Class 17 Strategizing with IS: Electronic Commerce

1. MIS 2000 Information Systems for Management Instructor: Bob Travica Class 17 Strategizing with IS: Electronic Commerce Updated 2014

2. Outline • Electronic commerce (E-commerce) • Business-to-Consumer (B2C) E-Commerce • Business-to-Business (B2B) E-Commerce • Summary

3. Concept of E-commerce • E-commerce is the area of commerce that is conducted via computer networks and information systems. • E-commerce started among businesses (supply markets), and expanded into consumer markets when Internet moved to businesses and homes in the mid-1990.* • Moving into B2C or B2B is an important strategy leading to increasing market share, integrating supply chains, improving financial results. Supplier Organization offer, sell sell Retailer/ Producer Web store buy demand, buy Supplier Organization Consumer = Electronic link

4. Domains of E-commerce B2C B2B • Two main domains: • - Business-to-Consumer (B2C), retail on the Internet via • Web storefronts: Chapters.com - music, electronics; online sales process (outsourced)* is an addition to physical store - “click and mortar”. • - Business-to-Business (B2B), buying & selling b/w firms • via e-marketplaces/e-markets (Covisint, Freelancer.com) • directly (linking via EDI**, private nets or Internet; Dell, • Cisco & shipping industry) • Either can use mobile devices (mobile commerce) Supplier Organization sell offer, sell Web storefront buy demand, buy Supplier Organization Consumer

5. Business Models for B2C E-commerce • Web Retail (also called Web Storefront, Web Store, Online Store) • Sells many goods & services online * • Example: Amazon.com – “pure click”, no physical stores • Amazon started as a bookstore and initiated the trend of web storefronts. • Amazon was not profitable for years. Amazon captured large market share, increased product & service offerings, and became profitable. • Amazon keeps improving business processes (sales, inventory) that are largely electronic (rested on various IS). • Amazon’s customers are consumers with access to Internet around globe. • Uses Interactive Marketing and Personalization.** More

6. Business Models for B2C E-commerce • Portal: Initial point of entry to Web, provides Internet search service for free; advertising revenues, may sell some services* & content (Google, Yahoo) • Customer: Global Internet user • Revenue: Advertising, some search services, mobile tech. (Google) • Broker: Middleman models mediating between buyers and sellers** • Customer: Global Internet user • Revenue: Fixed fees, Referral fees (advertising)

7. E-commerce Expands Customer Data Catalog Search Customer ID Terms Searched Customer Customer ID CustomerType IP-Address Tel-Number Product ProductID Category Maker Customer Movement Customer ID Web Pages Visited Screen Items Clicked Customer Comparison Match Product Purchased Tracking consumer behavior Other Online Purchases ProductCategory Support to cross-selling New data, do not exist in classical marketing

8. B2C E-commerce Benefits Product catalog Customer profiling Browse products Web Store- front Offering Buy Sales sys. Pay Clearing houses, Banks Billing & Pay-ment systems • Boom 1994-2000, crash in 2001; pure vs. hybrid models • About 15% of total retail sales in U.S. 2012, somewhat less in Canada * • Firm’s benefits: • Global reach & 24/7 sales • Savings on physical stores • Direct marketing (customer profiling via clickstream • or search tracking systems*; personalized Web storefronts) • Cross selling (automatic matching of customer profiles via systems**) More

9. B2C E-commerce Costs • Firm’s costs: - IS investments - Delivery, Logistics - Payment security - Legal boundaries - Competition increase - Invisible customer - Electronic branding • Consumer’s costs: - IT have-nots - Privacy - Payment anxiety • Product testability & return See footnote…

10. Production Scheduling Inventory Buyer Supplier Purchasing E-market Bank Bank Bank B2B E-Commerce • Complex processes (inter-org.), connections, & systems • 2 business models: • Larger part of e-commerce (1/3 of all B2B sales in US; ~5% in CA*) Sales 1. Direct model 2. Mediated model

11. Mediated Model: E-Market • Also called e-Exchange, e-Hub, Market maker • Can be controlled by Buyer or Seller • Within an industry (plastics, metals, etc.) • Across industries (Covisint, B2BQuote, more) • Revenue: Membership fee, Transaction charge, Financial services, Product catalogue creation, Order fulfillment

12. B2B E-Commerce Benefits & Costs • Firm’s Benefits: - Larger market - Savings from efficiencies in supply chain - Better coordination in supply chain - Dynamic pricing (auctions) • 24/7 business (via e-marketplaces) • Firm’s Costs: • - Increased competition • - Volatile business relationships (partner • switching) • - Costs of private networks • - Costs of intermediaries (e-markets) • - Legal boundaries (e.g., anti-monopoly pressures on buyers-driven e-markets) See footnote… More

13. Summary • E-commerce is buying and selling via electronic means, and these can transpire between businesses (B2B; older segment), and between business and consumers (B2C, newer segment). • Models of B2C e-commerce include portal, web store, and broker. • Two main models of B2B e-commerce are direct company-to-company and e-marketplace. • B2C e-commerce enriches the customer profile. • B2B e-commerce is bigger part of e-commerce and has certain future. • Both B2B and B2C has certain benefits and costs.