Chapter 9 E-Commerce: Digital it Markets, Digital Goods 9.1 2007 by Prentice Hall
STUDENT LEARNING OBJECTIVES What are the unique features of e-commerce, digital markets, and digital goods? How has Internet technology changed business models? What are the various types of e-commerce, and how has e-commerce changed consumer retailing and business-to-business transactions? 9.2 2007 by Prentice Hall
STUDENT LEARNING OBJECTIVES (continued) What is the role of m-commerce in business, and what are the most important m-commerce applications? What are the principal payment systems for electronic commerce? 9.3 2007 by Prentice Hall
Photobucket: The New Face of E-commerce Problem: Building a business model that serves the emerging market for social networking sites. Solutions: Set up a simple, easy to use photo storage site usable at any social networking site. 9.4 2007 by Prentice Hall
Photobucket: The New Face of E-commerce Photobucket pioneered the concept of linking media from one Web Site to multiple online sites. Demonstrates IT s role in generating new business models. Illustrates digital technology s importance in reducing the costs of storing photos and video online. 9.5 2007 by Prentice Hall
Photobucket: The New Face of E-commerce 9.6 2007 by Prentice Hall
Electronic Commerce and the Internet E-Commerce Today E-commerce: Use of the Internet and Web to transact business; digitally enabled transactions Began in 1995 and grew exponentially; still growing at an annual rate of 25 percent Companies that survived the dot-com bubble burst and now thrive E-commerce revolution is still in its early stages 9.7 2007 by Prentice Hall
Electronic Commerce and the Internet The ego Growth of E-Commerce Retail e-commerce revenues have grown exponentially since 1995 and have only recently slowed to a very rapid 25 percent annual increase, which is projected to remain the same until 2010. Figure 9-1 9.8 2007 by Prentice Hall
Electronic Commerce and the Internet Unique Features es of E-commerce ce Technology ogy Ubiquity Internet/Web t/w technology available everywhere: work, home, etc., anytime. Effect: Marketplace removed from temporal, geographic g locations to become marketspace Enhanced customer convenience and reduced shopping costs 9.9 2007 by Prentice Hall
Electronic Commerce and the Internet Unique Features es of E-commerce ce Technology ogy Global reach The technology reaches across national boundaries, around Earth Effect: Commerce enabled across cultural and national boundaries seamlessly and without modification Marketspace includes, potentially, billions of consumers s and millions of businesses worldwide 9.10 2007 by Prentice Hall
Electronic Commerce and the Internet Unique Features es of E-commerce ce Technology ogy Universal standards One set of technology standards: Internet standards Effect: Disparate computer systems easily communicate with each other Lower market entry costs costs merchants must pay to bring goods to market Lower consumers search costs effort required to find suitable products 9.11 2007 by Prentice Hall
Electronic Commerce and the Internet Unique Features es of E-commerce ce Technology ogy Richness Supports video, audio, and text messages Effect: Possible to deliver rich messages with text, audio, and video simultaneously to large numbers of people Video, audio, and text marketing messages can be integrated into single marketing message and consumer experience 9.12 2007 by Prentice Hall
Electronic Commerce and the Internet Unique Features es of E-commerce ce Technology ogy Interactivity The technology works through interaction with the user Effect: Consumers engaged in dialog that dynamically adjusts experience to the individual Consumer becomes co-participant in process of delivering e goods to market 9.13 2007 by Prentice Hall
Electronic Commerce and the Internet Unique Features es of E-commerce ce Technology ogy Information density Large increases in information density the the total amount and quality of information available to all market participants Effect: Greater price transparency Greater cost transparency Enables merchants to engage in price discrimination 9.14 2007 by Prentice Hall
Electronic Commerce and the Internet Unique Features es of E-commerce ce Technology ogy Personalization/Customization Technology permits modification of messages, goods Effect Personalized messages can be sent to individuals as well as groups Products and services can be customized to individual preferences 9.15 2007 by Prentice Hall
Electronic Commerce and the Internet Unique Features es of E-commerce ce Technology ogy Social technology The technology promotes user content generation and social networking Effect New Internet social and business models enable user content creation and distribution, and support social networks 9.16 2007 by Prentice Hall
Electronic Commerce and the Internet Key Concepts in E-commerce: ce Digital Markets and Digital Goods In a Global Marketplace Digital markets reduce Information asymmetry Search costs Transaction costs Menu costs Digital markets enable Price discrimination Dynamic pricing Disintermediation 9.17 2007 by Prentice Hall
Electronic Commerce and the Internet The Benefits e of Disintermediation ed 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. Figure 9-2 9.18 2007 by Prentice Hall
Electronic Commerce and the Internet Key Concepts in E-commerce: ce Digital Markets and Digital Goods In a Global Marketplace Digital goods Goods that can be delivered over a digital network E.g. Music tracks, video, software, newspapers, books Cost of producing first unit almost entire cost of product: marginal cost of producing 2 nd unit is about zero Costs of delivery over the Internet very low Marketing costs remain the same; pricing highly variable Industries with digital goods are undergoing g revolutionary changes (publishers, record labels, etc.) 9.19 2007 by Prentice Hall
Electronic Commerce and the Internet Internet et Business Models Pure-play models: Based purely on Internet Clicks-and-mortar models: Extensions of bricks-and- mortar businesses Communication and Social Networking Some new business models take advantage of Internet s rich communication capabilities Social networking sites Social shopping Can provide ways for corporate clients to target customers through banner ads and pop-up ads 9.20 2007 by Prentice Hall
Electronic Commerce and the Internet Internet et Business Models Digital content, entertainment, and services Ability to deliver digital goods and content has created new alternatives to traditional print and broadcast media Online games, radio channels, films and television, music downloads, and podcasts Portal: Supersite that provides comprehensive entry point for huge array of resources and services on the Internet Online syndicators: Aggregate content from multiple sources,,package for distribution, and resell to third-party Web sites 9.21 2007 by Prentice Hall
Virtual storefront: Electronic Commerce and the Internet Internet et Business Models Sells physical products directly to consumers or to individual businesses Information broker: Provides product, pricing, and availability information to individuals and businesses Transaction broker: Saves users money and time by processing online sales transactions and generating g a fee for each transaction 9.22 2007 by Prentice Hall
Online marketplace: Electronic Commerce and the Internet Internet et Business Models Provides a digital environment where buyers and sellers can meet, search for products, display products, and establish prices for those products Content provider: Creates revenue by providing digital content, such as digital news, music, photos, or video, over the Web 9.23 2007 by Prentice Hall
Social network: Electronic Commerce and the Internet Internet et Business Models Provides an online meeting place where people with similar interests can communicate and find useful information Portal: Provides initial point of entry to the Web along with specialized content and other services Service provider: Provides Web 2.0 applications such as photo sharing, video sharing, and user-generated content as services 9.24 2007 by Prentice Hall
Electronic Commerce Interactive e Session: Organizations at Can ebay Continue Growing? Read the Interactive Session and then discuss the following questions: What is ebay s business model and business strategy? How successful has it been? What are the problems that ebay is currently facing? How is ebay trying to solve these problems? Are these good solutions? Are there any other solutions that ebay should consider? What people, organization, and technology factors play a role in ebay s response to its problems? Will ebay be successful in the long run? Why or why not? 9.25 2007 by Prentice Hall
Electronic Commerce Payment Systems Interactive e Session: People e The Allure of MySpace Read the Focus on Organizations and then discuss the following questions: How do businesses benefit from MySpace? How do MySpace members benefit Does MySpace create an ethical dilemma? Why or why not? Do parents and schools objections to MySpace have any merit? Should a site such as MySpace be allowed to operate? Why or why not? Is there anything that MySpace management can do to make the site less controversial? 9.26 2007 by Prentice Hall
Electronic Commerce and the Internet Toyota set up a MySpace profile for the Yaris to attract the attention of young buyers and gather marketing data. 9.27 2007 by Prentice Hall
Electronic Commerce Types of Electronic c Commerce Business-to-consumer (B2C) Business-to-business (B2B) Consumer-to-consumer (C2C) Mobile commerce (m-commerce) 9.28 2007 by Prentice Hall
Electronic Commerce Achieving Customer Intimacy: Interactive e Marketing, Personalization, and Self-ServiceService Interactive marketing and personalization Web sites are bountiful source of details about customer behavior, preferences, buying patterns used to tailor promotions, products, services, and pricing Clickstream tracking tools: Collect data on customer activities at Web sites Used to create personalized Web pages Collaborative filtering: Compares customer data to other customers to make product recommendations 9.29 2007 by Prentice Hall
Electronic Commerce and the Internet Web Site Visitor Tracking Figure 9-3 E-commerce Web sites have tools to track a shopper s every step through an online store. Close examination of customer behavior at a Web site selling women s clothing shows what the store might learn at each step and what actions it could take to increase sales. 9.30 2007 by Prentice Hall
Electronic Commerce and the Internet Web Site Personalization at o 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. Figure 9-4 9.31 2007 by Prentice Hall
Electronic Commerce Achieving Customer Intimacy: Interactive e Marketing, Personalization, and Self-ServiceService Blogs Personal web pages that contain series of chronological entries by author and links to related Web pages Has increasing influence in politics, news Corporate blogs: New channels for reaching customers, introducing new products and services Customer self-service service Web sites and e-mail to answer customer questions or to provide customers with product information Reduces need for human customer-support s expert 9.32 2007 by Prentice Hall
Electronic Commerce and the Internet Stonyfield Farms Baby Babble blog provides a channel for the company to talk to customers with young children directly and hear back from them. 9.33 2007 by Prentice Hall
Electronic Commerce Business-to-Business Electronic Commerce: New Efficiencies and Relationships Electronic data interchange (EDI) Computer-to-computer exchange of standard transactions such as invoices, purchase orders Major industries have EDI standards that define structure and information fields of electronic documents for that industry More companies increasingly moving away from private networks to Internet for linking to other firms E.g. Procurement: Businesses can now use Internet to locate most low-cost supplier, search online catalogs of supplier products, negotiate t with suppliers, place orders, etc. 9.34 2007 by Prentice Hall
Electronic Commerce Electronic c Data Interchange (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. Figure 9-5 9.35 2007 by Prentice Hall
Electronic Commerce Business-to to-business Electronic c Commerce: New Efficiencies and Relationships Private industrial networks (private exchanges) Large firm using extranet to link to its suppliers, distributors and other key business partners Owned by buyer Permits sharing of: Product design and development Marketing Production scheduling and inventory management Unstructured communication (graphics and e-mail) 9.36 2007 by Prentice Hall
Electronic Commerce A Private Industrial Network Figure 9-6 A private industrial network, also known as a private exchange, links a firm to its suppliers, distributors, and other key business partners for efficient supply chain management and other collaborative commerce activities. 9.37 2007 by Prentice Hall
Electronic Commerce Business-to to-business Electronic c Commerce: New Efficiencies and Relationships Net marketplaces (e-hubs) Single market for many buyers and sellers Industry-owned or owned by independent intermediary Generate revenue from transaction fees, other services Use prices established through negotiation, auction, RFQs, or fixed prices May focus on direct or indirect goods May be vertical or horizontal marketplaces 9.38 2007 by Prentice Hall
Electronic Commerce A Net Marketplace ace Figure 9-7 Net marketplaces are online marketplaces where multiple buyers can purchase from multiple sellers. 9.39 2007 by Prentice Hall
Electronic Commerce Business-to to-business Electronic c Commerce: New Efficiencies and Relationships Exchanges Independently owned third-party Net marketplaces Connect thousands of suppliers and buyers for spot purchasing Typically provide vertical markets for direct goods for single industry (food, electronics) Proliferated during early years of e-commerce; many have failed Competitive bidding drove prices down and did not offer long-term relationships with buyers or services to make lowering prices worthwhile 9.40 2007 by Prentice Hall
M-Commerce M-Commerce Services and Applications Although m-commerce represents small fraction of total e-commerce transactions, revenue has been steadily growing Location-based services Banking and financial services Wireless Advertising Games and entertainment 9.41 2007 by Prentice Hall
Electronic Commerce Global M-commerce ce Revenue e 2000-2009 2009 Figure 9-8 M-commerce sales represent a small fraction of total e- commerce sales, but that percentage is steadily growing. (Totals for 2007 2008 are estimated.) 9.42 2007 by Prentice Hall
M-Commerce Accessing Information o from the Wireless ess Web Cell phones and mobile handhelds Data limitations Display size Wireless portals (mobile portals) Feature content and services optimized for mobile devices to steer users to information i they are most likely to need 9.43 2007 by Prentice Hall
Digital wallet Electronic Commerce Payment Systems Types of Electronic c Payment Systems s Stores credit card and owner identification information and enters the shopper s name, credit card number, and shipping information automatically when invoked to complete a purchase Micropayment systems: Developed for purchases of less than $10 Accumulated balance digital payment systems Accumulating debit balance that is paid periodically on credit card or telephone bills 9.44 2007 by Prentice Hall
Electronic Commerce Payment Systems Types of Electronic c Payment Systems s Stored value payment systems Enable online payments based on value stored in online digital account May be merchant platforms or peer-to-peer (PayPal) Digital checking Extend functionality of existing checking accounts to be used for online payments Electronic billing presentment and payment systems Paying monthly bills through electronic fund transfers or credit cards 9.45 2007 by Prentice Hall
Electronic Commerce Payment Systems Digital Payment Systems s for M-Commerce Three types of mobile payment systems in use in Japan Stored value system charged by credit cards or bank accounts Mobile debit cards Mobile credit cards In the U.S., the cell phone has not yet evolved into a mobile payment system 9.46 2007 by Prentice Hall