain customer loyalty, and fulfill customers’ orders in a timely and satisfactory way. Consumers can pay their state and federal taxes online and access information from various government agencies. 3. Section 2-2 31

Customizable Slide 32

End of Back to Table of Contents