Outline. Introduction to E-commerce. Why is e-commerce? [Awad] What is e-commerce? Session 1. Yan Wang E-commerce.

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1 Introduction to E-commerce Session 1 Yan Wang yan.wang@mq.edu.au Outline E-commerce E-business Examples of e-commerce Types of e-commerce 1 2 What is e-commerce? The marketing, buying and selling of products and services on the Internet. [Awad] The process of buying, selling or exchanging products, services, and information via computer networks. [Turban et al, p3] 3 Why is e-commerce? [Awad] Some drivers promote e-commerce Digital convergence. Digital devices can now communicate with one another. The Internet made it all possible. Anytime, anywhere, anyone. This means that anyone can communicate with the e-merchant or e-shop online 24 hours a day, 7 days a week, from anywhere in the world. Changes in organizations. Knowledge workers at the lower level in the organization can now take on responsibilities that once were relegated to lower or junior managers. A trend also is developing toward owners and managers across departments to develop a chain of relationships that adds value to the enterprise. It also helps downsize large organizations. 4 1

2 Why is e-commerce? [Awad] Increasing pressure on operating costs and profit margins. Global competition and the proliferation of products and services worldwide have added unusual pressure to keep a close watch on operating costs and maximize profit margins. Demand for customized products and services. Today s customers are expecting higher quality and better performance regarding products and services. What is e-business? (Turban et al, p3) A broader definition of EC, which includes not just the buying and selling of goods and services, but also servicing customers, collaborating with business partners, and conducting electronic transactions within an organization. 5 6 What is e-business? (Awad, p4) What is e-business? (Awad, p4) In contrast to e-commerce, e-business is more encompassing. It connects critical business systems directly to customers, vendors, and suppliers via the Internet. It means to use electronic information to boost performance and create value by forming new relationships between and among businesses and customers. So, it goes beyond an e-commerce Web site to affect all aspects of business, from strategy and process to trading partners and the ultimate consumers. In contrast, e-commerce means the commerce with anyone, anytime and anywhere. It emphasizes new business opportunities that result in greater efficiency and more effective transactions. EC is relatively narrow, but more technical

3 Advantages of E-commerce [Awad, p12] Lower Cost, economical Higher Margins Better and Quicker Customer Service Quick Comparison Shopping Teamwork Information Sharing, Convenience, and Control Allows High Product Customization Limitations of E-commerce Security and Trust System and Data Integrity System Scalability E-Commerce Is Not Free Product Search Is Not Efficient Products People Won t Buy Online etc. 9 A Framework for E-commerce Examples of E-commerce [Turban et al, p6] 10 Lee, p. 6, figure Internet Internet Internet Internet Internet Advertisement Shop Bank Auction Gambling infrastructure

4 Examples of E-commerce Client Client Client Internet Client Server Client Client Database The Overview of the Client/Server Internet Advertisement The most common money making method on the Internet is to establish a popular web site, where other parties are willing to advertise on the web site. For example, you can provide an Internet search engine for Internet surfers to search some specific information in a fast manner. Your web site may then receive a number of hits per day and could therefore become an ideal place for advertising. How much money you can make is dependent upon how popular your site is. This kind of money making methods may not require complex client/server, but you need to have bright marketing thinking to find a hot topic for your site Internet Shop Internet Shop With the growth of the Internet, there are more and more on-line shops available in the Internet. An Internet shop functions like a normal shop, where you buy goods by cash, cheque, or credit card. Most Internet shops use credit card based payment systems. That is, you pay your goods by sending your credit card information to the vendor through a secure channel provided by the Internet shop. Go and select one or several items. A typical credit card based Internet shopping protocol is as follows: 1. Merchant: advertise its goods on a web page. 2. Client: log on the merchant's page and selects one or several items. 3. Client: send his or her payment token that contains his or her credit card information via a secure channel. 4. Merchant: Verify the information in the payment token. If it is okay, sends the item(s) to the client

5 Internet Shop Internet Shop Of course, the security and fairness are the key issues to enable a payment. In the most of Internet shops, the transmission security is fine - it is based on SSL, but the merchant knows full information about customers' credit cards. It is possible for us to create an Internet shopping system, where the merchant is not able to get the information about its customers' credit cards. In such system, an on-line bank checks credit card information for the merchants. A well-known such protocol is SET. 17 The Figure shows a credit card based Internet shop 18 Internet Shop Internet Banking Goods can be paid by digital-cash (e-cash) The digital cash has been used in some countries. Based on cryptography, we can make a digital cash. A digital cash system works as follows. 1. Client: open a normal account at a bank. 2. Client: withdraw e-cash from the bank through an Internet access. The bank deducts the client's account. 3. Merchant: advertises its goods on its web page. 4. Client: select her purchase item(s). 5. Client: load her e-cash into the window on the Merchant's page and clicks OK. 6. Merchant: validate the e-cash and delivers the goods 7. Merchant: deposit the e-cash 8. Bank: check the validation of the e-cash and updates the merchant's account. More and more banks now consider the Internet banking as a "must go" way to further reduce banking cost. However, many people are still cautious about Internet banking due to security fears. If security becomes better and better, more people will start to use the Internet as a faster and more convenient way of banking

6 Internet Banking Internet Banking Internet banking has many advantages over conventional banking and telephone banking. In the end, If security is reassured, Internet banking is the way to go. Conventional banking may be the safest way to banks as you are talking to an actual person. An Internet Banking system is a client/ server system. Hoverer, there are long lines and you might have to drive a long way just to get to a branch. The bank is the server who provides the banking service. Telephone banking may be much quicker than conventional banking but listening to the long line of instructions can really give you a headache. When a customer opens the client page on a banking site, what he or she can do is dependent on the service provided. The one or several services could be available Internet Banking Internet Banking

7 Internet Banking They include Checking your account balance. Transferring your money from one account to the other. Doing digital cash transaction: Withdraw digital cash Deposit digital cash Internet Auction An Internet action system is a client/server system. The action server provides the service for bidders to submit their bids. A typical Internet bidding protocol looks like: 1. Auction Server: provide auction information on the Web. 2. Bidder: cast its bid to the server via a secure channel. 3. Auction Server: open bids after the bidding time is over and announces the highest bid (seller-oriented auction). 4. Bidder: send its payment to the Server via a secure channel Internet Auction Internet Gambling Internet gambling is very much dependent upon the electronic commerce. The most on-line gambling systems use the existing electronic commerce protocols. Therefore, an Internet gambling server must provide two basic services, i.e., game service and e-commerce service

8 Internet Gambling 29 M-Commerce m-commerce or w-commerce are terms for mobile or wireless e-commerce GSM (Global System For Mobile Communication ) - 2G GPRS (General Packet Radio Service ) kbps - 2.5G WAP (Wireless Application Protocol) is emerging technology based on WML - 2.5G WAP is a set of communication protocols to standardise the way that wireless devices can be used for Internet access 30 M-Commerce M-Commerce 3G 2M/s, 384k/s or 144k/s in outdoor, indoor or moving environments 4G has been deployed in a number countries, including Australia and China up to 2-100Mbps for moving users These areas utilise m-commerce: Financial services: customers can use hand held devices to access accounts, pay bills Telecommunications: service changes, bill payments and account reviews can be conducted from a hand held device

9 M-Commerce Service Retail: allows customers to pay for services on the fly Pilot schemes in Scandinavia allow for consumers to use their mobile phones to pay for unattended car parking, soft drinks in vending machines Information Services: delivery of financial news, sports figures and traffic updates to a mobile device P-Commerce Pervasive Commerce a new trend a handheld device with Wi-Fi enabled, such as PDA, will become cheaper and more popular with handphone with Bluetooth with RFID (Radio Frequency Identification) reader each product can have a RFID tag attached, which stores the product s information The PDA can obtain the product s info and communicate with the server of the shop for more info P-Commerce Types of E-Commerce? wiki 35 There are nine segments to e-commerce: B2B Business to Business B2C Business to Consumer C2C Consumer to Consumer C2B Consumer to Business B2G Business to Government C2G Consumer to Government G2B Government to Business G2G Government to Government G2C Government to Consumer 36 9

10 What s B2B E-Commerce? [Awad chapter 11] B2B Entities B2B Both sellers and buyers are business organizations Involves complex procurement, manufacturing, planning collaboration, payment terms and performance agreements Buying Company Order Fulfillment Deliverer Selling Company ERP 37 ERP: Enterprise Resources Planning 38 B2B Entities Enterprise Resource Planning (ERP) is a term used to refer to a system that links individual applications (for example, accounting and manufacturing applications) into a single application that integrates the data and business processes of the entire e-business. By Napier et al, pp B2B Entities (cont.) Purchasing Company Focus on procurement in terms of reduced purchase prices and cycle time The buying company announces a request for purchase of a certain product on its Web site, and the participating suppliers in the B2B network send their bids. Selling Company Focus on marketing and sales. Each seller has its unique catalog, pricing policy, and discount schedule

11 B2B Entities (cont.) Intermediating Service Provider Focus on ensuring order fulfillment Such a service provider mediates between the buying company and the supplier (seller), usually for parts and unique products. JIT Deliverer Focus on just-in-time delivery B2B Entities (cont.) Web-based Platform Focus on Internet, Intranet, and Extranet Tools of B2B Focus on Electronic Data Interchange (EDI) and software agents Back-End Technical Support Focus on Enterprise Resource Planning (ERP) Advantages Save money on purchases that are negotiated instantly Replacing earlier purchasing bureaucracy with online links improves efficiency Just-in-time environment minimizes inventory sitting in the warehouse Supply Chain (Awad, p337) Process of moving goods from customer order through the raw materials, supply, production, and the distribution of products to the customer Benefits Reduced inventory, higher sales, improved ability to customize products for different business buyers, and reduced production cost

12 Supply chain relationships in B2B Supply chain process consists of a number of interrelated subprocesses and roles acquisition of materials from suppliers processing of a product or service packaging it and moving it to distributors and retailers purchase of a product by the end consumer A simple supply chain (Turban, Chapter 8) A simple supply chain (Awad, Chapter 11) B2B Models Supplier-oriented B2B A supplier invites customers to order product via its electronic market store Forward auction Buyer-oriented B2B A buyer uses the Internet by opening a marketplace on its own server and opening the window for suppliers to do the bidding Reverse auction

13 B2B Integration Challenge B2B Integration Deals with spanning independent businesses, each with its own set of applications and users Interoperates with heterogeneous systems without being tied to one specific system technology B2B Integration Solutions Via a Web site as a front-end for information sharing among partners Extract information from one partner s application convert it into a format amenable for transmission via EDI For two companies to use common technology to coordinate data exchange What is B2C? Business-to-Consumer It is also called e-retailing B2C EC includes retail transactions of products and services from business to individual shoppers. Amazon.com What is C2C? In C2C, consumers sell directly to other consumers. Examples include selling residential property, cars and so on. Peer-to-Peer technique used in C2C. ebay.com

14 What is C2B? consumer-to-business is this type of business Developed the reverse auction model where bidders set their price for items and a seller decides whether to supply them Buyer-oriented E-government? G2B, government to business G2C, government to individual citizens Government to Government G2G Particularly important in Australia using the Internet to communicate between federal and state governments Australia has an office for government Online OGO E-Business Systems: Intranets" Intranet Extranet Internet

15 References Awad, Chapters 1, 11 Lawrence, Chapters 1,