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E-Commerce: Digital Markets, Digital Goods

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Title: E-Commerce: Digital Markets, Digital Goods


1
9
Chapter
E-Commerce Digital Markets, Digital Goods
2
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
STUDENT LEARNING OBJECTIVES
  • What are the unique features of e-commerce,
    digital markets, and digital goods?
  • How has Internet technology changed business
    models?
  • What are the various types of e-commerce, and how
    has e-commerce changed consumer retailing and
    business-to-business transactions?

3
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
STUDENT LEARNING OBJECTIVES (continued)
  • What is the role of m-commerce in business, and
    what are the most important m-commerce
    applications?
  • What are the principal payment systems for
    electronic commerce?

4
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Photobucket The New Face of E-commerce
  • Problem Building a business model that serves
    the emerging market for social networking sites.
  • Solutions Set up a simple, easy to use photo
    storage site usable at any social networking
    site.

5
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Photobucket The New Face of E-commerce
  • Photobucket pioneered the concept of linking
    media from one Web Site to multiple online sites.
  • Demonstrates ITs role in generating new business
    models.
  • Illustrates digital technologys importance in
    reducing the costs of storing photos and video
    online.

6
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Photobucket The New Face of E-commerce
7
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce and the Internet
E-Commerce Today
  • E-commerce Use of the Internet and Web to
    transact business digitally enabled transactions
  • Began in 1995 and grew exponentially still
    growing at an annual rate of 25 percent
  • Companies that survived the dot-com bubble burst
    and now thrive
  • E-commerce revolution is still in its early
    stages

8
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce and the Internet
The Growth of E-Commerce
Retail e-commerce revenues have grown
exponentially since 1995 and have only recently
slowed to a very rapid 25 percent annual
increase, which is projected to remain the same
until 2010.
Figure 9-1
9
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce and the Internet
Unique Features of E-commerce Technology
  • Ubiquity
  • Internet/Web technology available everywhere
    work, home, etc., anytime.
  • Effect
  • Marketplace removed from temporal, geographic
    locations to become marketspace
  • Enhanced customer convenience and reduced
    shopping costs

10
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce and the Internet
Unique Features of E-commerce Technology
  • 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

11
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce and the Internet
Unique Features of E-commerce Technology
  • Universal standards
  • One set of technology standards Internet
    standards
  • Effect
  • Disparate computer systems easily communicate
    with each other
  • Lower market entry costscosts merchants must pay
    to bring goods to market
  • Lower consumers search costseffort required to
    find suitable products

12
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce and the Internet
Unique Features of E-commerce Technology
  • 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

13
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce and the Internet
Unique Features of E-commerce Technology
  • 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

14
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce and the Internet
Unique Features of E-commerce Technology
  • Information density
  • Large increases in information densitythe 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

15
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce and the Internet
Unique Features of E-commerce Technology
  • 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

16
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce and the Internet
Unique Features of E-commerce Technology
  • Social technology
  • The technology promotes user content generation
    and social networking
  • Effect
  • New Internet social and business models enable
    user content creation and distribution, and
    support social networks

17
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce and the Internet
Key Concepts in E-commerce Digital Markets and
Digital Goods In a Global Marketplace
  • Digital markets reduce
  • Information asymmetry
  • Search costs
  • Transaction costs
  • Menu costs
  • Digital markets enable
  • Price discrimination
  • Dynamic pricing
  • Disintermediation

18
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce and the Internet
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.
Figure 9-2
19
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce and the Internet
Key Concepts in E-commerce Digital Markets and
Digital Goods In a Global Marketplace
  • Digital goods
  • Goods that can be delivered over a digital
    network
  • E.g. Music tracks, video, software, newspapers,
    books
  • Cost of producing first unit almost entire cost
    of product marginal cost of producing 2nd unit
    is about zero
  • 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.)

20
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce and the Internet
Internet Business Models
  • Pure-play models Based purely on Internet
  • Clicks-and-mortar models Extensions of
    bricks-and-mortar businesses
  • Communication and Social Networking
  • Some new business models take advantage of
    Internets rich communication capabilities
  • Social networking sites
  • Social shopping
  • Can provide ways for corporate clients to target
    customers through banner ads and pop-up ads

21
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce and the Internet
Internet Business Models
  • Digital content, entertainment, and services
  • Ability to deliver digital goods and content has
    created new alternatives to traditional print and
    broadcast media
  • Online games, radio channels, films and
    television, music downloads, and podcasts
  • Portal Supersite that provides comprehensive
    entry point for huge array of resources and
    services on the Internet
  • Online syndicators Aggregate content from
    multiple sources, package for distribution, and
    resell to third-party Web sites

22
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce and the Internet
Internet Business Models
  • Virtual storefront
  • Sells physical products directly to consumers or
    to individual businesses
  • Information broker
  • Provides product, pricing, and availability
    information to individuals and businesses
  • Transaction broker
  • Saves users money and time by processing online
    sales transactions and generating a fee for each
    transaction

23
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce and the Internet
Internet Business Models
  • Online marketplace
  • Provides a digital environment where buyers and
    sellers can meet, search for products, display
    products, and establish prices for those products
  • Content provider
  • Creates revenue by providing digital content,
    such as digital news, music, photos, or video,
    over the Web

24
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce and the Internet
Internet Business Models
  • Social network
  • Provides an online meeting place where people
    with similar interests can communicate and find
    useful information
  • Portal
  • Provides initial point of entry to the Web along
    with specialized content and other services
  • Service provider
  • Provides Web 2.0 applications such as photo
    sharing, video sharing, and user-generated
    content as services

25
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce
Interactive Session Organizations Can eBay
Continue Growing?
  • Read the Interactive Session and then discuss the
    following questions
  • What is eBays business model and business
    strategy? How successful has it been? What are
    the problems that eBay is currently facing?
  • How is eBay trying to solve these problems? Are
    these good solutions? Are there any other
    solutions that eBay should consider?
  • What people, organization, and technology factors
    play a role in eBays response to its problems?
  • Will eBay be successful in the long run? Why or
    why not?

26
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce Payment Systems
Interactive Session People The Allure of MySpace
  • Read the Focus on Organizations and then discuss
    the following questions
  • How do businesses benefit from MySpace? How do
    MySpace members benefit
  • Does MySpace create an ethical dilemma? Why or
    why not?
  • Do parents and schools objections to MySpace
    have any merit? Should a site such as MySpace be
    allowed to operate? Why or why not?
  • Is there anything that MySpace management can do
    to make the site less controversial?

27
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce and the Internet
Toyota set up a MySpace profile for the Yaris to
attract the attention of young buyers and gather
marketing data.
28
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce
Types of Electronic Commerce
  • Business-to-consumer (B2C)
  • Business-to-business (B2B)
  • Consumer-to-consumer (C2C)
  • Mobile commerce (m-commerce)

29
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce
Achieving Customer Intimacy Interactive
Marketing, Personalization, and Self-Service
  • Interactive marketing and personalization
  • Web sites are bountiful source of details about
    customer behavior, preferences, buying patterns
    used to tailor promotions, products, services,
    and pricing
  • Clickstream tracking tools Collect data on
    customer activities at Web sites
  • Used to create personalized Web pages
  • Collaborative filtering Compares customer data
    to other customers to make product recommendations

30
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce and the Internet
Web Site Visitor Tracking
Figure 9-3
E-commerce Web sites have tools to track a
shoppers every step through an online store.
Close examination of customer behavior at a Web
site selling womens clothing shows what the
store might learn at each step and what actions
it could take to increase sales.
31
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce and the Internet
Web Site Personalization
Firms can create unique personalized Web pages
that display content or ads for products or
services of special interest to individual users,
improving the customer experience and creating
additional value.
Figure 9-4
32
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce
Achieving Customer Intimacy Interactive
Marketing, Personalization, and Self-Service
  • Blogs
  • Personal web pages that contain series of
    chronological entries by author and links to
    related Web pages
  • Has increasing influence in politics, news
  • Corporate blogs New channels for reaching
    customers, introducing new products and services
  • Customer self-service
  • Web sites and e-mail to answer customer questions
    or to provide customers with product information
  • Reduces need for human customer-support expert

33
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce and the Internet
Stonyfield Farms Baby Babble blog provides a
channel for the company to talk to customers with
young children directly and hear back from them.
34
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce
Business-to-Business Electronic Commerce New
Efficiencies and Relationships
  • 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 for that industry
  • More companies increasingly moving away from
    private networks to Internet for linking to other
    firms
  • E.g. Procurement Businesses can now use Internet
    to locate most low-cost supplier, search online
    catalogs of supplier products, negotiate with
    suppliers, place orders, etc.

35
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce
Electronic Data Interchange (EDI)
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.
Figure 9-5
36
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce
Business-to-Business Electronic Commerce New
Efficiencies and Relationships
  • Private industrial networks (private exchanges)
  • 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)

37
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce
A Private Industrial Network
Figure 9-6
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.
38
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce
Business-to-Business Electronic Commerce New
Efficiencies and Relationships
  • 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

39
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce
A Net Marketplace
Figure 9-7
Net marketplaces are online marketplaces where
multiple buyers can purchase from multiple
sellers.
40
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce
Business-to-Business Electronic Commerce New
Efficiencies and Relationships
  • 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

41
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
M-Commerce
M-Commerce Services and Applications
  • Although m-commerce represents small fraction of
    total e-commerce transactions, revenue has been
    steadily growing
  • Location-based services
  • Banking and financial services
  • Wireless Advertising
  • Games and entertainment

42
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce
Global M-commerce Revenue 2000-2009
Figure 9-8
M-commerce sales represent a small fraction of
total e-commerce sales, but that percentage is
steadily growing. (Totals for 20072008 are
estimated.)
43
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
M-Commerce
Accessing Information from the Wireless Web
  • Cell phones and mobile handhelds
  • Data limitations
  • Display size
  • Wireless portals (mobile portals)
  • Feature content and services optimized for mobile
    devices to steer users to information they are
    most likely to need

44
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce Payment Systems
Types of Electronic Payment Systems
  • Digital wallet
  • Stores credit card and owner identification
    information and enters the shoppers name, credit
    card number, and shipping information
    automatically when invoked to complete a purchase
  • Micropayment systems
  • Developed for purchases of less than 10
  • Accumulated balance digital payment systems
  • Accumulating debit balance that is paid
    periodically on credit card or telephone bills

45
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce Payment Systems
Types of Electronic Payment Systems
  • Stored value payment systems
  • Enable online payments based on value stored in
    online digital account
  • May be merchant platforms or peer-to-peer
    (PayPal)
  • Digital checking
  • Extend functionality of existing checking
    accounts to be used for online payments
  • Electronic billing presentment and payment
    systems
  • Paying monthly bills through electronic fund
    transfers or credit cards

46
Essentials of Business Information
Systems Chapter 9 E-Commerce Digital Markets,
Digital Goods
Electronic Commerce Payment Systems
Digital Payment Systems for M-Commerce
  • Three types of mobile payment systems in use in
    Japan
  • Stored value system charged by credit cards or
    bank accounts
  • Mobile debit cards
  • Mobile credit cards
  • In the U.S., the cell phone has not yet evolved
    into a mobile payment system
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