Chapter
10 - E-Commerce
What is E-Commerce
What is electronic commerce
(e-commerce)?
° A financial business transaction that occurs over an
electronic network
° Sometimes called e-business
° Anyone with access to a computer, an Internet
connection, and a
means to pay for
purchased goods or
services can
participate in
e-commerce
How are e-commerce transactions conducted?
° Primarily through desktop computers
° Wirelessly using handheld Web-enabled devices
What is a bricks-and-mortar business?
° A company that has a physical location
° Also called a brick-and-mortar business
What is a clicks-and-mortar business?
° A company that has a bricks-and-mortar location as
well as an online presence
° Some companies
only have an
online presence
without physical
locations
How has e-commerce grown?
° Forrester Research, a leading independent research
firm, estimates that by 2004 worldwide e-commerce will exceed $6.7 trillion
What were early stages in the
development of e-commerce?
E-Commerce Business Models
What is business-to-consumer
(B-to-C or B2C) e-commerce?
° Consists of the sale of products or services from a
business to the general public or end user
° The seller is the business
° The buyer is the consumer (public)
° Products can be physical objects or intangible items
such as software or services
How might a B2C e-commerce business
operate?
What is disintermediation?
° Businesses sell products directly to consumers without
using traditional retail channels
° Enables companies to maximize benefits by eliminating
the middleman
What is consumer-to-consumer
(C-to-C or C2C) e-commerce?
° Consists of individuals using the Internet to sell
products and services directly to other individuals
° An online auction is similar to negotiating, in which
one consumer auctions goods to other consumers
° eBay is a popular online auction
What is peer-to-peer (P2P)
e-commerce?
° A form of e-commerce that enables users with the same
networking software to connect to each other’s hard disks and exchange files
directly
° A consumer
can pay another
consumer to copy
a file
Company on the Cutting Edge
° World’s largest online trading community
° More than 60 million objects offered for sale since
the company’s inception
° Founded by Pierre Omidyar on
Labor Day, 1995
E-Commerce Business Models
What is business-to-business
(B-to-B or B2B) e-commerce?
° The sale and exchange of products and service between
businesses
° The major type of e-commerce interaction
° Many businesses engage in both B2B and B2C
What is a supply chain?
° The interrelated network of facilities and
distribution methods that
• obtains materials
• transforms materials into finished products
• delivers the finished products to customers
What
are four basic types of B2B e-commerce sites?
What is vertical B2B e-commerce?
° An
e-commerce site that specializes in a particular industry
What is business-to-employee
(B-to-E or B2E) e-commerce?
° The use of intranet technology to handle activities that take place
within a business
° Also called intrabusiness
e-commerce
° Increases profits by reducing expenses within a
company
What are some advantages of
e-commerce?
• Global market 24 hours per day
• Businesses have access to 360 million people with
Internet access
• Customers can conduct price comparisons easily
• Feedback can be immediate
• Changing information can be available quickly
• FAQ (frequently asked questions) pages can provide
easy access to customer support
• Ability to gather customer information, analyze it,
and react
• New and traditional approaches to generating revenue
• Manufacturers can buy and sell directly, avoiding the
cost of the middleman
• Distribution costs for information reduced or
eliminated
• Options to create a paperless environment
E-Commerce Revenue Streams
What is a revenue stream?
° The method a business uses to generate income
° A single Web site may use more than one method of
generating revenue
How is revenue generated with
direct sales?
° You purchase a product or service
° The business arranges delivery
° Sales are made to both consumers and businesses
What is electronic software
distribution (ESD)?
° Sale of digital products such as software, music,
movies, books, and photographs
° A purchase entitles you to download one copy of an
item
How is revenue generated with
software rental?
° Application service providers (ASPs)
charge a rental fee before you can access and use Web application software
° Rental fee arrangements
vary by vendor
and application
° Microsoft’s Web
applications are
called .NET
What is advertisement revenue?
° Some Web sites contain advertisements
° Sites earn commissions from the advertising sponsors
when visitors make purchases as a result of clicking the advertisement
Technology Trailblazer
Michael Dell
° Began building and selling computers at 18 while in
college
° In first year of
business,
sales reached $6
million
° In 1992, Dell became
the youngest CEO
of a company named
to the Fortune 500 list
° Successful in creating a company that bypassed the
middleman to sell custom-built personal computers directly to consumers
E-Commerce Revenue Streams
How
is revenue generated with an informational Web site?
° Visitors are required to subscribe to a service
° Usually provide some information at no cost, but
require a subscription to access the content of the entire site
What is a Web hosting service?
° Assists people and companies in hosting their Web site
° Provides the hardware, software, and communications
required for a Web server
° Some provide services that include managing payments
and tracking inventory
What is an online storage service?
° Provides data storage to computer users
° Often used to store backup copies of data and
information
How
is revenue generated with Internet access?
° Some sites provide Internet access
° Many have become portals offering many other services
The E-Retailing Market Sector
What is E-retail?
° Occurs when retailers use the Web to sell their
products and services
° Also called e-tail
Company on the Cutting Edge
° Founded by Jeff Bezos in
1995
° Originally a book store
° Now expanded to sell a variety of products
° Has become the Internet's top retailer with more than
$600 million in annual sales
The E-Retailing Market Sector
What is an electronic storefront?
° The Web site where an e-retailer displays its products
° Also called an online catalog
° Contains descriptions, graphics, and sometimes product
reviews
What is a shopping cart?
° A software component on the Web that allows the
customer to collect purchases
° Items can be added, deleted, or saved for a future
visit
What is a secure checkout?
° Web site where the customer enters personal and
financial data
° The transaction and financial data automatically are
verified at a banking Web site
Technology Trailblazers
Dieter Seitzer
and Heinz Gerhäuser
° Researchers at the Applied Electronics division at the
Fraunhoufer Institute in Germany
° Began developing the MP3 format in 1987
° A method to compress audio
files into a digitized
format so they
transfer quickly
from a Web page
to a computer
Other
E-Commerce Market Sectors on the Web
What are other e-commerce market
sectors on the Web?
° Many market sectors have taken advantage of business
opportunities on the Web
What is online banking?
° Allows you to pay bills from your computer
° Transfer money electronically from your account to a
payee’s account
° Download monthly banking transactions
What is online trading?
° You can invest in stocks, options, bonds, treasuries,
CDs, money markets, annuities, and mutual funds without using a broker
° Transaction fee usually less than when trading through
a broker
What
entertainment and media are available on the Web?
° Music, videos, news, sporting events, and 3-D
multiplayer games
° News and live radio broadcasting
° Streaming audio
What travel services are available
on the Web?
° Driving directions and maps
° Airline, hotel, and car reservations
What is a shopping bot?
° A Web site that searches the Internet for the best
price on a product or service in which you are interested
° Also called a shopbot
What
health services are available on the Web?
° Provide up-to-date medical, fitness, nutrition, or
exercise information
° Some maintain databases of doctors and dentists
° Pharmacies allow customers to refill prescriptions and
ask questions
What are other business services?
Creating an Online Store
What decisions should be made to
create an online store?
° Building a storefront
° Managing payment
° Managing
product delivery
° Designing a site
that attracts customers and keeps them returning
° Managing the site
° Promoting the site
What
are the options available for building a storefront?
° E-retailers must select software and hardware to build
a storefront
° Can develop and maintain the site in house
° Can outsource all or part of the system
° Often e-retailers hire an expert in Web design and
development to assist in implementing a site
What is e-commerce software?
° Allows a merchant to set up a storefront with a
product database, combined with a shopping cart
° Should provide a secure environment to process order
transactions
° Some include statistical tracking features and
capability of integrating with a business' other systems
What is a Web host?
° An outside company that provides the hardware,
software, and communications required for a Web server
° Charges a monthly fee or a percentage of the sales
income
° Web server also called an e-commerce server or
commerce server
What is a secure server?
° Prevents access to the system by unauthorized users
° Often used for transaction services where credit card
information is entered
What is a Web site development
service?
° Assists in the process of creating a storefront
° Allows small businesses and individuals to participate
in the e-commerce arena with a minimum investment
How can customers pay for products?
What
are steps in accepting customer payments using a credit card?
° Obtain a merchant account
• Establishes a relationship between the e-retailer and
a bank
• Allows the e-retailer to accept credit card payments
° Provide a secure order form
• Used to collect orders and
credit card information from
the customer
° Use a payment-processing service
• Provides software to manage
the transaction between the
e-retailer and the bank
What is fulfillment?
° Managing and storing inventory
° Packaging and shipping products
° Maintaining records of all transactions
° Fulfillment companies
• outsourcing services that provide warehousing and inventory
management, product assembly, order processing, packing, shipping, return processing,and online reporting
• also called logistics companies
What are the implications of
e-retail for delivery services?
° Traditional delivery services such as Federal Express
and UPS will have increased business due to e-retail sales
What factors lead to customer
loyalty?
° Successful sites attract customers and keep them
returning to the site
° Te best storefronts plan for convenience, are
efficient, and easy to use
° Customers who must wait more than eight seconds for a
page to download usually will click to another site
What
is electronic Customer Relationship Management (eCRM)?
° Used to provide service after a sale
° Combines a personalized touch and customized service
to customers
° Uses automatic e-mail to confirm orders, display a
list of frequently asked questions (FAQ), and send surveys for feedback
What is e-mail publishing?
° The process of sending newsletters via e-mail messages
to a large group of people with similar interests
° Can be used as
follow up after
a sale to
generate return
business and
recommendations
What is site management?
° Monitoring Web site use
° Collecting data and using it to improve the Web site
What is a domain name?
° A unique registered name that identifies and locates a
Web site
° Customer types a domain name into a Web browser to
display a Web page
° Should correspond to the
business name or the
function of the business
° Domain name is registered
with various search engines
• Ensures the site will appear
in the hit lists for searches
on related keywords
What is a submission service?
° A Web-based business in which you typically pay a fee
to register with hundreds of search engines
What is online advertising?
° Often called banner ads
° Advertisements are linked to the advertiser's Web site
° Advertiser usually pays based on the number of click-throughs
• Occurs when a visitor clicks an advertisement to move
to the advertiser’s Web page
What is spam?
° Unsolicited e-mail messages or newsgroup postings
° Internet junk mail
° Usually generates antagonism instead of sales
Summary of E-Commerce:
A Revolution in the Way We Do Business
° What is e-commerce?
° E-commerce business models
° E-commerce revenue streams
° The e-retailing market sector
° Other e-commerce market sectors on the Web
° Creating an online store
Chapter 10 Complete