Introduction to Electronic Commerce
February 26 – March 2
What is e-Commerce:
o Electronic commerce (e-commerce) is commerce, but it is commerce accelerated
and enhanced by IT, in particular the Internet (p. 240).
E-commerce uses powerful technologies that enable customers,
consumers, and companies to form new relationships that otherwise
would not be possible.
E-commerce breaks down business barriers such as time, geography,
language, currency, and culture.
o The Good and Bad of e-Commerce:
The good: it doesn’t take much effort to create e-commerce
The bad: still have to follow sound business fundamentals and principles
to be successful
B2B vs. B2C:
o Business to Business (B2B) e-commerce occurs when a business sells products
and services to customers who are primarily other businesses (p. 242).
o Business to Consumer (B2C) e-commerce occurs when a business sells products
and services to customers who are primarily individuals (p. 242).
o B2B and B2C businesses employ entirely different tactics (p. 242).
B2B involves businesses using marketplaces. B2B involves businesses
buying goods and sharing information from a number of sources.
Consumers within B2C typically deal directly with a business he or she
chose on the Internet (eBay would be a notable exception).
Ways to Make Money Online:
o Horizontal Portals – an Internet portal site that offers a broad range of content
Examples include Yahoo and Microsoft Network.
Make money by selling advertising (such as banner ads).
o Vertical Portals – an Internet portal site that offers content and services aimed at
a specific type of user.
Example includes familyeducation.com, which focuses its content
towards parents and children.
Make money by selling advertising (such as banner ads) and
o Application Service Providers – a third party whose main business is providing a
software-based solution to multiple customers over the Internet. It allows users
to avoid purchasing, installing, supporting, and upgrading expensive software
Example includes timereporting.com. This site can handle a company’s
entire payroll processing needs.
Make money by charging fees based on the level of usage.
o Content Provider – provide content (such as news stories and photographs) to
other web sites.
Make money by charging each piece of content sold.
o Auctions – individuals place items online and other individual place bids on those
items. Obviously, the highest bid wins.
Examples include eBay and uBid.
Make money by charging fees for placing items online and receive a
certain percentage of the selling amount.
o Online Stores – place pictures and descriptions of items on a web site; make
money by selling these items.
Examples include eToys, TigerDirect, and many more.
Make money by selling these items for more than the item cost.
Five Components of Selling Online:
o Web Site – a place where goods or services can be shown and described.
o Payment Processing – provide customers the means to pay for goods.
o Shipping / Order Fulfillment – once you make the sale, you must package the
goods and ship them. This component is very important and encompasses a
number of steps.
o Customer Service – ensure that customers are satisfied with their buying
experience so that they will return to your site or tell their friends.
Support – depending on what you are selling, you are probably going to
have to answer questions about it.
Complaints – some people will have problems with your product.
Returns – some (the fewer the better) of your items will be defective, so
you must be ready to replace these items.
o Promotion – if no one knows that your site exists, no one will see it and no one
will buy from it.
Statistics about e-Commerce:
o B2B E-commerce represents 97% of all e-commerce revenues (p. 242).
o Comparing B2C to B2B (Sales in billion $):
1998 8 43
2000 39 406
2002 101 1167
2004 185 2695
o 25% of all U.S. households have broadband connections (Source:
o 55% of U.S. home having an Internet connection have broadband in 2004. By
the end of 2005, this number is expected to grow to 70%. (Source:
o 69% of online purchases were conducted by users with broadband connections.
o 16% of all time spent online in 2004 was dedicated to commerce activities.
o Online Holiday Shopping, 2003 vs. 2004
Buy 10% or less holiday goods 52% 41%
Buy 20-50% of holiday goods 35% 42%
50% or more holiday goods online 14% 17%
o 45 percent of online shoppers planned to spend more online in 2004, versus the
25 percent of respondents who planned to spend more in the 2003 holiday season
than in 2002.
o Also look over Figure 5.2 on p. 241.