Information Systems Electronic Commerce

1. Information SystemsElectronic Commerce Chapter 5

2. Chapter Overview • E-Commerce Overview, Statistics and Models • Business To Consumer E-Commerce • Keys To Success in B2C E-Commerce • Business To Business E-Commerce • Disintermediation • Payment Systems and Security

3. E-Commerce & E-Business • E-Commerce: commerce that is accelerated and enhanced by IT, in particular the Internet. • E-Business:a broader definition of E-Commerce which also includes non-financial transactions. • buying and selling of goods and services • servicing customers • collaborating with business partners • conducting electronic transactions within an organization

4. E-Commerce is rapidly growing with consumer spending up 12% in 2011 to $256,000,000,000! More and more users (customers) are utilizing broadband and mobile connections to the Internet. There are an estimated 2.1 billion users (customers) using the Internet. This represents roughly 30.2% of the world population. The Internet is becoming more diverse. In other words, the market you can sell to is growing and changing. Why should you care about E-Commerce?

5. 9 out of 10 U.S. users now visit a social networking site in a month, and the average Internet user spends more than 7 hours on these sites each month Nearly 1 out of every 6 minutes online is spent on Facebook US users viewed 4.8 trillion display ads in 2011 More than 100 Million Americans watched online video content on an average day - up 43% from 2010 In 2011, smartphones accounted for the majority of new mobile phone purchases for the first time comScore 2011 Digital Year in Review Highlights

6. E-Commerce Growth: % of overall retail sales

8. E-Commerce Holiday Sales Statistics

11. Online Advertising Statistics

12. Online Advertising Statistics

13. Mobile Smartphones - 2010 Stats • Total mobile phone sales were at 1.6 billion - up 31.8% from 2009 • 302 million smartphones sold - up 74% from 2009. • Smartphones represented 19% of total mobile handset sales in 2010 - up from 14% in 2009. • Smartphones (100.9 M) outsold PCs (92.1 M) for the first time in 4Q 2010

15. Languages of The ‘Net

16. E-commerce Shopping Statistics

17. E-Commerce Terms • E-tailer: an Internet retail site • Electronic market (e-marketplace): online marketplace where buyers and sellers meet to exchange goods, services, money, or information • Pure vs. Partial E-Commerce: degree of digitization of the product (service) sold; the process; the delivery agent (or digital intermediary)

18. Virtual (pure-play) organizations: Internet retailers such as Amazon.com that have no physical stores. Conduct business activities solely online. Clicks-and-mortarretailers(bricks-and-clicks): Conduct some EC activities, but do primary business in the physical world. An example is Nordstrom, which has both an Internet presence and many physical stores. E-Commerce Terms

19. Brick-and-Mortar organizations: old-economy corporations that perform most of their business off-line, selling physical products by means of physical agents E-Commerce Terms

20. Primary E-Commerce Models

21. E-Commerce Models • B2B is where most of the money is • B2C is the most well-known • Amazon, eBay, etc. • B2B and B2C differences require that you know your customers well, develop the right marketing mix, and move money easily

22. E-Commerce Models • B2B is where most of the money is • B2C is the most well-known • Amazon, eBay, etc. • B2B and B2C differences require that you know your customers well, develop the right marketing mix, and move money easily

23. B2C E-Commerce Advantages • Shopping can be faster and more convenient. • Offerings and prices can change instantaneously. • Call centers can be integrated with the Web site. • Broadband telecommunications will enhance the buying experience. • What are disadvantages when buying online?

25. Keys To Success In B2CE-CommerceDigital Products Are the Best of All Because… • They are commoditylike products. • They can be mass-customized and personalized. • They can be delivered at the time of purchase. • They foster disintermediation. • They have global reach.

26. Keys To Success In B2CE-CommerceDigital Products Are the Best of All • Micro-payments- techniques to facilitate the exchange of small amounts of money for an Internet transaction. • Cellular ringtones, 99 cent song downloads, possibly integrated in Xbox Live

27. Keys To Success In B2CE-CommerceGive customers exactly what they want • Mass customization – the ability of an organization to give its customers the opportunity to tailor its products or services • Dell – customized computer purchases • Apple iTunes – only the music you want (not necessarily the whole album)

28. Keys To Success In B2CE-CommerceAttracting and Retaining Customers • Marketing mix - the set of marketing tools that the firm uses to pursue its marketing objectives in the target market. • Additional techniques for attracting Internet customers include: • Registering with search engines • Online ads • E-Mail and viral marketing • Affiliate programs • Selling to existing customers

29. Keys To Success In B2CE-Commerce You Must Execute Well • Executing well simply means that when a customer places an order on your Web site, you have to follow through and execute the necessary business processes to get the right item to the customer in a timely fashion. • A good B2C site immediately sends an e-mail acknowledgement of the order, containing all of the order details and an estimated ship date.

30. Order Acknowledgement Email Thanks for your order with CD Baby! This is just a happy automated email to let you know a real person will email you as soon as your package is sent, and you will also receive a paper receipt with your order in the mail. Please save this email in case you have any questions about your order. ** NOTE: if any of the info below looks wrong, please hit REPLY now to let us know! ---------------------------------------- ORDER # 123456 - Monday, November 22nd 2004, 09:34 - (PLEASE READ!) 1 of: SPOTTISWOODE: ugly love  ($15.00 each) SHIPPING: $2.25 GRAND TOTAL: $17.25 - US Dollars. SHIPPING ADDRESS: DeletedBILLING ADDRESS: DeletedEMAIL: Deleted---------------------------------------- IF ANYTHING LOOKS WRONG, PLEASE REPLY TO THIS EMAIL AND LET US KNOW! Or you can always call us at: 1-800-448-6369 (California time) THANK YOU!! CD Baby, the cutest little record store on the web 5925 NE 80th Ave - Portland, OR 97218-2891 phone: 1-800-448-6369 email: cdbaby@cdbaby.com http://www.cdbaby.com <--- new CDs added every day!

31. Product Delivery Email Thanks for your order with CD Baby! Shipping Address - Deleted1 of: SPOTTISWOODE: ugly love  ($15.00 each) SHIPPING: $2.25 GRAND TOTAL: $17.25 - US Dollars. Your CD has been gently taken from our CD Baby shelves with sterilized contamination-free gloves and placed onto a satin pillow. A team of 50 employees inspected your CD and polished it to make sure it was in the best possible condition before mailing. Our packing specialist from Japan lit a candle and a hush fell over the crowd as he put your CD into the finest gold-lined box that money can buy. We all had a wonderful celebration afterwards and the whole party marched down the street to the post office where the entire town of Portland waved 'Bon Voyage!' to your package, on its way to you, in our private CD Baby jet on this day, Monday, November 22nd. I hope you had a wonderful time shopping at CD Baby.  We sure did. Your picture is on our wall as 'Customer of the Year'.  We're all exhausted but can't wait for you to come back to CDBABY.COM!! Thank you once again, Derek Sivers, president, CD Baby the little CD store with the best new independent music phone: 1-800-448-6369  email: cdbaby@cdbaby.com http://www.cdbaby.com

32. Keys To Success In B2CE-Commerce Watch the Competition • Retaining customers is one of the keys to e-commerce success. • Spend time on the Web surfing around seeing what’s going on in your competitive space by looking at the Web sites of known competitors.

33. Business to Business E-Commerce • Purchasing applications are usually divided into three segments: • Purchasing of indirect materials (MRO) • Purchasing of direct materials • Purchasing of services

34. MRO – Indirect Materials • Maintenance, repair, and operations (MRO) materials (indirect materials) – materials necessary for running a company but do not relate to the company’s primary business activities • Office supplies, repair parts, lubricating oils

35. MRO – Indirect Materials • Buyers in B2B make large purchases and can then demand a discount (not true in B2C) • Can also team up with other buyers to create demand aggregation - combining purchase requests from multiple buyers which justifies a larger discount

36. Direct Materials • Direct materials – materials that are used in production in a manufacturing company or are placed on the shelf for sale in retail environments • Relate directly to a company’s primary business activities • Quality, quantity, and delivery timing are important

37. Direct Materials • Buyers can participate in reverse auctions for direct materials – process in which a buyer posts its interests in buying items and sellers compete by submitting successively lower bids • The lowest bidder wins

38. B2B: Horizontal and Vertical E-Marketplaces • Horizontal e-marketplace: connects buyers and sellers across industries • Primarily for MRO materials • All industries need office supplies, travel, etc. • Vertical e-marketplace: connects buyers and sellers in a given industry • Primarily for direct materials • Each industry has unique direct material needs

39. E-Marketplaces

40. Disintermediation • Intermediaries: specialist companies that provide services better than their client companies can themselves - Order fulfillment, payment processing • Disintermediation: The removal of organizations or business process layers responsible for certain intermediary steps in a value chain • Reintermediation: Shifting of the intermediary role in a value chain to a new source

41. Cost/ Sweater Distributor Retailer Manufacturer Customer $48.50 $40.34 Manufacturer Retailer Customer Manufacturer $20.45 Customer Disintermediation Benefits

42. B2C Payment Systems • Credit cards • Financial cybermediaries - Paypal • Electronic checks - online banking • Electronic Bill Presentment and Payment – Checkfree.com • Smart cards

43. B2B Payment Systems • Business customers… • Make large purchases • Will not pay with credit card or financial cybermediary • Use financial EDI • Pay for many purchases at once (perhaps the end of the month)

44. Electronic Data Interchange (EDI) • The direct computer-to-computer transfer of transaction information contained in standard business documents such as invoices and purchase orders, in a standard format.

45. Security • Security is very important when moving money • Common security measures • Encryption • Secure Sockets Layers

46. Encryption • Encryption – scrambles the contents of a file so that you can’t read it without having the right decryption key • Often through public key encryption (PKE) – uses two keys: a public key for everyone and private key for only the recipient of the encrypted information

47. Secure Sockets Layers • Secure Sockets Layer (SSL)… • Creates a secure connection between a Web client and server • Encrypts the information • Sends the information over the Internet • Denoted by lock icon on browser or https:// (notice the “s)

48. Security Trust and risk Lack of qualified personnel Lack of business models Culture User authentication and lack of public key infrastructure Organization Fraud Slow navigation on the Internet Legal issues Barriers of EC