Introduction to E-Commerce and E-Marketplaces Sharif University of Technology, Ali A. Nazari...

Introduction to E-Commerce and

E-MarketplacesSharif University of Technology ,

Ali A. Nazari [email protected]

Fall 1392

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Learning Objectives

1. Define Electronic Commerce (EC) and describe its categories

2. Discuss the content and framework of EC

3. Describe the major types of EC transactions

4. Describe the digital revolution as the major driver of EC

5. Describe some EC business models

6. Describe benefits and limitations of EC

7. Describe the contribution of EC to organizations responding to environmental pressure

8. Describe social & business networks

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Overview Definition Business Models

Summary

EC Framework

E-Marketplaces

Learning Objectives

9. Define Electronic Commerce (EC) and describe its categories

10. Define e-marketplaces and list their components.

11. List the major types of e-marketplaces and describe their features.

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Summary

EC Framework

E-Marketplaces

12. Describe the various types of EC intermediaries and their roles.

13. Describe electronic catalogues, shopping carts, and search engines.

14. Describe the major types of auctions and list their characteristics.

Learning Objectives

15. Discuss the benefits, limitations, and impacts of auctions.

16. Describe bartering and negotiating online.

17. Define m-commerce and explain its role as a market mechanism.

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Summary

EC Framework

E-Marketplaces

18. Discuss competition in the digital economy.

19. Describe the impact of e-marketplaces on organizations and industries.

What is Commerce?

Commerce = com- (together)+ mercis- (merchandise).

1530s, from Middle French commerce (14c.), from Latin commercium "trade, trafficking," from com- "together" + merx (genitive mercis)

"merchandise“

Source: Online Etymology Dictionary, retrieved on 29.09.2013 from http://www.etymonline.com

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Summary

EC Framework

E-Marketplaces

Traditional Commerce

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Summary

EC Framework

E-Marketplaces

Elements of Traditional Commerce

Products or services to sell Location or storefront in which

to sell Marketing plan to promote and

advertise Way(s) to accept orders Way(s) to accept payment

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Summary

EC Framework

E-Marketplaces

Electronic Commerce

The process of buying, selling, or exchanging products, services, or information via computer networks


Summary

EC Framework

E-Marketplaces

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Different perspectives on EC

Doing business electronically by completing business processes over networks

A tool to cut service costs while improving the quality of customer service and increasing the speed of service delivery

Enabler of online learning and training Framework for inter- and intra-organizational

collaboration A gathering place for community members to

learn, transact, and collaborate such as in social networks


Summary

EC Framework

E-Marketplaces

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What is Electronic Business?

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Summary

EC Framework

E-Marketplaces

Types of Commerce

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Summary

EC Framework

E-Marketplaces

Dimensions of Electronic Commerce

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Source: Choi et al. “The Economics of Electronic Commerce.” In: Macmillan Technical Publishing, Indianapolis, 1997.


Summary

EC Framework

E-Marketplaces

EC Classification

Pure vs. Partial– Partial, when at least 1 dim is electronic such

as ordering food online– Pure, when no physical dimensions is involved

Internet vs. Non-Internet EC– Internet– Private networks (e.g., ATM)– LAN (e.g., using services at airports accessed

via intranet)

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Summary

EC Framework

E-Marketplaces

Organisations

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Brick-and-mortar (old economy) organizations– Primary business conducted offline – E.g. the super market around the corner

Virtual (pure-play) organizations– business conducted purely online– E.g. online gaming; providing web space

Click-and-mortar (click-and-brick) organizations

– Some EC activities– E.g., the super store around the SUT Metro

station uses an eShop to sell food, drinks, and fruit


Summary

EC Framework

E-Marketplaces

Information Systems

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Interorganizational information systems (IOSs)

Communications systems that allow routine transaction processing and information flow between two or more organizations

Intraorganizational information systems

Communication systems that enable e-commerce activities to go on within individual organizations


Summary

EC Framework

E-Marketplaces

EC FrameworkEC Framework

EC Framework

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Summary

EC Framework

E-Marketplaces

EC Framework

EC applications are supported by infrastructure and by these five support areas:

– People– Public policy– Marketing and advertisement– Support services– Business partnerships

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Summary

EC Framework

E-Marketplaces

Classification by Transaction Nature

Business-to-business (B2B)E-commerce model in which all of the participants are businesses or other organizations

Business-to-consumer (B2C)E-commerce model in which businesses sell to individual shoppers

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Summary

EC Framework

E-Marketplaces


E-tailingOnline retailing, usually B2C

Business-to-business-to-consumer (B2B2C)E-commerce model in which a business provides some product or service to a client business that maintains its own customers

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Summary

EC Framework

E-Marketplaces


Consumer-to-business (C2B)E-commerce model in which individuals use the Internet to sell products or services to organizations or individuals who seek sellers to bid on products or services they need

Mobile commerce (m-commerce)E-commerce transactions and activities conducted in a wireless environment 2

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Summary

EC Framework

E-Marketplaces


Location-based commerce (l-commerce)M-commerce transactions targeted to individuals in specific locations, at specific times

Intrabusiness ECE-commerce category that includes all internal organizational activities that involve the exchange of goods, services, or information among various units and individuals in an organization

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Summary

EC Framework

E-Marketplaces


Business-to-employees (B2E)E-commerce model in which an organization delivers services, information, or products to its individual employees

Collaborative commerce (c-commerce)E-commerce model in which individuals or groups communicate or collaborate online

Consumer-to-consumer (C2C)E-commerce model in which consumers sell directly to other consumers 2

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Summary

EC Framework

E-Marketplaces


Peer-to-peer (P2P)Technology that enables networked peer computers to share data and processing with each other directly; can be used in C2C, B2B, and B2C e-commerce

E-learningThe online delivery of information for purposes of training or education

E-governmentE-commerce model in which a government entity buys or provides goods, services, or information from or to businesses or individual citizens 2

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Summary

EC Framework

E-Marketplaces


Exchange

A public electronic market with many buyers and sellers

Exchange-to-exchange (E2E)

E-commerce model in which electronic exchanges formally connect to one another for the purpose of exchanging information

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Summary

EC Framework

E-Marketplaces

Driver, Benefits, and Limitations

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Summary

EC Framework

E-Marketplaces


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Summary

EC Framework

E-Marketplaces

Business Pressure Drives EC


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Summary

EC Framework

E-Marketplaces

Elements of EC

SEARCH ENGINE

SHOPPING BOT

AGGREGATOR

ON-LINE CATALOG

AUTOMATED AGENTS

TRACKING AGENT

ON-LINE HELP

INTERNET TELEPHONY

CUSTOMER PREFERENCES

BARGAINING STRATEGIES

PRICE SENSITIVITIES

CREDIT/PAYMENT INFORMATION

ON-LINE PROBLEM REPORTS

FOLLOW-ON SALES OPPORTUNITIES

TECHNOLOGIES USED INFORMATION GATHERED

BROWSING BEHAVIOR

DELIVERY REQUIREMENTSE-PAYMENT SYSTEMS

CONFIGURATOR

RECOMMENDER AGENT

TRANSACTION PROCESSOR

DATA INTERCHANGE

CRYPTOGRAPHY

BROWSER SHARING

MARKET BASKET

PERSONAL DATA

CUSTOMER SATISFACTION

SEARCH BEHAVIOR

EFFECTIVENESS OF PROMOTIONS

BUYER FINDS BUYER FINDS SELLERSELLER

NEGOTIATIONNEGOTIATION

PAYMENTPAYMENT

SALESALE

DELIVERYDELIVERY

POST-SALEPOST-SALEACTIVITIESACTIVITIES

SELECTION OF SELECTION OF GOODSGOODS

Source: Habib Mir Hosseini, Course content EBC6210, uOttawa, Ottawa, ON, Canada

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Summary

EC Framework

E-Marketplaces

Business ModelsBusiness Models

EC Business Model

Business model

A method of doing business by which a company can generate revenue to sustain itself

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Summary

EC Framework

E-Marketplaces

Elements of A Business Model

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Summary

EC Framework

E-Marketplaces

Customers People to be served and the company’s relationships with these customers including customers’ value proposition

Products & services That the business will offer

Business Processes required to make and deliver the products and services

Resources required and the identification of which ones are available, which will be developed in house, and which will need to be acquired

Supply Chain including suppliers and other business partners

Expected Revenue anticipated costs, sources of financing, and estimated profitability (financial viability)

Functions of a BM

Articulate a customer value proposition Identify a market segment Define the venture’s specific value chain structure Estimate the cost structure and profit potential Describe the venture’s positioning within the

value network linking suppliers and customers Formulate the venture’s competitive strategy

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Summary

EC Framework

E-Marketplaces

EC Business Models

Revenue model

Description of how the company or an EC project will earn revenue

Value proposition

The benefits a company can derive from using EC

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Summary

EC Framework

E-Marketplaces

Major Revenue Models

Sales Transaction fees Subscription fees Advertising fees Affiliate fees Other revenue sources

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Summary

EC Framework

E-Marketplaces

Typical EC Business Models

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Summary

EC Framework

E-Marketplaces

Online direct marketing Electronic tendering systems. Name your own price Find the best price Affiliate marketing Viral marketing Group purchasing Online auctions Product and service

customization Electronic marketplaces and

exchanges

Information brokers (informediaries)

Bartering Deep discounting Membership Value-chain integrators Value-chain service providers Supply chain improvers Social networks,

communities, and blogging Direct sale by manufacturers Negotiation


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Summary

EC Framework

E-Marketplaces

Tendering (bidding) system: Model in which a buyer requests would-be sellers to submit bids; the lowest bidder wins

Name-your-own-price model: Model in which a buyer sets the price he or she is willing to pay and invites sellers to supply the good or service at that price


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Summary

EC Framework

E-Marketplaces

Affiliate marketing: An arrangement whereby a marketing partner (a business, an organization, or even an individual) refers consumers to the selling company’s Web site

Viral marketing: Word-of-mouth marketing in which customers promote a product or service to friends or other people


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Summary

EC Framework

E-Marketplaces

SME: Small-to-medium enterprises Group purchasing: Quantity

(aggregated) purchasing that enables groups of purchasers to obtain a discount price on the products purchased


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Summary

EC Framework

E-Marketplaces

Customization: Creation of a product or service according to the buyer’s specifications

Major Revenue Models

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Summary

EC Framework

E-Marketplaces

Benefits

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Summary

EC Framework

E-Marketplaces

To customers: ‒ Increases Choice of Vendors.‒ Enables customers to shop or do other transaction

anytime‒ Increased amount of information on demand.‒ Allows quick delivery.‒ Facilitates competition which leads to more discounted

prices. ‒ Increased price comparison capabilities.‒ Simple method to check on order status.‒ Customization of products and services. ‒ Creates virtual communities. ‒ Makes it possible to participate in virtual auctions

Benefits

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Summary

EC Framework

E-Marketplaces

To society: ‒ Enables more individuals to work at home. ‒ Allows consumers to do less travelling for shopping,

resulting in less traffic on the roads, and lower air pollution.

‒ Allows some merchandise to be sold at lower prices benefiting less affluent people.

‒ Enables people in rural areas to enjoy products and services which otherwise are not available to them.

‒ Facilitate delivery of public services

Benefits

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Summary

EC Framework

E-Marketplaces

To organisations: ‒ Expand the marketplace to global markets‒ Creates virtual communities. ‒ Decreases the cost of creating, processing,

distributing, storing and retrieving paper-based information.

‒ Allows reduced inventories.‒ Provides customization of products and services. ‒ Support business process reengineering efforts‒ Lower telecommunication cost

Limitations

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Summary

EC Framework

E-Marketplaces

Technical limitations: ‒ Lack of system security, reliability, standards and

communication protocols.‒ Rapid developing pace of underlying technologies.‒ The need for special Web servers and other

infrastructures, in addition to the network servers.‒ Insufficient telecommunication bandwidth.‒ The cost of developing an Electronic Commerce

business in house can be very high, and mistakes due to lack of experience may result in delays.

‒ Software development tool are still evolving and changing rapidly.

‒ limited choices of Payment systems and universal e-cash

Limitations

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Summary

EC Framework

E-Marketplaces

Lack of Trust and User Resistance:‒ Customers do not trust

‒ Unknown faceless sellers‒ Paperless transactions‒ Electronic money

‒ Switching from a physical to a virtual store may be difficult.

Security and Privacy:‒ The Electronic Commerce industry has a very long and

difficult task of convincing customers that online transactions and privacy are secure.

Limitations

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Summary

EC Framework

E-Marketplaces

Lack of touch and feel online Many unresolved legal issues Insufficiently large number of sellers and

buyers Breakdown of human relationships Expensive and/or inconvenient accessibility to

the Internet Different Policies Pricing - granularity of price (micro payment),

pricing policy

Discussion: Major problems of Iranian society

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Summary

EC Framework

E-Marketplaces

Discussion

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Summary

EC Framework

E-Marketplaces

Can EC help us to solve our problems? Traffic congestion / reliable and efficient transportation Unemployment / Job creation Pollution Fair distribution of opportunities Inflation Service provision in remote areas Transparency in processes traceability in public administration reliable statistics

Discussion

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Summary

EC Framework

E-Marketplaces

Reliable transportation Job creation Avoiding Pollution Fair distribution of

opportunities Reducing Inflation Services for all Transparency in

processes High quality processes Traceability Reliable statistics

Health

Wealth

Justice

..……..

Discussion

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Summary

EC Framework

E-Marketplaces

E-MarketplacesE-Marketplaces

E-Marketplace

An online market, usually B2B, in which buyers and sellers exchange goods or services;

3 types of e-marketplaces – private – public – consortia

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Summary

EC Framework

E-Marketplaces

Elements of E-Marketplaces

Customers Sellers Products and services

– digital productsGoods that can be transformed to digital format and delivered over the Internet

Infrastructure Front end Back end Intermediaries

– Third parties that operates between sellers and buyers

Other business partners Support services 5

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Summary

EC Framework

E-Marketplaces

Functions of a Market

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Summary

EC Framework

E-Marketplaces

E-Marketplace

Front endThe portion of an e-seller’s business processes through which customers interact, including the seller’s portal, electronic catalogs, a shopping cart, a search engine, and a payment gateway

Back endThe activities that support online order fulfillment, inventory management, purchasing from suppliers, payment processing, packaging, and delivery

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Summary

EC Framework

E-Marketplaces

Storefronts

StorefrontA single company’s Web site where products or services are sold

E-mall (online mall)An online shopping center where many online stores are located

– Visualization and virtual realty in shopping malls

Types of Stores and Malls– General stores/malls– Specialized stores/malls– Regional versus global stores– Pure-play online organizations versus click-and-mortar stores

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Summary

EC Framework

E-Marketplaces

Types of E-Marketplaces

Private E-Marketplaces

Online markets owned by a single company; may be either sell-side and/or buy-side e-marketplaces

Sell-side E-Marketplace

A private e-marketplace in which one company sells either standard and/or customized products to qualified companies

Buy-side E-Marketplace

A private e-marketplace in which one company makes purchases from invited suppliers

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Summary

EC Framework

E-Marketplaces

Types of E-Marketplaces

Public E-Marketplaces

B2B marketplaces, usually owned and/or managed by an independent third party, that include many sellers and many buyers; also known as exchanges

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Summary

EC Framework

E-Marketplaces

Information Portals

Information Portal

A single point of access through a Web browser to business information inside and/or outside an organization

Portal Types– Commercial (public)– Corporate– Personal– Knowledge– Mobile– Publishing– Voice

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Summary

EC Framework

E-Marketplaces

Transactions: Online Auction

AuctionA competitive process in which a seller solicits consecutive bids from buyers (forward auctions) or a buyer solicits bids from sellers (backward auctions). Prices are determined dynamically by the bids

Traditional vs. Online Auctions– rapid process gives potential buyers little time to make a decision– electronic auction (e-auction) conducted online

Types of Auction– One buyer, one seller– One seller, many potential buyers

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Summary

EC Framework

E-Marketplaces

Transactions: Online Auction

Forward auction

An auction in which a seller entertains bids from buyers. Bidders increase price sequentially

Reverse auction (bidding or tendering system)Auction in which the buyer places an item for bid (tender) on a request for quote (RFQ) system, potential suppliers bid on the job, with the price reducing sequentially, and the lowest bid wins; primarily a B2B or G2B mechanism

“name-your-own-price” modelAuction model in which a would-be buyer specifies the price (and other terms) he or she is willing to pay to any willing and able seller. It is a C2B model that was pioneered by Priceline.com

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Summary

EC Framework

E-Marketplaces

Transactions: Reverse Auction Process

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Summary

EC Framework

E-Marketplaces

Transactions: Auction

Double Auction (many-to-many)

Auctions in which multiple buyers and their bidding prices are matched with multiple sellers and their asking prices, considering the quantities on both sides

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Summary

EC Framework

E-Marketplaces

Transactions: Bartering

Bartering

The exchange of goods or services E-bartering (electronic bartering)

Bartering conducted online, usually in a bartering exchange

Bartering exchange

A marketplace in which an intermediary arranges barter transactions

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Summary

EC Framework

E-Marketplaces

Transactions: Online Negotiation

Negotiated pricing commonly is used for expensive or specialized products

Negotiated prices also are popular when large quantities are purchased

Much like auctions, negotiated prices result from interactions and bargaining among sellers and buyers

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Summary

EC Framework

E-Marketplaces

Intermediaries in E-Markets

The Roles and Value of infomediaries– Electronic intermediaries that provide and/or control information flow in

cyberspace, often aggregating information and selling it to others

Broker – is a company that facilitates transactions between

buyers and sellers

Types of brokers– Buy/sell fulfillment

– Virtual mall

– Metamediary

– Bounty

– Search agent

– Shopping facilitator

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Summary

EC Framework

E-Marketplaces


Intermediaries can address the following five important limitations of direct interaction:– Search costs

– Lack of privacy

– Incomplete information

– Contract risk

– Pricing inefficiencies

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Summary

EC Framework

E-Marketplaces


e-distributor

An e-commerce intermediary that connects manufacturers with business buyers (customers) by aggregating the catalogs of many manufacturers in one place—the intermediary’s Web site

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Summary

EC Framework

E-Marketplaces


disintermediation

Elimination of intermediaries between sellers and buyers

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Summary

EC Framework

E-Marketplaces

Buying Process in E-Markets

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Summary

EC Framework

E-Marketplaces

Electronic Catalogues

Electronic product presentation The backbone of most e-selling sites Three dimensions of electronic

catalogs:– The dynamics of the information presentation

– The degree of customization

– Integration with business processes

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Summary

EC Framework

E-Marketplaces

Electronic Shopping Cart

An order-processing technology that allows customers to accumulate items they wish to buy while they continue to shop

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Summary

EC Framework

E-Marketplaces

Competitive Factors of Online Transactions

Lower search costs for buyers Speedy comparisons Lower prices Customer service Barriers to entry are reduced Virtual partnerships multiply Market niches abound Differentiation and personalization

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Summary

EC Framework

E-Marketplaces

Competitive Forces Model

Model devised by Porter that says that five major forces of competition determine industry structure and how economic value is divided among the industry players in an industry; analysis of these forces helps companies develop their competitive strategy

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Summary

EC Framework

E-Marketplaces

The Analysis-of-Impact Framework

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Summary

EC Framework

E-Marketplaces

Impacts of E-Marketplaces on B2C

Product promotion New sales channel Direct savings Reduced cycle time Improved customer service Brand or corporate image Customization Advertising Ordering systems Market operations Accessibility

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Summary

EC Framework

E-Marketplaces

Impacts of EC on BP and Organisations

Impacts on manufacturing– Build-to-Order Manufacturing

• build-to-order (pull system)

A manufacturing process that starts with an order (usually customized). Once the order is paid for, the vendor starts to fulfill it

– Real-Time Demand-Driven Manufacturing

– Virtual Manufacturing

– Assembly Lines

Impacts on Finance and Accounting Impact on Human Resources

Management and Training

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Summary

EC Framework

E-Marketplaces

SummarySummary

EC and E-Marketplaces

What is EC? EC Framework Types and Classification Business Models Drivers, Benefits and Limitations E-Marketplaces Transactions

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Summary

EC Framework

E-Marketplaces

متشکرم

Efraim Turban, H. Michael Chung, Jae Kyu Lee, Michael Chung. Electronic Commerce 2010: A Managerial Perspective. 7th Edition, Pearson , ISBN 0132145383, 2009.

Mehdi Khosrow-Pour. Cases on Electronic Commerce Technologies and Applications. Idea Group Publishing, ISBN 1599044021, 2006..

Related Literature

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Introduction to E-Commerce and E-Marketplaces Sharif University of Technology, Ali A. Nazari...

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