chapter7 :

7.1 Overview of E-Business and E-Commerce

Definitions and Concepts

Electronic commerce (e-commerce, EC) describes the buying, selling, transferring or exchanging of products, services or information via computer networks, including the Internet.

E-business is a broader definition of EC, including buying and selling of goods and services, and also servicing customers, collaborating with partners, conducting e-learning and conducting electronic transactions within an organization.

The degree of digitization is the extent to which the commerce has been transformed from physical to digital.

Pure versus Partial Electronic Commerce depends on the degree of digitization involved.

The product can be physical or digital.

The process can be physical or digital.

The delivery agent can be physical or digital.

Brick-and-mortar organizations are purely physical organizations. For example, buy books at university bookstore.

Virtual organizations are companies that are engaged only in EC. (Also called pure play). For example, Order and download book from Amazon.

Click-and-mortar organizations are those that conduct some e-commerce activities, yet their business is primarily done in the physical world. I.e. partial EC. (Use Internet to order physical book from Amazon)

Types of E-Commerce

E-commerce can be conducted between and among various parties. These parties include:

Business-to-consumer (B2C): the sellers are organizations and the buyers are individuals.

Business-to-business (B2B): both the sellers and buyers are business organizations. B2B represents the vast majority of e-commerce.

Consumer-to-consumer (C2C): an individual sells products or services to other individuals.

Business-to-employee (B2E): An organization uses e-commerce internally to provide information and services to its employees. Companies allow employees to manage their benefits, take training classes electronically; buy discounted insurance, travel packages, and event tickets.

E-Government: the use of Internet Technology in general and E-commerce in particular to deliver information about public services to citizens (called Government-to-citizen [G2C EC]), business partners and suppliers (called government-to-business [G2B EC]).

Mobile Commerce (m-commerce) refers to e-commerce that is conducted in a wireless environment. For example, using cell phone to shop over the Internet.

E-Commerce and Search

Offline and online brands initially were kept distinct and then were awkwardly merged.
 Initial E-commerce efforts consisted of flashy brochure sites, with rudimentary shopping carts and checkout systems. They were replaced with systems that tried to anticipate customer needs and accelerate checkout.

Major E-Commerce Mechanisms 

Auction: is a competitive process in which either a seller solicits consecutive bids from buyers or a buyer solicits consecutive bids from sellers.

Forward auction: are auctions that sellers use as a channel to many potential buyers.

Reverse auctions: one buyer, usually an organization, wants to buy a product or a service.  The buyer posts a request for quotation (RFQ) on its Web site or on a third-party Web site.  The RFQ contains detailed information on the desired purchase.  Suppliers study the RFQ and submit bids, and the lowest bid wins the auction.

In general, forward auctions result in higher prices over time, where reverse auctions result in lower prices over time.

Electronic storefront: is a website that represents a single store.

Electronic mall: (Cybermall or e-mall) is a collection of individual shops under one internet address.

Benefits and Limitations of E-Commerce

Benefits to organizations

·         Makes national and international markets more accessible and by lowering costs of processing, distributing, and retrieving information.

Benefits to customers

·         Being able to access a vast number of products and services around the clock.

Benefits to Society

·         The ability to easily and conveniently deliver information, services and products to people in cities, rural areas and developing countries.

Technological Limitations

·         Lack of universally accepted security standards

·         Insufficient telecommunications bandwidth

·         Expensive accessibility

Non-technological Limitations

·         Perception that EC is unsecure

·         Unresolved legal issues

·         Lacks a critical mass of sellers and buyers

7.2 Business-to-Consumer (B2C) Electronic Commerce

B2B EC is much larger than B2C EC by volume, but   B2C EC is more complex. The reason is that B2C involves a large number of buyers making millions of diverse transactions per day with a relatively small number of sellers.

Online Service Industries

• Cyber banking (conducting various banking activities from home, or any similar locations)
1. Virtual banks: dedicated solely to internet transactions.           
•  Online securities trading
• Online job market
• Travel services
• Online advertising
1. Banners
2. Pop-up ad
3. Pop-under ad
4. Spaming

There is to response of spamming :

• Permission marketing
• Viral marketing
• Online service involves customers accessing services via the Web.

Intermediaries or middlemen provide information and/or provide value-added services.When the function(s) of these intermediaries can be automated or eliminated, this process is called               

Online Advertising methods

Advertising is an attempt to disseminate information in order to influence a  buyer-seller transaction.

Banners are simply electronic billboards.

Pop-up ad appears in front of the current browser window.

Pop-under ad appears underneath the active window.

Permission marketing asks consumers to give their permission to voluntarily accept online advertising and e-mail.

Viral marketing refers to online “word-of-mouth” marketing.

Issues in E-Tailing

Channel conflict occurs when manufacturers disintermediate their channel partners, such as distributors, retailers, dealers, and sales representatives, by selling their products directly to consumers, usually over the Internet through electronic commerce.

Multi channeling is a process in which a company integrates its offline and online channels.

Order fulfillment involves finding the product to be shipped; packaging the product; arrange for speedy delivery to the customer; and handle the return of unwanted or defective products.

Drivers of today’s online advertising

·         The emergence of “communitainment.”

o   Communitainment is the blending of community, communication, and entertainment into a new form of online activity driven by consumers.  

·         The increasing popularity of Usites.

·         Mainstreaming of the Internet.

·         Declining usage of traditional media.

·         Fragmentation of content consumption.

·         Consumers are multitasking and they do not like ads.

The bank predicts that consumers will shift more than 50% of their content consumption over the next decade to communitainment formats (e.g., social networking, video, and photo sharing sites), displacing traditional forms of media content like TV, magazines, and large Internet sites. This trend presents a major challenge for advertisers.

7.3 Business-to-Business (B2B) Electronic Commerce

In business to business, the buyers and sellers are organizations.

There are several business models for B2B applications. The major ones are Sell-Side marketplace, Buy-Side marketplace and electronic exchange.

Sell-Side marketplace

organizations sell their products or services to other organizations Electronically from their own Web site and/or from a third-party Web site.

This model is similar to the B2C model in which the buyer comes to the seller’s site, views catalogs, and places an order.  In the B2B sell-side marketplace, the buyers are organizations.

Buy-Side Marketplace

organizations sell their products or services to other organizations Electronically from their own Web site and/or from a third-party Web site.

This model is similar to the B2C model in which the buyer comes to the seller’s site, views catalogs, and places an order.  In the B2B sell-side marketplace, the buyers are organizations.

Electronic Exchanges

Exchanges have many buyers and many sellers.

1.    Vertical exchanges connect buyers and sellers in a given industry.

2.    Horizontal exchanges connect buyers and sellers across many industries and are used

3.    mainly for MRO materials.

4.    functional exchanges, needed services such as temporary help or are traded on an “as-needed” basis.

7.4 Electronic Payment

Electronic payment systems enable you to pay for goods and services electronically.

1.    checks (e-checks) are similar to paper checks and are used mostly in B2B.

2.    Electronic credit cards allow customers to charge online payments to their credit card account.

3.    Purchasing cards are the B2B equivalent of electronic credit cards and are typically used for unplanned B2B purchases.

4.    Electronic cash

a.     Stored-Value Money cards allow you to store a fixed amount of prepaid money and then spend it as necessary.

b.    Smart cards contain a chip called a microprocessor that can store a considerable amount of information and are multipurpose – can be used as a debit card, credit card or a stored-value money card.

c.    Person-to-person payments are a form of e-cash that enables two individuals or an individual and a business to transfer funds without using a credit card.

7.5 Ethical and legal issues in E-Business

1. Ethical Issues

A.   Privacy

E-commerce provides opportunities for businesses and employers to track individual activities on the WWW using cookies or special spyware. This allows private/personal information to be tracked, compiled, and stored as an individual profile. This profile can be used or sold to other businesses for target marketing or by employees to aide in personnel management decisions (i.e., promotions, raises, layoffs).

B.   Job Loss

2. Legal Issues Specific to E-Commerce

A.   Fraud on the Internet i.e. stocks, investments, business opportunities, auctions.

B.   Domain Names problems with competition.

C.   Cybersquatting refers to the practice of registering domain names solely for the purpose of selling them later at a higher price.

D.   Domain Tasting is a practice of registrants using the five-day "grace period" at the beginning of a domain registration to profit from pay-per-click advertising

E.   Taxes and other Fees when and where (and in some cases whether) electronic sellers should pay business license taxes, franchise fees, gross-receipts taxes, excise taxes, …etc.

F.    Copyright protecting intellectual property in e-commerce and enforcing copyright laws is extremely difficult.