E-Commerce

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Chapter 11 E-Commerce
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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.

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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.

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Overview

• 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

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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

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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

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Advantages of E-Commerce

• For customers
• Convenience
• 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

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Advantages of E-Commerce
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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

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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

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Types of E-Commerce Web Sites

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

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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

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Types of E-Commerce Web Sites
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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.

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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

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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

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Implementing Web-BasedE-Commerce
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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

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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 customers
  checking account
• Online payment accounts (such as PayPal) Funds
  can be transferred to others from the customers
  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

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Implementing Web-BasedE-Commerce
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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

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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

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Implementing Web-BasedE-Commerce
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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

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Implementing Web-BasedE-Commerce

• Order-fulfillment companies
• Take care of physically filling orders for a
  business including
• Order management
• Distribution
• CRM services
• Marketing tools
• E-fulfillment strategic planning
• Integration with existing systems

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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

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Implementing Web-BasedE-Commerce
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Implementing Web-BasedE-Commerce
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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

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Implementing Web-BasedE-Commerce

• Promote your Web site sufficiently
• Use appropriate meta tags (description, keywords)

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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.)

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Implementing Web-Based E-Commerce
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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)

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Summary

• What Is E-Commerce?
• Types of E-Commerce Web Sites
• E-Commerce Business Models
• Implementing Web-Based E-Commerce
• Security Issues