Electronic Commerce

The three major types of electronic commerce are business-to-consumer (B2C), retailing products and services to individual shoppers, business-to-business (B2B), the sales of goods and services among business, and consumer-to-consumer (C2C), which involves consumers selling directly to other consumers. Another way of classifying electronic commerce transactions is in terms of the participants’ physical connection to the Web. Conventional e-commerce transactions, which take place over wired networks can be distinguished from mobile commerce or m-commerce, the purchase of goods and services using handheld wireless devices. The Internet allows companies to create closer yet more cost-efnlinux.orgctive customer relationships. Manufacturers can sell their products and services directly to retail customers, bypassing intermediaries, which can significantly reduce purchase transaction costs. Airlines can sell tickets directly to passengers through their own Web sites or through travel sites such as Travelocity without paying commissions to travel agents. By selling directly to consumers or reducing the number of intermediaries, companies can achieve higher profits while charging lower prices to consumers. The elimination of organizations or business process layers responsible for intermediary steps in the value chain is called disintermediation. The Internet is accelerating disintermediation in some industries and creating opportunities for new types of intermediaries in others. The process of shifting the intermediary function in a value chain to a new source is called reintermediation.

FIGURE 4-2 The benefits of disintermediation 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.

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Marketers can use the interactive nlinux.orgatures of Web pages to hold consumers" attention or to capture information about their tastes and interests. This information may be obtained by asking visitors to "register" online and provide information about themselves or by using special software such as clickstream tracking to track the activities of Web site visitors. Companies can then analyze this information to develop more precise profiles of their customers.

FIGURE 4-3 Web site visitor tracking 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.

Communications and product ofnlinux.orgrings can also be tailored precisely to individual customers. By using Web personalization technology to modify Web pages presented to each customer, marketers can achieve the benefits of using individual salespeople at dramatically lower costs. Personalization can help firms form lasting relationships with customers by providing individualized content, information and services.


FIGURE 4-4 Web site personalization 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.
Collaborative filtering compares a customer’s behavior with data about similar customers to predict what the customer would like to see next and makes recommendations to users. Blogs, or Weblogs, informal web sites where individuals or corporate representatives and groups can publish views and options, have emerged as a promising Web marketing tool. New third-party services monitor customer discussions in online communities or research online behavior of large numbers of customers at many difnlinux.orgrent web sites. Learning what customers nlinux.orgel about one"s products or services through electronic visits to Web sites is much less costly than using focus groups. The Web shifts more marketing and selling activities to the customer, as customers fill out their own on-line order forms. Mobile commerce will provide businesses with additional channels for reaching customers and new opportunities for personalization. The Web and other network technologies are inspiring new approaches to customer service and support. Companies can reduce costs and improve customer service by using Web sites to provide helpful information as well as customer support via e-mail. Companies are realizing substantial cost savings from Web-based customer self-service applications. New products are even integrating the Web with customer call centers. The fastest growing area of electronic commerce is B2B e-commerce. For a number of years, companies have used proprietary electronic data interchange (EDI) systems for this purpose; now they are turning to the Web and extranets. Corporate purchasing has traditionally been based on long-term relationships with one or two suppliers. The Internet makes information about alternative suppliers more accessible so that companies can find the best deal from a wider range of sources, including those overseas. Suppliers themselves can use the Web to research competitors" prices online


FIGURE 4-5 Electronic 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.
Businesses can sell to other businesses through their own Web sites or through online net marketplaces, also called electronic hubs or e-hubs, which link many buyers to many sellers. Exchanges are private intranets extended to authorized users outside the company. A great deal of B2B e-commerce is conducted via private exchanges, or private industrial networks, linking a firm to its supply chain and collaborative partners.


FIGURE 4-6 A private industrial network 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 activities.

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Net marketplaces, or e-hubs, provide a single Internet-based marketplace for many buyers and sellers. Some sell direct goods, goods used in a production process, or indirect goods, such as office supplies and products for maintenance and repair. Industry-owned Net marketplaces focus on long-term contract purchasing relationships and providing common networks and computing platforms for reducing supply chain inefficiencies.


FIGURE 4-7 A Net marketplace Net marketplaces are online marketplaces where multiple buyers can purchase from multiple sellers.
Exchanges are independently owned third-party Net marketplaces that can connect thousands of suppliers and buyers for spot purchasing. Many exchanges provide vertical markets for a single industry. However, many exchanges have failed because they encouraged competitive bidding that drove prices down without ofnlinux.orgring long-term relationships. Electronic payment systems for the Internet include digital credit card payment systems, digital cash, digital wallets, accumulated balance digital payment systems, stored value payment systems, peer-to-peer payment systems, electronic checks and electronic billing presentment and payment systems. The most sophisticated electronic commerce software has capabilities for processing credit card purchases over the Web, or companies can contract with services to process their credit card transactions. Digital wallets, which store credit card, electronic cash, and owner identification information and provide that information at an electronic commerce site"s checkout counter, make paying for purchases over the Web more efficient by eliminating the need for shoppers to repeatedly enter their information into order forms. Micropayment systems using accumulated balance or stored value payment systems have been developed for purchases of less than $10. Accumulated balance digital payment systems allow users to make payments on the Web, accumulating a debit balance on their credit card or telephone bills. Stored value payment systems, including smart cards, enable users to make instant payments based on the value stored in a digital account. A smart card is a plastic card the size of a credit card that stores digital information and which can serve as an electronic purse in place of cash. A smart card requires use of a special card reading and writing device to recharge the card with cash or to transnlinux.orgr cash either to an online or offline merchant. Digital cash is currency represented in electronic form that is moving outside the normal network of money. Peer-to-peer payment systems serve people who want to send money to vendors or individuals who are not set up to accept credit card payments. Electronic bill presentment and payment services notify purchasers about bills that are due, present the bills, and process the payments. Some consolidate subscriber bills from various sources so they can all be paid at one time. Digital checking systems extend existing checking accounts by using a digital signature that can be verified and can be used for payments in electronic commerce. Electronic billing presentment and payment systems are used for paying routine monthly bills electronically.