1. E-Business and E-Commerce
CHAPTER 7
E-Business and E-Commerce

2. CHAPTER OUTLINE 7.1 Overview of E-Business & E-Commerce
7.2 Business-to-Consumer (B2C) Electronic Commerce
7.3 Business-to-Business (B2B) Electronic Commerce
7.4 Ethical and Legal Issues in E-Business

3. LEARNING OBJECTIVES
1. Describe the six common types of electronic commerce.
2. Describe the various online services of business-to-consumer electronic commerce, provide specific examples of each service.
3. Describe the three business models for business-to-business electronic commerce.
4. Identify the ethical and legal issues relating to electronic commerce, providing examples.

4. Chapter Opening Case The Flash Crash May 6, 2010
High frequency trading

5. Gemvara (IT’s About Business 7.1)
Matt Lauzon
Click on Minecraft image above to go to Minecraft home page.
Click on Mojang image above to go to Mojang home page.

6. ZocDoc (IT’s About Business 7.2)
Click on the image above to go to Treat America home page.

7. 7.1 Overview of E-Business and E-Commerce
Definitions and Concepts
Types of E-Commerce
E-Commerce and Search
Major E-Commerce Mechanisms
Benefits and Limitations of E-Commerce
Electronic commerce (e-commerce, EC) describes the buying, selling, transferring or
exchanging of products, services or information via computer networks, including the Internet.
E-business is a broader definition of EC, including buying and selling of goods and services,
and also servicing customers, collaborating with partners, conducting e-learning and conducting
electronic transactions within an organization.

8. Definitions and Concepts
Electronic commerce Electronic business
Electronic commerce (e-commerce, EC) describes the buying, selling, transferring or
exchanging of products, services or information via computer networks, including the Internet.
E-business is a broader definition of EC, including buying and selling of goods and services,
and also servicing customers, collaborating with partners, conducting e-learning and conducting
electronic transactions within an organization.

9. Definitions and Concepts (continued)
Pure versus Partial Electronic Commerce depends on the degree of digitization involved.
Brick-and-mortar organizations
Virtual organizations
Click-and-mortar organizations
Pure vs. Partial EC
--The product can be physical or digital.
--The process can be physical or digital.
--The delivery agent can be physical or digital.
Brick-and-mortar organizations are purely physical organizations.
Virtual organizations are companies that are engaged only in EC. (Also called pure play)
Click-and-mortar organizations are those that conduct some e-commerce activities, yet their
business is primarily done in the physical world. i.e. partial EC.

10. Bricks and Mortar, Partial EC, and Pure EC
Use Internet to order physical book from Amazon:
partial EC
Order and download book from Amazon: pure EC
Buy books at university bookstore:
bricks and mortar

11. Types of E-Commerce Business-to-Consumer (B2C)
Business-to-Business (B2B)
Consumer-to-Consumer (C2C)
Business-to-consumer (B2C): the sellers are organizations and the buyers are individuals.
Business-to-business (B2B): both the sellers and buyers are business organizations.
B2B represents the vast majority of e-commerce.
Consumer-to-consumer (C2C): an individual sells products or services to other individuals.
Business-to-employee (B2E): An organization uses e-commerce internally to provide information
and services to its employees. Companies allow employees to manage their benefits, take training classes electronically; buy discounted insurance, travel packages, and event tickets.
E-Government: the use of Internet Technology in general and e-commerce in particular to deliver
information about public services to citizens (called Government-to-citizen [G2C EC]), business partners
and suppliers (called government-to-business [G2B EC]),
Mobile Commerce (m-commerce) refers to e-commerce that is conducted in a wireless environment.
For example, using cell phone to shop over the Internet.

12. Types of E-Commerce (continued)
Business-to-Employee (B2E)
E-Government
Mobile Commerce (m-commerce)

13. B2B and B2C Electronic Commerce
This image shows B2B and B2C electronic commerce, and illustrates the difference between
the two types of EC.

14. Major E-Commerce Mechanisms
Auctions Forward Auctions Reverse Auctions
An auction is a competitive process in which either a seller solicits consecutive
bids from buyers or a buyer solicits consecutive bids from sellers.
Sellers use a forward auction as a channel to many potential buyers. Note that
Sotheby’s uses forward auctions.
In reverse auctions, one buyer, usually an organization, wants to buy a product
or a service. The buyer posts a request for quotation (RFQ) on its Web site
or on a third-party Web site. The RFQ contains detailed information on the
desired purchase. Suppliers study the RFQ and submit bids, and the lowest
bid wins the auction.
(Slides of electronic storefronts, electronic malls, and electronic marketplaces are in subsequent sections)

15. Forward and Reverse Auctions
Bid price
Bid price
In general, forward auctions result in higher prices over time, where
reverse auctions result in lower prices over time.
Time
Time
Forward Auction
Reverse Auction

16. E-Commerce Business Models
Online direct marketing
Electronic tendering system
Name-your-own-price
Find-the-best-price
Online direct marketing: manufacturers or retailers sell directly to customers.
Electronic tendering system: businesses (or governments) request quotes from suppliers;
uses B2B (or G2B) with reverse auctions. Image above is the Hong Kong Government’s
electronic tending system homepage.
Name-your-own-price: customers decide how much they want to pay.
Image above is William Shatner, Priceline’s spokesman.
Find-the-best-price. customers specify a need and an intermediary compares providers
and shows the lowest price.
Note: clicking on the images will take you to the respective Web pages.

17. E-Commerce Business Models (continued)
Affiliate marketing
Note the Sony logo at the top of this Web page
Affiliate marketing: Vendors ask partners to place logos or banners on partner’s site.
If customers click on logo, go to vendor’s site, and buy, then vendor pays commission
to partners.
Note: clicking on image above will take you to the Web page.

18. E-Commerce Business Models (continued)
Viral marketing
Group purchasing
Online auctions
Viral marketing: receivers send information about your product to their friends.
Group purchasing: small buyers aggregate demand to get a large volume; then
the group conducts tendering or negotiates a lower price.
Online auctions: companies run auctions of various types on the Internet.
Note: clicking on the bottom two images will take you to the respective Web pages.

19. E-Commerce Business Models (continued)
Product customization
Deep discounters
Membership
Product customization: customers use the Internet to self-configure products or services.
Sellers then price them and fulfill them quickly.
Deep discounters: company offers deep price discounts.
Membership: only members can use the services provided.
Note: clicking on the images above will take you to the respective Web pages.
(We address Electronic marketplaces and exchanges in later PowerPoints.)

20. E-Commerce Business Models (continued)
Bartering online
Bartering online: an intermediary administers online exchange of surplus products,
and/or company receives “points” for its contribution, and the points can be used
to purchase other needed items.

21. Electronic Payments Electronic checks (e-checks)
Electronic credit cards
Purchasing cards
Electronic cash
Stored-value money cards
Smart cards
Person-to-person payments
Electronic payment systems enable you to pay for goods and services electronically.
checks (e-checks) are similar to paper checks and are used mostly in B2B.
Electronic credit cards allow customers to charge online payments to their credit card account.
Purchasing cards are the B2B equivalent of electronic credit cards and are typically used for unplanned B2B purchases.
Electronic cash
Stored-value money cards allow you to store a fixed amount of prepaid money and then spend it as necessary.
Smart cards contain a chip called a microprocessor that can store a considerable amount of information and are multipurpose – can be used as a debit card, credit card or a stored-value money card.
Person-to-person payments are a form of e-cash that enables two individuals or an individual and a business to transfer funds without using a credit card.

22. How E-Credit Cards Work

23. Electronic Payments (continued)
Purchasing card
Electronic credit card
Smart card
Pre-paid stored value money card

24. Benefits of E-Commerce
Benefits to organizations
Makes national and international markets more accessible
Lowering costs of processing, distributing, and retrieving information
Benefits to customers
Access a vast number of products and services around the clock (24/7/365)

25. Benefits of E-Commerce (continued)
Benefits to Society
Ability to easily and conveniently deliver information, services and products to people in cities, rural areas and developing countries.

26. Limitations of E-Commerce
Technological Limitations
Lack of universally accepted security standards
Insufficient telecommunications bandwidth
Expensive accessibility
Non-technological Limitations
Perception that EC is unsecure
Unresolved legal issues
Lacks a critical mass of sellers and buyers

27. 7.2 Business-to-Consumer (B2C) Electronic Commerce
Electronic storefronts
Electronic malls
An electronic storefront is a Web site that represents a single store.
Electronic malls are collections of individual shops under a single Internet address.
Note: clicking on the images above will take you to the respective Web sites.

28. Leading E-Tailing Websites
B2C electronic commerce is also known as e-tailing. Examples of e-tailing Websites include:

29. The Long Tail
Online services carry far more inventory than traditional retailers. Note the inventory that
Rhapsody (735,000 songs compared to Wal-Mart’s 39,000), Amazon (2.3 million books compared
to Barnes and Noble’s 150,000), and Netflix (25,000 DVDs compared to Blockbuster’s 3,000) carry.
See top right on the figure.
The demand for Rhapsody’s more obscure songs (shown in yellow on the graph) makes up the Long Tail.
Meanwhile, even as consumers flock to mainstream books, music, and films, there is real demand for
niche products (shown on the middle right of the figure). Note the percentages of total sales for
Rhapsody, Amazon, and Netflix that come from products not available in traditional retail stores.

30. Online Service Industries
Cyberbanking
Online securities trading
Cyberbanking involves conducting banking activities from home, a place of business,
or on the road instead of at a physical bank location.
Virtual banks are dedicated only to Internet transactions.
Note: Clicking on images above will take you to the respective Web sites. However,
NetBank has been acquired by ING Direct, so the NetBank image has no link.
Online job market

31. Online Service Industries (continued)
Travel services Online advertising

32. Disintermediation A key issue is disintermediation
Online service involves customers accessing services via the Web.
Intermediaries or middlemen provide information and/or provide value-added services.
When the function(s) of these intermediaries can be automated or eliminated, this
process is called disintermediation.

33. Disintermediation example
Online diamond broker
Blue Nile is an online diamond broker that disintermediates the diamond
supply chain.
Note: clicking on the image above will take you to the Blue Nile homepage.

34. Online Advertising Online Advertising methods Banners Pop-up ad
Pop-under ad
Permission marketing
Viral marketing
Advertising is an attempt to disseminate information in order to influence a
buyer-seller transaction.
Banners are simply electronic billboards.
Pop-up ad appears in front of the current browser window.
Pop-under ad appears underneath the active window.
Permission marketing asks consumers to give their permission to voluntarily accept online advertising and .
Viral marketing refers to online “word-of-mouth” marketing.

35. Banner Ad

36. Pop-Up Ads

37. Pop-Under Ads

38. Permission Marketing Yes No
Permission marketing asks consumers to give their permission to voluntarily accept
online advertising and .

39. Viral Marketing
Word of mouth

40. Online Advertising on Social Networks

41. Issues in E-Tailing Channel conflict Order fulfillment
Channel conflict occurs when manufacturers disintermediate their channel partners,
such as distributors, retailers, dealers, and sales representatives, by selling
their products directly to consumers, usually over the Internet through electronic
commerce.
Multichanneling is a process in which a company integrates its offline and online channels.
Order fulfillment involves finding the product to be shipped; packaging the product; arrange
for speedy delivery to the customer; and handle the return of unwanted or defective products.

42. Drivers of today’s online advertising
The emergence of “communitainment.” The increasing popularity of “Usites.” Mainstreaming of the Internet. Declining usage of traditional media. Fragmentation of content consumption. Consumers are multitasking and they do not like ads.
PiperJaffray is an investment bank. See PiperJaffray at
Source: PiperJaffrey

43. Communitainment
Communitainment is the blending of community, communication, and entertainment into a new form of online activity driven by consumers.  
The bank predicts that consumers have shifted over 50% of their content consumption to communitainment formats (e.g., social networking, video, and photo sharing sites), displacing traditional forms of media content like TV, magazines, and large Internet sites. 
This trend presents a major challenge for advertisers.

44. Popular Usites “Usites” are Web sites devoted to user-driven content.
Yelp hosts an online database of user-generated reviews of local businesses.
StumbleUpon is a web browser plugin that allows its users to discover and
rate webpages, photos, videos, and news articles.
Broadcaster is a video entertainment community and live webcam social network.
The site allows users to create personal profiles, post pictures, upload videos,
and chat with the site's other users through a live webcam chat feature.
Clicking on the logos above will take you to the respective Web sites.

45. Mainstreaming of the Internet

46. Declining usage of traditional media

47. Fragmentation of content consumption
Source: PiperJaffray

48. And…consumers are multitasking
Source: PiperJaffray

49. And…consumers don’t like ADS
Source: PiperJaffray

50. Eight Types of Web sites for Advertising
Portals: most popular; best for reach but not targeting
Search: second largest reach; high advertising value
Source: PiperJaffray

51. Eight types of sites (continued)
Commerce: high reach; not conducive to advertising
Entertainment: large reach; strong targetability
Mall of Hawai’i

52. Eight types of sites (continued)
Community: emphasize being a part of something; good for specific advertising
Communications: not good for branding; low targetability

53. Eight types of sites (continued)
News/weather/sports: poor targetability
Games: good for very specific types of advertising

54. What the eight categories mean for advertisers
Portals and Search have the greatest reach.
Community and Games have the highest level of engagement.
Search and News/Weather/Sports have the highest monetization.

55. 7.3 Business-to-Business (B2B) Electronic Commerce
In B2B e-commerce, the buyers and sellers are organizations.

56. B2B Sell-Side Marketplace
Key mechanisms: electronic catalogs and forward auctions
In the sell-side marketplace, organizations sell their products or services to other organizations
Electronically from their own Web site and/or from a third-party Web site.
This model is similar to the B2C model in which the buyer comes to the seller’s site, views
catalogs, and places an order. In the B2B sell-side marketplace, the buyers are organizations.

57. Ariba (sell-side marketplace)

58. (Sell-side marketplace)

59. (Sell-side marketplace)

60. B2B Buy-Side Marketplace
Key mechanism: reverse auctions
The buy-side marketplace is a model in which organizations buy needed products and
services from other organizations electronically.

61. United Sourcing Alliance
The United Sourcing Alliance is an example of a buy-side marketplace.

62. Electronic Exchanges
Exchanges have many buyers and many sellers.

63. Boeing PART
Boeing PART is an example of an electronic exchange.

64. PlasticsNet (Vertical Exchange)
Vertical exchanges connect buyers and sellers in a given industry.

65. Horizontal Exchange
Horizontal exchanges connect buyers and sellers across many industries and are used
mainly for MRO materials.

66. Functional Exchange
In functional exchanges, needed services such as temporary help or extra office space
are traded on an “as-needed” basis.

67. 7.5 Ethical and Legal Issues
Ethical Issues
Privacy
Job Loss
Privacy: ecommerce provides opportunities for businesses and employers to track individual activities on the WWW using cookies or special spyware. This allows private/personal information to be tracked, compiled, and stored as an individual profile. This profile can be used or sold to other businesses for target marketing or by employees to aide in personnel management decisions (i.e., promotions, raises, layoffs).

68. Legal Issues Specific to E-Commerce
Fraud on the Internet
Domain Names
Cybersquatting
Fraud on the Internet i.e. stocks, investments, business opportunities, auctions.
Domain Names problems with competition.
Cybersquatting refers to the practice of registering domain names solely for the purpose of selling them later at a higher price.

69. Legal Issues Specific to E-Commerce (continued)
Domain Tasting Taxes and Other Fees Copyright
Domain Tasting is a practice of registrants using the five-day "grace period" at the beginning of a domain registration to profit from pay-per-click advertising.
Taxes and other Fees when and where (and in some cases whether) electronic sellers should pay business license taxes, franchise fees, gross-receipts taxes, excise taxes, …etc.
Copyright protecting intellectual property in e-commerce and enforcing copyright laws is extremely difficult.

70. Chapter Closing Case