Chapter 2

E-commerce Fundamentals

Learning Objectives
To evaluate changes in business relationships
between organizations and their customers
enabled by e-commerce
To Identify the main business and marketplace
models for electronic communications and
trading
Describe different revenue models transaction
mechanisms available through online services.

2.1 The environment in which e-business services are provided

For the e-commerce strategy, the most significant influences are
those of the immediate marketplace that is
shaped by the needs of customers
how services are provided to them through competitors
intermediaries and via upstream suppliers.

Environment constraints and opportunities

Customers
which services are they offering via their web site that your
organization could support them in?

Competitors
need to be benchmarked in order to review the online
services they are offering do they have a competitive
advantage?

Intermediaries
are new or existing intermediaries offering products or
services from your competitors while you are not
represented?

Suppliers
are suppliers offering different methods of procurement to
competitors that give them a competitive advantage?

E-Marketplaces
Markets (electronic or otherwise) have
three main functions:
Matching buyers and sellers;
Facilitating the exchange of information, goods,
services, and payments associated with market
transactions;
Providing an institutional infrastructure, such as a
legal and regulatory framework, which enables the
efficient functioning of the market.

E-Marketplaces
Electronic marketplaces, changed several of the
processes used in trading and supply chains

Greater information richness

Lower information search costs for buyers
Diminished information asymmetry between sellers
and buyers
Greater temporal separation between time of
purchase and time of possession
Greater temporal proximity between time of
purchase and time of possession
Ability of buyers and sellers to be in different
locations

E-Marketplaces
Marketspace
A marketplace in which sellers and buyers
exchange goods and services for money (or
for other goods and services), but do so
electronically

E-Marketplaces
Marketspace components
Customers
Sellers
Products and services

digital products
Goods that can be transformed into digital format
and delivered over the Internet

E-Marketplaces
front end
The portion of an e-sellers business
processes through which customers interact,
including the sellers portal, electronic
catalogs a shopping cart, a search engine,
and payment gateway

back end
The activities that support online order-taking.
It includes fulfillment, inventory management,
purchasing from suppliers, payment
processing, packaging, and delivery

The Order Fulfillment Process

Fulfillment process
1.
2.
3.
4.
5.
6.

Order entry
Product pick
Product scan
Packing slip
Waybill
Ship scan
shipment
confirmation

E-Marketplaces
Marketspace components
intermediary
A third party that operates between sellers and
buyers.
Other business
Support services
The Qualified Intermediary is responsible for properly
filling out the appropriate tax forms for the client.

Figure 2.2 B2B and B2C interactions between an organization, its suppliers and its customers

B2B and B2C characteristics

Figure 2.3 Disintermediation of a consumer distribution channel showing

Disintermediation
The removal of intermediaries such as distributors or brokers that
formerly linked a company to its customers.

(a) the original situation,

(b) disintermediation omitting the wholesaler, and
(c) disintermediation omitting both wholesaler and retailer

Reintermediation The creation of new intermediaries between customers and suppliers providing services
such as supplier search and product evaluation.

Figure 2.4 From original situation (a) to disintermediation (b) and reintermediation (c)

Figure 2.5 Example channel chain map for consumers selecting

an estate agent to sell their property

Portal
A gateway to information resources and
services
Type of portal

Horizontal or functional portal

Vertical
Geographical ( region, country, local area )
Marketplace
Media type

Figure 2.6 Variations in the location and scale of trading on e-commerce sites

e-Commerce