Chapter 7

E-Business and E-Commerce

 Describe the six common types of electronic
commerce.

Describe the various online services of

business-to-consumer (B2C) commerce,
providing specific examples of each.
Learning
Objectives Describe the three business models for
business-to-business electronic commerce.

Identify the ethical and legal issues related

to electronic commerce, providing
examples.
What’s in IT for You?
 • Read the Gemvara Case and answer
the following questions
1. Access the Gemvara Web site. What
are its strengths? Its weaknesses?
Would you design and purchase
jewelry on the site? Why or why not?
2. Search out Web sites for Gemvara
Gemvara competitors. Discuss each site’s
strengths and weaknesses. In light of
your findings, do you think Gemvara
will be successful in the long term?
Why or why not?
3. How would a traditional brick-and-
mortar jewelry store compete against
Gemvara and other similar Web sites?
 There are several reasons for employing Web
sites:

Overview of To sell goods and services

E-Business To induce people to visit a physical location

and E-
Commerce To reduce operational and transaction costs

To enhance your reputation

Definitions and concepts

Electronic business (e-business) is a somewhat

Electronic Commerce describes the process of broader concept. In addition to the buying and
buying, selling, transferring, or exchanging selling of goods and services, e-business refers
products, services, or information via to servicing customers, collaborating with
computer networks, including the Internet. business partners, and performing electronic
transactions within an organization.
 • In traditional commerce, both dimensions are
physical. Purely physical organizations are
referred to as brick-and-mortar

Definitions organizations. (You may also see the term

bricks-and-mortar).

and • Companies engaged only in EC are

considered virtual (or pure-play) organizations.

concepts • Clicks-and-mortar organizations conduct

some e-commerce activities, yet their primary
business is carried out in the physical world. A
common alternative to the term clicks-and-
mortar is clicks-and-bricks.
 Purchasing a shirt at Walmart Online or a book
from Amazon.com is an example of partial EC
because the merchandise, although bought
and paid for digitally, is physically delivered by
FedEx or UPS.

Examples In contrast, buying an e-book from

Amazon.com or a software product from
Buy.com constitutes pure EC because the
product itself as well as its delivery, payment,
and transfer are digital. To avoid confusion, we
use the term electronic commerce to denote
both pure and partial EC.
Types of E-Commerce

• Business-to-consumer electronic commerce (B2C). In B2C, the sellers are

organizations, and the buyers are individuals.
• Business-to-business electronic commerce (B2B). In B2B transactions, both
the sellers and the buyers are business organizations. B2B comprises the vast
majority of EC volume.
• Consumer-to-consumer electronic commerce (C2C). In C2C (also called
customer-to-customer), an individual sells products or services to other
individuals.
• Business-to-employee (B2E). In B2E, an organization uses EC internally to
provide information and services to its employees.
• E-government. E-government is 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 to business partners and
suppliers (called government-to-business or G2B EC).
• Mobile commerce (m-commerce). The term m-commerce refers to e-
commerce that is conducted entirely in a wireless environment.
E-
Commerce
Business
Models
Major E-Commerce Mechanisms

Electronic catalogs,
Electronic auctions,
E-storefronts,
E-malls, and
E-marketplaces.
Electronic Payment Mechanisms

Electronic payment mechanisms enable buyers to pay Payments are an integral part of doing business,
for goods and services electronically, rather than whether in the traditional manner or online.
writing a check or using cash.
Types of electronic payment
• Electronic Checks. Electronic checks (e-checks), which are
used primarily in B2B, are similar to regular paper checks.
• Electronic Cards. There are a variety of electronic cards,
and they are used for different purposes. The most
common types are electronic credit cards, virtual credit
cards, purchasing cards, stored-value money cards, and
smart cards
Steps of electronic
payment via e-
credit cards
Types of electronic payment (con’t)

• Person-to-Person Payments. Person-to-person

payments enable two individuals, or an individual
and a business, to transfer funds without using a
credit card (PayPal).
Benefits of E-Commerce
• Making national and international markets more accessible and by
lowering the costs of processing, distributing, and retrieving
information.
• Customers benefit by being able to access a vast number of
products and services, around the clock.
• The major benefit to society is the ability to easily and
conveniently deliver information, services, and products to people
in cities, rural areas, and developing countries.
Benefits of E-Commerce
• One major technological limitation is the lack of universally
accepted security standards.
• In less-developed countries, telecommunications bandwidth
often is insufficient, and accessing the Web is expensive.
• Nontechnological limitations include the perceptions that EC
is insecure, has unresolved legal issues, and lacks a critical
mass of sellers and buyers.
 • B2B EC is much larger than B2C EC by
Business-to- volume, but B2C EC is more complex.
• Consider Amazon, an online retailer
Consumer (B2C) that offers thousands of products to its
Electronic customers. Each customer purchase is
relatively small, but Amazon must
Commerce manage every transaction as if that
customer were its most important one.
 Electronic retailing (e-tailing) is the direct sale of products
and services through electronic storefronts or electronic
malls, usually designed around an electronic catalog format
and/or auctions.

E-commerce enables you to buy from home and to do so 24

Electronic hours a day, 7 days a week. Compared to mail order,

however, EC offers a wider variety of products and services,
including the most unique items, often at lower prices.
Storefronts and Within seconds, shoppers can access very detailed
Malls supplementary product information. In addition, they can
easily locate and compare competitors’ products and prices.

Buyers can find hundreds of thousands of sellers

 Electronic Storefronts

• An electronic storefront is a Web site that represents a single store.

• Each storefront has a unique uniform resource locator (URL), or Internet address, at which
buyers can place orders. Some electronic storefronts are extensions of physical stores such
as Hermes, The Sharper Image, and Walmart. Others are new businesses started by
entrepreneurs who discovered a niche on the Web (e.g., Restaurant.com and Alloy.com).
Manufacturers (e.g., www.dell.com) and retailers (e.g., www.offi cedepot.com) also use
storefronts.
 Electronic Malls

• An electronic mall, also known as a cybermall or an e-mall, is a collection of individual

shops grouped under a single Internet address.
• The basic idea of an electronic mall is the same as that of a regular shopping mall: to
provide a one-stop shopping place that offers a wide range of products and services.
• A cybermall may include thousands of vendors. For example, Microsoft Shopping (now
Bing shopping, www.bing.com/shopping) includes tens of thousands of products from
thousands of vendors.
Types of Cybermalls

• Referral malls (e.g., www.hawaii.com), you

cannot buy anything. Instead, you are
transferred from the mall to a participating
storefront.
• Electronic Shopping cart, (e.g.,
http://shopping.google.com), you can
actually make a purchase. At this type of
mall, you might shop from several stores,
but you make only one purchase
transaction at the end.
 Online Service Industries

Selling books, toys,

In addition to purchasing
computers, and most other
products, customers can
products on the Internet
also access needed
can reduce vendors’ selling
services via the Web.
costs by 20 to 40 percent.
Cyberbanking
• Electronic banking involves conducting various
banking activities from home, at a place of business,
or on the road instead of at a physical bank location.
• virtual banks, which are dedicated solely to Internet
transactions, are emerging. An example of a virtual
bank is First Internet Bank of Indiana (www.firstib.com
).
• International banking and the ability to handle trading
in multiple currencies are critical for international trade.
 Several well-known securities companies,
including E*Trade, Ameritrade, and Charles
Online Schwab, offer only online trading.

Securities On the Web, investors can find a

Trading. considerable amount of information
regarding specific companies or mutual funds
in which to invest (e.g.,
http://money.cnn.com and
www.bloomberg.com).
The Online Job
Market
• The Internet offers a promising new
environment for job seekers and for
companies searching for hard-to-find
employees.
• Job seekers use the online job market to
reply online to employment ads, to place
resumes on various sites, and to use
recruiting fi rms (e.g., www.monster.com,
www.simplyhired.com, www.linkedin.com,
and www.truecareers.com).
 Travel Services

• Online travel services allow you to purchase airline tickets, reserve hotel rooms, and rent cars.
• Examples of comprehensive online travel services are Expedia.com, Travelocity.com, and
Orbitz.com.
• Online services are also provided by all major airline vacation services, large conventional travel
agencies, car rental agencies, hotels (e.g., www.hotels.com), and tour companies.
• In a variation of this process, Priceline.com allows you to set a price you are willing to pay for an
airline ticket or hotel accommodations. It then attempts to find a vendor that will match your
price.
 • Advertising is the practice of disseminating
information in an attempt to influence a
buyer–seller transaction.
• Internet advertising redefines the advertising
process, making it media rich, dynamic, and
interactive, How?

Online
1. Internet ads can be updated any time at
minimal cost and therefore can be kept
current.
Advertising 2. These ads can reach very large numbers of
potential buyers all over the world.
3. They are generally cheaper than radio,
television, and print ads.
4. Internet ads can be interactive and targeted
to specific interest groups and/or
individuals.
 Banners: electronic billboards

Pop-ups ad: appears in front of the current

Advertising browser window

Methods Pop-under ad: appears underneath the active

window; when users close the active window,
they see the ad.

E-mail: is generally cost effective to implement,

and it provides a better and quicker response
rate than other advertising channels
 Issues in E-Tailing

Channel Order
Conflict Fulfillment
 In business to business (B2B) e-commerce, the
buyers and sellers are business organizations.

Business-to-
There are three models of E-B2B:
Business
(B2B) Sell-Side Marketplaces
Electronic
Commerce Buy-side Marketplaces.

Electronic Exchange.
What’s In IT For Me?
What’s in IT for You?