Class 17 Strategizing with IS: Electronic Commerce

1. MIS 2000 Information Systems for Management Instructor: Bob Travica Class 17 Strategizing with IS: Electronic Commerce Updated 2018

2. Outline • Electronic commerce (E-commerce) • Business-to-Consumer (B2C) E-Commerce • Business-to-Business (B2B) E-Commerce • Summary

3. Concept of E-commerce • E-commerce is the area of commerce that is conducted via computer networks and information systems. • E-commerce started among businesses (supply markets), and expanded into consumer markets when Internet moved to businesses and homes in the mid-1990. • Moving into B2C or B2B is an important strategy leading to increasing market share, integrating supply chains, improving financial results.

4. Two Domains of E-commerce B2B B2C offer, sell Supplier Organization Web storefront sell demand, buy Physical company Supplier Organization buy buy Consumer sell Classical company • Business-to-Consumer (B2C), retail on the Internet via • Web storefronts: Chapters.com; “click and mortar” or “pure click” • Business-to-Business (B2B), buying & selling between firms • via e-markets (Covisint, Freelancer.com) • directly (private networks or Internet; Dell, shipping ind.)

5. Business Models for B2C E-commerce • Web Retail (also called Web Storefront, Web Store, Online Store) • Sells many goods & services online • Example: Amazon.com – “pure click”, no physical stores • Amazon started as a bookstore and initiated the trend of web retail. • Amazon keeps improving business processes (sales, inventory) to increase up-selling and cross-selling. • Global presence; Interactive Marketing and Personalization. • Bestsellers in Web storefronts: • 10-25% of purchases: DVD, CD, books, computer hardware & software • Below 10% of purchases: A/V equipment, clothes, music… anything More

6. Business Models for B2C E-commerce • Portal: Initial point of entry to Web, provides Internet search service for free; advertising revenues, may sell some services* & content (Google, Yahoo) • Customer: Global Internet user • Revenue: Advertising*, some search services, mobile tech. (Google) • Broker: Middleman models mediating between buyers and sellers (travel industry, comparison shopping engines…)** • Customer: Global Internet user • Revenue: sellers pay per shopper’s click or purchase

7. E-commerce Expands Customer Data Catalog Search Customer ID Terms Searched Customer Customer ID CustomerType IP-Address Tel-Number Product ProductID Category Maker Customer Movement Customer ID Web Pages Visited Screen Items Clicked Customer Comparison Match Product Purchased Tracking consumer behavior Other Online Purchases ProductCategory Support to cross-selling New data, do not exist in classical marketing

8. B2C E-commerce Systems Web Store- front Browse products Customer profiling Product catalog Product promotion Buy Sales sys. Pay Clearing houses, Banks Ordering & Pay-ment systems More

9. B2C E-commerce • Boom 1994-2000, crash in 2001; pure vs. hybrid models • Share in total retail in 2014: • Globally 6%, Canada 4.9%, UK 13% • U.S.A. 6.5%, China 10% (nominally largest)* • Firm’s benefits: • Global reach & 24/7 sales • Savings on physical stores • Direct marketing (customer profiling via clickstream • or search tracking systems*; personalized Web storefronts) • Cross selling (automatic matching of customer profiles via systems) • Consumer: Convenience, selection, some savings Benefits

10. B2C E-commerce Costs • Firm: - IS investments - Delivery, Logistics - Payment security - Legal boundaries - Competition increase - Invisible customer - Electronic branding • Consumer: - Shipping & handling expenses - Privacy - Payment anxiety • Product testability & return

11. Production Scheduling Inventory Buyer Supplier Purchasing E-market Bank Bank Bank B2B E-Commerce • Larger part of e-commerce (1/3 of all B2B sales in US; ~5% in CA*) • Complex processes (inter-org.), connections, & systems • 2 business models: 1. Direct model Sales 2. Mediated model

12. Mediated Model: E-Market • Also called e-Exchange, e-Hub, Market maker • Can be controlled by Buyer or Seller • Within an industry (plastics, metals, etc.) • Across industries (Covisint, B2BQuote, Alibaba*, more**) • Revenue: Membership fee, Transaction charge, Financial services, Product catalogue creation, Order fulfillment E-Market

13. B2B E-Commerce Benefits & Costs • Benefits: - Larger market - Savings from efficiencies in supply chain - Better coordination in supply chain - Dynamic pricing (auctions) • 24/7 business (via e-marketplaces) • Costs: • - Increased competition • - Volatile business relationships (partner • switching) • - Costs of private networks • - Costs of intermediaries (e-markets) • - Legal boundaries (e.g., anti-monopoly pressures on buyers-driven e-markets)

14. Summary • E-commerce is buying and selling via electronic means, and these can transpire between businesses (B2B; older segment), and between business and consumers (B2C, newer segment). • Models of B2C e-commerce include portal, web store, and broker. • Two main models of B2B e-commerce are direct company-to-company and e-marketplace. • B2C e-commerce enriches the customer profile. • B2B e-commerce is bigger part of e-commerce and has certain future. • Both B2B and B2C has certain benefits and costs.