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Bob Travica
Class 17
Strategizing with IS: Electronic Commerce
MIS 2000Information Systems for Management
Instructor: Bob Travica
Updated 2015
Bob Travica
2
Outline
• Electronic commerce (E-commerce)
• Business-to-Consumer (B2C) E-Commerce
• Business-to-Business (B2B) E-Commerce
• Summary
Bob Travica
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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.
Bob Travica
• 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.)
Two Domains of E-commerce
SupplierOrganization
Web storefront
SupplierOrganization
Classical company
Consumer
sell
buy
offer, sell
demand, buy
sellbuy
B2CB2B
4
Bob Travica
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• 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
Business Models for B2C E-commerce
More
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• 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
• Customer: Global Internet user
• Revenue: Fixed fees, Referral fees (advertising)
Business Models for B2C E-commerce
Bob Travica
E-commerce Expands Customer Data
7
Customer
Customer ID CustomerType IP-AddressTel-Number
Catalog Search
Customer IDTerms Searched Customer Movement
Customer IDWeb Pages VisitedScreen Items Clicked
ProductProductIDCategoryMaker
Customer Comparison
Match Product Purchased
Other Online Purchases
ProductCategory
New data, do not exist in classical marketing
Tracking consumer behavior
Support to cross-selling
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B2C E-commerce Systems
Web Store- frontWeb Store- frontBrowse
productsBrowse
products
BuyBuy
PayPay
Product catalogProduct catalog
Sales sys.
Sales sys.
Ordering & Pay-ment systems
Ordering & Pay-ment systems
Customer profiling
Customer profiling
Product promot
ion
Product promot
ion
Clearing houses,
Banks
Clearing houses,
Banks
More
Bob Travica
B2C E-commerce
9 of 14
• Boom 1994-2000, crash in 2001; pure vs. hybrid models
• Share in total retail in 2014:
Globally 6%
Canada 4.9%
UK 13%
China 10% (nominally largest) *
U.S.A. 6.5% (second 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
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• 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
B2C E-commerce Costs
Bob Travica
B2B E-Commerce
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• 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:
InventoryBuyer Purchasing
BankBank
Bank
Production
Scheduling
Supplier
E-marketSales
1. Direct model
2. Mediatedmodel
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• 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, more)
• Revenue: Membership fee, Transaction charge, Financial services, Product catalogue creation, Order fulfillment
Mediated Model: E-Market
Bob Travica
• Benefits:
- Larger market
- Savings from efficiencies in supply chain
- Better coordination in supply chain
- Dynamic pricing (auctions)
- 24/7 business (via e-marketplaces)
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B2B E-Commerce Benefits & Costs
More
• 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)
Bob Travica
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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.