11th Edition

TODAY AND TOMORROW


CHAPTER
Chapter 11
11 E-Commerce

Understanding Computers, 11 th Edition 1

 What Is E-Commerce?
 E-commerce: act of doing business transactions
over the Internet or similar technology

 E-commerce in the U.S. has continued to grow at a

steady pace

 M-commerce (mobile commerce) is growing

 U-commerce (universal commerce) trend being

strongly supported by Visa is on the rise

Chapter 11 Understanding Computers, 11 th Edition 2

 Advantages of E-Commerce
 To businesses

 Reduced costs
 Dot-coms are less expensive than brick-and-

mortar store because there is no physical

storefront to maintain
 Increased customer satisfaction
 If shopping experience is convenient (open all the

time, no driving, etc.

 More effective sales and marketing tools
(personalized e-mails, customer relationship
management tools, etc.)
 Potentially higher sales
Chapter 11 Understanding Computers, 11 th Edition 3
 Advantages of E-Commerce, Cont’d
 To customers

 Convenience
 Easier comparison shopping
 Higher number of merchants to choose from

 Geographical location is not an issue

 Shopping bots and other comparison shopping

tools are available

 Higher degree of selection
 Potential cost savings

Chapter 11 Understanding Computers, 11 th Edition 4

 Disadvantages of E-Commerce
 To businesses

 Pressure to be “always open”

 Lost business due to customer hesitation to shop

online

 Risk of fraudulent credit card transactions

 Ease of entry for competitors

Chapter 11 Understanding Computers, 11 th Edition 5

 Disadvantages of E-Commerce,
Cont’d
 To customers

 Fraud and other potential security problems

 Not being able to see or touch the goods

 Possible expense to the customer of returning

merchandise

Chapter 11 Understanding Computers, 11 th Edition 6

 Types of E-Commerce Web Sites
 Manufacturer and e-tailer sites: sell products and
services directly to the end user

Chapter 11 Understanding Computers, 11 th Edition 7

 Types of E-Commerce Web Sites,
Cont’d
 Brokerage sites: sites that bring buyers and sellers
together
 Online auction sites: sites where individuals

auction products to other individuals

 Buyers bid and highest bidder at the time the

auction closes buys the item

 Seller pays a listing fee and a selling fee based on

the final price

 Sellers set the starting bid and can specify a

minimum sales price

 Many sites bid automatically for each bidder up to

his or her maximum stated price

Chapter 11 Understanding Computers, 11 th Edition 8
Chapter 11 Understanding Computers, 11 th Edition 9
 Types of E-Commerce Web Sites,
Cont’d
 Brokerage sites, cont’d

 Financial brokerage sites (allow individuals to sell

stocks, bonds, etc.

 Market and commodity exchange sites (match up

buyers and sellers of commodities, such as
equipment, energy, cattle, etc.

Chapter 11 Understanding Computers, 11 th Edition 10

 E-Commerce Business Models
 Business model: description of how a company
does business
 E-commerce business model: description of the
types of buyers and sellers in an e-commerce
company, such B2B, B2G, and so forth
 Business-to-consumer (B2C) model
 Business-to-business (B2B) model
 Consumer-to-consumer (C2C) model
 Business-to-government (B2G) model
 Intermediary hub model
 Vertical hub
 Horizontal hub

Chapter 11 Understanding Computers, 11 th Edition 11

 Implementing Web-Based
E-Commerce, Cont’d
 Step 3: Develop
procedures for
handling electronic
financial
transactions
 Need to

determine which
types will be
accepted
 Most sites

accept credit
cards

Chapter 11 Understanding Computers, 11 th Edition 12

 Implementing Web-Based
E-Commerce, Cont’d
 Other digital cash options include:

 Electronic checks: funds come out of customer’s

checking account

 Online payment accounts (such as PayPal):

funds can be transferred to others from the
customer’s account
 Can transfer funds ahead of time or have
money transferred from a credit card or bank
account as needed

Chapter 11 Understanding Computers, 11 th Edition 13

Chapter 11 Understanding Computers, 11 th Edition 14
 Implementing Web-Based
E-Commerce, Cont’d
 Other digital cash options, cont’d

 Electronic gift certificates, gift cards, and coupons

 Appropriate codes are entered into the Web site
at time of purchase
 Smart cards: holds a cash value
 Typically read by readers
attached to a PC
 Smart card readers may become
common on vending machines,
in taxis, and other public
locations
Chapter 11 Understanding Computers, 11 th Edition 15
 Implementing Web-Based
E-Commerce, Cont’d
 Other digital cash options, cont’d

 Digital wallets: electronic file that holds

information to speed online transactions
 Can hold credit card numbers, passwords,

address, etc. to be automatically or manually

transferred to an online order form as needed
 Site-specific digital wallets store this

information for each customer on a business’

Web server for use with purchases on that site
only
Chapter 11 Understanding Computers, 11 th Edition 16
Chapter 11 Understanding Computers, 11 th Edition 17
 Implementing Web-Based
E-Commerce, Cont’d
 Special considerations for B2B financial transactions:
because of the volume of transactions businesses
may consider using:

 B2B transaction processing

 Can take care of transaction processing for a

business, including processing payments,

electronic billing, etc.
 Order-fulfillment companies
 Take care of physically filling orders for a

business including order management,

distribution, CRM services, etc.
Chapter 11 Understanding Computers, 11 th Edition 18
 Implementing Web-Based
E-Commerce, Cont’d
 Step 4: Design and develop an effective Web site
 Sites should be carefully designed

 Can consider using:

 Storefront software: facilitates the creation

of an online store (either packaged or Web-

based)
 Shopping cart software: designed to add
only ordering capabilities to an existing Web
site

Chapter 11 Understanding Computers, 11 th Edition 19

Chapter 11 Understanding Computers, 11 th Edition 20
 Implementing Web-Based
E-Commerce, Cont’d
 Step 5: Implement appropriate sales and marketing
strategies

 Include adequate customer service features

 Collect taxes from customers if required by law
 Display a privacy policy and security statement
 Use an appropriate domain name and URL
 URL should be easy to remember and type

 Visitors should not have to type a page name

(such as index.html) to view the home page of

the site

Chapter 11 Understanding Computers, 11 th Edition 21

 Implementing Web-Based
E-Commerce, Cont’d
 Step 5: Implement appropriate sales and marketing
strategies, cont’d

 Promote your Web site sufficiently

 Use appropriate meta tags

 Submit your site to search sites

 Consider paying for sponsored listings on search

sites
 Consider using banner ads on other sites

 Update your site regularly and consider adding

incentives for return visits (contests, coupons, etc.)

Chapter 11 Understanding Computers, 11 th Edition 22

Chapter 11 Understanding Computers, 11 th Edition 23
 Implementing Web-Based
E-Commerce, Cont’d
 Step 5: Implement appropriate sales and marketing
strategies, cont’d

 Data warehousing and mining

 Data warehouse: a collection of data about a

company and its customers

 Data mining: the use of intelligent software to

analyze a data warehouse to find patterns and

relationships that would not otherwise be
obvious

Chapter 11 Understanding Computers, 11 th Edition 24

Chapter 11 Understanding Computers, 11 th Edition 25
 Security Issues
 Security is essential for e-commerce Web sites

 Some guidelines for e-commerce sites:

 Secure financial transactions (use a secure Web

server)
 Secure sensitive documents and files (use
encryption)
 Authenticate online business partners (use digital
certificates and digital signatures)

Chapter 11 Understanding Computers, 11 th Edition 26

 Summary
 What Is E-Commerce?

 Types of E-Commerce Web Sites

 E-Commerce Business Models

 Implementing Web-Based E-Commerce

 Security Issues

Chapter 11 Understanding Computers, 11 th Edition 27