EFT – Electronic funds transfer

• Refers to the payment for goods, where the payment is made from one account to another i.e– Credit and debit cards– Payments made using an intermediary such as Paypal– Payments through an electronic purse (pre-paid cards)– Payments made between one bank account and another

using online banking

Advantages of electronic paymentsAdvantages from a customers

perspectiveAdvantages from a store’s

perspectiveFaster receipt of goods or services – no wait for post or cheques to clear

Payment is immediate and cash flow is improved

Quicker to enter credit card details rather than send a cheque in the post

EFT can be integrated with accountancy system, so fewer account staff are needed thus reducing business costs

If a credit card is used for items costing over £100, then the credit card company will take up any complaints you have with the store

No wasted time dealing with cheques that bounce (i.e. When a customers account doesn't have enough money and it returned.)Faster delivery can be offered which can improve turnover

Disadvantages of electronic paymentsDisadvantages from a customers

perspectiveDisadvantages from a store’s

perspective

Payments are easy, so a customer may impulse buy and regret it

Stores have to pay commission for electronic payments to the company being used to make the payment

There may be a tendency to spend too much on credit cards

There is danger in entering card details that they will fall into the wrong hands and be used fraudulently

Stolen credit cards may be used to pay for products or services. It is the seller of goods or services who has to bear the cost of fraudulent transactions.

Not everyone has a computer or internet access

There needs to be procedures in place to ensure the security and privacy of customer’s data i.e. Credit and debit card details

Erosion of privacy as more companies hold data about you and what you buy

It is quite expensive to set up a payment system

E Commerce – online shopping

• Commerce involves– Buying– Distributing – Marketing– Selling– Paying

• If some or all of these are performed using electronic systems such as the internet it is seen as e-commerce

E – Commerce involves...

• On-line marketing• EFT• Just-in-time control systems• On-line transaction processing• Electronic data exchange• Automatic stock control systems• Automated data entry systems

Main Parts of an E-Commerce system

1. A catalogue of products that include a search facility and also provide a link to the stock control system

2. A shopping basket – allows shoppers to browse, add and remove items

3. Checkout – where shoppers enter their details and pay for their goods

4. Payment – when card details are encrypted and validated and the transaction is either accepted or declined. If authorised a confirmation email is sent to the customer.

Benefits of E-Commerce• Always accessible – open 24/7• Low start-up/running costs – relatively cheap to set up

an e-commerce as all you require is a computer connected to the internet and something to sell

• Easily updated – No need for printed materials, websites can be updated daily or even more so

• Search facilities – Goods can be found quickly on e-commerce sites using a search facility

Benefits of E-Commerce• Low distribution costs – no use for other types of promotion,

websites aren’t labour intrusive• Global marketplace – goods can be shipped worldwide• Competitive edge – nearly always savings to be made online due

to low running costs• Gathering customer info – via email, tracking cookies (items

viewed)• Alternative income sources – if your website has many hits you

can produce income through: banner adverts; links to other sites; both of wish generate commission and promo for your website

Drawbacks of E-Commerce

• Unemployment – computers automate many administrative tasks

• Lack of social interaction – between customers and staff

• Lack of exercise – walking around traditional shops is good exercise

• Problems when things go wrong – i.e. When returning items

Drawbacks of E-Commerce

• Lack of customer trust – fake websites, credit card fraud, bad customer service

• Problems with international legislation – Goods bought overseas seem cheaper but can be heavily taxed by customs duty

• Goods from abroad mean profits abroad – high street stores and country may suffer

• Security problems – many people are scared/weary of entering details online

Tasks• What does EFT refer too and give 2 examples

of its usage. (4)• Discuss the advantages and disadvantages of

electronic payments from a customer and store perspective. (8)

• What are the four main components of an E-Commerce system? (8)

• Discuss in detail three benefits and three drawbacks of an E-Commerce system. (12)

EPOS – Electronic Point of sale

• POS terminals are placed in stores where customers pay for goods, they generally include:– Touch screen displays– Keyboards– Magnetic Strip Readers (i.e. For credit cards etc)– Bar code readers

Bar code recognition

• Involves a series of light and dark bars of different widths to enter a code which is usually printed underneath the bar code

• The system then finds the product in its database

• Bar code applications include:– Warehouse stock control systems– Recording goods in the supermarket

Advantages and disadvantages of bar code input

Advantage DisadvantageFaster – Scanners are sophisticated and can read bar codes at different angles

Can only be used for the input of numbers

More accurate compared to typing in long codes automatically

Expensive – the laser scanners in supermarkets are expensive, although handheld scanners are cheaper

Low printing costs – can be printed on labels, software can be purchased to print bar codes using a ordinary printer

Other methods of data entry• Handheld input devices – portable devices for stock taking;

use wireless communication to send data to the system• Magnetic strip readers – can be seen on credit, debit and

loyalty cards; fewer errors as no keying in of data; added security as details are held on strip which don’t appear on the card; quick to scan; data can’t be read without required machine

• Chip and PIN reader – replaced magnetic strip readers; rather than signing to verify you own the card you use a PIN to verify ownership

Automatic stock control

• Shops need to control stock for the following:– Keeping large quantities of stock is expensive, if the

quantity is decreased then the resources released can be put into better use in the organisation

– If insufficient stock is kept, customer’s requirements may not be met and shoppers may move elsewhere

– Many of the stock items are perishable – have a limited shelf life

Automatic stock control costs

• Cost of buying the stock• Cost of premises to house stock• Staffing costs to find and move stock• Higher wastage due to perishable goods

Feedback

• Feedback systems are used in forms of stock control to reduce the variation between the stock kept and the stock required to satisfy customers

• This reduces higher than necessary stock levels

• Comparisons are constantly made between set stock level and actual stock used

Main objectives of stock control

• To maintain adequate stock levels• Automatically re order goods• Monitor and adjust stock levels• To produce stock evaluations for accountancy• To provide management with up-to-date and

accurate stock info

JIT - Just in time stock control• Goods are delivered as fast as they are being sold• Cuts stock held by a fifth and frees up staff• Allows individual stores to respond to changed demand for

products throughout the day• System ensures they don’t run out of items such as ice cream

on a sunny day• Deliveries are spread to 4-5 times a day rather than one large

delivery in the morning• Saving in human resources as staff can concentrate on

customer focused tasks

Advantages and disadvantages of JIT

Advantages DisadvantagesSmaller stores can be used as less stock is held

Expensive to introduce

Store is able to change its demand throughout the day

Stores are more responsible for their own ordering so more admin is needed.

Easier to cope with several smaller deliveries

True stock may differ due to theft

Ensures that they do not run out of fast selling goods

Pricing

• A database holds all of the item details• The bar code of an item is linked to each item• When the price is changed, the bar code links to

the new price• The store then needs to print out a stock label for

the shelf• Stores can pass on price increases from their

suppliers to the customers• This increases profitability

Loyalty Cards• Used as a mean of encouraging customers to shop at their

store• Enables stores to gather information on customers• Customers gather points which they can use in store• The scheme works as follows:

– The customer fills out an application– The customer gives a card that contains a magnetic strip– Each customer takes the card to the store when they shop– When making a purchase the loyalty card is linked– This then adds points to the loyalty cards– The store then allows customers to spend their points and offer vouchers

Tasks• What does a POS terminal typically include? (4)• How does bar code recognition work, and give two advantages and two

disadvantages of using them (6)• What could errors occur when scanning a barcode? (4) • Other than bar code recognition describe in detail three examples of data

entry. (6)• State two reasons why supermarkets use automatic stock control. (2)• Describe the process of just in time stock control. (3)• What are the advantages and disadvantages of using JIT stock control (4)• How are loyalty cards used to entice customers to shop at a store? (2)