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Chapter 4: Enabling Business-to-Consumer Electronic Commerce

The Internet and World Wide Web are extremely well suited for conducting business electronically on a global basis

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Chapter 4 Learning Objectives�After this chapter, you will be able to:

Electronic Business: E-Commerce and E-Government

Describe different business models used to compete in cyberspace as well as different forms of electronic government.

Business-to-Consumer E-Commerce

Describe business-to-consumer electronic commerce strategies.

Electronic Commerce Websites and Internet Marketing

Understand the keys to successful electronic commerce Web sites, and explain the different forms of Internet marketing.

Mobile Commerce, Consumer-to-Consumer EC, and Consumer-to-Business EC

Describe mobile commerce, consumer-to-consumer electronic commerce, and consumer-to-business electronic commerce.

Managing Finances and Navigating Legal Issues in EC

Describe how to conduct financial transactions and navigate the legal issues of electronic commerce.

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Electronic Business: �E-Commerce and E-Government

Electronic Business: E-Commerce and E-Government

Describe different business models used to compete in cyberspace as well as different forms of electronic government.

Business-to-Consumer E-Commerce

Describe business-to-consumer electronic commerce strategies.

Electronic Commerce Websites and Internet Marketing

Understand the keys to successful electronic commerce Web sites, and explain the different forms of Internet marketing.

Mobile Commerce, Consumer-to-Consumer EC, and Consumer-to-Business EC

Describe mobile commerce, consumer-to-consumer electronic commerce, and consumer-to-business electronic commerce.

Managing Finances and Navigating Legal Issues in EC

Describe how to conduct financial transactions and navigate the legal issues of electronic commerce.

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E-Commerce (EC) Defined

“The exchange of goods, services, and money among firms, between firms and their customers, and between customers, supported by communication technologies and, in particular, the Internet”

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Electronic Commerce Defined:�EC Business Models

All of the above types of EC are in the private sector.

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E-Government

Government-to-Citizens (G2C)
Government-to-Business (G2B)
Government-to-Government (G2G)

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Business-to-Consumer E-Commerce

Electronic Business: E-Commerce and E-Government

Describe different business models used to compete in cyberspace as well as different forms of electronic government.

Business-to-Consumer E-Commerce

Describe business-to-consumer electronic commerce strategies.

Electronic Commerce Websites and Internet Marketing

Understand the keys to successful electronic commerce Web sites, and explain the different forms of Internet marketing.

Mobile Commerce, Consumer-to-Consumer EC, and Consumer-to-Business EC

Describe mobile commerce, consumer-to-consumer electronic commerce, and consumer-to-business electronic commerce.

Managing Finances and Navigating Legal Issues in EC

Describe how to conduct financial transactions and navigate the legal issues of electronic commerce.

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EC Business Strategies

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e-Tailing: Capabilities and Benefits

Mass Customization

Firms can tailor their products and services to meet a customer’s particular needs

Disintermediation

Cutting out the “middleman” and reaching customers more directly and efficiently

Group Buying

If many people agree to purchase the product or service, they get significant discounts

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e-Tailing: Capabilities and Benefits (cont.)

New Revenue and Pricing Models

Companies can earn revenues not only through traditional sales, but also through subscription, licensing, or transaction fees
Companies and individuals can earn money through Web advertising or affiliate marketing

Social Commerce

Utilizing social networks to build lasting relationships and advertise products

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Mass Customization

Mass customization generates additional value for customers and profits for producers.

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New Revenue and Pricing Models

Priceline.com lets consumers name their own price for travel-related services.

Reverse pricing

“Name your own price”

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Benefits of e-Tailing

Product Benefits: With no store size and shelf space restrictions, companies can sell a far wider variety of goods
Place Benefits: Internet storefronts are available on almost every computer connected to the Internet
Price Benefits: Online retailers are efficient, with high volumes and low overhead allow for very competitive pricing
The Long Tail (see next slide)

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Benefits of e-Tailing: The Long Tail

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Drawbacks of e-Tailing

Trust

This is especially a concern for new online businesses without a proven track record

Direct Product Experience

E-tailing doesn’t provide sensory information

Product Delivery and Returns

Except for direct downloads, e-tailing requires additional delivery time for products
Returns may also be a hassle, compared to just going to the store

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Electronic Commerce Websites and �Internet Marketing

Electronic Business: E-Commerce and E-Government

Describe different business models used to compete in cyberspace as well as different forms of electronic government.

Business-to-Consumer E-Commerce

Describe business-to-consumer electronic commerce strategies.

Electronic Commerce Websites and Internet Marketing
Understand the keys to successful electronic commerce Web sites, and explain the different forms of Internet marketing.

Mobile Commerce, Consumer-to-Consumer EC, and Consumer-to-Business EC

Describe mobile commerce, consumer-to-consumer electronic commerce, and consumer-to-business electronic commerce.

Managing Finances and Navigating Legal Issues in EC
Describe how to conduct financial transactions and navigate the legal issues of electronic commerce.

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EC Web Sites: Attracting and Retaining Online Customers—Four Key Recommendations

The Web site should offer something unique
The Web site must motivate people to visit, to stay, and to return
You must advertise your presence on the Web
You should learn from your Web site

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Designing Web Sites to Meet Online Consumers’ Needs

Structural Firmness

No bad links, understandable error messages, privacy/security, speed

Functional Convenience

Ease of use, simple navigation, user feedback, help features, one-click ordering, flexible payment, order tracking

Representational Delight

Aesthetically pleasing, professional look and feel, color/font/images, consistent layout, no clutter

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Different Web Sites Focus on Different Needs

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Internet Marketing

If you build it, they won’t come unless you market it
Search engine optimization (SEO) can be critical to a Web site’s success

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Internet Marketing Methods


Search Marketing	Includes paid search, placing ads on search Web sites based on search terms, and SEO, optimizing a Web site and its relative search engine ranking
Display Ads	Simple banner ads, but now often contextualized to what the person is viewing
E-Mail Marketing	Extremely low cost, less than a penny an e-mail, and hence very popular; effectiveness also easy to track
Social Media Marketing	Increasingly used for interactive communication and relationship building with customers
Mobile Marketing	If ads can be tailored to a user’s location, then highly targeted marketing opportunities open up
Performance Assessment	Impression, pay-per-click/click-through, and conversion models (but beware of click fraud)

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Search Engine Optimization (SEO)

Source: Courtesy of Google, Inc.

SEO attempts to improve a page’s ranking in search engines like Google.

Techniques include having other pages link to the page,

keeping content updated, and including key words.

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Mobile Commerce, Consumer-to-Consumer EC, and Consumer-to-Business EC

Electronic Business: E-Commerce and E-Government

Describe different business models used to compete in cyberspace as well as different forms of electronic government.

Business-to-Consumer E-Commerce

Describe business-to-consumer electronic commerce strategies.

Electronic Commerce Websites and Internet Marketing

Understand the keys to successful electronic commerce Web sites, and explain the different forms of Internet marketing.

Mobile Commerce, Consumer-to-Consumer EC, and Consumer-to-Business EC
Describe mobile commerce, consumer-to-consumer electronic commerce, and consumer-to-business electronic commerce.

Managing Finances and Navigating Legal Issues in EC
Describe how to conduct financial transactions and navigate the legal issues of electronic commerce.

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Mobile EC

Location-Based M-Commerce

Services can be offered tailored to a person’s needs based on their current location

Information on the Go

Customers can get further information about a product wherever they are, including in the store, but this can lead to “showrooming”

Product and Content Sales

Consumers use mobile apps to make purchases while on the go

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GPS-Enabled Location-Based Services

GPS = global positioning system

Service	Example
Location	Determining the basic geographic position of the cell phone
Mapping	Capturing specific locations to be viewed on the phone
Navigation	The ability to give route directions from one point to another
Tracking	The ability to see another person’s location

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C2C EC

E-Auctions

Individual sellers can sell or barter items at online auctions
Consumers place bids
Examples: eBay.com and swap.com
Revenue model based on small transaction fees, highly profitable

Online Classifieds

Just advertising, no online transactions
Freecycling
Example: craigslist.com

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C2C Opportunities and Threats

Opportunities	Threats
Consumers can buy and sell to broader markets	No quality control
Eliminates the middleman that increases the final price of products and services	Higher possibility of fraud
Always available for consumers, 24/7/365	Harder to use traditional payment methods (checks, cash, ATM cards)
Market demand is an efficient mechanism for setting prices in the electronic environment
Increases the numbers of buyers and sellers who can find each other

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C2B EC

Relatively new phenomenon, consumers can sell small pieces of work (e.g., photos) or services to businesses
It might be argued that anyone who made a living doing this is actually in business for themselves, so may be B2B

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Managing Finances and Navigating Legal Issues in EC

Electronic Business: E-Commerce and E-Government

Describe different business models used to compete in cyberspace as well as different forms of electronic government.

Business-to-Consumer E-Commerce

Describe business-to-consumer electronic commerce strategies.

Electronic Commerce Websites and Internet Marketing

Understand the keys to successful electronic commerce Web sites, and explain the different forms of Internet marketing.

Mobile Commerce, Consumer-to-Consumer EC, and Consumer-to-Business EC

Describe mobile commerce, consumer-to-consumer electronic commerce, and consumer-to-business electronic commerce.

Managing Finances and Navigating Legal Issues in EC
Describe how to conduct financial transactions and navigate the legal issues of electronic commerce.

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E-Banking

Online Banking and Electronic Bill Services

Convenience
Security concerns
Mobile banking

Online Investing

Increased access to financial information and analytical tools
Online investing
Mobile investing

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Securing Payments in the Digital World

Credit and Debit Cards

Credit cards are a simple mechanism
Consumers have to transfer a lot of personal information to the seller
Risk of identity theft

Managing Risk

Businesses are financially liable for fraudulent transactions
Businesses have to look for fraud indicators and sometimes reject risky transactions

Payment Services

Examples: PayPal, Google Checkout

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Ways to Protect Yourself When Shopping Online

Use a secure browser
Check the site’s privacy policy
Read and understand the refund and shipping policies
Keep your personal information private

Give payment information only to businesses you know and trust
Keep records of your online transactions and check your e-mail
Review your monthly credit card and bank statements

Source: Based on Federal Trade Commission (2010).

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Possible Indicators of Fraud

Email addresses

Shipping and billing addresses

Transaction patterns

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Legal Issues in EC

Taxation

Sales taxes
Internet Freedom Act: Internet sales are treated like mail-order sales

Digital Rights Management

Preventing unauthorized duplication
Restrict which devices can play media
Limit number of times media can be played

Net Neutrality

Should the Internet be open? Or should Internet access come first to the highest bidder?

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END OF CHAPTER CONTENT

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Managing in the Digital World: �Taobao and the World of e-Commerce

Taobao is the largest digital marketplace in China

By 2011 more registered users (370 million) than the population of the United States
Online marketplace for multiple companies
Online consumer-to-consumer sales, much like eBay
Notorious for piracy and counterfeit goods

360buy new-fast growing competitor

Not on the list of notorious markets

Sales in China pose huge logistics headaches

Widely varying population densities
No “overnight shipping” infrastructure

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Ethical Dilemma:�The Ethics of Reputation Management

Online reviews can be critical to a customer’s buying decision
Biased and fake reviews can affect a business’s profitability, or even survival
Owners are tempted to post fake positive reviews
Competitors are tempted to post fake negative reviews
Reputation management can help offset negative biased reviews, but poses ethical dilemmas

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Key Players: Behind the Online Storefront: How e-Commerce Giants Help Small Businesses Flourish

Starting an online business can be complex

Commercial giants such as eBay and Amazon allow small retailers to sell through their sites
Large hosting companies such as GoDaddy provide hosting and online shopping carts
Payment services such as Intuit and PayPal offer credit card services
Fulfillment centers, such as Amazon, handle packaging and shipping individual orders

These simplify small business implementations

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When Things Go Wrong:�Buying Likes

Many businesses entice users to “like” their business page on Facebook, Twitter, or other sites for some reward
Campaigns and contests can be deeply biased by automated “likes” and votes, giving unfair advantage to users who game the system
Social media platforms try to suppress this type of devious behavior, but it can be a cat-and-mouse game

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Coming Attractions:�Carbon Nanocomputers

Despite rapid advancements in computer power, processors constantly battle the limits of silicon
Enter the carbon nanotube

Hollow cylinders composed of a single sheet of carbon atoms
Relatively little energy required to power a nanotube transistor
Small size makes them easy to pack into small places
Heat efficient

Stanford University recently created the first functioning nanotube-based computer

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�Brief Case: CrowdSpring—The Graphic Designers’ Marketplace�

CrowdSpring: a large marketplace for connecting businesses with creative professionals in mutually beneficial relationships
Businesses create a description of the design project
Designers submit design ideas
Such marketplaces provide tremendous value for all parties involved

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Who’s Going Mobile:�Mobile Payments

Electronic funds transfer (EFT) technologies are paving the way for cashless societies
The smartphone is becoming a natural payment companion
Near field communication (NFC) allows for simply waving an NFC-enabled phone in front of a reading device to make a payment
Potential problems: merchant costs, privacy concerns

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Industry Analysis:�Retailing

Retailing has embraced new technologies

Bar code scanning for price, inventory management, self-checkout
RFID functions like a barcode but uses wireless technologies, and can be integrated with other information technologies
New forms of electronic payment, whether by pin, phone barcode, near-field communication (NFC) technologies, or fingerprint, are gaining traction