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The Internet and World Wide Web are extremely well suited for conducting business electronically on a global basis

Chapter 4 - Enabling Business-to-Consumer Electronic Commerce

Chapter 4 Learning Objectives After this chapter, you will be able to:

Electronic Commerce Defined

Describe electronic commerce, how it has evolved, and the strategies that companies are adopting to compete in cyberspace.

Business-to-Consumer E-Commerce and Internet Marketing

Describe the stages of business-to-consumer electronic commerce, understand the keys to successful electronic commerce applications, and explain the different forms of Internet marketing.

Mobile Commerce, Consumer-to-Consumer EC, and Consumer-to-Business EC

Describe mobile commerce, consumer-to-consumer electronic commerce, and consumer-to-business electronic commerce.

E-Government

Explain different forms of electronic government.

Managing Finances and Navigating Legal Issues in EC

Describe how to conduct financial transactions and navigate the legal issues of electronic commerce.

Electronic Commerce Defined

Describe electronic commerce, how it has evolved, and the strategies that companies are adopting to compete in cyberspace.

Business-to-Consumer E-Commerce and Internet Marketing

Describe the stages of business-to-consumer electronic commerce, understand the keys to successful electronic commerce applications, and explain the different forms of Internet marketing.

Mobile Commerce, Consumer-to-Consumer EC, and Consumer-to-Business EC

Describe mobile commerce, consumer-to-consumer electronic commerce, and consumer-to-business electronic commerce.

E-Government

Explain different forms of electronic government.

Managing Finances and Navigating Legal Issues in EC

Describe how to conduct financial transactions and navigate the legal issues of electronic commerce.

Electronic Commerce Defined

Electronic Commerce

“the exchange of goods, services, and money among firms, between firms and their customers, and between customers, supported by communication technologies and, in particular, the Internet”

Electronic Commerce occurs when any aspect of the transaction is facilitated by Electronic Communication Technologies.

We typically think of the Internet, which is where the vast majority of Electronic Commerce takes place.

Exchanges can involve consumer, businesses, and the government where any of these can be the buyer, the seller, or both.

Electronic Commerce Defined: Types of Electronic Commerce (EC)

Type of EC	Description
Business-to-consumer (B2C)	Transactions between businesses and their customers
Business-to-business (B2B)	Transactions among businesses
Consumer-to-business (C2B)	Transactions between customers and businesses
Consumer-to-consumer (C2C)	Transactions between people not necessarily working together
Government-to-citizen (G2C)	Transactions between a government and its citizens
Government-to-business (G2B)	Transactions between a government and businesses
Government-to-government (G2G)	Transactions among governments

There are many types of Electronic Commerce, based on who is interacting or selling to whom.

Business to Consumer is Businesses selling to Consumers; Consumer to Business is Consumers selling to Businesses.

Internet and World Wide Web Capabilities: Dissemination, Integration, Customization

Information Dissemination

Products and services can be marketed over vast distances

Integration

Web sites can be linked to corporate databases to provide real-time access to current and/or personalized information

Mass Customization

Firms can tailor their products and services to meet a customer’s particular needs

The World Wide Web allows for information to be readily disseminated to anyone visiting a Web site, which allows products to be marketed on a global basis.

As companies become more sophisticated, they may link databases containing information such as product specifications to their Web site, allowing customers and potential customers to call up details at the click of a mouse.

Companies can even set up Web sites that allow customers to not only order products, but also specify individual customizations to them.

Internet and World Wide Web Capabilities: Communication, Transactional, Disintermediation

Interactive Communication

Companies can communicate with customers, improving their image of responsiveness

Transaction Support

Clients and businesses can conduct business online without human support

Disintermediation

Cutting out the “middleman” and reaching customers more directly and efficiently

The World Wide Web also supports interactive communication, transactions, and bypassing the middleman. Companies can do online chat sessions with customers who need more information, and then the customer can complete the order online.

Disintermediation is where companies who have typically sold through distributors and or retailers now sell direct to end users, eliminating some of the expenses that the distributors and retailers have and impose on the distribution channel.

EC Business Strategies

Companies can ignore E-Commerce and just sell through physical outlets, can be virtual companies that only sell through online store fronts, or can combine them using a “Click and Mortar” approach that allows both online transactions and physical store sales.

The physical, store-only company has a limited product reach as well as limited sales and support hours.

The online company can sell anywhere in the world 24/7, but customers must wait for their product to be shipped and some products require physical inspection and testing to verify suitability.

Click-and-Mortar stores often combine the best of both worlds, but retailers must overcome the pricing differences inherent between online and physical locations as well as the complexity of two sales channels.

EC Business Strategies: Revenue Models

Revenue Type	Description	Who is Doing This?
Affiliate marketing	Paying businesses that bring or refer customers to another business	Amazon.com’s Associates program
Subscription	Users pay a monthly or yearly recurring fee for the product/service	Netflix.com, World of Warcraft
Licensing	Users pay a fee for using protected intellectual property	Symantec, Norton
Transaction fees/Brokerage	A commission is paid to the business for aiding in the transaction	PayPal.com, eBay.com, Groupon.com
Traditional sales	A consumer buys a product/service from the Web site	Nordstrom.com, iTunes.com
Web advertising	A free service/product is supported by advertising on the Web site	Facebook.com, Answers.com

There are many ways E-Commerce can be monetized outside of simple sales transactions. Some companies work strictly as referrals companies, receiving affiliate marketing fees.

Subscription fees allow access or use for a limited time period.

Licensing transfers the right to use, but not ownership.

Transaction fees are based on aiding a transaction between two parties.

Web advertising leverages the users visiting a site to derive advertising revenue.

Business-to-Consumer E-Commerce and Internet Marketing

Electronic Commerce Defined

Describe electronic commerce, how it has evolved, and the strategies that companies are adopting to compete in cyberspace.

Business-to-Consumer E-Commerce and Internet Marketing

Describe the stages of business-to-consumer electronic commerce, understand the keys to successful electronic commerce applications, and explain the different forms of Internet marketing.

Mobile Commerce, Consumer-to-Consumer EC, and Consumer-to-Business EC

Describe mobile commerce, consumer-to-consumer electronic commerce, and consumer-to-business electronic commerce.

E-Government

Explain different forms of electronic government.

Managing Finances and Navigating Legal Issues in EC

Describe how to conduct financial transactions and navigate the legal issues of electronic commerce.

Stages of B2C EC

As businesses become more comfortable with and versed in Electronic Commerce they progress from simple, static informational Web sites to more sophisticated sites that can support customized information retrieval and/or perform transaction processing.

E-Tailing: Selling Goods and Services in the Digital World

Companies utilizing E-Tailing have unique benefits

Product Benefits: With no store size and shelf space restrictions, companies can sell a far wider variety of goods.

Place Benefits: Internet storefronts are available on almost every computer connected to the Internet.

Price Benefits: The efficiency of online retailers, with high volumes and low overhead allow for very competitive pricing.

When companies are selling online, they can take advantage of the elimination of the Retail Market space, selling a much wider variety of products, targeting unique market segments on a global basis, and undercutting competitors pricing.

E-Tailing: Selling Goods and Services in the Digital World: The Long Tail

Online retailers can cater to “The Long Tail”, or niche markets in addition to (or instead of) purely selling mainstream products.

While customers with unusual wants or needs may not be able to support a local storefront, there are often enough individuals in larger geographic regions to support an online merchant.

EC Web Sites: Attracting and Retaining Online Customers – 4 Key Recommendations

The Web site should offer something unique

The Web site must motivate people to visit, to stay, and to return

You must advertise your presence on the Web

You should learn from your Web site

Online customers have many choices, but if you can provide customers with something they can find nowhere else, then they will have to come to you to get that benefit.

You can compete for customers on price, but if you also offer them service, support, community, or other benefits you can build a relationship to draw customers to you instead.

Customers have to find you to buy from you.

If you have features on your Web site that are prompting customers to buy, or to leave, you should know what they are. By tracking how customers navigate through your site you can learn what is working and what isn’t, and make adjustments accordingly.

EC Web Sites: Attracting and Retaining Online Customers

Consumers need Web sites to meet their basic needs, which vary depending on why they are using the site.

If a site can’t reliably process transactions, is difficult to use, and is off-putting in it’s design, consumers are unlikely to use it.

Internet Marketing

If you build it, they won’t come unless you market it

Search Engine Optimization (SEO) can be critical to your Web site’s success

Internet Marketing Methods


Search Marketing	Includes Paid Search, Placing Ads on search Web sites based on Search Terms, and Search Engine Optimization (SEO), optimizing your Web site and it’s relative search engine ranking
Display Ads	Simple banner ads, but now often contextualized to what the person is viewing
E-mail Marketing	Extremely low cost, less than a penny an email, and hence very popular; Effectiveness also easy to track
Social Media	Increasingly used for interactive communication and relationship building with customers
Mobile Marketing	If ads can be tailored to a users location then highly targeted marketing opportunities open up
Pricing Models & Click Fraud	Impression, Pay-per-Click/Click Through, and Conversion models

Advertisers continually look for ways to deliver targeted information at the time and place where it will be most likely to stimulate a purchase or build a relationship increasing the lifetime value of the customer base. Internet marketing is no exception, and these approaches all seek to address these needs.

As with many aspects of business, there is a potential for fraud in advertising if aspects of the transaction can’t be monitored, and click fraud by the ad seller trying to drive up revenue or a competitor (or disgruntled employee) trying to drive up business costs can readily occur.

Mobile Commerce, Consumer-to-Consumer EC, and Consumer-to-Business EC

Electronic Commerce Defined

Describe electronic commerce, how it has evolved, and the strategies that companies are adopting to compete in cyberspace.

Business-to-Consumer E-Commerce and Internet Marketing

Describe the stages of business-to-consumer electronic commerce, understand the keys to successful electronic commerce applications, and explain the different forms of Internet marketing.

Mobile Commerce, Consumer-to-Consumer EC, and Consumer-to-Business EC

Describe mobile commerce, consumer-to-consumer electronic commerce, and consumer-to-business electronic commerce.

E-Government

Explain different forms of electronic government.

Managing Finances and Navigating Legal Issues in EC

Describe how to conduct financial transactions and navigate the legal issues of electronic commerce.

Mobile EC

Location-Based M-Commerce

Services can be offered tailored to a person’s needs based on their current location

Information on the Go

Customers can get further information about a product wherever they are, including in the store, but this can lead to “showrooming”

Product and Content Sales

Consumers use mobile apps to make purchases while on-the-go

Mobile E-Commerce is an emerging field that is still finding it’s place.

The promise of Mobile E-Commerce includes location-based services.

Customers can also look up additional information in a store about it’s products, but this sometimes leads to comparison shopping with online retailers.

Finally, mobile apps now allow consumers to make purchases wherever they are.

C2C EC

E-Auctions

Consumers can sell items, including rare and unusual items, at online auctions where competition can result in a fair price even if the seller isn’t sure what a fair price is

Businesses participate in reverse auctions to compete for the right to make a sale

Online Classifieds

Typically local in nature, these have flourished in recent years

Consumer-to-Consumer E-Commerce allows consumers to achieve a fair price for goods which they otherwise might not be able to achieve.

E-Auctions allow consumers to sell rare and unusual items to a world market.

Online Classifieds allow consumers to sell and search for products locally, reaching a wider audience but still facilitating what is often a local face-to-face transaction.

C2B EC

Relatively new, this is where consumers can sell relatively small pieces of work (e.g.: photos) or services to businesses

It might be argued that anyone who made a living doing this is actually in business for themselves, and technically isn’t a consumer anymore

A relatively new phenomenon is C2B E-Commerce. This involves consumers selling what is typically small slices of work to businesses.

A good example might be businesses that buy photos from Amateur photographers to sell online to interested parties. Each photo is a small piece of work, but when they sell the photographer gets a small commission.

Managing Finances and Navigating Legal Issues in EC

Electronic Commerce Defined

Describe electronic commerce, how it has evolved, and the strategies that companies are adopting to compete in cyberspace.

Business-to-Consumer E-Commerce and Internet Marketing

Describe the stages of business-to-consumer electronic commerce, understand the keys to successful electronic commerce applications, and explain the different forms of Internet marketing.

Mobile Commerce, Consumer-to-Consumer EC, and Consumer-to-Business EC

Describe mobile commerce, consumer-to-consumer electronic commerce, and consumer-to-business electronic commerce.

E-Government

Explain different forms of electronic government.

Managing Finances and Navigating Legal Issues in EC

Describe how to conduct financial transactions and navigate the legal issues of electronic commerce.

E-Banking

Online Banking

Convenience

Security Concerns

Mobile banking

Online Investing

Increased access to financial information and analytical tools

Online investing

Mobile investing

Online banking has become widely accepted, although many people are still worried about the security aspect.

An emerging trend is mobile banking apps allowing anytime, anywhere banking.

Online investing has also taken off, with a variety of sites offering financial information, investment advice, and online brokerage accounts.

Securing Payments in the Digital World

Credit and Debit Cards

Credit Cards are a simple mechanism

Consumers have to transfer a lot of personal information to the seller

Managing Risk

Businesses are financially liable for fraudulent transactions

Businesses have to look for fraud indicators and sometimes reject risky transactions

Online payments are readily made using credit cards, which offer consumers some protection against fraud by the seller, who typically still requires a significant amount of personal information to complete the sale.

At the same time, the merchant is at significant risk of fraud from buyers, and unlike “card-present” sales in traditional stores, when a sale is made online the merchant is financially liable if the sale is fraudulent.

Merchants now employ additional safeguards to flag and reject sales that have warning signs indicating they may not be legitimate.

Legal Issues in EC

Taxation

Sales Taxes

Digital Rights Management

Preventing unauthorized duplication

Restrict which devices can play media

Limit number of times media can be played

Sales taxes have historically not been levied on companies selling to consumers in different states.

EC both reduces state sales tax revenues and makes local business less competitive as compared to out-of-state online retailers.

Digital Rights Management, or DRM, includes practices to limit the copying and distribution of digital goods to paying customers.

E-Government

Electronic Commerce Defined

Describe electronic commerce, how it has evolved, and the strategies that companies are adopting to compete in cyberspace.

Business-to-Consumer E-Commerce and Internet Marketing

Describe the stages of business-to-consumer electronic commerce, understand the keys to successful electronic commerce applications, and explain the different forms of Internet marketing.

Mobile Commerce, Consumer-to-Consumer EC, and Consumer-to-Business EC

Describe mobile commerce, consumer-to-consumer electronic commerce, and consumer-to-business electronic commerce.

E-Government

Explain different forms of electronic government.

Managing Finances and Navigating Legal Issues in EC

Describe how to conduct financial transactions and navigate the legal issues of electronic commerce.

E-Government

Government-to-Citizens

Government-to-Business

Government-to-Government

Governments use e-Government to increase efficiency and effectiveness much like businesses do.

By reducing paperwork and allowing for the electronic dissemination of information and the automated processing of transactions, governments can significantly reduce operating costs while increasing services.

Examples of this might include the electronic filing of income tax returns, the online filing of business license applications, or the ability to share data electronically between different law enforcement agencies.

End of Chapter Content

Managing in the Digital World: Taobao and the World of e-Commerce

Taobao is the largest digital marketplace in China

By 2011 more registered users (370 million) than the population of the United States

Online marketplace for multiple companies

Online consumer-to-consumer sales, much like eBay

Notorious for piracy and counterfeit goods

360buy new fast growing competitor

Not on the list of notorious markets

Sales in China pose huge logistics headaches

Widely varying population densities

No ‘overnight shipping’ infrastructure

Brief Case: Catchafire—Fueling “Volunteer-to-Charity” e-Commerce

Many people want to donate time / service as well as or instead of money

Matching people and charities is difficult

Catchafire is an online platform to bridge this gap

Potential volunteers can “shop” for a good fit

Ethical Dilemma: The Ethics of Reputation Management

Online reviews can be critical to a customers buying decision

Biased and fake reviews can affect a businesses profitability, or even survival

Owners are tempted to post fake positive reviews

Competitors are tempted to post fake negative reviews

Reputation Management can help offset negative biased reviews, but poses ethical dilemmas

Key Players: Behind the Online Storefront: How e-Commerce Giants Help Small Businesses Flourish

Starting an online business can be complex

Commercial giants such as eBay and Amazon allow small retailers to sell through their sites

Large hosting companies such as GoDaddy provide hosting and online shopping carts

Payment services such as Intuit and PayPal offer credit card services

Fulfillment centers, such as Amazon, handle packaging and shipping individual orders

These simplify small business implementations

When Things Go Wrong: Rigging Search Results

Sites often try to raise their search profile

Many sites use techniques Google considers ‘cheating’

When Google discovers a site cheating, they demote them or remove them from the search results altogether

There is a constant struggle between search engines trying to provide accurate results and sites seeking to skew results in their favor

Coming Attractions: Smartphones of the Future

Upcoming smartphone technologies are a closely guarded secret

However, some suppliers have announced new developments

Tactus Technology has developed a layer for a screen that can make shapes rise, so a virtual keyboard would have bumps with the keys

Near-field communication allows devices to exchange information with a tap

Who’s Going Mobile: Mobile Payments

Electronic payment technologies can now eliminate the need for cash and checks

Emerging technologies use near field communication or on-screen barcodes to allow payment by phone

In Kenya subscribers can use M-Pesa to pay via text message

Security concerns remain, as there is a record of every transaction

Industry Analysis: Retailing

Retailing has embraced new technologies

Bar code scanning for price, inventory management, self-checkout

RFID functions like a barcode but uses wireless technologies, and can be integrated with other information technologies

New forms of electronic payment, whether by pin, phone barcode, near-field communication technologies, or fingerprint are gaining traction