Electronic and Mobile Commerce

Electronic and Mobile Commerce

E-Commerce and M-Commerce

7 Electronic and Mobile Commerce

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Know?Did Yo u

Although the business-to-consumer market grabs more of the news headlines, the B2B market is considerably larger and is growing more rapidly. B2B sales within the United States were estimated to be over $780 billion in 2015, twice the size of B2C commerce.

Target reported that cyberthieves compromised the credit card data and personal information including

phone numbers, email and home addresses, credit and debit card numbers, PINS, expiration dates, and mag- netic stripe data of as many as 110 million of its custo- mers. Within two days after the Target data breach was announced, a class action lawsuit was filed claiming that Target was negligent in its failure to implement and maintain reasonable security procedures and practices.

Principles Learning Objectives

Electronic and mobile commerce are evolving, providing new ways of conducting business that present both potential benefits and problems.

Describe the current status of various forms of e-commerce, including B2B, B2C, C2C, and e-government.

Outline a multistage purchasing model that describes how e-commerce works.

Define m-commerce and identify some of its unique challenges.

E-commerce and m-commerce can be used in many innovative ways to improve the operations of an organization.

Identify several e-commerce and m-commerce applications.

Identify several advantages associated with the use of e-commerce and m-commerce.

E-commerce and m-commerce offer many advantages yet raise many challenges.

Identify the many benefits and challenges asso- ciated with the continued growth of e-commerce and m-commerce.

Organizations must define and execute an effec- tive strategy to be successful in e-commerce and m-commerce.

Outline the key components of a successful e-commerce and m-commerce strategy.

E-commerce and m-commerce require the careful planning and integration of a number of technol- ogy infrastructure components.

Identify the key components of technology infra- structure that must be in place for e-commerce and m-commerce to work.

Discuss the key features of the electronic pay- ment systems needed to support e-commerce and m-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, government agencies, and other business partners. As a result, most organizations today have set up business on the Internet or are considering doing so. To be successful, all members of the organization need to plan and participate in that effort.

As a sales or marketing manager, you will be expected to help define your firm’s e-commerce business model. As a customer service employee, you can expect to participate in the development and operation of your firm’s Web site. As a human resource or public relations manager, you will likely be asked to provide Web site content for use by potential employees and shareholders. As an analyst in finance, you will need to know how to measure the business impact of your firm’s Web operations and how to compare that to competitors’ efforts.

Clearly, as an employee in today’s organization, you must understand what the potential role of e-commerce is, how to capitalize on its many opportunities, and how to avoid its pitfalls. The emergence of m-commerce adds an exciting new dimension to these opportunities and challenges. Many customers, potential employees, and shareholders will be accessing your firm’s Web site via smartphones, tablets, and laptops. This chapter begins by providing a brief overview of the dynamic world of e-commerce.

As you read this chapter, consider the following:

• What are the advantages of e-commerce and m-commerce?

• How do innovations in technology and infrastructure affect regions across the globe?

An Introduction to Electronic Commerce

Electronic commerce (e-commerce) is the conducting of business activities (e.g., distribution, buying, selling, marketing, and servicing of products or ser- vices) electronically over computer networks. It includes any business transac- tion executed electronically between companies (business-to-business), companies and consumers (business-to-consumer), consumers and other con- sumers (consumer-to-consumer), public sector and business (government- to-business), public sector to citizens (government-to-citizen), and public sector to public sector (government-to-government). Business activities that are strong candidates for conversion to e-commerce are ones that are paper based, time consuming, and inconvenient for customers.

Business-to-Business E-Commerce Business-to-business (B2B) e-commerce is a subset of e-commerce in which all the participants are organizations.

B2B e-commerce is a useful tool for connecting business partners in a virtual supply chain to cut resupply times and reduce costs. Although the business-to-consumer market grabs more of the news headlines, the B2B market is considerably larger and is growing more rapidly. B2B sales within the United States were estimated to be over $780 billion in 2015, twice the size of B2C commerce.1

A recent survey by Forrester Research and Internet Retailer showed that 30 percent of B2B buyers now make more than half of their purchases online, and that percentage will likely increase to 56 percent by 2017, with much of that growth coming from purchases that are researched or completed through mobile devices.2 Popular B2C Web sites have helped raise expectations as to how an e-commerce site must operate, and many B2B companies are responding to those heightened expectations by investing heavily in their B2B platforms. Spending on e-commerce technologies by large U.S. manufac- turers, wholesalers, and distributors is expected to top $2 billion in 2019.3

business-to-business (B2B) e-commerce: A subset of e-commerce in which all the participants are organizations.

298 PART 3 • Business Information Systems

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Moving more customers online is key to B2B commerce success, so in addition to investing in new technologies, B2B companies are focusing on new ways of engaging their customer across multiple channels—both online and offline. Providing customers with a consistent experience regardless of channel was a top priority for 68 percent of B2B organizations who took part in another recent survey commissioned by Accenture Interactive and SAP. The top e-commerce priorities for many B2B buyers include transparent pricing, easily accessible product details, purchase tracking, and personalized recommendations.4

Many organizations use both buy-side e-commerce to purchase goods and services from their suppliers and sell-side e-commerce to sell products to their customers.

Buy-side e-commerce activities include identifying and comparing competitive suppliers and products, negotiating and establishing prices and terms, ordering and tracking shipments, and steering organizational buyers to preferred suppliers and products.

Sell-side e-commerce activities include enabling the purchase of products online, providing information for custo- mers 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, and enabling interactions among a community of consumers. Thus, 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.

Grainger is a B2B distributor of products for facilities maintenance, repair, and operations (a category called MRO) with more than 1.5 million different items offered online. See Figure 7.1.

In 2015, the company’s online sales exceeded $4 billion or more than 40 percent of the company’s total sales.5 A key part of Grainger’s e-commerce success is its suite of mobile apps, which make it possible for customers to access products online and quickly find and order pro- ducts via a smartphone or other mobile device. Currently, 15 percent of the com- pany’s e-commerce traffic comes to its Web site through mobile devices.6

Business-to-Consumer E-Commerce Business-to-consumer (B2C) e-commerce is a form of e-commerce in which customers deal directly with an organization and avoid intermediaries. Early B2C pioneers competed with the traditional “brick-and-mortar” retailers in an industry, selling their products directly to consumers. For example, in 1995,

FIGURE 7.1 Grainger e-commerce Grainger offers more than 1.5 million items online. Source: grainger.com

business-to-consumer (B2C) e-commerce: A form of e-commerce in which customers deal directly with an organization and avoid intermediaries.

CHAPTER 7 • Electronic and Mobile Commerce 299

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upstart Amazon.com challenged well-established booksellers Waldenbooks and Barnes & Noble. Amazon did not become profitable until 2003; the firm has grown from selling only books on a U.S.-based Web site to selling a wide variety of products through international Web sites in Canada, China, France, Germany, Japan, and the United Kingdom.

A recent Forrester Research Inc. and Internet Retailer survey found that the average B2C order value was $158.7 As with B2B sales, B2C revenues are increasingly being driven by customers using mobile devices. In Q3 of 2015, smartphones accounted for 14 percent of all B2C revenue—a 98 percent jump from the previous year.8

By using B2C e-commerce to sell directly to consumers, producers or providers of consumer products can eliminate the middlemen, or intermediar- ies, between them and the consumer. In many cases, this squeezes costs and inefficiencies out of the supply chain and can lead to higher profits for busi- nesses and lower prices for consumers. The elimination of intermediate orga- nizations between the producer and the consumer is called disintermediation.

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.

Worldwide, B2C e-commerce sales continue to grow rapidly, reaching $1.9 trillion in 2014.

The Asia-Pacific region represents the world’s largest and fastest-growing B2C market; it accounts for almost 40 percent of total world- wide B2C sales.9 China’s e-commerce sales are now over $670 billion and are growing at a rate of over 40 percent per year. Other top markets with double- digit e-commerce sales growth include: United Kingdom ($99.4 billion), Japan ($89.6 billion), and Germany ($61.8 billion).10 Table 7.1 shows the estimated B2C e-commerce sales by world region from 2012 to 2017 (estimated).

One reason for the steady growth in B2C e-commerce is shoppers find that many goods and services are cheaper when purchased online, including stocks, books, newspapers, airline tickets, and hotel rooms.

Another reason for the growth in B2C e-commerce is that online B2C shoppers have the ability to design a personalized product. Nike, Inc., pro- vides a successful example of this approach to personalization. The com- pany’s online NIKEiD service enables purchasers to customize a pair of shoes by selecting from different material, features, and fit options

Electronic

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