Introduction to E-commerce

1. Introduction to E-commerce International Telecommunication Union (ITU) Basic E-Commerce Training For Pakistan Pakistan Telecommunication Authority (PTA) Islamabad, Pakistan 31 March – 5 April Alexander NTOKO, Project Manager, ITU Electronic Commerce ITU Telecommunication Development Bureau (BDT) Email: ntoko@itu.int Web: http://www.itu.int/ecdc

2. Agenda History of e-commerce Overview of various models A very simple definition Requirements for B2C Overview of B2B Benefits of e-commerce

3. History (how it started) Commerce over the net started almost 30 years ago with the use of private networks (VANs) by large US corporations to exchange business information using EDI. Online retailing gained enormous popularity (some 6 years ago) with companies like AMAZON selling to consumers world-wide. Today, electronic commerce covers a broad range of business activities with an estimated 50% of U.S businesses online.

4. Very simple Definition Electronic Commerce: Can be simply defined as transactions conducted over public and private networks. It includes a broad range of activities such as: e-tailing, e-marketplaces e-procurement, e-government, and e-banking, ERM, CRM and VCM services. In the simple and most common scenario a customer uses a Web browser to access a Web-based virtual store through the Internet and pays using a credit card.

5. E-Commerce is... The the result of the convergence of financial, networking and business services. The emergence of new intermediaries in business relationships. The transition from bricks and mortar to bricks and clicks – enhancing traditional business processes using new ICTs. Thebreakdown of geographical and time barriers and the increase in market access.

6. E-Commerce is... The increased effectiveness of business relationships and the invention new ones. The conduction of business transactions over public and private networks. The emergence of a global electronic economy. Theopportunity for developing countries to leapfrog and compete in a global marketplace.

7. Models of e-commerce Individuals Governments Businesses

8. E-commerce models • Business-to-business • Business-to-government • Business-to-consumer • Consumer-to-consumer • Government-to-citizen

9. Business-to-business • Corporate Procurements • Customer Relationship Management • Enhancing value chain (VCM) • Supply Chain Management (SCM) • Collaboration Services • Transportation and Logistics • Manufacturing and Distribution • E-commerce Marketplaces • Financial and Information Services

10. Business-to-consumer • Direct sales (online retailing) • Marketing and advertising • Customer services • Financial services • Product distribution

11. What is B2C E-commerce? A simple definition: Includes the online marketing, distribution, sales and purchase of products and services: companies publish their catalogs online, and consumers order from the catalogs, make payments, and perhaps track the status of their orders online. In the typical scenario a customer uses a Web browser to access a Web-based virtual store through the Internet and pays using a credit card.

12. Requirements for B2C (e-tailing) • Payment, Trust and Security infrastructure • Banking services to merchants (MOTO,SET) • Merchant Web site with online catalogue • Goods and services which can be sold online • Information technology (hardware, software) • Legal, policy and regulatory framework • Services and logistics (shipping/delivery for physical and digital content)

13. Payment, Trust and Security • Confidentiality of transactions  Encryption • Who am I dealing with? Authentication • Message integrity Message Digest • Non-repudiation Digital Signature • Evidence of authenticity X.509 Certificate • Trusted third party Certification Authorities • Secure communication SSL, IPsec • Secure payment systems SSL-based, SET, • Interface to banks ISO8583, CyberCash

14. Everything … must be accessed in money; for this enables men to always exchange their services, and so makes society possible. Aristotle (384-322 B.C.)

15. Banking Services • Merchant local bank account • Acquiring banks for desired card brands (Visa, MasterCard, Amex, Diners) • Mail Order Phone Order (MOTO) or SET contract with partner banks • Host/Network enabled vPOS terminal services for connecting to processors

16. Credit Card Acquiring bank Merchant Bank account MOTO contract Payment, Trust and Security technologies and services Merchant Business Merchant Web Site

17. Merchant Web Site • Web site accessible via the Internet • Online catalogue containing items description, price, store policy and payment and shipping options • Order capture and completion services (tax, shipping/handling,online delivery for digital content) • Shopping basket features, catalogue management • Advice of order services (email, fax) transactions • Email contact for pre and post transactional services

18. Goods and Services • Legal to export/import at source/destination • Price range within limits for payment type • Weight and volume to facilitate delivery • Reasonable shipping and delivery cost • Of interest to potentially large consumer base • Easy to package and preserve as final product

19. ICT requirements • Local support services for hardware and software • Information technology support for customer services • Environment for application development and integration (middleware, application integrators) • Applications, systems and network monitoring, management and support • BackOffice systems for inventory, catalogue management, billing and invoicing • System, host and network security services • Trust services for merchant and customer authentication.

20. Legal Requirements • Policies for the and use of digital signatures • Regulations for Certification Authorities • Electronic contracts and notarization • Privacy and confidentiality laws • Data and consumer protection policies • Procedures for parties in e-transactions • Intellectual property and trademark laws • Laws and regulations for settlement of disputes

21. Potential benefits to DCs • Enable businesses to trade at internationally acceptable prices by providing access to the global marketplace • Provides a low-cost channel for the selling, marketing and distributing goods and services • Provides 7 x 24 storefront availability (any hour of the day, any day of the year) • Reduces the cost of processing transactions, orders and payments including credit and collection expenses

22. Potential benefits DCs • Could provide the need to learn new technologies and build local capacity to maintain services and infrastructure • Could act as a stimulus for the development of the information and communication technology (ICT) infrastructure • Improvement in the ICT infrastructure could facilitate access to health and educational information available via the Internet • Increase trade with developed countries and attract foreign investments

23. Potential benefits for customer • From the comfort of home or office • Any hour of the day, any day of the year • Access to worldwide choices • Reduced acquisition times and cost • Access to extensive marketing information on products of interest • Online test of digital products (e.g., CD) • Immediate download of digital products • Use of intelligent agents for correct order

24. B2C E-commerce sites • Banking: www.ubs.com • Books: www.amazon.com • Cars: www.edmunds.com • Clothes: www.eddiebauer.com • Investment: www.etrade.com • IT: www.dell.com • Digital content: www.itu.int • Travel: www.travelocity.com • Wine: www.virtualvin.com

25. Business to Business E-Commerce

26. The Trading Community 3rd Party Services Sellers MarketSite Other Communities Buyers

27. Vision for B2B e-Maketplace • Any company trading with any company • Automation of the entire trading process • Interoperable set of Global Marketplaces

28. Impact on FSPs • Financial Service Providers (FSPs) are Buyers • New Revenue Opportunities as Market Maker • Route to Market for Electronic Financial Services

29. What is e-Procurement? Automation of the ENTIRE (indirect) supply chain from product selection through receipt. select requisition approve status receive Requires real-time interactivity with trading partners worldwide

30. E-Procurement Opportunities Automating the Entire Indirect Goods & Services Supply Chain can Deliver: • Reduced Cost of Goods… • Reduced Administration.. • Shorter Cycle Times…….. • Inventory Reduction….…… 3 - 5% or More £50 to £4 From 7 Days to 2 Days Reduced or Zero-Stock

31. Supplier Return on Investment Increased Revenue More Accurate • A new sales channel • More on-contract buying • Lower inventory • Less rework • Fewer returns Reduced Costs Efficient Operation • Order entry • Customer service • Invoicing, Accounts Receivable • Content in existing form • “Sharable” normalization • One update for trading community Supplier ROI is Critical

32. A Win—Win Solution Substantial ROI for both parties Buyers Suppliers Automate Process Reduce Costs per Transaction Eliminate Maverick Purchasing Increase Revenue per Customer Global economies of scale Gain New Customers

33. The Portal Model • Single Point of Business Integration For Buyer and Supplier • Shared Content Mapped from multiple formats • Real-Time Interactivity • Commerce Platform Complex B to B process support • Single “Plug In” for New Services • Totally Open Applications, Trading Communities and Companies of All Sizes Sellers MarketSite Buyers

34. Portal Role A Portal Supports the Entire Breadth of “Trading Relationship” Process The Buying Process The Selling Process Identify Customers Find Decision Makers Build Trust Offer Solution Present Value Negotiate Terms Make Transaction Fulfilment Provide Support Retire/Upgrade Identify Needs Find Sources Build Trust Configure Solution Determine Value Negotiate Terms Make Transaction Fulfilment Receive Support Retire/Upgrade Business to Business Marketplace Portal MarketSite

35. Portals Drive the Network Effect Maximum participation drives “network effect” and maximum value for everyone in the trading community: • Buyers • Suppliers • Service Providers Economic Value Number of Users

36. Rise of the Internet Market Maker • Turn your supply chain into a revenue generation opportunity • Proactive influence on power balance in electronic supply chain • Leverage your industry domain expertise into strategic e-commerce value • Examples: GM etc, Shell, Boeing etc, TD Bank, Banamex, Citigroup Your Portal

37. Traditional Lines of Business • Cash management services • Credit insurance • Physical insurance • Letters of credit and bills of exchange • Payment guarantees • Payment processing • Asset based financing e.g. factoring, invoice discounting, forfeiting and financing based on bills of exchange • Leasing • Loans

38. New Financial Services • Identity services • Information services based on identity • delivery address • credit rating • Advice and guidance services • tax • legal • jurisdiction

39. The Global Trading Web Global Trading Web Connect once to trade with anyone,anytime, anywhere in the world.

40. Electronic commerce promises to be a major generator of new and skilled jobs and growth in the next century, through improvements in business productivity, growth in consumer transactions, and development of the supporting information technology infrastructure. Early adopters can quickly establish market dominance and help shape evolving rules as well as business and consumer behavior. … But there are several challenges and pitfalls…