Bob Travica

Class 17

Strategizing with IS: Electronic Commerce

MIS 2000Information Systems for Management

Instructor: Bob Travica

Updated 2014

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Outline

• Electronic commerce (E-commerce)

• Business-to-Consumer (B2C) E-Commerce

• Business-to-Business (B2B) E-Commerce

• Summary

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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.

SupplierOrganization

Retailer/Producer

Web store

SupplierOrganization

Consumer

sell

buy

offer, sell

demand, buy

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• Two main domains:

- Business-to-Consumer (B2C), retail on the Internet via

Web storefronts: Chapters.com - music, electronics; online sales process (outsourced)* is an addition to physical store - “click and mortar”.

- Business-to-Business (B2B), buying & selling b/w firms • via e-marketplaces/e-markets (Covisint, Freelancer.com)• directly (linking via EDI**, private nets or Internet; Dell,

Cisco & shipping industry)•Either can use mobile devices (mobile commerce)

Domains of E-commerce

SupplierOrganization

Web storefront

SupplierOrganization

Consumer

sell

buy

offer, sell

demand, buy

B2CB2B

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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 storefronts.

• Amazon was not profitable for years. Amazon captured large market share, increased product & service offerings, and became profitable.

• Amazon keeps improving business processes (sales, inventory) that are largely electronic (rested on various IS).

• Amazon’s customers are consumers with access to Internet around globe.

• Uses Interactive Marketing and Personalization.**

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

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E-commerce Expands Customer Data

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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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• Boom 1994-2000, crash in 2001; pure vs. hybrid models

• About 15% of total retail sales in U.S. 2012, somewhat less in Canada *

• 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**)

B2C E-commerce Benefits

Web Store- front

Web Store- front

Browse productsBrowse

productsBuyBuy

PayPay

Product catalogProduct catalog

Sales sys.Sales sys.Billing &

Pay-ment systems

Billing & Pay-ment systems

Customer profilingCustomer profilingOfferingOffering

Clearing houses,

Banks

Clearing houses,

Banks

More

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• Firm’s costs:

- IS investments

- Delivery, Logistics

- Payment security

- Legal boundaries

- Competition increase

- Invisible customer

- Electronic branding

• Consumer’s costs:

- IT have-nots

- Privacy

- Payment anxiety

- Product testability & return

B2C E-commerce Costs

See footnote…

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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

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• Firm’s 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

See footnote…

• Firm’s 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)

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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.