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Chapter 11: E-Commerce. Learning Objectives. Explain what e-commerce is and describe some of the benefits and risks involved with implementing e-commerce. Discuss the types of Web sites that can be used to implement e-commerce.

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Chapter 11:


Learning objectives
Learning Objectives

Explain what e-commerce is and describe some of the benefits and risks involved with implementing e-commerce.

Discuss the types of Web sites that can be used to implement e-commerce.

Identify a variety of e-commerce business models and discuss their similarities and differences.

Learning objectives1
Learning Objectives

List several strategies for implementing e-commerce using the Web, including some of the decisions that need to be made, the options available for accepting payments, and the process of designing and developing an effective Web site.

Outline some sales and marketing strategies that can be used in conjunction with an e-commerce Web site.

Discuss some security issues related to e-commerce transactions.


This chapter covers:

Potential advantages and disadvantages of e-commerce

Types of e-commerce Web sites and e-commerce business models

Steps for implementing Web-based e-commerce

Sales and marketing strategies for e-commerce Web sites

E-commerce security issues

What is e commerce
What Is E-Commerce?

E-commerce: Act of doing business transactions over the Internet or similar communications technology

Has existed for years via private networks (electronic funds transfers, etc.)

Now typically performed via the Internet

E-commerce in the U.S. has continued to grow at a steady pace

M-commerce (mobile commerce) is growing

U-commerce (universal commerce) trend is also on the rise

Advantages of e commerce
Advantages of E-Commerce

For businesses:

Reduced costs

Dot-coms are less expensive than brick-and-mortar stores because there is no physical storefront to maintain

Increased customer satisfaction

If shopping experience is convenient (open all the time, no driving, etc.)

Broader customer base (less geographical restrictions)

More effective sales and marketing tools (personalized e-mails, customer relationship management tools, etc.)

Potentially higher sales

Advantages of e commerce1
Advantages of E-Commerce

For customers:


Easier comparison shopping

Higher number of merchants to choose from

Geographical location is not an issue

Shopping bots and other comparison shopping tools are available

Higher degree of selection

Potential cost savings

Customized products

Disadvantages of e commerce
Disadvantages of E-Commerce

For businesses:

Pressure to be always open, site always working

Lost business due to some customer hesitation to shop online

Risk of fraudulent credit card transactions

Ease of entry for competitors

Disadvantages of e commerce1
Disadvantages of E-Commerce

For customers:

Fraud and other potential security problems

Buyer protection programs and using credit cards can help

Not being able to see or touch the goods

3D online stores may help

Possible expense of returningmerchandise

Types of e commerce web sites
Types of E-Commerce Web Sites

Manufacturer and e-tailer Web sites: Sell products and services directly to the end user

Types of e commerce web sites1
Types of E-Commerce Web Sites

Brokerage sites: Bring buyers and sellers together and earn revenue by charging commissions on sales made via the site

Online auction sites: Allow individuals to auction products to other individuals

Buyers bid and highest bidder at the time the auction closes buys the item

Seller pays a listing fee and a selling fee based on the final price

Sellers set the starting bid and can specify a minimum sales price

Many sites bid automatically for each bidder up to his or her maximum stated price

Types of e commerce web sites3
Types of E-Commerce Web Sites

Financial brokerage sites: Allow individuals to sell stocks, bonds, etc.

Market and commodity exchange sites: Match up buyers and sellers of commodities, such as equipment, energy, cattle, etc.

E commerce business models
E-Commerce Business Models

Business model: The policies, operations, and technologies used by a business in order to generate revenue

E-commerce business model: Description of the types of buyers and sellers in an e-commerce company, such as B2B, B2G, and so forth

Business-to-consumer (B2C) model

Business-to-business (B2B) model

Consumer-to-consumer (C2C) model

Business-to-government (B2G) model (consumer-to-government - C2G)

Intermediary hub model

Vertical hub

Horizontal hub

Implementing web based e commerce
Implementing Web-BasedE-Commerce

Step 1: Select appropriate business models and types of Web sites

More than one can be selected

Some businesses add additional types later on

Some business modelsare patented

Step 2: Select the desired e-commerce applications

Determine electronic customer relationship management (eCRM) activities to be included

Determine which other business systems the Web site will be linked to

Implementing web based e commerce2
Implementing Web-BasedE-Commerce

Step 3: Develop procedures for handling electronic financial transactions

Need to determine which types will be accepted

Most sites accept credit cards; debit cards too

Implementing web based e commerce3
Implementing Web-BasedE-Commerce

Customers can use virtual account numbers,and prepaid credit cards to limit risk and liability

Digital cash options include:

Electronic checks: Funds come out of customer’s checking account

Online payment accounts (such as PayPal): Funds can be transferred to others from the customer’s account

Can transfer funds ahead of time or have money transferred from a credit card or bank account as needed

Some transactions require a fee

Can add or remove funds as needed

Electronic gift certificates, gift cards, and coupons: Appropriate codes are entered into the Web site at time of purchase

Implementing web based e commerce5
Implementing Web-BasedE-Commerce

Smart cards:Can hold a cash value

For Web purchases, typically read by readers attached to a PC

Many credit cards and campus IDs are smart cards

Many can be used with NFC technology

Smart card readers may become common on vending machines, in taxis, and other public locations

Implementing web based e commerce6
Implementing Web-Based E-Commerce

Digital wallet: Electronic file that holds information to speed online transactions

Can hold credit card numbers, passwords, address, etc. to be used in e-commerce transactions

Third-party digital wallets: Standalone programs that automatically or manually transfer necessary information to an online order form as needed

Site-specific digital wallets: Store this information for each customer on a business’ Web server for use with purchases on that site only

Implementing web based e commerce8
Implementing Web-BasedE-Commerce

Special B2B considerations because of the volume of B2B transactions

B2B transaction processing

Allows merchants to customize their payment processing plans to fit their needs

Credit card, debit card, check, and digital cash settlement

Credit checking

Expense tracking

Electronic billing

Payment settlement compatible with other widely used systems

Consolidation and reconciliation services

Escrow services

Implementing web based e commerce9
Implementing Web-BasedE-Commerce

Order-fulfillment companies

Take care of physically filling orders for a business including:

Order management


CRM services

Marketing tools

E-fulfillment strategic planning

Integration with existing systems

Implementing web based e commerce10
Implementing Web-BasedE-Commerce

Step 4: Design and develop an effective Web site

Sites should be carefully designed, developed, and tested

Sites should use adequate security measures

Should be attractive, fast loading, and easy to use

Make checkout process easy to use to reduce shopping cart abandonment

Consider adding statements to encourage trust

E-commerce features can be created using:

Storefront software: Facilitates the creation of an online store (either packaged or Web-based)

Shopping cart software: Designed to add only ordering capabilities to an existing Web site

Implementing web based e commerce13
Implementing Web-BasedE-Commerce

Step 5: Implement appropriate sales and marketing strategies

Include adequate customer service features

Collect taxes from customers only if required by law

Display a privacy policy and security statement

Use an appropriate domain name and URL

URL should be easy to remember and type

Visitors should not have to type a page name (such as index.html) to view the home page of the site

Implementing web based e commerce14
Implementing Web-BasedE-Commerce

Promote your Web site sufficiently

Use appropriate meta tags (description, keywords)

Implementing web based e commerce15
Implementing Web-BasedE-Commerce

Submit your site to search sites

Consider paying for sponsored listings on search sites

Consider using banner ads

Use of rich media ads is growing

Can display sponsor banner ads on site

Can place banner ads on other sites

Use of behavioral (targeted) ads is growing

Update your site regularly and consider adding incentives for return visits (contests, coupons, etc.)


Security issues
Security Issues

Security is essential for e-commerce Web sites

Some guidelines for e-commerce sites:

Secure financial transactions (use a secure Web server)

Secure sensitive documents and files (use encryption)

Authenticate online business partners (use digital certificates and digital signatures)


What Is E-Commerce?

Types of E-Commerce Web Sites

E-Commerce Business Models

Implementing Web-Based E-Commerce

Security Issues