1. Tutorial 9: Electronic Commerce

2. Session 9.1 – Understand the basics of e-commerce – Explore Web sites that conduct e-commerce – Learn how companies generate revenues online by selling products, subscriptions, and services – Determine how companies generate revenues online through advertising and marketing – Learn how consumers pay for e-commerce purchases – Learn about consumer concerns about transaction security and privacy – Understand international and legal concerns related to e- commerce New Perspectives on the Internet, 9th Edition2 Objectives

3. Session 9.1 Overview Ecommerce Categories New Perspectives on the Internet, 9 th Edition3

4. Buying and Selling over the Web The business processes that a company uses to find new customers, make sales, and deliver the goods or services that it sells are collectively referred to as the company’s revenue model The most common revenue model is direct sales or products and services In the U.S., there has been a dramatic rise in e- commerce retail sales from 1998 to 2010 New Perspectives on the Internet, 9 th Edition4

5. Buying and Selling over the Web Buying and Selling Goods – The most common form of e-commerce is online retail, which refers to selling physical products on the Web – In the online retail model, a company replaces or supplements its printed catalogs and/or brick-and-mortar store with a Web site – Web-only businesses are sometimes called dot-com or pure dot-com companies – Adding a Web site to reach potential customers creates an additional sales channel – Companies that use both a physical store and the Web to sell their products and services are sometimes referred to as bricks and clicks New Perspectives on the Internet, 9 th Edition5

6. Buying and Selling over the Web Buying and Selling Subscriptions – A subscription is an amount that users pay in order to access the site’s content – Entertainment sites that feature online games, music, movies, and books are often subscription based – Many gaming sites offer free online games to attract visitors as well as premium games that visitors must pay to play either by buying and downloading software to install on their computers, or by paying a subscription fee to enter the premium games area on the site – It’s common to see sites that charge a subscription fee as well as include advertising New Perspectives on the Internet, 9 th Edition6

7. Buying and Selling over the Web Buying and Selling Services – Professional services sites charge fees for their services – Broker and intermediary services are sold on the Web An intermediary is a person or an organization that acts as a mediator or an agent between two parties to effect a transaction or an agreement A liquidation broker is an intermediary who matches sellers of obsolete inventory with purchasers who are looking for bargains Some auction sites offer mediation or escrow services that hold the buyer’s payment until he or she is satisfied that the item matches the seller’s description New Perspectives on the Internet, 9 th Edition7

8. Buying and Selling over the Web Buying and Selling Services (continued) – Disintermediation is when an intermediary from an industry is no longer needed for the consumer to obtain the goods and services from the industry – The introduction of a new intermediary into an industry is called reintermediation New Perspectives on the Internet, 9 th Edition8

9. Advertising and Marketing on the Internet Businesses use the Internet to establish an online marketplace and reach potential customers The Internet provides businesses the opportunity to promote their goods and services effectively and efficiently through advertising and marketing Advertising – Advertising is a paid announcement that attracts attention to a product, service, business, person, or idea – The most successful advertising is directed at very specific audiences New Perspectives on the Internet, 9 th Edition9

10. Advertising and Marketing on the Internet Advertising (continued) – Some of the more common types of ads include: Banner ads (at the top of a Web page) Pop-up ads (open in a new window or within a Web page) Text ads (text links that appear within a Web page) Contextual ads (change based on the viewed content) Sponsorship ads (often a logo or simple statement) Video ads (ads in video format prior to online videos) Interstitial ads (appear as visitors browse between pages) Advertorials (paid editorial ads that contain opinions) Classified ads (descriptions of items for sale or something being looked for) New Perspectives on the Internet, 9 th Edition10

11. Advertising and Marketing on the Internet Affiliate Marketing – Affiliate marketing is an arrangement in which one company performs some business processes for another company in exchange for money or the sharing of expertise or access to customers – Affiliate marketing can also be called a strategic alliance (or a strategic partnership) – Examples include: Amazon has a variety of affiliate programs PriceGrabber Upromise by Sallie Mae New Perspectives on the Internet, 9 th Edition11

12. Advertising and Marketing on the Internet New Perspectives on the Internet, 9 th Edition12 Social media marketing is the process of using social media Web sites such as Facebook, Twitter, and YouTube to attract attention to an idea, product, Web site, store, and so forth

13. Paying for E-Commerce Purchases Most e-commerce sites accept credit card payments; other forms of payment are available A digital wallet (also called an electronic wallet or e- wallet) is an electronic device with software (or software that runs on a computer or phone) that enables the user to make a purchase online – Originally, they were stored only on the user’s computer – Now mobile phones and other wireless devices are used as digital wallets and stored on a server owned by a digital wallet vendor or an ISP New Perspectives on the Internet, 9 th Edition13

14. Paying for E-Commerce Purchases A digital wallet that an organization creates and maintains on its servers for consumers is sometimes called a thin wallet Using a digital wallet enables a merchant to collect data about you and your shopping habits Examples of digital wallets include: – PayPal – Google Wallet – V.me – Discover Money Messenger – Sprint Mobile Wallet New Perspectives on the Internet, 9 th Edition14

15. Paying for E-Commerce Purchases Near field communication (NFC) is a standards- based, short-range wireless technology that allows electronic devices to interact over a couple of inches NFC-enabled smartphones include chips that can store all the information from: – A physical bank – Credit cards – Identification cards NFC-enabled smartphones transmit the payment or ID data wirelessly over a short distance when the phone is close to a compatible receiver New Perspectives on the Internet, 9 th Edition15

16. Although many companies accept PayPal to complete transactions, most companies also accept credit cards for payments The value-to-weight ratio is the price of the item divided by its weight – Large, heavy products that have a low price are difficult to sell online because the shipping costs exceed the profit on the item – Items that are small, light, and relatively expensive can be shipped at low cost and often generate enough profit to cover even next-day shipping costs New Perspectives on the Internet, 9 th Edition16 Paying for E-Commerce Purchases

17. Consumer Concerns E-commerce leads to two major concerns: transaction security and privacy Transaction Security Concerns – Online consumers often do not know who is operating a Web site and might: Wonder whether the firm is a real company that will deliver the merchandise ordered Want to know if the company will replace defective merchandise or refund the purchase price – Online customers want assurance that the payments they make are secure New Perspectives on the Internet, 9 th Edition17

18. Consumer Concerns Privacy Concerns – Web sites can collect a great deal of information about customers’ preferences, even before they place an order – By recording a user’s clickstream (a record of the links clicked by a user while visiting a Web site), the Web server can gather extensive knowledge about that visitor and use it for marketing purposes or share it with other companies – A greater concern for many consumers is how e- commerce Web sites store their personal information New Perspectives on the Internet, 9 th Edition18

19. Consumer Concerns To ensure that the transactions conducted on their sites are secure, legitimate e-commerce Web sites use the SSL protocol to protect sensitive information Several assurance providers have started offering various kinds of certifications for Web site transaction security and privacy policies The Children’s Online Privacy Protection Act of 1998 (often referred to as COPPA) makes it illegal for Web sites to collect identifiable information from children under the age of 13 without first obtaining their parents’ consent The Electronic Communications Privacy Act (ECPA) of 1986, which was enacted before most people were using the Internet, does not include rules specifically designed to protect the privacy of persons using Web sites to conduct transactions New Perspectives on the Internet, 9 th Edition19

20. International E-Commerce Issues When using a Web site to purchase products, subscriptions, or services, customers might be doing business with companies located anywhere around the globe Cultural and Language Issues – Cultural conventions differ from country to country – The predominant language on the Web is English, but sites in other languages and in multiple languages are becoming more common – Translation that takes into account the culture and customs of the country is called localization New Perspectives on the Internet, 9 th Edition20

21. International E-Commerce Issues New Perspectives on the Internet, 9 th Edition21 Cultural and Language Issues (continued) – Well-designed Web sites are accessible and effective for users no matter what country they are located in and what language they speak

22. International E-Commerce Issues Legal Issues – Many of the international issues that arise relate to legal, tax, and privacy concerns – Each country has the right to pass laws and levy taxes on businesses that operate within their jurisdictions – Complying with all of these laws and regulations can be difficult for small businesses; many restrict the countries to which they will deliver merchandise or in which they will provide services – These Web sites can place terms of service (TOS) statements on their sites to protect themselves from laws and regulations of which they might be unaware; these can Include rules for site visitors and a statement of copyright interest in the site design and content Restrict the types of business that a visitor can conduct with the site New Perspectives on the Internet, 9 th Edition22

23. International E-Commerce Issues New Perspectives on the Internet, 9 th Edition23