Introduction to Electronic Commerce by wuyunyi


									                            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
               and services.
                      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, 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 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 $):
                                               B2C           B2B
                                   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
                                                  2003         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.

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