What is E-Commerce?What is E-Commerce?

Section 8.1Section 8.1

What is E-commerce?What is E-commerce?

E-commerceE-commerce is the is the exchange of goods, exchange of goods, services, information, services, information, or other businesses or other businesses through electronic through electronic media.media.

Through low-cost or free Through low-cost or free connections to the connections to the internet, millions of internet, millions of people around the people around the world can instantly world can instantly access information and access information and communicate with communicate with each other.each other.

Business on the NetBusiness on the Net

Not all businesses can Not all businesses can complete all of their complete all of their activities using the activities using the internet, but the internet, but the internet can be used internet can be used for many activities. for many activities.

For example, a For example, a company can process company can process orders, bill customers, orders, bill customers, and maintain accounts. and maintain accounts.

Bricks to Dot.ComsBricks to Dot.Coms

A company that does A company that does almostalmost all of its all of its business activities through the internet is business activities through the internet is referred to as a dot.com business.referred to as a dot.com business.

Businesses that complete Businesses that complete mostmost of their of their activities by means other than the internet activities by means other than the internet are referred to as bricks and mortar are referred to as bricks and mortar businesses. businesses.

Information StageInformation Stage

Information Stage-the website provides Information Stage-the website provides basic information to help prospective basic information to help prospective customers as they gather information about customers as they gather information about products and companies. products and companies.

Interaction StageInteraction Stage

In addition to providing information, the In addition to providing information, the company uses its website to interact with its company uses its website to interact with its consumers. consumers.

The simplest form of interaction is the use The simplest form of interaction is the use of e-mail.of e-mail.

They can check product availability, They can check product availability, calculate product costs and shipping calculate product costs and shipping charges, and determine how long it will charges, and determine how long it will take to have an order delivered.take to have an order delivered.

Integration StageIntegration Stage

With all of the internet With all of the internet tools available , an tools available , an entire business entire business transaction can be transaction can be completed on an completed on an integrated site. integrated site.

Customers can get Customers can get necessary product, necessary product, pricing, and shipping pricing, and shipping information .information .

Companies with Companies with integrated use of the integrated use of the internet do not have to internet do not have to be a dot.com business. be a dot.com business.

The Internet and MarketingThe Internet and Marketing

Many of the first internet businesses did not Many of the first internet businesses did not understand the importance of marketing.understand the importance of marketing.

Thousands of business thought they could Thousands of business thought they could be successful in e-commerce , but a be successful in e-commerce , but a majority was not successful because they majority was not successful because they did not apply the marketing concept.did not apply the marketing concept.

Advantages of E-CommerceAdvantages of E-Commerce

Businesses that use the internet have several Businesses that use the internet have several advantages over those who do not.advantages over those who do not.

They also have immediate access to They also have immediate access to customers all over the world.customers all over the world.

They can introduce new products or update They can introduce new products or update product information instantaneously.product information instantaneously.

With the Internet, a customer’s concern or With the Internet, a customer’s concern or question can be sent to the company at any question can be sent to the company at any time.time.

Disadvantages of E-CommerceDisadvantages of E-Commerce

Not everything about the development of Not everything about the development of the Internet as a business tool has been the Internet as a business tool has been positive.positive.

Provides any easier way for someone to Provides any easier way for someone to start a business without understanding start a business without understanding everything that’s necessary for success.everything that’s necessary for success.

By using E-commerce, businesses have By using E-commerce, businesses have found that it is harder to predict the demand found that it is harder to predict the demand for products.for products.

The Marketing Concept Applied The Marketing Concept Applied to E-Commerceto E-Commerce

E-Commerce has E-Commerce has demonstrated the demonstrated the importance of the importance of the marketing concept to marketing concept to successful businesses.successful businesses.

All parts of the marketing All parts of the marketing mix not just promotion is mix not just promotion is important for successful important for successful e-commerce e-commerce

When information When information about a company's about a company's products and services products and services can be viewed by can be viewed by people in many people in many locations, it is harder locations, it is harder for businesses to find for businesses to find their target market.their target market.

8.2 8.2 Growing Importance of Growing Importance of E-CommerceE-Commerce

Growth of internetGrowth of internet

It was first developed as a military and It was first developed as a military and research tool in the 1950’sresearch tool in the 1950’s

In 2000, the United States had the highest In 2000, the United States had the highest amount of internet users, which is 40% of amount of internet users, which is 40% of all users in the worldall users in the world

Internet sales to consumers represent less Internet sales to consumers represent less than 1% of all consumer purchasesthan 1% of all consumer purchases

56%

9%

7%

7%

6%

3% 3%3%3% 3%

Countries With the Highest % of internet users in 2000 % of users

United States Japan United Kingdom Canada

Germany Australia Brazil China

France South Korea

Business usages of the internetBusiness usages of the internet

Many businesses believe that the internet is Many businesses believe that the internet is not useful for the type of business activities not useful for the type of business activities they performthey perform

In 1998, only $8 billion out of $45 billion of In 1998, only $8 billion out of $45 billion of sales came from the internetsales came from the internet

Businesses can use the internet to distribute Businesses can use the internet to distribute information to the customers and the information to the customers and the employeesemployees

Business usages of the internet Business usages of the internet continued…continued…

Small businesses can benefit competitively Small businesses can benefit competitively from using the internet.from using the internet.

From the very beginning of the internet, the From the very beginning of the internet, the primary way people have communicated primary way people have communicated using internet technology is through e-mail.using internet technology is through e-mail.

A business can use the information it A business can use the information it gathers to improve its marketing mix.gathers to improve its marketing mix.

Business usages of the internet Business usages of the internet continued…continued…

Businesses that do not provide information Businesses that do not provide information about themselves on the internet may miss about themselves on the internet may miss some potential customers.some potential customers.

The internet has affected the ability to find The internet has affected the ability to find out information out about its customersout information out about its customers

Impact of E-Commerce on Impact of E-Commerce on Distribution ChannelsDistribution Channels

Distribution for E-CommerceDistribution for E-Commerce Effective distribution is an Effective distribution is an

important part of important part of satisfying customer needs.satisfying customer needs.

Major distribution Major distribution changes in e-commerce changes in e-commerce have been in access to have been in access to products and services, products and services, order processing, and the order processing, and the methods used to distribute methods used to distribute products from the products from the business to its customers. business to its customers.

Finding and Buying ProductsFinding and Buying Products With Internet access consumers have more choices of companies and With Internet access consumers have more choices of companies and

products.products. Consumers and companies can easily find suppliers and vendors on Consumers and companies can easily find suppliers and vendors on

the Internet by using a search engine. the Internet by using a search engine. The Internet has made it easier for a company to process an order. The Internet has made it easier for a company to process an order. Online shopping carts have been designed to make it easy to complete Online shopping carts have been designed to make it easy to complete

an order, make immediate payment, and submit the order securely.an order, make immediate payment, and submit the order securely. Eventually U.S. consumers will make up only a small percentage of Eventually U.S. consumers will make up only a small percentage of

individuals shopping on the Internetindividuals shopping on the Internet. .

Order Processing Order Processing The Internet has streamlined order processing The Internet has streamlined order processing

and reduced the amount of paper that must be and reduced the amount of paper that must be handled to complete a sales transaction. handled to complete a sales transaction.

The customer or salesperson can check on the The customer or salesperson can check on the status of the order at any time it is processed, status of the order at any time it is processed, filled, and shipped. filled, and shipped.

The use of the Internet for order processing The use of the Internet for order processing reduces the number of errors since the reduces the number of errors since the accuracy of the order can be more easily accuracy of the order can be more easily checked. checked.

There is also a large savings in order There is also a large savings in order processing and distribution costs. processing and distribution costs.

PRODUCTPRODUCT SAVINGSSAVINGS

Computer Computer SoftwareSoftware

99%99%

Banking Banking ServicesServices

89%89%

Airline TicketsAirline Tickets 87%87%

StocksStocks 78%78%

BooksBooks 56%56%

Toys/GiftsToys/Gifts 48%48%

Product DistributionProduct Distribution Express packages, fresh Express packages, fresh

flowers, and gourmet flowers, and gourmet foods can be transported foods can be transported on airplanes to insure on airplanes to insure rapid shipment, so it is rapid shipment, so it is not possible for those not possible for those types of products to be types of products to be distributed using the distributed using the Internet. Internet.

The Internet allows many The Internet allows many services to be easier to services to be easier to process and products less process and products less expensive to distribute. expensive to distribute.

Companies have had to Companies have had to change the form of their change the form of their products to be able to products to be able to distribute them using the distribute them using the internet. Ex. Airlines and internet. Ex. Airlines and E-tickets.E-tickets.

Distribution Problems and SolutionsDistribution Problems and Solutions The key distribution problems The key distribution problems

include the security of transactions, include the security of transactions, expanded the distribution expanded the distribution requirements, and customer service requirements, and customer service demands. demands.

Privacy concerns have led some Privacy concerns have led some users to distrust and avoid sites that users to distrust and avoid sites that use cookies (small files that a web use cookies (small files that a web server sends to your browser when server sends to your browser when you access a site) because the you access a site) because the cookies can be sent to a users cookies can be sent to a users computer without their permission.computer without their permission.

Transaction Security Transaction Security One of the greatest concerns express by customers is One of the greatest concerns express by customers is

the security of their personal information they must the security of their personal information they must provide to the company when placing an order. provide to the company when placing an order.

The most important is that their credit card number will The most important is that their credit card number will be stolen.be stolen.

There are alternatives to using a credit card to There are alternatives to using a credit card to purchasing a product on the internet for example; pre purchasing a product on the internet for example; pre arranged payments.arranged payments.

Consumers are also afraid the business will misuse the Consumers are also afraid the business will misuse the information after the order has been processed. To information after the order has been processed. To meet this concern, companies have purchased security meet this concern, companies have purchased security technology.technology.

Expanded Distribution andExpanded Distribution and Customer Service Customer Service

Businesses found that they had to distribute their Businesses found that they had to distribute their products in different ways to many more locations products in different ways to many more locations than before. For example; books can be electronically than before. For example; books can be electronically delivered to a customer but flowers cannot (most delivered to a customer but flowers cannot (most products can be electronically ordered).products can be electronically ordered).

Companies such as UPS and FedEx have expanded Companies such as UPS and FedEx have expanded their services and offer overnight shipping.their services and offer overnight shipping.

E-businesses offer complete return policies and E-businesses offer complete return policies and procedures on their websites, while some have made procedures on their websites, while some have made arrangements to make returns at local stores.arrangements to make returns at local stores.

Customer service centers have been improved by 24/7 Customer service centers have been improved by 24/7 online help centers, FAQ’s, and product warranties.online help centers, FAQ’s, and product warranties.

Promotion in E-CommercePromotion in E-Commerce

CommunicationCommunication

Only 2% of internet users go online with Only 2% of internet users go online with the intention of purchasing a productthe intention of purchasing a product

Most people go online to research the Most people go online to research the product they want to buy and go buy it at a product they want to buy and go buy it at a local store local store

Many companies use internet advertising to Many companies use internet advertising to promote products and servicespromote products and services

Top internet advertisers include Amazon, Top internet advertisers include Amazon, yahoo, eBay, E*Trade, etc. yahoo, eBay, E*Trade, etc.

Internet PromotionInternet Promotion

Web site sponsorship, priority placement in Web site sponsorship, priority placement in web browsers and comparison shopping web browsers and comparison shopping services, and providing consumer services, and providing consumer information websites. information websites.

Companies are competing for attention of Companies are competing for attention of internet users.internet users.

Cost of E-CommerceCost of E-Commerce

Its estimated the companies will spend Its estimated the companies will spend between 5 million and 23 million dollars.between 5 million and 23 million dollars.

Planning the Shopping Planning the Shopping ExperienceExperience

There are 8 steps to shopping onlineThere are 8 steps to shopping online The steps deal with everything from search The steps deal with everything from search

engines for gathering information to engines for gathering information to answering the questions of the customer.answering the questions of the customer.

Effective Promotion MethodsEffective Promotion Methods

Important methods of promotion for E-Commerce Important methods of promotion for E-Commerce include the followinginclude the following

An easy to remember meaningful internet addressAn easy to remember meaningful internet address Well designed online advertisementsWell designed online advertisements Advertisements and other media such as Advertisements and other media such as

newspapers and televisionnewspapers and television Registration with search engines to identify the Registration with search engines to identify the

company for people gathering information related company for people gathering information related to its productsto its products