IS 402E

Information Technology Management

Instructors: Tuba BAKICI, Hadj BARKAT, Arnaud

POISSON, Pantelis FRANGOUDIS

Rennes, September 2016

1
OUTLINE

• E- Commerce and the Internet

• E-Commerce: Business and Technology
• The Mobile Digital Platform and Mobile E-Commerce
• Building an E-Commerce Presence

2
Groupon’s Business Model: Social and Local

• Problem: Competing with other business models

utilizing social and local commerce in group
couponing; large number of competitors
• Solution: Get big quick to build a brand to prevent
competitors from finding audience
• Demonstrates use of localization and social
networking technologies in generating new
business models
• Illustrates the difficulties many social networking
sites have in showing a profit or monetizing
E-COMMERCE AND THE INTERNET

• E-commerce: Use of the Internet and Web to transact

business.

• Began in 1995 and grew exponentially; still stable even

in a recession.

• Companies that survived the dot-com bubble burst and

now thrive.

• E-commerce revolution is still in its early stages.

 The Growth of E-Commerce

Retail e-commerce revenues grew 15–25 percent per year until the recession of 2008–2009, when
they slowed measurably. In 2012, e-commerce revenues are growing again at an estimated 15
percent annually.
E-COMMERCE AND THE INTERNET

Eight unique features of Internet and Web as

commercial medium
1. Ubiquity
2. Global reach
3. Universal standards
4. Richness
5. Interactivity
6. Information density
7. Personalization/customization
8. Social technology
E-COMMERCE AND THE INTERNET

Ubiquity
• Internet/Web technology available everywhere:
work, home, and so on, anytime.
• Effect:
– Marketplace removed from temporal, geographic
locations to become “marketspace”
– Enhanced customer convenience and reduced
shopping costs
• Reduces transaction costs
– Costs of participating in market
E-COMMERCE AND THE INTERNET

• Global reach
• The technology reaches across national boundaries,
around Earth
• Effect:
• Commerce enabled across cultural and national
boundaries seamlessly and without modification.
• Marketspace includes, potentially, billions of
consumers and millions of businesses worldwide.
E-COMMERCE AND THE INTERNET

• Universal standards
One set of technology standards: Internet standards
Effect:
• Disparate computer systems easily communicate with
one another
• Lower market entry costs—costs merchants must pay
to bring goods to market
• Lower consumers’ search costs—effort required to find
suitable products
E-COMMERCE AND THE INTERNET

• Richness
Supports video, audio, and text messages
Effect:
• Possible to deliver rich messages with text, audio, and
video simultaneously to large numbers of people.
• Video, audio, and text marketing messages can be
integrated into single marketing message and consumer
experience.
E-COMMERCE AND THE INTERNET

• Interactivity
The technology works through interaction with the
user.
Effect:
• Consumers engaged in dialog that dynamically adjusts
experience to the individual.
• Consumer becomes co-participant in process of
delivering goods to market.
E-COMMERCE AND THE INTERNET

• Information density
Large increases in information density—the total
amount and quality of information available to all
market participants
Effect:
• Greater price transparency
• Greater cost transparency
• Enables merchants to engage in price discrimination
E-COMMERCE AND THE INTERNET

• Personalization/Customization
Technology permits modification of messages, goods
Effect:
• Personalized messages can be sent to individuals as
well as groups.
• Products and services can be customized to individual
preferences.
E-COMMERCE AND THE INTERNET

• Social technology
The technology promotes user content generation
and social networking
Effect:
• New Internet social and business models enable
user content creation and distribution, support
social networks
• Many-to-many model
E-COMMERCE AND THE INTERNET

Effect of the Internet on the marketplace:

• Reduces information asymmetry
• Offers greater flexibility and efficiency because of:
• Reduced search costs and transaction costs
• Lower menu costs
• Greater price discrimination
• Dynamic pricing
• May reduce or increase switching costs
• May delay gratification: effects dependent on product
• Increased market segmentation
• Stronger network effects
• More disintermediation
 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.
E-COMMERCE AND THE INTERNET

Digital goods
• Goods that can be delivered over a digital network
• For example: music tracks, video, software, newspapers,
books
• Cost of producing first unit is almost entire cost of
product
• Costs of delivery over the Internet very low
• Marketing costs remain the same; pricing highly
variable
• Industries with digital goods are undergoing
revolutionary changes (publishers, record labels,
etc.)
E-COMMERCE: BUSINESS AND TECHNOLOGY

• Three major types of e-commerce

Business-to-consumer (B2C)
• Example: BarnesandNoble.com
Business-to-business (B2B)
• Example: ChemConnect
Consumer-to-consumer (C2C)
• Example: eBay
• E-commerce can be categorized by platform
Mobile commerce (m-commerce)
E-COMMERCE: BUSINESS AND TECHNOLOGY

E-commerce business models

• E-tailer
• Transaction broker
• Market creator
• Content provider
• Community provider
• Portal
• Service provider
E-COMMERCE: BUSINESS AND TECHNOLOGY

E-commerce revenue models

• Advertising
• Sales
• Subscription
• Free/Freemium
• Transaction fee
• Affiliate
E-COMMERCE: BUSINESS AND TECHNOLOGY

Social networking and the wisdom of crowds

• Most popular Web 2.0 service: social networking

• Wisdom of crowds

• Crowdsourcing

• Large numbers of people can make better decisions

about topics and products than a single person.
E-COMMERCE: BUSINESS AND TECHNOLOGY

E-commerce marketing
• Internet provides new ways to identify and
communicate with customers.
• Long tail marketing:
• Ability to reach a large audience inexpensively
• Behavioral targeting:
• Tracking online behavior of individuals on thousands of
Web sites
• Internet advertising formats
• Search engine marketing, display ads, rich media,
e-mail, and so on
 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.
 How an Advertising Network Works

Advertising networks
and their use of tracking
programs have become
controversial among
privacy advocates
because of their ability
to track individual
consumers across the
Internet.
E-COMMERCE: BUSINESS AND TECHNOLOGY

• Social media:
• Fastest growing media for branding and marketing
• Social network marketing:
• Seeks to leverage individuals influence over others
in social graph
• Target is a social network of people sharing interests
and advice
• Facebook’s “Like button”
• Social networks have huge audiences
• Facebook: 150 million U.S. visitors monthly
E-COMMERCE: BUSINESS AND TECHNOLOGY

• B2B e-commerce
U.S. B2B trade in 2012 is $16 trillion
U.S. B2B e-commerce in 2012 is $4.1 trillion
Procurement requires significant overhead costs, which
Internet and networking helps automate
Variety of Internet-enabled technologies used in B2B
• Electronic data interchange (EDI)
• Private industrial networks (private exchanges)
• Net marketplaces
• Exchanges
E-COMMERCE: BUSINESS AND TECHNOLOGY

• Electronic data interchange (EDI)

• Computer-to-computer exchange of standard
transactions such as invoices, purchase orders.
• Major industries have EDI standards that define
structure and information fields of electronic
documents.
• More companies are increasingly moving toward
private networks that allow them to link to a wider
variety of firms than EDI allows and share a wider range
of information in a single system.
 Electronic Data Interchange

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.
E-COMMERCE: BUSINESS AND TECHNOLOGY

• Private industrial network (private exchange)

Large firm using extranet to link to its suppliers,
distributors, and other key business partners
Owned by buyer
Permits sharing of:
• Product design and development
• Marketing
• Production scheduling and inventory management
• Unstructured communication (graphics and e-mail)
 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 commerce
activities.
E-COMMERCE: BUSINESS AND TECHNOLOGY

• Net marketplaces (e-hubs)

Single market for many buyers and sellers
Industry-owned or owned by independent intermediary
Generate revenue from transaction fees, other services
Use prices established through negotiation, auction,
RFQs, or fixed prices
May focus on direct or indirect goods
May be vertical or horizontal marketplaces
 A Net Marketplace

Net marketplaces are

online marketplaces
where multiple buyers
can purchase from
multiple sellers.
E-COMMERCE: BUSINESS AND TECHNOLOGY

• Exchanges
• Independently owned third-party Net marketplaces
• Connect thousands of suppliers and buyers for spot purchasing
• Typically provide vertical markets for direct goods for single
industry (food, electronics)
• Proliferated during early years of e-commerce; many have
failed
• Competitive bidding drove prices down and did not offer long-
term relationships with buyers or services to make lowering prices
worthwhile.
THE MOBILE DIGITAL PLATFORM AND MOBILE E-COMMERCE

• M-commerce
In 2012 is 10% of all e-commerce
Fastest growing form of e-commerce
• Some areas growing at 50%
Four billion mobile phone users worldwide
Main areas of growth
• Retail sales at top Mobile 400 (Amazon, eBay, etc.)
• Sales of digital content (music, TV, etc.)
• Local search for restaurants, museums, stores
THE MOBILE DIGITAL PLATFORM AND MOBILE E-COMMERCE

• Location-based services
Used by 74% of smartphone owners
Based on GPS map services
Types
• Geosocial services
– Where friends are
• Geoadvertising
– What shops are nearby
• Geoinformation services
– Price of house you are passing
THE MOBILE DIGITAL PLATFORM AND MOBILE E-COMMERCE

• Other mobile commerce services

Banks, credit card companies provide account
management apps
Mobile display advertising
• iAd, AdMob, Facebook
Games and entertainment
• Downloadable and streamable services
• Games
• Video, short films, movies, TV shows
• Music and ring tones
BUILDING AN E-COMMERCE WEB SITE

• Business objectives
The capabilities the site should have
• Business decisions should drive technology
Example: execute a transaction payment
• System functionality
Technology needed to achieve objective
Example: a shopping cart or other payment system
• Information requirement
Specific data and processes needed
Example: secure credit card clearing, multiple payment
options
BUILDING AN E-COMMERCE WEB SITE

• Alternatives in building the Web site:

Completely in-house
Mixed responsibility
Completely outsourced
– Co-location

• Web site budgets

Several thousand to millions per year
50% of budget is system maintenance and content
creation
 Choices in Building and Hosting Web Sites

You have a number of alternatives to consider when building and hosting an e-commerce site.
Components of a Web Site Budget