CSC 1233 E-PERNIAGAAN

CHAPTER 4 :

E-COMMERCE
Introduction to E-Business and E-commerce

• Electronic commerce (EC or e-commerce) describes

the process of buying, selling, transferring, or
exchanging products, service, or information via
computer networks, including the Internet.
• On the other hand, E-Business not only includes
buying and selling of goods and services, it also
refers to servicing customers, collaborating with
business partners, and performing electronic
transactions within an organization.
 Pure vs Partial EC

• Electronic commerce can take several forms

depending on the degree of digitization involved.
• The degree of digitization refers to the extent to
which the commerce has been transformed from
physical to digital.
• It can relate to (1) the product or service being
sold, (2) the process by which the product or
service is produced, (3) the delivery agent or
intermediary.
 Pure vs Partial EC

• In other words,
1) the product can be physical or digital
2) the process can be physical or digital
3) the delivery agent can be physical or digital
 Pure vs Partial EC

• Purely physical organizations are referred to as

brick-and-mortar organizations. Eg: kedai runcit
• In pure EC all dimensions are digital.
• Companies engaged only in EC are considered
virtual (or pure-play) organizations.eg: spotify,
ebook from amazon
• All other combinations that include a mix of
digital and physical dimensions are considered
partial EC.
 Pure vs Partial EC

• Click-and-mortar organizations are those that

conduct some e-commerce activities, yet their primary
business is done in the physical world.
• Example, buying a shirt at Wal-Mart Online or a book
from Amazon.com is partial EC because the
merchandise is physically delivered by FedEx.
• However, buying an e-book from Amazon.com or a
software products from Buy.com is pure EC because
the products as well as its delivery, payments, and
transfer are all conducted online.
 Types of E-commerce

1) Business-to-Consumer (B2C)
2) Business-to-Business (B2B)
3) Consumer-to-Consumer (C2C)
4) Business-to-Employee (B2E)
5) E-Government
6) Mobile commerce (M-commerce)
 Business-to-Consumer (B2C)

• Sellers are organizations, and the buyers are

individuals.
• Example:
– Dell selling me a laptop
 2.Business-to-Business (B2B)

• Both the sellers and the buyers are business

organizations.
• Examples:
– Intel selling microprocessor to Dell
– Life selling ketchup to KFC
 3.Consumer-to-Consumer (C2C)

• Individual sells products or services to other

individuals.
• Examples:
– Ali buying an iPod from Ahmad on eBay,
mudah.my
– Me selling a car to my neighbor
 4.Business-to-Employee (B2E)

• An organization use EC internally to provide

information and services to its employee.
• Companies allow employees to manage their
benefits and to take training classes electronically.
• In addition, employees can buy discounted
insurance, travel packages, and tickets to events on
the corporate intranet.
 Business-to-Employee (B2E)

• They also can order supplies and material

electronically.
• Many companies have electronic corporate store
that sells the company’s products to its employees,
usually at a discount.
 5.E-Government

• The use of internet technology in general and e-

commerce in particular to deliver information and
public services to citizens (called government-to-
citizen or G2C EC), and business partners and
suppliers (called government to business or G2B
EC).
• Example of G2C electronic commerce is electronic
benefits transfer, in which governments transfer
benefits, such as Social Security and pension
payments, directly to recipients’ bank account.
 6.M-commerce

• Mobile commerce (m-commerce) that is conducted

entirely in a wireless environment.
• Example: using cell phones to shop over the
internet.
• Other examples:
– Mobile Ticketing
– Information Services
– Mobile Banking
 Mobile Ticketing
Example: Air Asia
Mobile Ticketing
Example: GSC
 Information Services
Example: Pos Malaysia
 Mobile Banking
Example: CIMB Clicks
 Mobile Banking
Example: Maybank2u
 Major E-Commerce Mechanisms

1) Electronic catalogs
2) Electronic auctions/lelong ebay
3) Electronic storefront
4) Electronic mall (E-malls)
5) Electronic marketplace (e-marketplace)
1. Electronic catalogs

• Catalogs have been printed on paper from years ago.

• Today, they are available on CD-ROM and the
Internet.
• Electronic catalogs consist of product database,
directory and search capabilities, and a presentation
function.
IKEA
Avon
2. Electronic auctions

• A competitive process in which either a seller solicits

consecutive bids from buyers or a buyer solicits bids
from seller.
• The primary characteristic of auctions is that prices
are determined dynamically by competitive bidding.
• Electronic auctions (e-auctions) generally increase
revenues from sellers by broadening the customer
base and shortening the cycle time of the auction.
 Electronic auctions

• Buyers generally benefits from e-auctions because

they can bargain for lower prices and don’t have to
travel to an auction at a physical locations.
• Auctions can be conducted from the seller’s site,
buyer’s site or a third party site.
 Electronic auctions

• There are 2 major types of auctions: forward and

reverse.
• Forward: auctions that sellers use as a channel to
many potential buyers. Usually sellers place items at
sites for auction, and buyers bid continuously for
them. The highest bidder wins the items. Both sellers
and buyers can be individuals or businesses. E.g.
eBay.com
 Electronic auctions

• Reverse: one buyer, usually an organization, wants to

buy a product or a service. The buyer posts a request
for quotations (RFQ) on its website or on a third
party web site. RFQ provides detailed information on
the desired purchase. Suppliers study the RFQ and
then submit bids electronically. The lowest price
bidder wins the auction. The buyers notify the
winning supplier electronically. Reverse auction is the
most common auction model for large purchases.
3. E-storefront

• E-storefront is a Website on the internet

representing a single store.
• Example: Adidas, Topgirl, Dell, Wal-Mart.
3. E-storefront
3. E-storefront
4. Electronic mall (E-malls)

• Electronic mall also known as a cybermall or e-mall is

a collection of individual shops under one internet
address.
• Example: Amazon, Zalora
4. Electronic mall (E-malls)
4. Electronic mall (E-malls)
5. Electronic marketplace
(e-marketplace)

• Electronic marketplace is a central, virtual market

space on the web where many buyers and many
sellers can conduct e-commerce and e-business
activities.
• Example: Zalora, Lazada,shopee
5. Electronic marketplace
(e-marketplace)
 Benefits of EC

1) Benefits to organizations
2) Benefits to customers
3) Benefits to society
 Benefits to organizations

• Making national and international markets more

accessible and by lowering the cost of processing,
distributing, and receiving information.
 Benefits to customers

• The ability to access vast number of products and

services.
 Benefits to society

• The ability to easily and conveniently deliver

information, services, and products to people in
cities, rural areas, and developing countries.
 Limitations of EC

1) Technological limitations
2) Nontechnological limitations
 Technological limitations

1) Lack of universally accepted security standards

2) Insufficient telecommunications bandwidth
3) Expensive accessibility.
 Nontechnological limitations

• Perception that EC is :
1) insecure
2) has unresolved legal issues
3) lack of critical mass of sellers and buyers.
BUSINESS-TO-CONSUMER (B2C) EC

• B2C involves large numbers of buyers making millions

of diverse transaction per day with a relatively small
number of sellers.
• 2 basic mechanisms for customers to access
companies on the Web: electronic storefronts and
electronic malls.
• Several online services include banking, securities
trading, job search, travel, and real estate.
 Electronic Storefronts and Malls

• Electronic retailing(e-tailing): direct sale of products

and services through electronic storefronts or
electronic malls usually designed around an
electronic catalog format and/or auctions.
• E-commerce allows you to buy from home 24 hours a
day, 7 days a week.
• EC offers wider variety of products and services,
often at lower prices.
• Shoppers can access very detailed information within
seconds
 Electronic Storefronts and Malls

• Easily locate and compare competitor’s products and

prices.
• Buyers can find hundreds of thousands of sellers.
• 2 popular online shopping mechanisms are electronic
storefronts and electronic malls.
 Electronic Malls

• 2 types:
1) Referral malls: cannot buy anything. Instead you are
transferred from the mall to a participating storefront.
2) Another type of mall: allows you make a purchase. You
might shop from several stores but make only 1 purchase
transaction at the end. Shopping cart
• Electronic shopping cart enables you to gather items
and pay for them in one transaction.
 Online Service Industries

• In addition to purchasing products, customers can

also access needed services via the Web.
• Leading online service industries include
cyberbanking, securities trading, job market, real
estate, and travel services.
 Cyberbanking

• Electronic banking also known as cyberbanking,

involves conducting various banking activities from
home, a business, or on the road instead of at a
physical bank location.
• Electronic banking has capabilities ranging from
paying bills to applying for a loan. It saves time and is
convenient for customers.
• For banks, it offers an inexpensive alternative to
branch banking. It also enables banks to enlist
remote customers.
 Cyberbanking

• In addition to regular banks with added online

services, we are seeing the emergence of virtual
banks, which are dedicated solely to Internet
transactions.
• International banking and the ability to handle
trading in multiple currencies are critical for
international trade.
 Cyberbanking

• Transfer of electronic funds and electronic letters of

credit are important services in international
banking.
• Example: Western Union, Maybank2U
Cyberbanking
Cyberbanking
 Online Securities Trading

• Emarketer.com estimates that some 40 million

people in United States use computers to trade
stocks, bonds, and other financial instruments.
• In Korea, more than half of stock traders are using
Internet for that purpose.
• This is because it is cheaper than a full-service or
discount broker.
• Saham/ share
• Company : digi – public Share
 Online Securities Trading

• In addition investors can find a more information

regarding specific companies or mutual funds in
which to invest through Web.
• Example: i*Trade@CIMB, OSK188.

• Nestle:
Online Securities Trading
Online Securities Trading
 Online job market

• Internet offers a promising new environment for job

seekers and for companies searching hard-to-find
employees.
• Companies and government agencies advertise
available positions, accepts resumes, and take
applications via the Internet.
• Job seekers use the online job market to reply online
to employment ads, to place resumes, on various
sites, and to use recruiting firms.
 Online job market

• Companies that have jobs to offer advertise openings

on their web sites, and they search the bulletin
boards of recruiting firms.
• In many countries, governments must advertise job
opening on the Internet.
• Example: Jobstreet, jobsMalaysia
Online job market
Online job market
 Real Estate

• Real estate transactions are an ideal area for e-

commerce.
• You can view many properties on the screen, and you
can sort and organize properties on the screen, and
sort and organize properties according to your
preferences and decision criteria.
• In some locations, broker requires that prospective
buyers use real estate databases only in the broker’s
offices.
Real Estate
Real Estate
 Travel Services

• Allow you to purchase airline tickets, reserve hotel

rooms, and rent cars.
• Most sites offer a fare-tracker feature that sends you
email messages about low cost flights.
• Online services are also provided by all major airline
vacation services, large conventional travel agencies,
car rental agencies, hotels, and tour companies.
Travel Services
Travel Services
 BUSINESS-TO-BUSINESS (B2B) EC

• Buyers and sellers are business organizations.

• Covers broad spectrum of application that enable
enterprise to form electronic relationships with its
distributors, resellers, suppliers, customers, and
other partners.
• Organizations can use B2B to restructure their supply
chains and their partner relationship.
• Business model for B2B application includes sell-side
marketplaces, buy-side marketplaces, and electronic
exchanges.
 Sell-Side Marketplace

• Organizations sells their products or services to other

organizations electronically from their private e-
marketplace Web site and/or from a third party Web
site (e.g. eBay)
• Buyer (organization) come to seller’s site, view
catalogs, and place an order.
• Key mechanisms are electronic catalog that can be
customized for each large buyer and forward auction.
 Sell-Side Marketplace

• Seller can be either manufacturer, a distributor, or

retailer.
• Seller uses EC to increase sales, reduce selling and
advertising expenditures, increase delivery speed,
and reduce administrative costs.
 Buy-Side Marketplace

• Organizations buy needed products or services from

other organizations electronically.
• Major method is reverse auction.
• Use EC technology to streamline the purchasing
process.
• Goal:
– Reduce cost of items purchased and administrative
expenses in purchasing them
– Shorten the purchasing cycle time
 Buy-Side Marketplace

• Procurement includes:
1) Purchasing goods and materials
2) Sourcing
3) Negotiating with suppliers
4) Paying for goods
5) Make delivery arrangements
 Buy-Side Marketplace

• E-procurement:
– purchasing by using electronic support
– uses reverse auction
• Group purchasing: multiple buyers combine their
orders so they can constitute large volume and
attract more seller attention.
– Can negotiate a volume discount
 Electronic Exchanges

• Private exchanges: one buyer and many sellers

• Public exchanges
– Many sellers and many buyers
– Open to all business organizations
– Owned and operated by third party
– Managers provide all necessary information systems to the
participants
– Buyers and sellers have to “plug in” in order to trade
 Electronic Exchanges

• Some electronic exchanges are for direct materials

and some for indirect materials.
• Direct materials: inputs to the manufacturing process
(e.g. safety glass used in automobile windshields and
windows)
• Indirect materials: items that are needed for
maintenance, operations, and repairs (MRO) (e.g.
office supplies)
Honda : DM: cermin, tayar,engine
IM: aircond, table, chair
 Electronic Exchanges

• 3 types of public exchanges:

1) Vertical exchanges: connect buyers and sellers in
a given industry. Honda– Tyre Supplier
2) Horizontal exchanges: connect buyers and sellers
across many industries and are used mainly for
MRO materials. Honda- office Aircond
3) Functional exchanges: needed services such as
temporary help/extra office space are traded on
an “as-needed” basis. (Temp office Sarawak)
 ELECTRONIC PAYMENTS

• Implementing EC typically requires electronic

payments.
• Electronic payment systems enable you to pay for
goods and services electronically rather than writing
a check or using cash.
• Electronic payment systems include electronic
checks, electronic credit cards, purchasing cards, and
electronic cash.
 ELECTRONIC PAYMENTS

• Traditional payment systems are not effective for EC

especially for B2B.
• Cash cannot be used because there is no face to face
contact between buyer and seller.
• Not everyone accepts credit cards or checks, and
some buyers do not have credit cards or checks.
 ELECTRONIC PAYMENTS

• In addition, it may be less secure for the buyer to use

the telephone or mail to arrange or send payment
especially from another country, than to complete a
secured transaction on a computer.
• Hence, electronic payment systems are needed in
cyberspace.
 ELECTRONIC PAYMENTS

1) Electronic Checks
2) Electronic Credit Cards (Paywave)
3) Purchasing Cards
4) Electronic Cash
1) Stored-Value Money Cards (Starbuck, Aeon
Card)
2) Smart cards ( IC)
3) Person-to-person payments
4) Digital Wallet (e-Wallet: tng, Grab pay, Boast,)
 Electronic Checks

• Electronic checks (e-checks) are similar to regular

paper checks.
• Used primarily in B2B.
• A customer who wishes to use e-checks must
establish a checking account with a bank.
• Then, when the customer buys a product or a
service, he or she e-mails an encrypted electronic
check to the seller.
 Electronic Checks

• The seller deposits the check in a bank account, and

funds are transferred from the buyer's account into
the seller's account.
• Like regular checks, e-checks carry a signature (in
digital form) that can be verified (see
www.echeck.net).
• Properly signed and endorsed e-checks are
exchanged between financial institution through
electronic clearinghouses (See www.eccho.org and
www.echecksecure.com for details)
 Electronic credit cards

• Electronic credit cards (e-credit) cards: allow

customers to charge online payments to their credit
cards account.
• E.g. When you buy a book from Amazon.com, your
credit card information is safe while it is ‘traveling’ on
the internet.
• Furthermore when this information arrives at
Amazon.com, it is not opened.
 Electronic credit cards

• Rather it is transferred automatically (in encrypted

form) to a clearinghouse, where the information is
decrypted for verification and authorization.
• Electronic credit cards are used primarily in B2C and
in shopping by small-to-medium enterprises (SMEs).
 Purchasing cards

• Unlike credit cards, where credit is provided for 30 to

60 days (for free) before payment is made to the
merchants, payments made with purchasing cards
are settled within a week.
• Corporations generally limit the amount per
purchase
• Can be used on the Internet, much like regular credit
cards.
 Electronic cash

• Despite the growth of credit cards, cash remains the

most common mode of payment in off-line
transactions.
• However many EC sellers, and some buyers, prefer
electronic cash.
 Electronic cash

• Electronic cash (e-cash) consists of four major forms:

1) stored value money cards
2) smart cards
3) person-to-person payments
4) digital wallets.
 Stored-Value Money Cards

• Stored value money cards: form of e-cash.

• E.g. The cards use to pay for photocopies in library,
transportation, or telephone calls.
• They are called stored value because they allow you
to store fixed amount of prepaid money and then
spend it as necessary.
• Each time you use the card, the amount is reduced
by the amount you spend.
 Smart cards

• Smart cards contain chip that can store a

considerable amount of information (more than 100
times that of a Stored-Value money cards.
• Smart card are frequently multipurpose that is you
can use them as a smart card in store, debit card, or
a Stored value money cards.
• When you use smart card in store chains as loyalty
card, it may contain your purchasing info.
 Smart cards

• Advanced smart cards can help customers transfer

funds, pay bills, and purchase items from vending
machines.
• You can load money values onto advanced smart
cards at ATMs and kiosks as well as from your PC.
 Person-to-person payments

• Person-to-person payments: form of e-cash that

enables two individuals or an individual and a
business to transfer funds without using a credit
card.
• This service can be used for a variety of purposes,
such as sending money to students at college, paying
for an item purchased at an online auction, or
sending a gift to a family member.
• Example: PayPal, iPay88
Person-to-person payments
 Digital wallet

• Digital wallets or (e-wallets): software mechanisms

that provide security measures, combined with
convenience, to EC purchasing.
• The wallet stores the financial information of the
buyer, such as credit card number, shipping
information, and more.
• You need e-wallet with each merchant.
• One solution is to have a wallet installed on your
computer (e.g. MasterCard Wallet or AOL Wallet).
 Digital wallet

• In that case you cannot make purchase from another

computer nor is it a totally secure system.
• Another solution is a universal e-wallet such as
Microsoft’s Passport.