Ralph M. Stair | George W.

Reynolds

Chapter 8

Electronic and Mobile Commerce

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Why Learn About Electronic and Mobile
Commerce?

• Electronic and mobile commerce have

transformed many areas of our lives and
careers
• One fundamental change has been the
manner in which companies interact with
their suppliers, customers, and others
• E-commerce and m-commerce present
both opportunities and challenges

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An Introduction to Electronic Commerce

• Electronic commerce: conducting business

activities electronically over computer
networks
• Business activities that are strong
candidates for conversion to e-commerce
are:
– Paper based
– Time-consuming
– Inconvenient for customers
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3
 Business-to-Business (B2B)
E-Commerce
• A subset of e-commerce
• All the participants are organizations
• Useful tool for connecting business partners in a
virtual supply chain to cut resupply times and
reduce costs
• buy-side and sell-side e-commerce activities
support the organization’s value chain and help
the organization provide lower prices, better
service, higher quality, or uniqueness of product
and service.
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4
 Business to business e-commerce

• An organization uses both:

– Buy-side e-commerce to purchase goods
• identifying and comparing competitive suppliers and products
• negotiating and establishing prices and terms
• ordering and tracking shipments
• steering organizational buyers to preferred suppliers and products.
– Sell-side e-commerce to sell products
• enabling the purchase of products online
• providing information for customers to evaluate the organization’s
goods and services
• encouraging sales and generating leads from potential customers
• providing a portal of information of interest to the customer,
• enabling interactions among a community ofconsumers.

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5
 Business-to-Consumer (B2C)
E-Commerce
• Customers deal directly with an organization and
avoid intermediaries; this is called disintermediation
• This increases profits for businesses, reduces costs
for customers and removes some of the
inefficiencies
• Reasons for steady growth
– Cheaper goods and services via the Web
– Online shoppers can design a personalized
product(Nike, Inc., providesa successful example of this
approach to personalization_
– The use of social media networks to promote products
and reach customers
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®

or duplicated, or posted to a publicly accessible website, in whole or in part.

6
 Business to consumer

• More than just a tool for placing orders, the Internet enables
shoppers to:
• compare prices, features, and value, and to check other
customers’ opinions.
• Consumers can, for example, easily and quickly compare
information about automobiles, cruises, loans, insurance,
and home prices to find better values.
• Internet shoppers can unleash shopping bots or access
sites such as eBay Shopping.com, Google Shopping,
Shopzilla, PriceGrabber, Yahoo! Shopping, or Excite to
browse the Internet and obtain lists of items, prices, and
merchants.
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7
 Consumer-to-Consumer (C2C)
E-Commerce

• Electronic transactions between

consumers are facilitated by a third party
• Popular sites include:
– eBay, Bidz.com, Craigslist, eBid, ePier,
Ibidfree, Kijiji, Ubid, and Tradus
• Companies and individuals involved in
C2C must be careful
– Sales must not violate the rules of various
county, state, and country legal jurisdictions
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8
 Table 8.3 Differences Among B2B, B2C,
and C2C
Factors B2B B2C C2C
Value of sale Thousands or millions Tens or hundreds of Tens of dollars
of dollars dollars

Length of sales process Days to months Days to weeks Hours to days

Number of decision Several people to a dozen One or two One or two
makers involved or more

Uniformity of offer Typically a uniform More customized Single product

product offering product offering offering, one of a kind

Complexity of Extremely complex; Relatively simple; Relatively simple;

buying process much room for limited discussion over limited discussion over
negotiation on price, price and payment and payment and delivery
payment and delivery delivery options options; negotiation
options, quantity, over price
quality, and options and
features

Motivation for sale Driven by a business Driven by an Driven by an

decision or need individual consumer’s individual consumer’s
need or emotion need or emotion

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9
 E-Government

• Use of information and communications

technology to:
– Simplify the sharing of information
– Speed formerly paper-based processes
– Improve the relationship between citizens and
government

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10
 E-Government (cont’d.)

• Forms of e-Government:
– Government-to-consumer (G2C)e.g tax filing,
government auctions
– Government-to-business (G2B) e.g firms
bidding on government contracts
– Government-to-government (G2G) e.g birth
and death data, warrant of arrests etc

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11
 An Introduction to Mobile Commerce

• Mobile commerce (m-commerce) relies on the

use of wireless devices
• The Internet Corporation for Assigned Names
and Numbers (ICANN):
– Created a .mobi domain to help attract mobile users
to the Web
• Afilias administers this domain and helps to
ensure that the .mobi destinations work quickly,
efficiently, and effectively with allmobile devices.

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12
 Mobile Commerce in Perspective

• The market for m-commerce in North

America
– Maturing much later than in Western Europe
and Japan responsibility for network
• M-commerce sales in the United States
– Projected to reach $113 billion by 2017
• The number of mobile Web sites
worldwide is growing rapidly because of

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13
 M-Commerce Web Sites

• Numerous retailers have established

special Web sites for users of mobile
devices
• @IMshopping
– A shopping-related question can be sent from
Twitter

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14
 Advantages of Electronic and Mobile
Commerce

• Reach new customers

• Reduce the cost of doing business
• Speed the flow of goods and information
• Increase the accuracy of order-processing
• Improve the level of customer service

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 Multistage Model for E-Commerce

• Search and identification

• Selection and negotiation
• Purchasing products and services
electronically
• Product and service delivery
• After-sales service

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17
Multistage Model for E-Commerce
(B2B and B2C)

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 E-Commerce Challenges

• Dealing with consumer privacy concerns

– About one-third of all adult Internet users will
not buy online due to privacy concerns
• Overcoming global issues
– Cultural, language, time and distance,
infrastructure, currency, and legal challenges

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19
 E-commerce challenges

• Overcoming consumers lack of trust in

online sellers
● Demonstrate a strong desire to build an ongoing relationship with
customer by giving first-time price incentives, offering loyalty programs, or
eliciting and sharing customer feedback.
● Demonstrate that the company has been in business for a long time.
● Make it clear that considerable investment has been made in the Website.
● Provide brand endorsements from well-known experts or well-respected
individuals.
● Demonstrate participation in appropriate regulatory programs or industry
associations.

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20
 Tips for online shoppers

• Only buy from a well-known Web site you trust

• Look for a seal of approval from organizations such as the Better Business
Bureau Online or TRUSTe.
• Review the Web site’s privacy policy to be sure that you are comfortable
with its conditions before you provide personal information.
• Determine what the Web site policy is for return of products purchased.
• Be wary if you must enter any personal information other than what’s
required to complete the purchase (name, credit card number, address, and
telephone number).
• Do not, under any conditions, ever provide information such as your Social
Security number, bank account numbers, or your mother’s maiden name.

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21
 Electronic and Mobile Commerce
Applications

• Areas in which applications are used

– Retail and wholesale –
Manufacturing
– Marketing and advertising – Bartering
– Price comparison – Couponing
– Investment and finance – Banking
– E-boutiques

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 Wholesale e-commerce

• A key sector of wholesale e-commerce

– Spending on manufacturing, repair, and
operations (MRO) goods and services
• Electronic retailing (e-tailing): the direct
sale from business to consumer through
electronic storefronts
• Cybermall: a single Web site that offers
many products and services at one
Internet location
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 Manufacturing

• Electronic exchange: an electronic forum

where manufacturers, suppliers, and
competitors buy and sell goods, trade market
information, and run back-office operations
• Companies can join one of three types of
exchanges based on who operates the
exchange
– Private exchanges are owned and operated by
a single company

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 Manufacturing (cont’d.)

• Consortium-operated exchanges are run

by a group of traditionally competing
companies with common procurement
needs
• Independent exchanges are open to any
set of buyers and sellers within a given
market

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Model of an Electronic Exchange

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 Marketing

• Market segmentation: the identification of

specific markets to target them with
advertising messages
• Nielsen, the marketing and media
information company:
– Has developed its Business-Facts database,
which provides information for more than 14
million businesses

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27
 Advertising

• Methods of buying mobile ad impressions

– Cost per thousand (CPM)
– Cost per click (CPC)
– Cost per action (CPA)
• Three main measures of success
– Number of users reached
– Click through rate (CTR)
– Number of actions users take

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 Advertising (cont’d.)

• Three types of mobile ad networks

– Blind
– Premium blind
– Premium networks

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 Table 8.5 Characteristics of Three Types
of Mobile Advertising Networks
Premium Blind
Characteristic Blind Networks Premium Networks
Networks
Degree to which An advertiser can specify Most advertising is Big brand advertisers
advertisers can country and content channel blind, but for an can secure elite
specify where (e.g., news, sports, or additional charge, the locations on top-tier
ads are run entertainment) on which the advertiser can buy a destinations.
ad will run but not a specific specific spot on a Web
Web site. site of its choice.

Predominant CPC ($0.01 per click) CPM ($20 per CPM ($40 per
pricing model thousand thousand impressions)
and typical rate impressions)

Examples Admoda/Adultmoda Jumptap Advertising.com/

AdMob Madhouse AOL Hands
BuzzCity InMobi Millennial Microsoft Mobile
Media Quattro Advertising Nokia
Wireless Interactive
Advertising
Pudding Media
YOC Group

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 Bartering

• With economic downturn, many people

and businesses have turned to bartering to
gain goods and services
• A number of Web sites have been created
to support bartering

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 Table 8.6 Popular Bartering Web Sites

Web Site Purpose

Craiglist.org Includes a section where users can request an item in exchange for
services or exchange services for services.

Goozez.com Allows users to exchange video games and movies.

Swapagift.com Enables users to buy, sell, or swap merchant gift cards.
SwapHog.com Bartering site that offers a third-party service that first receives all
items and inspects them before finalizing the transaction to
eliminate fraud and ensure a successful transaction.

Swapstyle.com Users can swap, sell, or buy women’s accessories, clothes, cosmetics,
and shoes.
Swaptree.com Users trade books, CDs, DVDs, and video games on a one- for-one
basis.
TradeAway.com Enables users to exchange a wide variety of new or used items,
services, or real estate.

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 Bartering: Retargeting

• An average of 67.75 percent of all online

shopping carts are abandoned
• Retargeting is used by advertisers to
recapture those shoppers by using
targeted and personalized ads to direct
shoppers back to a retailer’s site

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 Bartering: Price Comparison

• Price comparison
– Mobile phone services enable shoppers to
compare prices and products on the Web
– In some cases, shopper can simply scan an
item’s barcode or snap a photo of the item

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 Bartering: Couponing

• In 2013, over 287 billion coupons with a

value of $467 billion were distributed in
North America
– Less than one percent were redeemed
• Shoppers can subscribe to mobile coupon
aggregators
• Mobile coupon redemption rate is
expected to increase due to coupon
integration in social networks
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35
Growth in U.S. Mobile Coupon Users

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 Investment and Finance

• The Internet has revolutionized the world

of investment and finance
• The brokerage business adapted to the
Internet faster than any other arm of
finance

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37
 Banking

• Online banking customers can:

– Check balances of their savings, checking,
and loan accounts
– Transfer money among accounts
– Pay their bills
• Many banks enable customers to perform
online banking activities via mobile phone

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38
 E-Boutiques

• An increasing number of Web sites offer

personalized consultations for shoppers
• Key to the success of Web sites such as
Charm Boutique and ShopLaTiDa
– A philosophy of high customer service and
strong, personal client relationships

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39
• End of Lesson 1

• Questions??

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40
 Strategies for Successful
E-Commerce and M-Commerce

• Companies must develop effective Web

sites that include the following
characteristics:
– Easy to use
– Accomplish the goals of the company
– Safe and secure
– Affordable to set up and maintain

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41
Defining an Effective E-Commerce Model
and Strategy

• Defining an effective model and strategy is

the first major challenge for a successful
e-commerce site
• Three components of a successful model
– Community
– Content
– Commerce

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42
Content, Commerce, and Community

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43
 Defining the Web Site Functions

• Decide which tasks the site must

accomplish
• An effective website creates an attractive
presence for the company and meets the
needs of its visitors

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44
 Defining website functions

• Obtaining general information about the organization

• Obtaining financial information for making an
investment decision in the organization
• Learning the organization’s position on social issues
• Learning about the products or services that the
organization sells
• Buying the products or services that the company
offers
• Checking the status of an order

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45
 Defining website functions

• Redefine the site’s basic business model

as needed to capture new opportunities-
keeping in mind that the priorities and
objectives of customers may change over
time

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46
 Establishing a Web Site

• Companies large and small can establish Web sites. Some

companies elect to develop their sites in-house.
• Web site hosting companies:
– Allow you to set up a Web page and conduct e-commerce within a
matter of days
– Have little up-front cost
• Storefront broker: a company that acts as an intermediary
between your Web site and online merchants who have the
products and retail expertise
• The storefront broker deals with the details of the transactions,
including who gets paid for what, and is responsible for bringing
together merchants and reseller sites
• E.g. Shopify

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47
 Building Traffic to Your Web Site

• Measures to attract customers

– Obtain and register a domain
name(descriptive of the business)
– Make your site search-engine friendly by
improving its rankings
• Include a meta tag in your store’s home page
• Use Web site traffic data analysis software
• Provide quality, keyword-rich content
• Add new content to the Web site on a regular basis
• Acquire links to your site from other Web sites
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48
Maintaining and Improving Your Web Site

• Personalization: the process of tailoring

Web pages to specifically target individual
consumers.
• Implicit personalization captures data
from customer Web sessions
• Explicit personalization captures user-
provided information e.g surveys, user
registrations

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49
 Technology Infrastructure Required to
Support E-Commerce and M-Commerce

• Factors in site performance

– Response time
– Customer support
– Order handling
• Poor Web site performance drives
consumers to abandon some e-commerce
sites in favor of those with better, more
reliable performance

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50
Key Technology Infrastructure
Components

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51
 Technology Infrastructure: Hardware

• The Web server’s required storage

capacity and computing power depend on:
– The software that must run on the server
– Volume of e-commerce transactions that must
be processed
• Successful e-commerce solutions are
designed to be highly scalable
– Can be upgraded to meet unexpected user
traffic
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52
 Technology Infrastructure:
Hardware (cont’d.)

• Key Web site performance measures

– Response time
– Transaction success rate
– System availability
• Key decision for a new e-commerce
company
– Choosing whether to host its own Web site or
to enlist a third-party Web service provider

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53
Table 8.7 Key Performance Measures for
Popular Retail Web Sites

Response Time Success Outage Time

Retail Apparel Firm
(seconds) Rate During One Week
Abercrombie 4.64 98.6% 1 hour

Macy’s 6.81 99.5% 0 hours

Sears 12.90 99.1% 1 hour

J Crew 7.89 97.7% 1 hour

Saks Fifth Avenue 10.59 95.7% 2 hours

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54
Technology Infrastructure: Web Server
Software

• Fundamental services needed in Web

server software
– Security and identification
– Retrieving and sending Web pages
– Web site tracking
– Web site development
– Web page development

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55
Technology Infrastructure: E-Commerce
Software
• Five core tasks that must be supported by e-
commerce software
– Catalog management-to create and update product
catalog
– Product configuration- to help customers select
necessary components and options
– Shopping cart facilities- to track the items selected for
purchase
– E-commerce transaction processing
– Web traffic data analysis- to provide details to adjust
the operations of the website
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56
 Technology Infrastructure: Mobile
Commerce Hardware and Software

• Limitations of handheld devices that

complicate their use:
– Screens are small
– Input capabilities are limited to a few buttons
– Less processing power and less bandwidth

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57
 Technology Infrastructure: Electronic
Payment Systems

• Digital certificate: an attachment to an e-

mail message or data embedded in a Web
site that verifies the identity of a sender or
Web site.
• Certificate authority (CA): a trusted third-
party organization or company that issues
digital certificates.

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58
 Electronic Payment Systems (cont’d.)

• Secure Sockets Layer (SSL) is used to secure

sensitive data during e-commerce
• Transport security layer: protocol that ensures
privacy between communicating applications
• Electronic cash: an amount of money that is
computerized, stored, and used as cash for e-
commerce transactions.
• Credit, charge, debit, and smart cards are
payment systems used for e-commerce

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59
 Comparison of Payment Systems

Payment Description Advantages Disadvantages

System
Credit card Carries preset spending Each month the user can Unpaid balance
limit based on the user’s pay all or part of the accumulates interest
credit history amount owed charges—often at a high
rate of interest
Charge card Looks like a credit card Does not involve lines of The entire amount
but carries no preset credit and does not charged to the card is
spending limit accumulate interest due at the end of the
charges billing period
Debit card Looks like a credit card Operates like cash or Money is immediately
or automated teller a personal check de- ducted from user’s
machine (ATM) card account balance

Smart card Is a credit card device with Better protected from Not widely used in the
embedded microchip misuse than conventional United States
capable of storing facts credit, charge, and debit
about cardholder cards because the smart
card information is
encrypted

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60
 Summary – Principle 1

• Electronic commerce is the conducting of

business activities electronically over
computer networks
• Types of e-commerce
– Business-to-consumer (B2C)
– Business-to-business (B2B)
– Consumer-to-consumer (C2C)

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61
 Summary – Principle 1 (cont’d.)

• A successful e-commerce system must

address the many stages consumers
experience in the sales life cycle
• Key challenges a business must overcome
in developing e-commerce processes
– Consumer privacy concerns
– Consumers’ lack of trust
– Global issues

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62
 Summary – Principle 2

• Electronic retailing (e-tailing) is the direct

sale from a business to consumers
through electronic storefronts
• Manufacturers are joining electronic
exchanges
• The Internet has revolutionized the world
of investment and finance
• There are many m-commerce applications

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or duplicated, or posted to a publicly accessible website, in whole or in part.
63
 Summary – Principle 2 (cont’d.)

• Businesses and individuals use

e-commerce and m-commerce to:
– Reduce transaction costs
– Speed the flow of goods and information
– Improve the level of customer service
– Enable the close coordination of actions
among manufacturers, suppliers, and
customers

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64
 Summary – Principle 2 (cont’d.)

• E-commerce and m-commerce enable

consumers and companies to gain access
to worldwide markets
• E-commerce and m-commerce are global
systems facing cultural, language, time
and distance, infrastructure, currency,
product and service, and state, regional,
and national law challenges

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65
 Summary – Principle 3

• An effective Web site is one that creates

an attractive presence and meets the
needs of its visitors
• Web site operators must constantly
monitor the traffic and response times
associated with their sites and adjust
software, databases, and hardware to
ensure that visitors have a good
experience when they visit
© 2016 Cengage Learning®. All Rights Reserved. May not be scanned, copied
or duplicated, or posted to a publicly accessible website, in whole or in part.
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 Summary – Principle 4

• M-commerce presents additional

infrastructure challenges including:
– Improving the ease of use of wireless devices
– Addressing the security of wireless
transactions
– Improving network speed
• Electronic payment systems are a key
component of the e-commerce
infrastructure
© 2016 Cengage Learning®. All Rights Reserved. May not be scanned, copied
or duplicated, or posted to a publicly accessible website, in whole or in part.
67