Markets, Digital Goods E-Commerce: DigitalEight unique features of e-commerce technology Ubiquity...

10.1 © 2010 by Pearson

10Chapter

E-Commerce: DigitalMarkets, Digital Goods


LEARNING OBJECTIVES

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Identify the unique features of e-commerce, digitalmarkets, and digital goods.Describe how Internet technology has changed businessmodels.Identify the various types of e-commerce and explainhow e-commerce has changed consumer retailing andbusiness-to-business transactions.Evaluate the role of m-commerce in business, anddescribe the most important m-commerce applications.Identify the principal payment systems for electroniccommerce.

Management Information SystemsChapter 10 E-Commerce: Digital Markets, Digital Goods


Electronic Commerce and the Internet

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E-Businessrefers to the use of digital technology and the Internet toexecute the major business processes in the enterprise.

E-business includes activities for the internal management ofthe firm and for coordination with suppliers and otherbusiness partners. It also includes e-commerce.

E-commerceis the part of e-business that deals with the buying and sellingof goods and services over the Internet.

It encompasses activities supporting those markettransactions, such as advertising, marketing, customersupport, security, delivery, and payment.




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E-commerceUse of the Internet and Web to transact business

Digitally enabled transactions

History of e-commerceBegan in 1995 and grew exponentially; still growing at anannual rate of 16 percent

Rapid growth led to market bubble

While many companies failed, many survived with soaringrevenues

E-commerce today the fastest growing form of retail trade inU.S., Europe, Asia



Figure 10-1

Retail e-commerce revenues have grownexponentially since 1995 and have only recently“slowed” to a very rapid 16 percent annual increase,which is projected to remain the same until 2010.

The Growth of E-Commerce




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Eight unique features of e-commerce technologyUbiquity

Internet/Web technology available everywhere: work, home,etc., and anytime

Global reach

The technology reaches across national boundaries, aroundEarth

Universal standards

One set of technology standards: Internet standards

Richness

Supports video, audio, and text messages




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Eight unique features (cont.)Interactivity

The technology works through interaction with the user

Information density

Vast increases in information density—the total amount andquality of information available to all market participants

Personalization/Customization:

Technology permits modification of messages, goods

Social technology

The technology promotes user content generation and socialnetworking




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Key concepts in e-commerce: The effects of digitalmarkets on the ways companies conduct business.

Digital markets reduceInformation asymmetry

Search costs:

Transaction costs:

Menu costs:

Digital markets enablePrice discrimination

Dynamic pricing

Disintermediation




Figure 10-2

The typical distribution channel has several intermediary layers, each of which adds to the final costof a product, such as a sweater. Removing layers lowers the final cost to the consumer.

The Benefits of Disintermediation to the Consumer



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Key concepts in e-commerce (cont.)

Digital goodsGoods that can be delivered over a digital network

E.g., Music tracks, video, software, newspapers, books

Cost of producing first unit almost entire cost of product:marginal cost of producing 2nd unit is about zero

Costs of delivery over the Internet very low

Marketing costs remain the same; pricing highly variable

Industries with digital goods are undergoing revolutionarychanges (publishers, record labels, etc.)



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Internet business modelsPure-play modelsClicks-and-mortar models

Social NetworkOnline meeting placeSocial shopping sitesCan provide ways for corporate clients to target customers throughbanner ads and pop-up ads

Online marketplace:Provides a digital environment where buyers and sellers canmeet, search for products, display products, and establish pricesfor those products



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Content providerProviding digital content, such as digital news, music, photos,or video, over the Web

Online syndicators: Aggregate content from multiple sources,package for distribution, and resell to third-party Web sites

Service providerProvides Web 2.0 applications such as photo sharing andinteractive maps, and services such as data storage

Portal“Supersite” that provides comprehensive entry point for hugearray of resources and services on the Internet



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Virtual storefront:Sells physical products directly to consumers or toindividual businesses. Such as Amazon.com

Information broker:Provides product, pricing, and availability information toindividuals and businesses. Such as Realtor.com.

Transaction broker:Saves users money and time by processing online salestransactions and generating a fee for each transaction,Such as E*Trade.com



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Types of Electronic Commerce

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Business-to-consumer (B2C)

Retailing products and services to individual shoppers

Business-to-business (B2B)Sales of goods and services among businesses

Consumer-to-consumer (C2C)Consumers selling directly to other consumers

Mobile commerce (m-commerce)the purchase of goods and services using handheld wirelessdevices.


Electronic Commerce

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Interactive marketing and personalization

Web sites are bountiful source of details about customerbehavior, preferences, buying patterns used to tailorpromotions, products, services, and pricing

Clickstream tracking tools: Collect data on customeractivities at Web sites

Used to create personalized Web pages

Collaborative filtering: Compares customer data to othercustomers to make product recommendations


Electronic Commerce

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BlogsPersonal web pages that contain series of chronologicalentries by author and links to related Web pagesHas increasing influence in politics, newsCorporate blogs: New channels for reaching customers,introducing new products and servicesBlog analysis by marketers

Customer self-service

Web sites and e-mail to answer customer questions or toprovide customers with product informationReduces need for human customer-support expert


Electronic Commerce

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B2B e-commerce: New efficiencies and relationshipsElectronic data interchange (EDI)

Computer-to-computer exchange of standardtransactions such as invoices, purchase ordersMajor industries have EDI standards that define structureand information fields of electronic documents for thatindustry

More companies increasingly moving away from privatenetworks to Internet for linking to other firms

E.g., Procurement: Businesses can now use Internet to locatemost low-cost supplier, search online catalogs of supplierproducts, negotiate with suppliers, place orders, etc.


Electronic Commerce

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Figure 10-5

Companies use EDI to automate transactions for B2B e-commerce and continuous inventoryreplenishment. Suppliers can automatically send data about shipments to purchasing firms. Thepurchasing firms can use EDI to provide production and inventory requirements and payment data tosuppliers.

Electronic Data Interchange (EDI)


Electronic Commerce

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Private industrial networks (private exchanges)Large firm using extranet to link to its suppliers, distributorsand other key business partners

Owned by buyer

Permits sharing of:

Product design and development

Marketing

Production scheduling and inventory management

Unstructured communication (graphics and e-mail)

A private industrial network, also known as a private exchange, links a firmto its suppliers, distributors, and other key business partners for efficientsupply chain management and other collaborative commerce activities.


Electronic Commerce

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Net marketplaces (e-hubs)Single market for many buyers and sellers

Industry-owned or owned by independent intermediary

Generate revenue from transaction fees, other services

Use prices established through negotiation, auction, RFQs, orfixed prices

May focus on direct or indirect goods

May support long-term contract purchasing or short-term spotpurchasing

May serve vertical or horizontal marketplaces


Electronic Commerce

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Figure 10-7

Netmarketplacesare onlinemarketplaceswhere multiplebuyers canpurchase frommultiple sellers.

A Net Marketplace


Electronic Commerce

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http://emallsofamerica.com/

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Consumer-to-Consumer (C2C)

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Online auctionsElectronic auction (e-auction) - Sellers andbuyers solicit consecutive bids from eachother and prices are determined dynamicallyForward auction - Sellers use the site as aselling channel to many buyers and thehighest bid winsReverse auction - Buyers use the site topurchase a product or service, selecting theseller with the lowest bid

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M-Commerce

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M-commerce services and applications

Although m-commerce represents small fraction oftotal e-commerce transactions, revenue has beensteadily growing

Location-based services

Banking and financial services

Wireless Advertising

Games and entertainment


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Figure 10-8

M-commerce sales represent a small fraction of total e-commerce sales, but thatpercentage is steadily growing.

Global M-commerce Revenue 2000-2012


M-Commerce

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Limitations in mobile’s access of Web information

Data limitations

Small display screens

Wireless portals (mobile portals)

Feature content and services optimized for mobiledevices to steer users to information they are mostlikely to need


M-Commerce

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Types of electronic payment systems

Digital walletStores credit card and owner identification information andenters the shopper’s name, credit card number, andshipping information automatically when invoked tocomplete a purchase

Accumulated balance digital payment systemsUsed for micropayments ($10 or less)

Accumulating debit balance that is paid periodically oncredit card or telephone bills


Electronic Commerce Payment Systems

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Stored value payment systemsEnable online payments based on value stored in onlinedigital accountMay be merchant platforms or peer-to-peer (PayPal)

Digital checkingExtend functionality of existing checking accounts to be usedfor online payments

Electronic billing presentment and payment systemsPaying monthly bills through electronic fund transfers orcredit cards


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Digital payments systems for m-commerce

Three types of mobile payment systems in usein Japan

Stored value system charged by credit cards or bankaccounts

Mobile debit cards

Mobile credit cards

In the U.S., the cell phone has not yet evolvedinto a mobile payment system



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NEW TRENDS IN E-BUSINESS:E-GOVERNMENT

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E-government - refers to the application of theInternet and networking technologies to digitallyenable government and public sector agencies'relationships with citizens, businesses, and otherarms of government.In addition to improving delivery of governmentservices, e-government can make governmentoperations more efficient and also empowercitizens by giving them easier access toinformation.

10.33 © 2010 by Pearson

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Markets, Digital Goods E-Commerce: DigitalEight unique features of e-commerce technology Ubiquity...

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