1. Information Systems Electronic Commerce
Chapter 5

2. Chapter Overview E-Commerce Overview, Statistics and Models
Business To Consumer E-Commerce
Keys To Success in B2C E-Commerce
Business To Business E-Commerce
Disintermediation
Payment Systems and Security

3. E-Commerce & E-Business
E-Commerce: commerce that is accelerated and enhanced by IT, in particular the Internet.
E-Business: a broader definition of E- Commerce which also includes non-financial transactions.
buying and selling of goods and services
servicing customers
collaborating with business partners
conducting electronic transactions within an organization

4. Why should you care about E-Commerce?
E-Commerce is rapidly growing with consumer spending up 14% in 2013.
More and more users (customers) are utilizing broadband and mobile connections to the Internet.
The Internet is becoming more diverse. In other words, the market you can sell to is growing and changing.
comScore 2011 US Digital Year in Review

5. comScore 2011 Digital Year in Review Highlights
9 out of 10 U.S. users now visit a social networking site in a month, and the average Internet user spends more than 7 hours on these sites each month
Nearly 1 out of every 6 minutes online is spent on Facebook
US users viewed 4.8 trillion display ads in 2011
More than 100 Million Americans watched online video content on an average day - up 43% from 2010
In 2011, smartphones accounted for the majority of new mobile phone purchases for the first time
Source: comScore 2011 US Digital Year in Review

6. comScore 2014 Digital Future in Focus
In 2013, multi-platform users became the majority of the digital population
Online video reaches 85 Million daily viewers.
Video ads account for 5.7% of total viewing time.
Mobile-commerce comprises 12% of online spending.
Half of all time spent on digital retail sites is on mobile.
“Advertising follows eyeballs”
Source: comScore 2011 US Digital Year in Review

7. E-Commerce Growth: % of overall retail sales
Source:

8. E-Commerce Holiday Sales Statistics
Source:

9. Source: comScore 2011 US Digital Year in Review
Digital Content & Subscriptions, a category predominantly composed of digital content downloads such as music, movies, TV shows and e-books, ranked as the fastest-growing retail e-commerce category in 2011 with a 26-percent growth rate. An acceleration of e-book downloads as tablets and e-readers gain in popularity represented a strong driver of this growth.

10. Online Advertising Statistics
Source: comScore 2011 US Digital Year in Review
FACEBOOK DELIVERS 1 OF EVERY 4 ONLINE DISPLAY ADS
Among the many beneficiaries of the growth and innovation in display advertising are web publishers. The leading U.S. publisher of display ads in 2011 was Facebook with more than 1.3 trillion impressions (27.9 percent market share), more than double that of #2 publisher Yahoo! Sites at 529 billion impressions. Microsoft Sites followed as the third largest display ad publisher with more than 215 billion impressions, while Google Sites delivered billion impressions, the majority of which were seen on YouTube. Advertising on Facebook, which combines many of the attributes of search such as granular targeting, small ad formats and self-purchased ad buys, presents a unique offering for many marketers looking to bridge their search and display advertising.

12. Source: comScore 2014 Digital Future in Focus

13. Languages of The ‘Net

14. E-commerce Shopping Statistics
What percentage of your gifts do you anticipate buying online this year?
0% (nothing)
16%
Less than 10%
25%
10% - 20%
22%
21% - 50%
20%
51% - 80%
13%
81% - 100% 4%
Source: ACNielson 2004
Why do you plan on shopping online?
Saves time
78%
Better prices
51%
More selection
43%
Easier shipping
40%
Ability to find a more personalized gift
28%
More information available about the products
20%
Other 8%
Source: ACNielson 2004

15. E-Commerce Terms E-tailer: an Internet retail site
Electronic market (e-marketplace): online marketplace where buyers and sellers meet to exchange goods, services, money, or information
Pure vs. Partial E-Commerce: degree of digitization of the product (service) sold; the process; the delivery agent (or digital intermediary)

16. E-Commerce Terms
Virtual (pure-play) organizations: Internet retailers such as Amazon.com that have no physical stores. Conduct business activities solely online.
Clicks-and-mortar retailers (bricks-and-clicks): Conduct some EC activities, but do primary business in the physical world. An example is Nordstrom, which has both an Internet presence and many physical stores.

17. E-Commerce Terms
Brick-and-Mortar organizations: old-economy corporations that perform most of their business off-line, selling physical products by means of physical agents

18. Primary E-Commerce Models

19. E-Commerce Models B2B is where most of the money is
B2C is the most well-known
Amazon, eBay, etc.
B2B and B2C differences require that you know your customers well, develop the right marketing mix, and move money easily

20. E-Commerce Models B2B is where most of the money is
B2C is the most well-known
Amazon, eBay, etc.
B2B and B2C differences require that you know your customers well, develop the right marketing mix, and move money easily

21. B2C E-Commerce Advantages
Shopping can be faster and more convenient.
Offerings and prices can change instantaneously.
Call centers can be integrated with the Web site.
Broadband telecommunications will enhance the buying experience.
What are disadvantages when buying online?

22. Global Trends in Online Shopping A Nielson Global Consumer Report June 2010
Consumer Confidence Survey – Q Field dates 3/8/2010-3/28/2010

23. Keys To Success In B2C E-Commerce Digital Products Are the Best of All
Because…
They are commoditylike products.
They can be mass-customized and personalized.
They can be delivered at the time of purchase.
They foster disintermediation.
They have global reach.

24. Keys To Success In B2C E-Commerce Digital Products Are the Best of All
Micro-payments - techniques to facilitate the exchange of small amounts of money for an Internet transaction.
Cellular ringtones, 99 cent song downloads, possibly integrated in Xbox Live

25. Keys To Success In B2C E-Commerce Give customers exactly what they want
Mass customization – the ability of an organization to give its customers the opportunity to tailor its products or services
Dell – customized computer purchases
Apple iTunes – only the music you want (not necessarily the whole album)

26. Keys To Success In B2C E-Commerce Attracting and Retaining Customers
Marketing mix - the set of marketing tools that the firm uses to pursue its marketing objectives in the target market.
Additional techniques for attracting Internet customers include:
Registering with search engines
Online ads
and viral marketing
Affiliate programs
Selling to existing customers

27. Keys To Success In B2C E-Commerce You Must Execute Well
Executing well simply means that when a customer places an order on your Web site, you have to follow through and execute the necessary business processes to get the right item to the customer in a timely fashion.
A good B2C site immediately sends an acknowledgement of the order, containing all of the order details and an estimated ship date.

28. Order Acknowledgement Email
Thanks for your order with CD Baby! This is just a happy automated to let you know a real person will you as soon as your package is sent, and you will also receive a paper receipt with your order in the mail. Please save this in case you have any questions about your order. ** NOTE: if any of the info below looks wrong, please hit REPLY now to let us know! ORDER # Monday, November 22nd 2004, 09:34 - (PLEASE READ!) 1 of: SPOTTISWOODE: ugly love  ($15.00 each) SHIPPING: $2.25 GRAND TOTAL: $ US Dollars. SHIPPING ADDRESS: Deleted BILLING ADDRESS: Deleted Deleted IF ANYTHING LOOKS WRONG, PLEASE REPLY TO THIS AND LET US KNOW! Or you can always call us at: (California time) THANK YOU!! CD Baby, the cutest little record store on the web NE 80th Ave - Portland, OR phone: <--- new CDs added every day!

29. Product Delivery Email
Thanks for your order with CD Baby! Shipping Address - Deleted 1 of: SPOTTISWOODE: ugly love  ($15.00 each) SHIPPING: $2.25 GRAND TOTAL: $ US Dollars. Your CD has been gently taken from our CD Baby shelves with sterilized contamination-free gloves and placed onto a satin pillow. A team of 50 employees inspected your CD and polished it to make sure it was in the best possible condition before mailing.
Our packing specialist from Japan lit a candle and a hush fell over the crowd as he put your CD into the finest gold-lined box that money can buy. We all had a wonderful celebration afterwards and the whole party marched down the street to the post office where the entire town of Portland waved 'Bon Voyage!' to your package, on its way to you, in our private CD Baby jet on this day, Monday, November 22nd.
I hope you had a wonderful time shopping at CD Baby.  We sure did. Your picture is on our wall as 'Customer of the Year'.  We're all exhausted but can't wait for you to come back to CDBABY.COM!!
Thank you once again,
Derek Sivers, president, CD Baby
the little CD store with the best new independent music
phone:  

30. Keys To Success In B2C E-Commerce Watch the Competition
Retaining customers is one of the keys to e-commerce success.
Spend time on the Web surfing around seeing what’s going on in your competitive space by looking at the Web sites of known competitors.

31. Business to Business E-Commerce
Purchasing applications are usually divided into three segments:
Purchasing of indirect materials (MRO)
Purchasing of direct materials
Purchasing of services

32. MRO – Indirect Materials
Maintenance, repair, and operations (MRO) materials (indirect materials) – materials necessary for running a company but do not relate to the company’s primary business activities
Office supplies, repair parts, lubricating oils

33. MRO – Indirect Materials
Buyers in B2B make large purchases and can then demand a discount (not true in B2C)
Can also team up with other buyers to create demand aggregation - combining purchase requests from multiple buyers which justifies a larger discount

34. Direct Materials
Direct materials – materials that are used in production in a manufacturing company or are placed on the shelf for sale in retail environments
Relate directly to a company’s primary business activities
Quality, quantity, and delivery timing are important

35. Direct Materials
Buyers can participate in reverse auctions for direct materials – process in which a buyer posts its interests in buying items and sellers compete by submitting successively lower bids
The lowest bidder wins

36. B2B: Horizontal and Vertical E-Marketplaces
Horizontal e-marketplace: connects buyers and sellers across industries
Primarily for MRO materials
All industries need office supplies, travel, etc.
Vertical e-marketplace: connects buyers and sellers in a given industry
Primarily for direct materials
Each industry has unique direct material needs

37. E-Marketplaces

38. Disintermediation
Intermediaries: specialist companies that provide services better than their client companies can themselves - Order fulfillment, payment processing
Disintermediation: The removal of organizations or business process layers responsible for certain intermediary steps in a value chain
Reintermediation: Shifting of the intermediary role in a value chain to a new source

39. Disintermediation Benefits
Cost/
Sweater
$48.50
$40.34
$20.45
Manufacturer
Distributor
Customer
Retailer

40. B2C Payment Systems Credit cards Financial cybermediaries - Paypal
Electronic checks - online banking
Electronic Bill Presentment and Payment – Checkfree.com
Smart cards

41. B2B Payment Systems Business customers… Make large purchases
Will not pay with credit card or financial cybermediary
Use financial EDI
Pay for many purchases at once (perhaps the end of the month)

42. Electronic Data Interchange (EDI)
The direct computer-to-computer transfer of transaction information contained in standard business documents such as invoices and purchase orders, in a standard format.

43. Security Security is very important when moving money
Common security measures
Encryption
Secure Sockets Layers

44. Encryption
Encryption – scrambles the contents of a file so that you can’t read it without having the right decryption key
Often through public key encryption (PKE) – uses two keys: a public key for everyone and private key for only the recipient of the encrypted information

45. Secure Sockets Layers Secure Sockets Layer (SSL)…
Creates a secure connection between a Web client and server
Encrypts the information
Sends the information over the Internet
Denoted by lock icon on browser or (notice the “s)

46. Barriers of EC Security Trust and risk Lack of qualified personnel
Lack of business models
Culture
User authentication and lack of public key infrastructure
Organization
Fraud
Slow navigation on the Internet
Legal issues