10% of individuals in the UK accessed the Internet with their mobile phone in 2010 - above the EU average of 7%. UK M-Commerce sales are forecasted to more than double until 2013. The expected boom of M-Commerce will be driven by new technologies and the growing penetration of smartphones.
B2C E-Commerce sales in France reached more than EUR 30 billion in 2010.
El Corte Ingles was the leading B2C E-Commerce player in terms of unique monthly visitors in Spain in May 2011, followed by Privalia.com, Carrefour, Casa del Libro, Zara, La Redoute and Venca.
The share of B2C E-Commerce on total retail sales in Italy grew from 4% in 2009 to 6% in 2010.
The number of Internet users in the Netherlands reached 15 million in 2010, accounting for 90% of the total
population.
Belgian B2C E-Commerce sales increased by +15% in 2010 (vs. 2009). 95% of Belgian online retailers see a bright future for 2011, however, 84% expect more international competition.
Wednesday, 29 February 2012
Increasing Ecommerce Trends Indicate High Holiday Spending
As retailers gear up for the holiday shopping season, many hope that the recent stock market turbulence will not prevent the strong end-of-year performance of years past. Retailers have come to count on the sales spike that traditionally occurs during Q4. The US Department of Commerce found that in 2010 retail ecommerce sales jumped from $39.2 billion to $53.2 billion between the third and fourth quarters.
The findings released in August by the DOC show that retail ecommerce sales are on track. Preliminary sales for Q2 2011 were the highest of all preceding second quarters. And, importantly for online retailers, ecommerce’s share of total retail sales, while still small, is steadily increasing
comScore also cited positive change for Q2 2011 compared to the same period last year. Sales were up by $5 billion, the number of online buyers increased 16% and online buyer penetration among internet users increased 9 percentage points to 70%. The 2% decrease in dollars spent per buyer could be attributed to the increase in number of overall online buyers, particularly those from lower income segments..
In addition, comScore found that the income segment with the largest increase in online spending from Q1 2011 to Q2 2011 was households making less than $50,000 per year. They experienced 28% growth, a significant jump compared to the 8% change among earners of $50,000 to $99,000 and the 12% increase for those making $100,000 or more.
The findings released in August by the DOC show that retail ecommerce sales are on track. Preliminary sales for Q2 2011 were the highest of all preceding second quarters. And, importantly for online retailers, ecommerce’s share of total retail sales, while still small, is steadily increasing
comScore also cited positive change for Q2 2011 compared to the same period last year. Sales were up by $5 billion, the number of online buyers increased 16% and online buyer penetration among internet users increased 9 percentage points to 70%. The 2% decrease in dollars spent per buyer could be attributed to the increase in number of overall online buyers, particularly those from lower income segments..
In addition, comScore found that the income segment with the largest increase in online spending from Q1 2011 to Q2 2011 was households making less than $50,000 per year. They experienced 28% growth, a significant jump compared to the 8% change among earners of $50,000 to $99,000 and the 12% increase for those making $100,000 or more.
Monday, 27 February 2012
M Commerce - CONCLUDING REMARK
This blog has presented variations of m-commerce business models that portray the revenue streams among the market players in m-commerce. In making a remark on this trend, we have made a comparison on the e-commerce context and the m-commerce context. In e-commerce, apart from the actual cost of the service and products, the network cost is well distributed among the internet users. As a consequent, content providers can launch attractive revenue models, including free email and free storage space, to attract consumers to their sites. One major reason for efficient e-commerce model is because the internet technology is not as costly as the wireless technology, such as 3G and beyond. We believe that the revenue streams in m-commerce model are still changing in search for the best model that result in profitability for the providers as well as low cost for the consumers.
We have also pointed out that technology advancement plays an essential role in m-commerce adoption. Taking advantage of technology and avoiding shortcoming in existing technical condition are significant to improve the efficiency of m-commerce model. For example, if high-speed network is not available in some areas, then mobile-TV services cannot be delivered.
Other factors that affect m-commerce adoption include: niche position of each player in the value chain, trust and service quality; trust among players as authorization and payment are key aspects in the m-commerce infrastructure; and quality of service to ensure that the services offered meet the consumers’ expectations.
We have also pointed out that technology advancement plays an essential role in m-commerce adoption. Taking advantage of technology and avoiding shortcoming in existing technical condition are significant to improve the efficiency of m-commerce model. For example, if high-speed network is not available in some areas, then mobile-TV services cannot be delivered.
Other factors that affect m-commerce adoption include: niche position of each player in the value chain, trust and service quality; trust among players as authorization and payment are key aspects in the m-commerce infrastructure; and quality of service to ensure that the services offered meet the consumers’ expectations.
Sunday, 26 February 2012
FACTORS AFFECTING M-COMMERCE ADOPTION
Apart from the business model outlined previously, in this section, we present four reasons for today’s low adoption rate of m-commerce: high cost, technology maturity, innovative service provision, and efficient procedure in pricing and billing process.
Cost
M-commerce operates within the paid-for service framework in the private mobile phone industry where business competition is stiff. In using this telecommunication services, users pay for air time, by the size of the data packet transmitted, and by the service used for what they get (Fox, 2000). At present, global wireless networks are segmented and owned by different mobile operators. Shim and Rice (2001) argued that compared to the low cost for internet access, a distinctive characteristic of m-commerce is the high cost of the network infrastructure. Mobile communication through mobile phones is costly, and any additional services and applications lead to extra charges. The reason is that the establishment of a mobile communication network requires heavy business investment (Ramakrishnan, 2001). Therefore, m-commerce players must generate revenue by conducting business activities to justify the huge initial investment (Lamont, 2001). Similar perspective can therefore be put forward on the price of services and applications. The development and delivery of services and applications also need initial investment. This means the service and application providers must look for revenues from selling the services and applications. Unfortunately, these costs of mobile network usage, and service and applications delivery have to be passed on to consumers. This high cost is undesirable because cost has been an important factor considered by consumers when deciding whether or not to participate in m-commerce (Plouffe, Hulland and Vandenbosch, 2001).
As stated by Chen and Hitt (2002): “when switching to different products or online services, consumers must deal with non-negligible costs.” Obviously, adoption of m-commerce initially implies expenses such as equipment (Constantinides, 2002). Combining with the cost of subscription and using the services and applications, in m-commerce models, we can observe that cost influences the adoption of m-commerce, which directly influences the efficiency of m-commerce models. However, it is quite common that the services and applications and equipments which incorporate the latest technology always cost more than products with matured technology. Although high cost may prevent users from accepting new services and applications, lack of services and applications may also lead to low usage.
Technology
M-Commerce services are constrained by a variety of wireless media communication standards ranging from global (Satellite), regional (3G, IEEE 802.11a/b, DoCoMo I-mode), to short distance or Bluetooth (Shim and Rice, 2001). Mobile network providers use different systems and standards such as GSM (Global Service for Mobile), TDMA (Time Division Multiple Access), and CDMA (Code Division Multiple Access) to compete with each other (Leung and Antypas, 2001). Because of different standards of technology, m-commerce applications tend to be device and network dependent. Studies found that there has been no generic world-wide framework and standard for application development using universal mobile connection and access. This resulted in the slower-than-expected adoption of m-commerce (Shim and Rice 2001).
Despite the challenge in different network standards, variant bandwidth is a critical problem. Recently, the multi-band and multi-mode mobile devices have emerged, allowing communications between networks. Typical forerunners are the dual-band mobile phones that are able to use 900 MHz and 1800 MHz GSM networks. Also, there are services that can use WLANs and Bluetooth, together with GSM, GPRS, and 3G networks. However, wireless technologies vary on the degree of bandwidth and reliability they provide. On one hand, this limits the types of services and applications that can be provided, for example, mobile TV that requires high bandwidth. On the other hand, it induces slow, unreliable connections, or poor connection quality - resulting in unsatisfying user experience. Furthermore, in some networks and for some services, fees are charged per connection-time, while for others, such as in packet radio, it is charged per message or packet (Wu and Wang, 2004). The difficulties in networks quality such as frequent unexpected disconnection may directly lead to increase in charges, which results unfavorably for m-commerce adopters.
In addition to underlying networking infrastructure and standards, it is the client devices that actually determine what specific services and applications can be delivered. M-commerce applications rely on the use of mobile devices. Mobile phones, as the main m-commerce device, can be divided into four categories based on their processor, memory and battery capacity, application capabilities (SMS, WAP, Web, I-mode) as well as physical size and weight (Tsalgatidou & Pitoura 2001). These categories are (from weakest to strongest): usual voice handsets with SMS capability, WAP phones, communicators or PDA with wireless communication capability, and finally laptops with wireless communication facilities. On one hand, in order to achieve mobility, devices must be physically light and small. Portability considerations, in conjunction with a given cost and level of technology, will keep mobile elements having less resources than static elements. This includes smaller memory, disk capacity and computational power than traditional computing devices. Additionally, mobile devices such as mobile phones have tiny screens with limited display area. Although WAP devices support a limited graphics format called Wbitmap, because mobile devices had limited bandwidth and small screens, any application that is heavily graphic or animation driven would not be suitable at this time. Furthermore, software applications are relatively crude. There are no cookies or session controls, meaning that if the connection is lost, the application will have to restart rather than being able to continue from previous screens (Leung & Antypas, 2001). Web browsers and drop-down menus are unavailable, so companies must plan on character-based terminal applications with cursors and key entry forms. Long selection lists or deep menu layers will wear out the fingers of even the most patient users (Moustafa 2000, Jainschigg and Grigonis 2001).
Service Provision
With the support of the mobile infrastructure, services and applications can be delivered to customers. Market players including network providers, service and content providers, gain revenue based on consumption of these services and applications.
Research by Zhang, Yuan and Archer (2002) concluded that wide accessibility of the internet plays a major role in e-commerce success. Powerful and matured computer systems enable searching and delivery of a variety of complex services and applications, as well as transaction processing to be accomplished easily. Comparing to e-commerce, the delivery of m-commerce applications relies on private network providers. Services are usually available in specific region, and are simpler, more personalized, location-specific and time-sensitive (Zhang, Yuan and Archer, 2002). Because mobile devices normally stay close to owners anytime and anywhere, it is believed that m-commerce creates a more private environment compared to e-commerce activities which may take place on any public computers. Lucas (2001) and Swartz (2001-1) affirmed that: “time sensitive, simple transactions such as movie ticket purchases, banking, and travel reservations are believed to be the key applications that will stimulate m-commerce”. Other important services and applications which drive m-commerce growth are location-based applications such as traveller navigation and emergency response (Secker, 2001, Rockhold, 2001 and Swartz, 2001-1, 2001-2). The main difference between m-commerce services and applications and traditional e-commerce services and applications is that the development and implementation of services and applications should take advantage of the characteristics of the available mobile networks and devices. As summarized by Zhang, Yuan & Archer (2002), the design of a successful service and application should take consideration on five factors: mobility (such as in mobile communication), location-sensitive (such as in travel navigation), Time-critical (such as in flight schedules), personal identity (such as in electronic payments), special market niche-targeted (such as in services tailored to specific country).
In short, we can conclude that innovative and useful services and applications are necessary for providers to attract voluminous usage. Also, the type, quality and service fit will directly influence the user acceptance.
Pricing and Billing Issues
Research by Panagiotakis, Koutsopoulou and Alonistioti (2005) suggested that the usage of a charging protocol for the exchange of real time charging and authorization information is essential for m-commerce, especially for roaming scenarios. This argument therefore raises another factor that is crucial to m-commerce adoption, namely how to manage pricing and billing effectively. From the customers’ point of view, simplicity, such as in the one-stop billing, is desirable (http://ping.fm/dOcAB). However, as different network providers and service and application providers have active role in the service provisioning and offering products under their own specific context, the pricing and billing systems should be customized to fit each of these providers. An example to solve this conflict and bypass the possibility of a complicated pricing model is the layered charging architecture proposed by Koutsopoulou et. al. (2004). This proposed model consists of three layers: transport, service and application, each designed for managing and processing relevant information at each layer. Additionally, different pricing models should be applied on each charging layer. For example, the applied pricing model can be: cost-based, subscription-based (or fixed charges), duration-based, volume-based, service-based, location-based, or event-based (http://ping.fm/YBx51). Moreover, the pricing of a service may be based on one or several of the following attributes: network type, device capabilities, quality of service, service termination indicator. Charges can be made depending on why, when or where a service was abnormally terminated, transaction type (receiving a certain type of message may have a specific price), content provider, content aggregator or network operator identity. This model is favorable from the independent providers’ perspective, because they can then set their own pricing policy for the services usage.
Cost
M-commerce operates within the paid-for service framework in the private mobile phone industry where business competition is stiff. In using this telecommunication services, users pay for air time, by the size of the data packet transmitted, and by the service used for what they get (Fox, 2000). At present, global wireless networks are segmented and owned by different mobile operators. Shim and Rice (2001) argued that compared to the low cost for internet access, a distinctive characteristic of m-commerce is the high cost of the network infrastructure. Mobile communication through mobile phones is costly, and any additional services and applications lead to extra charges. The reason is that the establishment of a mobile communication network requires heavy business investment (Ramakrishnan, 2001). Therefore, m-commerce players must generate revenue by conducting business activities to justify the huge initial investment (Lamont, 2001). Similar perspective can therefore be put forward on the price of services and applications. The development and delivery of services and applications also need initial investment. This means the service and application providers must look for revenues from selling the services and applications. Unfortunately, these costs of mobile network usage, and service and applications delivery have to be passed on to consumers. This high cost is undesirable because cost has been an important factor considered by consumers when deciding whether or not to participate in m-commerce (Plouffe, Hulland and Vandenbosch, 2001).
As stated by Chen and Hitt (2002): “when switching to different products or online services, consumers must deal with non-negligible costs.” Obviously, adoption of m-commerce initially implies expenses such as equipment (Constantinides, 2002). Combining with the cost of subscription and using the services and applications, in m-commerce models, we can observe that cost influences the adoption of m-commerce, which directly influences the efficiency of m-commerce models. However, it is quite common that the services and applications and equipments which incorporate the latest technology always cost more than products with matured technology. Although high cost may prevent users from accepting new services and applications, lack of services and applications may also lead to low usage.
Technology
M-Commerce services are constrained by a variety of wireless media communication standards ranging from global (Satellite), regional (3G, IEEE 802.11a/b, DoCoMo I-mode), to short distance or Bluetooth (Shim and Rice, 2001). Mobile network providers use different systems and standards such as GSM (Global Service for Mobile), TDMA (Time Division Multiple Access), and CDMA (Code Division Multiple Access) to compete with each other (Leung and Antypas, 2001). Because of different standards of technology, m-commerce applications tend to be device and network dependent. Studies found that there has been no generic world-wide framework and standard for application development using universal mobile connection and access. This resulted in the slower-than-expected adoption of m-commerce (Shim and Rice 2001).
Despite the challenge in different network standards, variant bandwidth is a critical problem. Recently, the multi-band and multi-mode mobile devices have emerged, allowing communications between networks. Typical forerunners are the dual-band mobile phones that are able to use 900 MHz and 1800 MHz GSM networks. Also, there are services that can use WLANs and Bluetooth, together with GSM, GPRS, and 3G networks. However, wireless technologies vary on the degree of bandwidth and reliability they provide. On one hand, this limits the types of services and applications that can be provided, for example, mobile TV that requires high bandwidth. On the other hand, it induces slow, unreliable connections, or poor connection quality - resulting in unsatisfying user experience. Furthermore, in some networks and for some services, fees are charged per connection-time, while for others, such as in packet radio, it is charged per message or packet (Wu and Wang, 2004). The difficulties in networks quality such as frequent unexpected disconnection may directly lead to increase in charges, which results unfavorably for m-commerce adopters.
In addition to underlying networking infrastructure and standards, it is the client devices that actually determine what specific services and applications can be delivered. M-commerce applications rely on the use of mobile devices. Mobile phones, as the main m-commerce device, can be divided into four categories based on their processor, memory and battery capacity, application capabilities (SMS, WAP, Web, I-mode) as well as physical size and weight (Tsalgatidou & Pitoura 2001). These categories are (from weakest to strongest): usual voice handsets with SMS capability, WAP phones, communicators or PDA with wireless communication capability, and finally laptops with wireless communication facilities. On one hand, in order to achieve mobility, devices must be physically light and small. Portability considerations, in conjunction with a given cost and level of technology, will keep mobile elements having less resources than static elements. This includes smaller memory, disk capacity and computational power than traditional computing devices. Additionally, mobile devices such as mobile phones have tiny screens with limited display area. Although WAP devices support a limited graphics format called Wbitmap, because mobile devices had limited bandwidth and small screens, any application that is heavily graphic or animation driven would not be suitable at this time. Furthermore, software applications are relatively crude. There are no cookies or session controls, meaning that if the connection is lost, the application will have to restart rather than being able to continue from previous screens (Leung & Antypas, 2001). Web browsers and drop-down menus are unavailable, so companies must plan on character-based terminal applications with cursors and key entry forms. Long selection lists or deep menu layers will wear out the fingers of even the most patient users (Moustafa 2000, Jainschigg and Grigonis 2001).
Service Provision
With the support of the mobile infrastructure, services and applications can be delivered to customers. Market players including network providers, service and content providers, gain revenue based on consumption of these services and applications.
Research by Zhang, Yuan and Archer (2002) concluded that wide accessibility of the internet plays a major role in e-commerce success. Powerful and matured computer systems enable searching and delivery of a variety of complex services and applications, as well as transaction processing to be accomplished easily. Comparing to e-commerce, the delivery of m-commerce applications relies on private network providers. Services are usually available in specific region, and are simpler, more personalized, location-specific and time-sensitive (Zhang, Yuan and Archer, 2002). Because mobile devices normally stay close to owners anytime and anywhere, it is believed that m-commerce creates a more private environment compared to e-commerce activities which may take place on any public computers. Lucas (2001) and Swartz (2001-1) affirmed that: “time sensitive, simple transactions such as movie ticket purchases, banking, and travel reservations are believed to be the key applications that will stimulate m-commerce”. Other important services and applications which drive m-commerce growth are location-based applications such as traveller navigation and emergency response (Secker, 2001, Rockhold, 2001 and Swartz, 2001-1, 2001-2). The main difference between m-commerce services and applications and traditional e-commerce services and applications is that the development and implementation of services and applications should take advantage of the characteristics of the available mobile networks and devices. As summarized by Zhang, Yuan & Archer (2002), the design of a successful service and application should take consideration on five factors: mobility (such as in mobile communication), location-sensitive (such as in travel navigation), Time-critical (such as in flight schedules), personal identity (such as in electronic payments), special market niche-targeted (such as in services tailored to specific country).
In short, we can conclude that innovative and useful services and applications are necessary for providers to attract voluminous usage. Also, the type, quality and service fit will directly influence the user acceptance.
Pricing and Billing Issues
Research by Panagiotakis, Koutsopoulou and Alonistioti (2005) suggested that the usage of a charging protocol for the exchange of real time charging and authorization information is essential for m-commerce, especially for roaming scenarios. This argument therefore raises another factor that is crucial to m-commerce adoption, namely how to manage pricing and billing effectively. From the customers’ point of view, simplicity, such as in the one-stop billing, is desirable (http://ping.fm/dOcAB). However, as different network providers and service and application providers have active role in the service provisioning and offering products under their own specific context, the pricing and billing systems should be customized to fit each of these providers. An example to solve this conflict and bypass the possibility of a complicated pricing model is the layered charging architecture proposed by Koutsopoulou et. al. (2004). This proposed model consists of three layers: transport, service and application, each designed for managing and processing relevant information at each layer. Additionally, different pricing models should be applied on each charging layer. For example, the applied pricing model can be: cost-based, subscription-based (or fixed charges), duration-based, volume-based, service-based, location-based, or event-based (http://ping.fm/YBx51). Moreover, the pricing of a service may be based on one or several of the following attributes: network type, device capabilities, quality of service, service termination indicator. Charges can be made depending on why, when or where a service was abnormally terminated, transaction type (receiving a certain type of message may have a specific price), content provider, content aggregator or network operator identity. This model is favorable from the independent providers’ perspective, because they can then set their own pricing policy for the services usage.
Thursday, 23 February 2012
M Commerce - An Introduction
In recent decade, we have witnessed e-commerce adoption and diffusion both in B2B and B2C contexts. Consequently, this acceptance has resulted in significant progress in strategies, requirements, and development of e-commerce applications and services. However, almost all e-commerce applications are based on wired infrastructure. This limitation, therefore, leads to the expectation of more portability and flexibility for facilitating business transactions. Hence, this leads to the emergence of mobile commerce (m-commerce) supported by advancement in wireless technologies.
M-commerce can be defined as the conduct of business supported by wireless technologies. The most significant advantage that m-commerce offer is the portability that facilitate customers doing business transactions and using services regardless of their physical locations. Studies found that mobile devices, namely mobile phones were one of the most quickly adopted consumer products (de Haan 2000). Currently, more than 800 million mobile phones and other mobile devices are in use worldwide.
The worldwide numbers are projected to rise to 1 billion soon, thereby exceeding the combined total of all computing devices (Vetter and Varshney 2002). Meanwhile, the mobile telecommunication networks, such as General Packet Radio Service (GPRS, Commonly referred to as 2.5G), Enhanced Data Rates for Global Evolution (EDGE, Commonly referred to as 2.75G), Code Division Multiple Access 2000-EVDO (CDMA2000-EVDO, Commonly referred to as one type of 3G) and Wideband Code Division Multiple Access (WCDMA, Commonly referred to as one type of 3G) (http://www.itu.int) have been developed rapidly. Countries that lack of regular telecommunication infrastructure are likely to adopt wireless and mobile communications to serve both urban and rural areas. Statistics indicate a rapid increase in mobile subscribers: from 2 billion in 2005 to approximately 3.3 billion by 2010 (Tilak, 2006). A study by the Wireless Data and Computing Service of Strategy Analytics predicted that transactions via mobile devices generate about $14 billion per year (Vetter and Varshney, 2002). This data implies the growing importance of mobile technology and applications in addition to the existing applications and services, including SMS and billing. It also suggests ample business opportunities and potential revenues in m-commerce.
To capture this opportunity, it is important for the industry to deploy effective business models and understand the drivers and inhibitors of m-commerce adoption. Hence, the purpose of our study is to examine the existing m-commerce business models and identify factors that influence the adoption of m-commerce. This paper discusses the advantages and disadvantages of existing business models. Furthermore, the paper also presents four important factors affecting the m-commerce adoption.
M-commerce can be defined as the conduct of business supported by wireless technologies. The most significant advantage that m-commerce offer is the portability that facilitate customers doing business transactions and using services regardless of their physical locations. Studies found that mobile devices, namely mobile phones were one of the most quickly adopted consumer products (de Haan 2000). Currently, more than 800 million mobile phones and other mobile devices are in use worldwide.
The worldwide numbers are projected to rise to 1 billion soon, thereby exceeding the combined total of all computing devices (Vetter and Varshney 2002). Meanwhile, the mobile telecommunication networks, such as General Packet Radio Service (GPRS, Commonly referred to as 2.5G), Enhanced Data Rates for Global Evolution (EDGE, Commonly referred to as 2.75G), Code Division Multiple Access 2000-EVDO (CDMA2000-EVDO, Commonly referred to as one type of 3G) and Wideband Code Division Multiple Access (WCDMA, Commonly referred to as one type of 3G) (http://www.itu.int) have been developed rapidly. Countries that lack of regular telecommunication infrastructure are likely to adopt wireless and mobile communications to serve both urban and rural areas. Statistics indicate a rapid increase in mobile subscribers: from 2 billion in 2005 to approximately 3.3 billion by 2010 (Tilak, 2006). A study by the Wireless Data and Computing Service of Strategy Analytics predicted that transactions via mobile devices generate about $14 billion per year (Vetter and Varshney, 2002). This data implies the growing importance of mobile technology and applications in addition to the existing applications and services, including SMS and billing. It also suggests ample business opportunities and potential revenues in m-commerce.
To capture this opportunity, it is important for the industry to deploy effective business models and understand the drivers and inhibitors of m-commerce adoption. Hence, the purpose of our study is to examine the existing m-commerce business models and identify factors that influence the adoption of m-commerce. This paper discusses the advantages and disadvantages of existing business models. Furthermore, the paper also presents four important factors affecting the m-commerce adoption.
Wednesday, 22 February 2012
Ecommerce - Success Stories and Lessons Learned
Offsetting the failures are hundreds of EC success stories, primarily in specialty
and niche markets (see Athitakis, 2003). Here are some of the reasons for EC
success and some suggestions from EC experts on how to succeed:
● Thousands of brick-and-mortar companies are slowly adding online channels
with great success. Examples are Godiva.com, Uniglobe.com, Staples.com,
Homedepot.com, Clearcommerce.com, 1-800-FLOWERS (800flowers.com),
and Southwest Airlines (iflyswa.com).
● As of late 2000, more companies were pursuing mergers and acquisitions
(e.g., Ivillage.com with Women.com, though each maintains its separate
Web site). Mergers seem to be a growing trend.
● Peter Drucker, the management guru, provides the following advice: “Analyze
the opportunities, go out to look, keep it focused, start small (one thing at a
time), and aim at market leadership.”
● A group of Asian CEOs recommends the following factors that are critical for
success: Select robust business models, foster e-innovation, co-brand, carefully
evaluate a spinoff strategy, employ ex-dot-com staffers, and focus on
the e-generation (young adults) as your market (e.g., alloy.com and bolt.com).
● Consultant PricewaterhouseCoopers (pwcglobal.com) suggests taking extra
care to avert technology malfunctions (e.g., inability to handle a surge of
orders quickly enough), which erode consumer trust.
● Many experts (e.g., The National Institute for Standards and Technology,
NIST) recommend contingency planning and preparing for disasters.
● Huff et al. (1999) suggest the following critical success factors for e-commerce:
Add value, focus on a niche and then extend that niche, maintain flexibility,
get the technology right, manage critical perceptions, provide excellent
customer service, create effective connectedness, and understand Internet
culture.
Conclusion:
Analyzing successful companies, researchers have suggested that if they do careful
planning to reach profitability quickly, many click-and-mortar companies are
likely to succeed. Joint ventures and partnerships are very valuable, and planning
for satisfactory infrastructure and logistics to meet high demand is needed.
In short, do not forget that e-business has a “business” side!
Finally, let’s not forget that history repeats itself. When the automobile was
invented, there were 240 startup companies between 1904 and 1908. In 1910
there was a shakeout, and today there are only three U.S. automakers. However,
the auto industry has grown by hundredfold. The same is happening in EC:
Despite the 2000–2003 failures, the total volume of EC activities continued to
grow exponentially. For example, emarketer.com reported on May 19, 2003, that
B2C revenues in 2002 reached $76 billion; a 48 percent increase over 2001. The
figure for 2003 was over $96 billion—more than a 30 percent increase over 2002.
and niche markets (see Athitakis, 2003). Here are some of the reasons for EC
success and some suggestions from EC experts on how to succeed:
● Thousands of brick-and-mortar companies are slowly adding online channels
with great success. Examples are Godiva.com, Uniglobe.com, Staples.com,
Homedepot.com, Clearcommerce.com, 1-800-FLOWERS (800flowers.com),
and Southwest Airlines (iflyswa.com).
● As of late 2000, more companies were pursuing mergers and acquisitions
(e.g., Ivillage.com with Women.com, though each maintains its separate
Web site). Mergers seem to be a growing trend.
● Peter Drucker, the management guru, provides the following advice: “Analyze
the opportunities, go out to look, keep it focused, start small (one thing at a
time), and aim at market leadership.”
● A group of Asian CEOs recommends the following factors that are critical for
success: Select robust business models, foster e-innovation, co-brand, carefully
evaluate a spinoff strategy, employ ex-dot-com staffers, and focus on
the e-generation (young adults) as your market (e.g., alloy.com and bolt.com).
● Consultant PricewaterhouseCoopers (pwcglobal.com) suggests taking extra
care to avert technology malfunctions (e.g., inability to handle a surge of
orders quickly enough), which erode consumer trust.
● Many experts (e.g., The National Institute for Standards and Technology,
NIST) recommend contingency planning and preparing for disasters.
● Huff et al. (1999) suggest the following critical success factors for e-commerce:
Add value, focus on a niche and then extend that niche, maintain flexibility,
get the technology right, manage critical perceptions, provide excellent
customer service, create effective connectedness, and understand Internet
culture.
Conclusion:
Analyzing successful companies, researchers have suggested that if they do careful
planning to reach profitability quickly, many click-and-mortar companies are
likely to succeed. Joint ventures and partnerships are very valuable, and planning
for satisfactory infrastructure and logistics to meet high demand is needed.
In short, do not forget that e-business has a “business” side!
Finally, let’s not forget that history repeats itself. When the automobile was
invented, there were 240 startup companies between 1904 and 1908. In 1910
there was a shakeout, and today there are only three U.S. automakers. However,
the auto industry has grown by hundredfold. The same is happening in EC:
Despite the 2000–2003 failures, the total volume of EC activities continued to
grow exponentially. For example, emarketer.com reported on May 19, 2003, that
B2C revenues in 2002 reached $76 billion; a 48 percent increase over 2001. The
figure for 2003 was over $96 billion—more than a 30 percent increase over 2002.
Tuesday, 21 February 2012
FAILURES AND STRATEGIES FOR SUCCESS
E-Commerce Failures : Failures of EC initiatives are fairly common. Furthermore, during 2000–2002,
large numbers of dot-com companies failed. In this section we will look at some
examples of failures and their causes. We will also look into some success factors
that can be used to prevent failure.
INTERNET-RELATED EC FAILURES. Pioneering organizations saw the potential
for e-commerce, but expertise and EC business models were just developing.
Failures of EC projects started as early as 1996. However, the major wave of
Internet-based EC failures started in 2000, as second-round funding (funding
subsequent to a firm’s original funding but before it goes to the stock market with a stock offering) began to dry up. Here are some examples. (In the list we
have highlighted key reasons for the failure.)
● Dr. Koop, a medical portal, was unable to raise the needed advertising
money, so the company folded. The diagnosis: death due to incorrect business
model.
● An Internet mall operated by Open Market was closed in 1996 due to an
insufficient number of buyers.
● Garden.com closed its doors in December 2000 due to lack of cash. Suppliers
of venture capital were unwilling to give the company any more money to
“burn.”
● Several toy companies—Red Rocket, eParties.com, and BabyBucks.com—
failed due to too much competition. This competition led vendors to lower their
prices, which resulted in insufficient profits.
● Living.com, the online furniture store, closed in 2000. The customer acquisition
cost was too high.
● PaperX.com, an online paper exchange in the UK, folded due to lack of
second-round funding.
● Webvan, an online grocery and same-day delivery company, made a huge
investment (over $1 billion) in infrastructure of warehouses and logistics. But its
income was insufficient to convince investors to fund it further. It collapsed
in 2002.
● In late 2000 Chemdex.com, the “granddaddy” of the third-party exchanges,
closed down. Ventro.com, its parent company, said that the revenue growth
was too slow and that a new business model was needed. Chemdex was not
alone: During 2001–2003 large numbers of exchanges folded or changed
their business models.
According to Useem (2000), the major reasons for EC failure are incorrect
revenue model, lack of strategy and contingency planning, inability to attract
enough customers, lack of funding, channel conflict with distributors, too much
online competition in standard (commodity) products (e.g., CDs, toys), poor
order-fulfillment infrastructure, and lack of qualified management. To learn
more about EC failures, visit whytheyfailed.com and techdirt.com.
FAILED EC INITIATIVES WITHIN ORGANIZATIONS : Whereas failed companies,
especially publicly listed ones, are well advertised, failed EC initiatives within
companies, especially within private companies, are less known. However,
news about some failed EC initiatives has been publicized. For example, Levi
Strauss stopped online direct sales of its apparel (jeans and its popular Levi’s
and Dockers brands) on its Web site (levistrauss.com) after its major distributors
and retailers put pressure on the company not to compete with their brickand-
mortar outlets (channel conflict). Another EC initiative that failed was a joint
venture between Intel and SAP, two world-class companies, which was
designed to develop low-cost solutions for SMEs. It collapsed in August 2000
due to low demand and too few customers. Large companies such as Citicorp,
Disney, and Merrill Lynch also closed EC initiatives after losing millions of
dollars in them.
large numbers of dot-com companies failed. In this section we will look at some
examples of failures and their causes. We will also look into some success factors
that can be used to prevent failure.
INTERNET-RELATED EC FAILURES. Pioneering organizations saw the potential
for e-commerce, but expertise and EC business models were just developing.
Failures of EC projects started as early as 1996. However, the major wave of
Internet-based EC failures started in 2000, as second-round funding (funding
subsequent to a firm’s original funding but before it goes to the stock market with a stock offering) began to dry up. Here are some examples. (In the list we
have highlighted key reasons for the failure.)
● Dr. Koop, a medical portal, was unable to raise the needed advertising
money, so the company folded. The diagnosis: death due to incorrect business
model.
● An Internet mall operated by Open Market was closed in 1996 due to an
insufficient number of buyers.
● Garden.com closed its doors in December 2000 due to lack of cash. Suppliers
of venture capital were unwilling to give the company any more money to
“burn.”
● Several toy companies—Red Rocket, eParties.com, and BabyBucks.com—
failed due to too much competition. This competition led vendors to lower their
prices, which resulted in insufficient profits.
● Living.com, the online furniture store, closed in 2000. The customer acquisition
cost was too high.
● PaperX.com, an online paper exchange in the UK, folded due to lack of
second-round funding.
● Webvan, an online grocery and same-day delivery company, made a huge
investment (over $1 billion) in infrastructure of warehouses and logistics. But its
income was insufficient to convince investors to fund it further. It collapsed
in 2002.
● In late 2000 Chemdex.com, the “granddaddy” of the third-party exchanges,
closed down. Ventro.com, its parent company, said that the revenue growth
was too slow and that a new business model was needed. Chemdex was not
alone: During 2001–2003 large numbers of exchanges folded or changed
their business models.
According to Useem (2000), the major reasons for EC failure are incorrect
revenue model, lack of strategy and contingency planning, inability to attract
enough customers, lack of funding, channel conflict with distributors, too much
online competition in standard (commodity) products (e.g., CDs, toys), poor
order-fulfillment infrastructure, and lack of qualified management. To learn
more about EC failures, visit whytheyfailed.com and techdirt.com.
FAILED EC INITIATIVES WITHIN ORGANIZATIONS : Whereas failed companies,
especially publicly listed ones, are well advertised, failed EC initiatives within
companies, especially within private companies, are less known. However,
news about some failed EC initiatives has been publicized. For example, Levi
Strauss stopped online direct sales of its apparel (jeans and its popular Levi’s
and Dockers brands) on its Web site (levistrauss.com) after its major distributors
and retailers put pressure on the company not to compete with their brickand-
mortar outlets (channel conflict). Another EC initiative that failed was a joint
venture between Intel and SAP, two world-class companies, which was
designed to develop low-cost solutions for SMEs. It collapsed in August 2000
due to low demand and too few customers. Large companies such as Citicorp,
Disney, and Merrill Lynch also closed EC initiatives after losing millions of
dollars in them.
Monday, 20 February 2012
E-Commerce : Protection of Buyers and Sellers
There are several ways buyers can be protected against fraud in e-commerce.
Representative methods are described next.
BUYER PROTECTION.
Some tips for safe electronic shopping are mentioned below. In short, do not forget that you have shopper’s rights. Consult your local or state consumer protection agency for general information on your consumer rights.
SELLER PROTECTION.
Online sellers, too, may need protection. They must be
protected against consumers who refuse to pay or who pay with bad checks and
from buyers’ claims that the merchandise did not arrive. They also have the
right to protect against the use of their name by others as well as to protect the
use of their unique words and phrases, slogans, and Web address (trademark
protection). Security features such as authentication, nonrepudiation, and
escrow services provide some needed protections. Another seller protection
applies particularly to electronic media: Sellers have legal recourse against customers
who download without permission copyrighted software and/or knowledge
and use it or sell it to others.
Tips for Safe Electronic Shopping :
● Look for reliable brand names at sites like Wal-Mart Online, Nichesuite, Disney Online, and
Amazon.com. Before purchasing, make sure that the site is authentic by entering
the site directly and not from an unverified link.
● Search any unfamiliar selling site for the company’s address and phone and fax
numbers. Call up and quiz the employees about the seller.
● Check out the vendor with the local Chamber of Commerce or Better Business
Bureau (bbbonline.org). Look for seals of authenticity such as TRUSTe.
● Investigate how secure the seller’s site is by examining the security procedures and
by reading the posted privacy policy.
● Examine the money-back guarantees, warranties, and service agreements.
● Compare prices to those in regular stores. Too-low prices could prove too good to
be true, and some “catch” is probably involved.
● Ask friends what they know. Find testimonials and endorsements in community
sites and well-known bulletin boards.
● Find out what your rights are in case of a dispute. Consult consumer protections
agencies and the National Fraud Information Center (fraud.org).
Representative methods are described next.
BUYER PROTECTION.
Some tips for safe electronic shopping are mentioned below. In short, do not forget that you have shopper’s rights. Consult your local or state consumer protection agency for general information on your consumer rights.
SELLER PROTECTION.
Online sellers, too, may need protection. They must be
protected against consumers who refuse to pay or who pay with bad checks and
from buyers’ claims that the merchandise did not arrive. They also have the
right to protect against the use of their name by others as well as to protect the
use of their unique words and phrases, slogans, and Web address (trademark
protection). Security features such as authentication, nonrepudiation, and
escrow services provide some needed protections. Another seller protection
applies particularly to electronic media: Sellers have legal recourse against customers
who download without permission copyrighted software and/or knowledge
and use it or sell it to others.
Tips for Safe Electronic Shopping :
● Look for reliable brand names at sites like Wal-Mart Online, Nichesuite, Disney Online, and
Amazon.com. Before purchasing, make sure that the site is authentic by entering
the site directly and not from an unverified link.
● Search any unfamiliar selling site for the company’s address and phone and fax
numbers. Call up and quiz the employees about the seller.
● Check out the vendor with the local Chamber of Commerce or Better Business
Bureau (bbbonline.org). Look for seals of authenticity such as TRUSTe.
● Investigate how secure the seller’s site is by examining the security procedures and
by reading the posted privacy policy.
● Examine the money-back guarantees, warranties, and service agreements.
● Compare prices to those in regular stores. Too-low prices could prove too good to
be true, and some “catch” is probably involved.
● Ask friends what they know. Find testimonials and endorsements in community
sites and well-known bulletin boards.
● Find out what your rights are in case of a dispute. Consult consumer protections
agencies and the National Fraud Information Center (fraud.org).
Sunday, 19 February 2012
Legal Issues Specific to E-Commerce
Many legal issues are related to e-commerce. When buyers and sellers do not
know each other and cannot even see each other (they may even be in different
countries), there is a chance that dishonest people will commit fraud
and other crimes over the Internet. During the first few years of EC, the public
witnessed many of these, ranging from the creation of a virtual bank that
disappeared along with the investors’ deposits, to manipulation of stock prices
on the Internet. Unfortunately, fraudulent activities on the Internet are increasing.
Representative examples of legal issues specific to e-commerce are discussed
below.
FRAUD ON THE INTERNET. Internet fraud and its sophistication have grown as
much as, and even faster than, the Internet itself. For example, stock promoters
falsely spread positive rumors about the prospects of the companies they
touted, to boost the stock price. In other cases the information provided might
have been true, but the promoters did not disclose that they were paid to talk
up the companies. Stock promoters specifically target small investors who are
lured by the promise of fast profits.
Stocks are only one of many areas where swindlers are active. Auctions
are especially conducive to fraud, by both sellers and buyers. Other areas of
potential fraud include selling bogus investments and phantom business
opportunities. Financial criminals now have access to many more people,
mainly due to the availability of electronic mail and pop-up ads. The U.S. Federal
Trade Commission (ftc.gov) regularly publishes examples of scams most
likely to arrive via e-mail or be found on the Web. Some ways in which consumers
and sellers can protect themselves from online fraud are discussed later
in this section.
DOMAIN NAMES. Another legal issue involves competition over domain names.
Internet addresses are known as domain names. Domain names appear in
levels. A top-level name is wiley.com or stanford.edu. A second-level name will
be wiley.com/turban or ibm.com.hk (for IBM in Hong Kong). Top-level domain
names are assigned by central nonprofit organizations that check for conflicts
and possible infringement of trademarks (e.g., see networksolutions.com). Obviously,
companies who sell goods and services over the Internet want customers
to be able to find them easily, so it is best when the domain name matches the
company’s name.
Problems arise when several companies that have similar names compete
over a domain name. For example, if you want to book reservations at Holiday
Inn hotels on a cross-country trip you are planning and you go to holidayinn.com,
you get the Web site for a hotel at Niagara Falls, New York; to get to the hotel
chain’s Web site, you have to go to holiday-inn.com. Several cases of disputed
names are already in court. An international arbitration organization is available as an alternative to the courts. The problem of domain names was alleviated
somewhat in 2001 after several upper-level names were added to “com” (such
as “info” and “coop”).
Cybersquatting. Cybersquatting refers to the practice of registering
domain names in the hope of selling them later at a higher price. For example,
the original owner of tom.com received about $8 million for the name. The case
of tom.com was ethical and legal. But in other cases, cybersquatting can be illegal
or at least unethical (see Stead and Gilbert, 2001). Companies such as Christian
Dior, Nike, Deutsche Bank, and even Microsoft have had to fight or pay to get
the domain name that corresponds to their company’s name. The Anticybersquatting
Consumer Protection Act (1999) lets trademark owners in the United
States sue for statutory damages.
TAXES AND OTHER FEES. In offline sales, most states and localities tax business
done within their jurisdiction, through sales taxes and other taxes. Federal,
state, and local authorities now are scrambling to figure out how to get a
piece of the revenue created by e-business. The problem is particularly complex
for interstate and international commerce. For example, some claim that even
the state in which a server is located deserves to receive some sales tax from an
e-commerce transaction. Others say that the state in which the seller is located
deserves the entire sales tax (or in some countries, value-added tax, VAT).
In addition to sales tax, there is a question about where (and in some
cases, whether) electronic sellers should pay business license tax, franchise
fees, gross-receipts tax, excise tax, privilege tax, and utility tax. Also, there is
the issue of taxing Internet access. Currently there is no tax on fees you pay
to AOL or to DSL or Internet service providers. Furthermore, how should tax
collection be controlled? Legislative efforts to impose taxes on e-commerce are
opposed by an organization named the Internet Freedom Fighters. Their efforts
have been successful so far: At the time this edition was written (June 2004),
there was a sales tax ban on business done on the Internet in the United States
and many other countries, which could remain valid until fall 2006. At that
time also, buyers were exempt from tax on Internet access (subject to renewal
in 2004).
COPYRIGHT. Intellectual property, in its various forms, is protected by copyright
laws and cannot be used freely. In EC it is very difficult to protect intellectual
property. For example, some people mistakenly believe that if they have bought
a piece of software, they have the right to share it with others. What they have
bought is the right to use the software, not the right to distribute it—that right
remains with the copyright holder. Similarly, it violates copyright laws to copy
material from Web sites without permission. For further discussion of issues
relating to intellectual property protection.
know each other and cannot even see each other (they may even be in different
countries), there is a chance that dishonest people will commit fraud
and other crimes over the Internet. During the first few years of EC, the public
witnessed many of these, ranging from the creation of a virtual bank that
disappeared along with the investors’ deposits, to manipulation of stock prices
on the Internet. Unfortunately, fraudulent activities on the Internet are increasing.
Representative examples of legal issues specific to e-commerce are discussed
below.
FRAUD ON THE INTERNET. Internet fraud and its sophistication have grown as
much as, and even faster than, the Internet itself. For example, stock promoters
falsely spread positive rumors about the prospects of the companies they
touted, to boost the stock price. In other cases the information provided might
have been true, but the promoters did not disclose that they were paid to talk
up the companies. Stock promoters specifically target small investors who are
lured by the promise of fast profits.
Stocks are only one of many areas where swindlers are active. Auctions
are especially conducive to fraud, by both sellers and buyers. Other areas of
potential fraud include selling bogus investments and phantom business
opportunities. Financial criminals now have access to many more people,
mainly due to the availability of electronic mail and pop-up ads. The U.S. Federal
Trade Commission (ftc.gov) regularly publishes examples of scams most
likely to arrive via e-mail or be found on the Web. Some ways in which consumers
and sellers can protect themselves from online fraud are discussed later
in this section.
DOMAIN NAMES. Another legal issue involves competition over domain names.
Internet addresses are known as domain names. Domain names appear in
levels. A top-level name is wiley.com or stanford.edu. A second-level name will
be wiley.com/turban or ibm.com.hk (for IBM in Hong Kong). Top-level domain
names are assigned by central nonprofit organizations that check for conflicts
and possible infringement of trademarks (e.g., see networksolutions.com). Obviously,
companies who sell goods and services over the Internet want customers
to be able to find them easily, so it is best when the domain name matches the
company’s name.
Problems arise when several companies that have similar names compete
over a domain name. For example, if you want to book reservations at Holiday
Inn hotels on a cross-country trip you are planning and you go to holidayinn.com,
you get the Web site for a hotel at Niagara Falls, New York; to get to the hotel
chain’s Web site, you have to go to holiday-inn.com. Several cases of disputed
names are already in court. An international arbitration organization is available as an alternative to the courts. The problem of domain names was alleviated
somewhat in 2001 after several upper-level names were added to “com” (such
as “info” and “coop”).
Cybersquatting. Cybersquatting refers to the practice of registering
domain names in the hope of selling them later at a higher price. For example,
the original owner of tom.com received about $8 million for the name. The case
of tom.com was ethical and legal. But in other cases, cybersquatting can be illegal
or at least unethical (see Stead and Gilbert, 2001). Companies such as Christian
Dior, Nike, Deutsche Bank, and even Microsoft have had to fight or pay to get
the domain name that corresponds to their company’s name. The Anticybersquatting
Consumer Protection Act (1999) lets trademark owners in the United
States sue for statutory damages.
TAXES AND OTHER FEES. In offline sales, most states and localities tax business
done within their jurisdiction, through sales taxes and other taxes. Federal,
state, and local authorities now are scrambling to figure out how to get a
piece of the revenue created by e-business. The problem is particularly complex
for interstate and international commerce. For example, some claim that even
the state in which a server is located deserves to receive some sales tax from an
e-commerce transaction. Others say that the state in which the seller is located
deserves the entire sales tax (or in some countries, value-added tax, VAT).
In addition to sales tax, there is a question about where (and in some
cases, whether) electronic sellers should pay business license tax, franchise
fees, gross-receipts tax, excise tax, privilege tax, and utility tax. Also, there is
the issue of taxing Internet access. Currently there is no tax on fees you pay
to AOL or to DSL or Internet service providers. Furthermore, how should tax
collection be controlled? Legislative efforts to impose taxes on e-commerce are
opposed by an organization named the Internet Freedom Fighters. Their efforts
have been successful so far: At the time this edition was written (June 2004),
there was a sales tax ban on business done on the Internet in the United States
and many other countries, which could remain valid until fall 2006. At that
time also, buyers were exempt from tax on Internet access (subject to renewal
in 2004).
COPYRIGHT. Intellectual property, in its various forms, is protected by copyright
laws and cannot be used freely. In EC it is very difficult to protect intellectual
property. For example, some people mistakenly believe that if they have bought
a piece of software, they have the right to share it with others. What they have
bought is the right to use the software, not the right to distribute it—that right
remains with the copyright holder. Similarly, it violates copyright laws to copy
material from Web sites without permission. For further discussion of issues
relating to intellectual property protection.
Thursday, 16 February 2012
E-COMMERCE SUPPORT SERVICES
The implementation of ECommerce(EC) may require several support services. B2B and B2C
applications require payments and order fulfillment; portals require content.
Figure 4.2 portrays the collection of the major EC services. They include: einfrastructure
(mostly technology consultants, system developers and integrators,
hosting, security, wireless, and networks), e-process (mainly payments and logistics),
e-markets (mostly marketing and advertising), e-communities (different
audiences and business partners), e-services (CRM, PRM, and directory services),
and e-content (supplied by content providers). All of these services support the EC
applications in the center of the figure, and all of the services need to be managed.
Here we will focus on two of the above topics—payments and order fulfillment.
For details on the other services, see Turban et al. (2006).
Payments are an integral part of doing business, whether in the traditional way
or online. Unfortunately, in most cases traditional payment systems are not
effective for EC, especially for B2B. Cash cannot be used because there is no
face-to-face contact. Not everyone accepts credit cards or checks, and some buyers
do not have credit cards or checking accounts. Finally, contrary to what
many people believe, it may be less secure for the buyer to use the telephone
or mail to arrange or send payment, especially from another country, than to
complete a secured transaction on a computer. For all of these reasons, a better
way is needed to pay for goods and services in cyberspace. This better way
is electronic payment systems.
ELECTRONIC PAYMENT SYSTEMS. As in the traditional marketplace, so too in
cyberspace, diversity of payment methods allows customers to choose how they
wish to pay. Here we will look at some of the most popular electronic payment
mechanisms.
Electronic Checks. Electronic checks (e-checks) are similar to regular paper
checks. They are used mostly in B2B (Reda, 2002). First, the customer establishes
a checking account with a bank. When the customer contacts a seller
and buys a product or a service, he or she e-mails an encrypted electronic
check to the seller. The seller deposits the check in a bank account, and funds
are transferred from the buyer’s account and into the seller’s account.
Like regular checks, e-checks carry a signature (in digital form) that can be
verified (see echeck.net). Properly signed and endorsed e-checks are exchanged
between financial institutions through electronic clearinghouses (see eccho.org
and Echecksecure from etroqgroup.com for details).
Electronic Credit Cards. Electronic credit cards make it possible to charge
online payments to one’s credit card account. For security, only encrypted
credit cards should be used. Credit card details can be encrypted by using the
SSL protocol in the buyer’s computer (available in standard browsers). (This
process is described in Online File W4.10.)
Here is how electronic credit cards work: When you buy a book from Amazon,
your credit card information and purchase amount are encrypted in your browser. So the information is safe while “traveling” on the Internet. Furthermore,
when this information arrives at Amazon, it is not opened but is transferred automatically
(in encrypted form) to a clearinghouse, where the information is
decrypted for verification and authorization. The complete process of how e-credit
cards work is shown in Figure 4.3. Electronic credit cards are used mainly in B2C
and in shopping by SMEs (small-to-medium enterprises).
Purchasing Cards. The B2B equivalent of electronic credit cards is purchasing
cards. In some countries companies pay other companies primarily by means
of purchasing cards, rather than by paper checks. Unlike credit cards, where
credit is provided for 30 to 60 days (for free) before payment is made to the
merchant, payments made with purchasing cards are settled within a week.
Purchasing cards typically are used for unplanned B2B purchases, and corporations
generally limit the amount per purchase (usually $1,000 to $2,000).
Purchasing cards can be used on the Internet much like regular credit cards.
They expedite the process of unplanned purchases, usually as part of desktop
purchasing (described earlier).
Electronic Cash. Cash is the most prevalent consumer payment instrument
in offline transactions. Some buyers pay with cash because they do not have
checks or credit cards, or because they want to preserve their anonymity. Traditional
brick-and-mortar merchants prefer cash since they do not have to pay
commissions to credit card companies, and they can put the money to use as
soon as it is received. It is logical, therefore, that EC sellers and some buyers
may prefer electronic cash. Electronic cash (e-cash) appears in three major forms:
stored-value money cards, smart cards, and person-to-person payments.
Stored-Value Money Cards. Although they look like credit cards, storedvalue
money cards actually are a form of e-cash. The cards that you use to
pay for photocopies in your library, for transportation, or for telephone calls are
stored-value money cards. They allow a fixed amount of prepaid money to be
stored. Each time you use the card, the amount is reduced. Millions of travelers,
around the world, pay for transportation with such cards. Some of these
cards are reloadable, and some are discarded when the money is depleted.
Cards with stored-value money can be also purchased for Internet
use. To use such cards, you enter a third-party Web site and provide
an ID number and a password, much as you do when you use a prepaid
phone card. The money can be used only in participating stores
online.
applications require payments and order fulfillment; portals require content.
Figure 4.2 portrays the collection of the major EC services. They include: einfrastructure
(mostly technology consultants, system developers and integrators,
hosting, security, wireless, and networks), e-process (mainly payments and logistics),
e-markets (mostly marketing and advertising), e-communities (different
audiences and business partners), e-services (CRM, PRM, and directory services),
and e-content (supplied by content providers). All of these services support the EC
applications in the center of the figure, and all of the services need to be managed.
Here we will focus on two of the above topics—payments and order fulfillment.
For details on the other services, see Turban et al. (2006).
Payments are an integral part of doing business, whether in the traditional way
or online. Unfortunately, in most cases traditional payment systems are not
effective for EC, especially for B2B. Cash cannot be used because there is no
face-to-face contact. Not everyone accepts credit cards or checks, and some buyers
do not have credit cards or checking accounts. Finally, contrary to what
many people believe, it may be less secure for the buyer to use the telephone
or mail to arrange or send payment, especially from another country, than to
complete a secured transaction on a computer. For all of these reasons, a better
way is needed to pay for goods and services in cyberspace. This better way
is electronic payment systems.
ELECTRONIC PAYMENT SYSTEMS. As in the traditional marketplace, so too in
cyberspace, diversity of payment methods allows customers to choose how they
wish to pay. Here we will look at some of the most popular electronic payment
mechanisms.
Electronic Checks. Electronic checks (e-checks) are similar to regular paper
checks. They are used mostly in B2B (Reda, 2002). First, the customer establishes
a checking account with a bank. When the customer contacts a seller
and buys a product or a service, he or she e-mails an encrypted electronic
check to the seller. The seller deposits the check in a bank account, and funds
are transferred from the buyer’s account and into the seller’s account.
Like regular checks, e-checks carry a signature (in digital form) that can be
verified (see echeck.net). Properly signed and endorsed e-checks are exchanged
between financial institutions through electronic clearinghouses (see eccho.org
and Echecksecure from etroqgroup.com for details).
Electronic Credit Cards. Electronic credit cards make it possible to charge
online payments to one’s credit card account. For security, only encrypted
credit cards should be used. Credit card details can be encrypted by using the
SSL protocol in the buyer’s computer (available in standard browsers). (This
process is described in Online File W4.10.)
Here is how electronic credit cards work: When you buy a book from Amazon,
your credit card information and purchase amount are encrypted in your browser. So the information is safe while “traveling” on the Internet. Furthermore,
when this information arrives at Amazon, it is not opened but is transferred automatically
(in encrypted form) to a clearinghouse, where the information is
decrypted for verification and authorization. The complete process of how e-credit
cards work is shown in Figure 4.3. Electronic credit cards are used mainly in B2C
and in shopping by SMEs (small-to-medium enterprises).
Purchasing Cards. The B2B equivalent of electronic credit cards is purchasing
cards. In some countries companies pay other companies primarily by means
of purchasing cards, rather than by paper checks. Unlike credit cards, where
credit is provided for 30 to 60 days (for free) before payment is made to the
merchant, payments made with purchasing cards are settled within a week.
Purchasing cards typically are used for unplanned B2B purchases, and corporations
generally limit the amount per purchase (usually $1,000 to $2,000).
Purchasing cards can be used on the Internet much like regular credit cards.
They expedite the process of unplanned purchases, usually as part of desktop
purchasing (described earlier).
Electronic Cash. Cash is the most prevalent consumer payment instrument
in offline transactions. Some buyers pay with cash because they do not have
checks or credit cards, or because they want to preserve their anonymity. Traditional
brick-and-mortar merchants prefer cash since they do not have to pay
commissions to credit card companies, and they can put the money to use as
soon as it is received. It is logical, therefore, that EC sellers and some buyers
may prefer electronic cash. Electronic cash (e-cash) appears in three major forms:
stored-value money cards, smart cards, and person-to-person payments.
Stored-Value Money Cards. Although they look like credit cards, storedvalue
money cards actually are a form of e-cash. The cards that you use to
pay for photocopies in your library, for transportation, or for telephone calls are
stored-value money cards. They allow a fixed amount of prepaid money to be
stored. Each time you use the card, the amount is reduced. Millions of travelers,
around the world, pay for transportation with such cards. Some of these
cards are reloadable, and some are discarded when the money is depleted.
Cards with stored-value money can be also purchased for Internet
use. To use such cards, you enter a third-party Web site and provide
an ID number and a password, much as you do when you use a prepaid
phone card. The money can be used only in participating stores
online.
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