CSC 601 Management Information Systems

1. CSC 601Management Information Systems Chapter 10 e-Commerce

2. Topics • Introduction • e-Commerce • m-Commerce • Payment systems

3. e-Commerce Today • Digitally enabled commercial transactions between and among organizations and individuals, primarily over Internet • Began in 1995 with Netscape.com’s acceptance of ads • Rapid growth led to dot-com bubble (burst in 2001) • Current growth 25% annually • Today e-Commerce revenues picture is very positive • E.g. Number of people who have purchased something online expanded to about 106 million in 2007

4. The Growth of e-Commerce Retail e-commerce revenues have grown exponentially since 1995 and have only recently “slowed” to a 25% annual increase.

5. Unique Features of e-Commerce 1. Ubiquity • Internet technology available anytime and everywhere: work, home, mobile devices • Business significance: • Marketplace is extended beyond traditional boundaries and is removed from temporal and geographic location • Creates marketspace: Marketplace extended beyond traditional temporal, geographical boundaries • Shopping can take place anywhere - customer convenience is enhanced, shopping costs are reduced

6. Unique Features of e-Commerce 2. Global reach • Technology reaches across national boundaries, around earth • Business significance: • Commerce enabled across cultural and national boundaries seamlessly, without modification • Marketspace includes potentially billions of consumers and millions of businesses worldwide

7. Unique Features of e-Commerce 3. Universal Standards • There is one set of Internet technology standards • Business significance • Disparate computer systems can easily communicate • Brings lower market entry costs (costs merchants pay to bring goods to market) • Lowers search costs for consumers

8. Unique Features of e-Commerce 4. Richness • Video, audio, text messages are possible • Business significance: Video, audio, text integrated into single marketing message and experience 5. Interactivity • Technology works through interaction with user • Business significance: Consumers engaged in dialog that adjusts to individual; consumer is co-participant in delivering goods to market

9. Unique Features of e-Commerce 6. Information density • Technology reduces information costs and raises quality • Business significance: • Information becomes plentiful, cheap, and more accurate • Increases price transparency and cost transparency • Enables price discrimination

10. Unique Features of e-Commerce 7. Personalization/customization • Technology allows personalized messages to be delivered to individuals as well as groups • Permits customization - changing delivered product or service based on user’s preferences or prior behavior • Business significance • Personalization of marketing messages and customization of products and services are based on individual characteristics

11. Key Concepts in e-Commerce • Internet enables disintermediation • Disintermediation: • Removal of organizations or business process layers responsible for intermediary steps in value chain • Enables selling direct to consumer

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

13. Digital Goods • Goods that can be delivered over network • E.g. Music tracks, video, e-books, software • Cost for producing first unit is nearly total cost of product. Cost for producing additional units very low • Impact of Internet on market for digital goods is revolutionary • Video rental services • Hollywood studios • Record label companies • Newspapers and magazines

14. Types of Internet Business Models • Pure-play • Based purely on Internet • Do not have bricks-and-mortar portion of business • E.g. Amazon.com, eBay.com, YouTube.com • Clicks-and-mortar • Internet presence is extension of bricks-and-mortar businesses • E.g. L.L.Bean, Office Depot, Wall Street Journal

15. Internet Business Models • Virtual storefront • Information broker • Transaction broker • Online marketplace • Content provider • Online service provider • Virtual community • Portal

16. Internet Business Models • Virtual storefront • Sell physical goods • www.amazon.com • Information broker • Provides product, pricing, availability information • Generates revenue from ads • E.g. www.edmunds.com • Transaction broker • Online sales transactions on behalf of other businesses • Generates revenue from transaction fees • www.expedia.com

17. Internet Business Models • Online marketplace • Provides digital environment where buyers and sellers can transact • Generates revenue from transaction fees • www.ebay.com • Content provider • Sells digital content (images, music, news, video etc) • www.itunes.com • Online service provider • Provides online services • Generates revenue from subscription fees, ads etc • www.salesforce.com

18. Internet Business Models • Virtual community • Provides online meeting place • Generates revenue from ads • www.ivillage.com • Portal • Provides initial point of entry to the web • Generates revenue from ads • www.yahoo.com

19. Topics • Introduction • e-Commerce • m-Commerce • Payment systems

20. e-Commerce Categories • Business-to-Consumer (B2C) • E.g. Barnesandnoble.com • Business-to-Business (B2B) • E.g. ChemConnect.com • Consumer-to-Consumer (C2C) • E.g. eBay.com

21. Achieving Customer Intimacy • Interactive marketing & personalization • Corporate blogs • Customer self-service

22. Achieving Customer Intimacy 1. Interactive marketing and personalization • Enabled by gathering customer data from Web site registrations or activities • Clickstream tracking tools • Web pages can be tailored to customer preferences or interests • Collaborative filtering • Compares user information to data about other customers to make recommendations based on assumed interests

23. Website Personalization Firms can create unique personalized Web pages that display content or ads for products or services of special interest to individual users, improving the customer experience and creating additional value.

24. Achieving Customer Intimacy 2. Corporate blogs: • Used as new channel for reaching customers, maintaining existing customers • Provide personal and conversational way for businesses to present information to the public and prospective customers about new products and services

25. Achieving Customer Intimacy 3. Customer self service: • Answer customer questions or to provide product information, reducing need for human customer-support experts • New software products can integrate Web with customer call centers • E.g. by directing representative to phone user regarding query

26. Customer Self-Service Calculate delivery costs and track shipments. Web sites for customer self-service are convenient for customers and help firms lower their customer service and support costs.

27. B2B e-Commerce • New efficiencies and relationships • EDI (Electronic Data Interchange) • Automated exchange of standard business documents (e.g. invoices) • Each major industry has EDI standards • Internet used increasingly for EDI instead of private networks • Internet broadens circle of trading partners • E.g. For procurement, firms can use Internet to locate most low-cost suppliers

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

29. Topics • Introduction • e-Commerce • m-Commerce • Payment systems

30. m-Commerce • Use of handheld wireless devices for purchasing goods and services from any location • m-Commerce services and applications • Popular for services that are time-critical, that appeal to people on the move, or that accomplish task more efficiently than other methods • Especially popular in Europe, Japan, South Korea, and countries where fees for conventional Internet usage are very expensive

31. m-Commerce Services & Applications • Content and location-based services • e.g. checking train schedules, searching for local businesses • Banking and financial services • e.g. wireless alerts about changes in account information • Wireless advertising • e.g. wireless service providers including advertising for local restaurants, movie theaters on cell phones and Wi-Fi devices • Games and entertainment • e.g. downloading ringtones, movie clips

32. Global m-Commerce Revenue m-Commerce sales represent a small fraction of total e-Commerce sales, but that percentage is steadily growing.

33. m-Commerce • Challenges • Keyboards and screens tiny and awkward to use • Data transfer speeds (2G networks) slow compared to Internet connections for PCs • Time-based connection fees • Limited memory and power supplies • m-Commerce will benefit from: • 3G networks and other broadband services • Standardized mobile payment systems

34. Topics • Introduction • e-Commerce • m-Commerce • Payment systems

35. Payment Systems

36. In-Class Exercise (Q) What type of payment systems do the following companies offer? • PayPal.com • CheckFree.com

37. Links & Resources • E-Commerce Journal • http://ecommerce-journal.com/categories/payment_systems • PayPal Buyer Protection • www.paypal.com/cgi-bin/webscr?cmd=_pbp-info-outside

38. Video Case • Lands’ End Information Systems

39. B2B B2C C2C Clicks-and-mortar Customization Digital goods Disintermediation e-Commerce EDI Electronic payment systems Internet business models m-Commerce Micropayment Personalization Podcasting Pure play Self-service Syndicators Key Terms