1. Information Systems for Management Instructor: Bob Travica
MIS 2000
Information Systems for Management
Instructor: Bob Travica
Class 20
Strategizing with IS: Electronic Commerce
Updated 2018

2. Outline Electronic commerce (E-commerce)
Business-to-Consumer (B2C) E-Commerce
Business-to-Business (B2B) E-Commerce
Summary

3. Concept of E-commerce
E-commerce is the area of commerce that is conducted via
computer networks and information systems.
E-commerce started among businesses (supply markets), and expanded into consumer markets when Internet moved to businesses and homes in the mid-1990.
Moving into B2C or B2B is an important strategy leading to increasing market share, integrating supply chains, improving financial results.

4. Two Domains of E-commerce
Supplier
Organization
Web storefront
Classical company
Physical
company
Consumer
sell
buy
offer, sell
demand, buy
B2C
B2B
Business-to-Consumer (B2C), retail on the Internet via
Web storefronts: Chapters.com; “click and mortar” or “pure click”
Business-to-Business (B2B), buying & selling between firms
via e-markets (Covisint, Freelancer.com)
directly (private networks or Internet; Dell, shipping ind.)
*Outsourcing is a business practice of sourcing (buying) in the market services that the company could produce by itself; instead of sourcing in, the company sources out.
**EDI = Electronic Data Interchange = system that creates business documents and facilitates transfer of documents and payment between buyer and seller organizations.

5. B2C E-Commerce Birth and Trends
Boom , crash in 2001; pure vs. hybrid models
Global share of B2C in total retail in 2017*:
Overall 8.2%, Canada 7.4%, U.S.A. 8.3%
UK 16.9% (top), China 15.5% (second)
Average revenue
per online shopper
US $1,804
UK $1,629
Sweden $1,446
France $1,228
Germany $1,064
Japan $968
Spain $849
China $626
Russia $396
Brazil $350
*Global B2C:
More:

6. Business Models for B2C E-commerce
Web Retail (also called Web Storefront, Web Store, Online Store)
Sells many goods & services online
Example: Amazon.com – “pure click”, leader*
Amazon started as a bookstore and initiated the trend of web retail.
Amazon keeps improving business processes (sales, inventory) to increase up-selling and cross-selling.
Global presence; Interactive Marketing and Personalization.
Bestsellers in Web storefronts:
10-25% of purchases: DVD, CD, books, computer hardware & software
Below 10% of purchases: A/V equipment, clothes, music… anything
* Amazon.com has held about 15% of total global B2C sales in 2010’s (biggest)
More

7. Business Models for B2C E-commerce
Portal: Initial point of entry to Web, provides Internet search service for free; advertising revenues*, may sell some services & content (Google, Yahoo)
Customer: Global Internet user
Revenue: Advertising*, some search services, mobile tech (Google)
Broker: Middleman models mediating between buyers and sellers (travel industry, comparison shopping engines…)**
Revenue: sellers pay per shopper’s click or purchase
*- Advertising spending in the U.S. was $190 bill. in 2016, and over $200 bill. in 2017:
Compare with Canada:
-Canada’s GDP is 12 times smaller (US$1.5 trillion vs. America’s US$18.5 trillion):
(The world GDP was 75 trillion.)
-In 2016, 141 countries (of 190) had GDP< US$200 bill. **

8. E-commerce Expands Customer Data
Customer ID CustomerType IP-Address
Tel-Number
Catalog Search
Customer ID
Terms Searched
Customer Movement
Web Pages Visited
Screen Items Clicked
Product
ProductID
Category
Maker
Customer Comparison
Match Product Purchased
Other Online Purchases
ProductCategory
Tracking
consumer
behavior
Support to
cross-selling
The online customer data include records on searching product catalogs, movement on a Website page and across pages (clickstream software), possibly other online purchases, and automatic comparisons with other customers (collaborative filtering software) that purchased at least one items like the given customer (match data for cross-selling).
New data, do not exist in classical marketing

9. Ordering & Pay-ment systems
B2C E-commerce Systems
Web Store- front
Browse products
Buy
Pay
Product catalog
Sales sys.
Ordering & Pay-ment systems
Customer profiling
Product promotion
Clearing houses,
Banks
More

10. B2C E-commerce Benefits & Costs
Must take a particular perspective – the company vs. the consumer
Firm’s benefits:
Global reach & 24/7 sales
Savings on physical stores
Direct marketing (customer profiling via clickstream
or search tracking systems*; personalized Web storefronts)
Cross selling (automatic matching of customer profiles via systems)
Consumer’s benefits: Convenience, selection, some savings
*World total retail in 2014=US$ 22.5 trillion
Sources:

11. B2C E-commerce Costs Firm: - IS investments - Delivery, Logistics
- Payment security
- Legal boundaries
- Competition increase
- Invisible customer
- Electronic branding
Consumer:
- Shipping & handling expenses
- Privacy
- Payment anxiety
Product testability & return

12. B2B E-Commerce
Larger part of e-commerce (11% of all B2B sales in US in 2017*; smaller in Canada**)
Complex processes (inter-organizational), connections, & systems
2 business models:
1. Direct model
Inventory
Buyer
Purchasing
Bank
Production
Scheduling
Supplier
E-market
Sales
*US$ 899bill. (est.),
Estimated to reach US$ 1.1 trill. (12% of total B2B) by This about 12% of global B2B e-commerce of US$7.66trill (
**Canadian government statistics make it impossible to get a straight figure of B2B buy-sell transactions as a proportion of all such transactions among firms. Figures are for 2009.
Gov’t just monitors the proportion of B2B in the total online transactions (B2B+B2C), which has been holding around 75%.
2. Mediated
model

13. Mediated Model: E-Market
Also called e-Exchange, e-Hub, Market maker
Can be controlled by Buyer or Seller
Within an industry (plastics, metals, etc.)
Across industries (Covisint, B2BQuote, Alibaba*, more**)
Revenue: Membership fee, Transaction charge, Financial services, Product catalogue creation, Order fulfillment
E-Market
*Alibaba’s founder Jack Ma’s interview:
**Since 2012, Amazon.com started moving into B2B on the seller side, and in 2015 added the buyer side:

14. B2B E-Commerce Benefits & Costs
- Larger market
- Savings from efficiencies in supply chain
- Better coordination in supply chain
- Dynamic pricing (auctions)
24/7 business (via e-marketplaces)
Costs:
- Increased competition
- Volatile business relationships (partner
switching)
- Costs of private networks
- Costs of intermediaries (e-markets)
- Legal boundaries (e.g., anti-monopoly pressures on buyers-driven e-markets)

15. Summary
E-commerce is buying and selling via electronic means, and these can transpire between businesses (B2B; older segment), and between business and consumers (B2C, newer segment).
Models of B2C e-commerce include portal, web store, and broker.
Two main models of B2B e-commerce are direct company-to-company and e-marketplace.
B2C e-commerce enriches the customer profile.
B2B e-commerce is bigger part of e-commerce and has certain future.
Both B2B and B2C has certain benefits and costs.