Electronic Commerce

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Electronic Commerce

• Doing Business on the Internet

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Electronic Commerce (1)

• Electronic Business (e-business) the conduct of
  selling, buying, logistics, or other organization
  management activities via the Web also called
  Electronic Commerce (e-commerce)
• Participant-Based Classification
• Business-to-consumer (B2C)
• Business-to-business (B2B)
• Business-to-government (B2G)

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Electronic Commerce (2)

• Activity-Based Classification organized by what
  the business activities are designed to
  accomplish
• Business model the sum of a companys business
  activities and processes
• Revenue model processes used to find new
  customers, make sales, and deliver goods sold
• Operational model other processes, such as
  purchasing, hiring, receiving, manufacturing,
  etc.

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Electronic Commerce (3)

• Competitive Advantage way of generating more
  revenues, incurring lower costs, or performing
  tasks more efficiently than other companies in
  the same business the Internet provides more
  competitive advantages
• Transaction costs the main contribution of
  electronic commerce to increase efficiency is the
  reduction of transaction costs

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Revenue Models for Electronic Commerce (1)

• Online Catalog Revenue Model company replaces
  or supplements its distribution of printed
  catalogs with a catalog on a Web site
• Sell only on Web (dot-com or pure dot-com
  companies) e.g. Amazon.com
• Sell through print catalogs and on Web e.g.
  Barnes Noble
• Sell through physical stores and on Web e.g.
  Target

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Revenue Models for Electronic Commerce (2)

• Advertising and Subscription Revenue Models few
  Web sites have enough visitors to interest larger
  advertisers, so most use a combination of
  advertising and subscription to generate revenue
• Advertising only model
• No consensus on how to measure and charge for Web
  advertising
• Most successful are Web portals (doorways to Web)
  e.g. Yahoo! AOL, etc.
• Sites that offer classified advertising have been
  more successful
• Target marketing to specific demographic
  characteristics has also been successful

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Revenue Models for Electronic Commerce (3)

• Direct Fee Revenue Model businesses offer
  services for which they charge a fee
• Can offer a high level of personal service
• Costs can be much lower than through physical
  stores or offices
• e.g. games, legal, tax, accounting, travel, stock
  brokerage, banks, insurance, etc.

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History of Business Cost Reductions Using
Electronic Technologies (1)

• Electronic Fund Transfers (EFTs or Wire
  Transfers) electronic transmissions of account
  exchange information over private networks (used
  for decades by banks)
• Electronic Data Interchange (EDI) transfer of
  computerized data from one company to another in
  a standard format (replacing standard paper
  forms, such as invoices, purchase orders, and
  shipping documents)
• For EDI to work, each company must have
  compatible computer systems, a communications
  link, and follow same set of EDI standards

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History of Business Cost Reductions Using
Electronic Technologies (2)

• Financial EDI when EDI includes payment
  information
• Value-added networks (VANs) accepts EDI
  transmissions in a variety of formats, converts
  the formats as needed, ensures EDI transmissions
  are received and acknowledged, and can forward
  financial transactions to the trading partners
  banks or ACHs (Automated Clearinghouses)

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Reducing Transaction Costs (1)

• Searching for products on Web the Web can help
  buyers conduct information searches more cheaply
  and efficiently (rather than using telephones,
  faxes, or going to stores)
• Some companies have started Web services that
  help buyers find products
• Price Watch
• DealTime

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Reducing Transaction Costs (2)

• Selling products on Web companies can use Web
  to reduce selling and other product related costs
• After-sale support - one of most expensive
  components of sales transactions costs,
  especially so for complex technology products
  (e.g. downloading software, technical assistance)
• Hewlett-Packard
• Dell

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Intranets and Extranets

• Intranets set of Web pages accessible only to
  employees of a company
• Extranet intranet made available to users
  outside the company (e.g. all major overnight
  freight companies)
• Many companies use intranets and extranets to
  coordinate employee, supplier, and customer
  activities
• Smaller companies that cannot afford dedicated
  intranets and extranets can obtain some of their
  benefits by using a Web portal site (e-mail,
  customizable personal home page, online
  calendars, address books, etc.)

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Automated E-Mail

• E-mail can be automatically generated to send
  message of new products and services to clients
  (best not to do more than once per week)
• Web sites exist to help companies produce high
  quality, marketing-based emails
• Digital Impact
• Email Vision

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Online Auctions

• One of more interesting and innovative
  implementations of electronic commerce
• Merchandise can belong to Web site owners, but in
  most cases does not
• Provides both revenue and cost-reduction
  opportunities
• Ebay
• Yahoo! Auctions
• Liquidation broker intermediary that matches
  sellers of obsolete inventory with buyers looking
  for bargains (now commonly use Web auctions)
• Liquidation World
• AssetControl.com

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Consumer Concerns

• Participants in electronic commerce have two
  major concerns 1) transaction security 2)
  violation of privacy
• Assurance provider a third party that, for a
  fee paid by the EC Web site, will certify the
  site meets some criteria for conducting business
  in a secure and privacy-preserving manner
• Better Business Bureau (BBBonline)
• TRUSTe

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International Nature of Electronic Commerce (1)

• The Internet and the Web offer an unprecedented
  degree of geographic reach
• Languages once a company overcomes language
  barriers, technology exists for it to conduct EC
  with any other business or consumer anywhere in
  the world
• Translate Web pages into different languages
• Machine translations can do rough translations,
  but human translators must refine these
  translations to make them accurate
• FreeTranslation.com
• Rubric

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International Nature of Electronic Commerce (2)

• A business on the Web becomes an international
  business exposes companies to a broader range
  of laws and regulations
• Most important issues relate to legal, tax, and
  privacy concerns
• Must also be concerned with currency conversions,
  tariffs, import and export restrictions, and
  local business customs
• Many smaller sites restrict the countries to
  which they will deliver merchandise or provide
  services
• Can also place terms of service statement on Web
  site (among other things, restricts type of
  business that can be conducted with the site)