Introduction to Information
Technology
Malik Shakeel Khan
Chapter 5:
Electronic Commerce
E-Commerce / E-Business
Electronic Commerce: buying and
selling of products, services and
information via computer networks,
primarily the Internet
Electronic Business: a broader definition
that includes
buying and selling, plus
servicing customers
collaborating with business partners
conducting electronic transactions within an
organization
Types of E-Commerce
Business-to-business EC (B2B)
Business-to-consumer EC (B2C)
Consumer-to-businesses (C2B)
Consumer-to-consumer (C2C)
Intrabusiness (intraorganizational)
commerce
Government-to-citizens (G2C) and
others
Mobile commerce (m-commerce)
E-Commerce History and Scope
History
Began in the early 1970s (long before the Internet
was open to commercial use)
Limited to large businesses initially
Electronic Fund Transfer (EFT) and Electronic Data
Interchange (EDI)
Scope Today Includes
advertising
home banking
shopping in electronic stores and malls
buying stocks
finding a job
conducting an auction
collaborating electronically with business partners
around the globe
providing customer service
EC Benefits to Organizations
Increased customer base:
Reduced cost:
Reach a large number of customers at little cost
Procure material and services from other companies at
less cost
Shorten marketing distribution channels and reduce
marketing costs
Lower telecommunications costs because the Internet is
much cheaper then other.
Reduced cycle time:
Broaden markets
Procure material and services from other companies
rapidly
Reduce the time between the outlay of capital and the
receipt of products and services
Helps small businesses compete against large companies
EC Benefits to Customers
Choice
Consumers can select from many vendors and many more
products than they could locate otherwise
Consumers can get customized products, from PCs to cars, at
competitive or bargain prices
Consumers can find unique products and collectors items
through virtual auctions that might otherwise require them to travel
long distances to a particular auction place at a specific time
Convenience
Consumers can conduct online quick comparisons to find less
expensive products and services
Customers can shop or make other transactions 24 hours a day,
year round, from almost any location
Product information immediately available 24 hours a day,
year round, from almost any location
Consumers can interact with other consumers in electronic
communities and can exchange ideas as well as compare
experiences
EC Benefits to Society
Convenience
Enables more individuals to work at home and to
do less traveling
Access
Allows some merchandise to be sold at lower
prices - less affluent people can buy more and
increase their standard of living
Enables people in less developed countries and rural
areas to enjoy products and services that
otherwise are not available to them
Facilitates delivery of public services, such as
government entitlements, reducing the cost of
distribution and fraud, and increasing the quality of
the social services, police work, health care and
education
Technical Limitations of EC
A few technical challenges remain for
organizations wishing to conduct EC:
Lack of universally accepted standards for quality,
security, and reliability
Insufficient telecommunications bandwidth
Still-evolving software development tools
Difficulties in integrating the Internet and EC software
with some existing applications and databases
Need for special Web servers in addition to the
network servers (added cost)
Expensive and/or inconvenient Internet accessibility
for many people
All of these will diminish over time
Non-Technical Limitations of EC
Legal and economic concerns:
Many legal issues are yet unresolved
Lack of national and international regulations and
standards
Difficulty in measuring benefits of EC and justifying EC
Insufficient number (critical mass) of sellers and
buyers exists for profitable EC operations
Cultural resistance:
Distrust of the new: Many sellers and buyers are
waiting for EC to stabilize before they take part
Customer resistance to the change from a physical to
virtual stores
Perception that electronic commerce is expensive and
unsecured, so many do not want even to try it
Business-to-Consumer EC
Electronic Storefronts and Malls
Electronic retailing can be conducted via
solo storefront or as a part of cybermall
Issues of e-tailing
May be channel conflict and conflict with
existing stores
Difficult to fulfill large quantity of very
small orders
Incorrect business model (advertising
revenue versus profitable sales)
Business-to-Consumer EC
(continued)
Services Online
Banking ([Link])
Securities trading (Schwab Online)
Job markets (Monster Board)
Travel ([Link])
Real estate ([Link])
Auctions ([Link])
Business-to-Consumer EC
(continued)
Personalization ability to customize
product, service, advertisement, or
customer service
B2C EC enables personalization at low
cost
Internet enables marketing research
Questionnaires
Usually involve some inducement
Direct behavior observation
Cookies or site tracking services
Business-to-Consumer EC
(continued)
Use of intelligent agents
Help customers determine what to buy
Search for and compare vendor prices
Collect information and develop customer
profiles
Online advertising
Banners
Direct email
Pop-up windows
Business-to-Consumer EC
(continued)
Advertising Approaches and Issues
Permission marketing offer incentives to consumers
to receive advertising
Viral (advocacy) marketing online word of mouth
advertising (send this ad to a friend and get)
Customizing ads base ads on consumers profile
Interactive marketing tailor ads based on stored
customer data
Attracting visitors to a site
Making the top list of a search engine
Online events, promotions, and attractions
Electronic catalogs / customized catalogs
Coupons online
Business-to-Business EC
Composes the majority of EC volume
Enables organizations to form electronic
relationships
Covers all activities along the supply chain
Business Models:
Sell-Side Marketplace
Organizations sell products to other organizations
electronically.
Buy-Side Marketplace
Buyers post needs; sellers submit bids
Electronic Exchanges
Electronic marketplaces link many buyers and
many sellers
Business-to-Business EC
(continued)
Collaborative Commerce nonbuying/selling activities between
businesses
Planning and scheduling
Design
New product information
Product content management
Order management
Electronic Commerce Innovations
E-Government deliver information
and public services to citizens and
members of the public sector
M-Commerce use of wireless
devices to deliver mobile e-commerce
Consumer-to-consumer EC direct
interaction facilitated by auctions,
classifieds, and bartering
Intrabusiness EC business units
interact or employees interact with
employers
Electronic Commerce
Requirements
Infrastructure hardware, software, and
networks needed to conduct transactions,
communicate, and collaborate
Electronic Payment Mechanisms
Electronic checks
Customer opens account with a bank
the customer e-mails an encrypted electronic
check signed with a digital signature
the merchant deposits the check in his or her
account; money is debited in the buyers account
and credited to the sellers account
Electronic Commerce
Requirements
Electronic Payment Mechanisms (continued)
Electronic credit cards
Unencrypted payments - the buyer e-mails her or his credit
card number to the seller on the Internet
Encrypted payments - credit card details encrypted for
security
Electronic cash in PC
bank provides special software to consumer
customer buys electronic money from the bank through
software
the bank sends electronic money note to this customer,
endorsing it with a digital signature
the money is stored on the buyers PC and can be spent in
any electronic store that accepts e-cash
the software is also used to transfer the e-cash from the
buyers computer to the sellers computer
the seller either deposits the e-cash in a bank or uses the ecash to make purchases elsewhere
Electronic Commerce
Requirements
Electronic Payment Mechanisms (continued)
Electronic payment cards with e-cash
Credit cards using magnetic strips
Card holds information about prepaid cash which can
be used to make payments
Smart cards
Cards with microprocessors can hold much more
information
Person-to-person payment systems
Transfer of funds between individuals (PayPal)
EFT
Electronic wallets
Purchasing cards
Electronic Commerce
Requirements
Security
Authentication - assurance regarding the identity of
the parties who are involved in the deal
Integrity - assurance that data and information
(orders, reply to queries, and payment authorization)
are not accidentally or maliciously altered or
destroyed during transmission
Non-repudiation - Protection against the customers
unjustifiable denial of placing an order; buyer needs
protection against the vendor denial of shipment, or
sending wrong order
Privacy - many customers want their identity to be
undisclosed
Safety - assurance that it is safe to provide a credit
card number on the Internet
Electronic Commerce
Requirements
Security (continued)
Encryption - a process of making messages
indecipherable except by those who have an
authorized decryption key
Single-key encryption
Public/private key encryption
Public key infrastructure
Electronic Certificates
Secure Socket Layer (SSL)
Secure Electronic Transaction Protocol
(SET)
Electronic Commerce
Requirements
Order Fulfillment
Find, assemble, and pack product
Ship product to customer
Collect customer payment
Arrange for returns if needed
Provide on-going support (e.g.,
animated assembly instructions)
EC is a pull operation hard to
forecast demand and prepare to
fulfill orders
Electronic Commerce Issues
Buyer Protection
look for reliable brand names at sites like Wal-Mart Online,
Disney Online, and [Link]
search any unfamiliar selling site for companys address and
phone and fax number
check out the seller with the local Chamber of Commerce
and/or Better Business Bureau
investigate how secure the sellers site is by reading the
posted privacy notice, and evaluate how well the site is
organized
examine the money-back guarantees, warranties, and service
agreements
compare prices to those in regular stores (suspect the too
cheap sites)
ask friends what they know about the vendor
find out what your rights are in case of a dispute
consult the National Fraud Information Center
check [Link] for a listing of useful resources
Electronic Commerce Issues
Seller Protection
Need protection against consumers who
refuse to pay or pay with bad checks and
buyers claims that the merchandise did not
arrive
Need protection against the use of their
name by others as well as use of their unique
words and phrases, slogans and Web address
Need legal recourse against customers who
download copyrighted software and/or
knowledge and sell it to others
Electronic Commerce Issues
Ethics
Privacy
most electronic payment systems know who
the buyers are; therefore, it may be
necessary to protect the buyers identity
Web Tracking
by using sophisticated software it is
possible to track individual movements on
the internet
Disintermediation
the use of EC may result in the elimination
of some of a companys employees as well
as brokers and agents
Electronic Commerce Issues
Legal Concerns
Domain Names
several companies that have similar or same
names (in different countries) compete over a
domain name that is not a registered
trademark
Taxes and Other Fees
Federal, state, and local taxing authorities are
trying to figure out how to impose taxes on
Internet sales
Copyright
intellectual property is protected by copyright
laws and cannot be used freely
