BSM3034 E-commerce

Lecture 1 – Framework
Lecture by: Shamsul Yusof
Program: B.Sc. (Hons) in Transportation and Logistics
School of Transportation and Logistics
Email: shamsul@must.edu.my
H/P No.: 013 369 5442
“People were doing business with one another through the internet
already, through bulletin boards. But on the Web, we could create an
auction, we could create a real marketplace. And that’s really what
triggered my imagination, if you will, and that’s what I did.”
Pierre Omidyar
Founder of e bay

WHAT IS E-COMMERCE?
 DEFINATION
• E-commerce is the activity of buying or selling of
products on online services or over the Internet.
– Electronic commerce draws on technologies such as
mobile commerce, electronic funds transfer, supply
chain management, Internet marketing, online
transaction processing, electronic data interchange
(EDI), inventory management systems, and automated
data collection systems.
• E-business (Online Business) is a term which can be
used for any kind of business or commercial
transaction that includes sharing information across
the internet.
 E-commerce Business Models
• The virtual merchant model is used
by online retailers that operate over the
Internet only.
• FreshDirect is a small business that
offers fresh food and brand-name
groceries for home delivery in New
York. Amazon is another example of a
virtual merchant.
 E-commerce Business Models
• The brokerage model brings buyers
and sellers together and facilitates
transactions. Supply Chain Connect is
a small business that helps
“companies optimize their purchasing
and sales purchasing and sales
processes through the use of e-
commerce across a broad range of
products including chemicals, plastics,
wire and cable, and manufactured
goods.”
 E-commerce Business Models
• The incentive marketing model is a
“customer loyalty program that
provides incentives to customers such
as redeemable points or coupons for
making purchases from associated
retailers.” .
• Cool Savings, a small business that
uses this model, wants to be its
customers’ free resource for valuable
coupons, discounts, and special offers
from their favourite brands and stores.
 Types of E-commerce
• Business-to-business (B2B) e-commerce, where businesses
focus on selling to other businesses or organizations, is the largest
form of e-commerce.
• This typically occurs when:
• A business is sourcing materials for their production process (e.g. a
food manufacturer purchasing salt).
• A business needs the services of another for operational reasons (e.g. a
food manufacturer employing an accountancy firm to audit their
finances).
• A business re-sells goods and services produced by others (e.g. a
retailer buying the end product from the food manufacturer).
 Types of E-commerce
• Business-to-consumer (B2C) is the earliest form of e-commerce, but it
is second in size to B2B.
• It refers to retail sales between businesses and individual consumers.
Consumers gather information; purchase physical goods, such as books
and clothing; purchase information goods, such as electronic material or
digitized content, such as software; and, for information goods, receive
products over an electronic network.
 Types of E-commerce
• Consumer-to-consumer (C2C) e-commerce is where consumers
sell products and personal services to each other with the help of an
online market maker to provide catalogue, search engine, and
transaction-clearing capabilities so that products can be easily
displayed, discovered, and paid for.
• The most well-known C2C business is eBay, but there are many
other online market makers as well.
 Types of E-commerce
• Business-to-government (B2G) e-commerce can generally be defined
as transactions with the government.
• The Internet is used for procurement, filing taxes, licensing procedures,
business registrations, and other government-related operations.
• This is an insignificant segment of e-commerce in terms of volume, but it
is growing.
 Types of E-commerce
• Consumer-to-business (C2B) e-commerce is between private
individuals who use the Internet to sell products or services to
organizations and individuals who seek sellers to bid on products or
services.
• Elance is an example of C2B where a consumer posts a project with a
set budget deadline and within hours companies and/or individuals
review the consumer’s requirements and bid on the project.
• The consumer reviews the bids and selects the company or individual
that will complete the project.
• Elance empowers consumers around the world by providing the
meeting ground and platform for such transactions.
 Types of E-commerce
• Peer-to-peer (P2P) technology makes it possible for Internet users to
share files and computer resources directly without having to go through a
central web server.
• P2P began with Napster offering free music downloads via a file-sharing
system.
 Types of E-commerce
• Mobile commerce (m-commerce) refers to the purchase of
goods and services through wireless technology, such as cell
phones, and handheld devices, such as Blackberries and
iPhones.
 Disadvantages of E-commerce
• Easy entry, anyone can start the business.
• Security
• There is no guarantee of product quality
• Network Unreliability
• Personal data privacy
 E-commerce Challenges
• Finding the right products to sell
• Attracting the perfect customer
• Generating targeted traffic
• Nurturing the ideal prospects
• Converting shoppers into paying customers
• Retaining customers
• High shipping cost turn down customers
 How is E-Commerce Differ from
Traditional Business
• Core Strategic Decisions are Technology-Based
– E.g. about the virtual storefront
• A Real-Time Competitive Responsiveness
– E.g. customer dialogue platform, easy for
companies to copy their competitor success
• The store is always open
• A Technology-Based Customer Interface
– E.g. Screen to face
 How is E-Commerce Differ from
Traditional Business
• The customer control the Interaction
– E.g. customer control the search process
• Knowledge of Customer Behaviour
– E.g. ability to observe and track individual consumer
behaviour (Bonuslink etc.)
• Network Economics
– E.g. positive feedback (comment)
• Non-Traditional Performance Metrics and
Emergent Valuation Models
– E.g. % of positive and negative feedback
“Making a profitable e-commerce store is hard work. I love the fact that
Shopify clients help each other in our forums. I love the fact that everyone
feels like we are in this together and that we all will succeed together.”
Scott Lake
Co-founder Shopify

WHY STUDY E-COMMERCE?

 Why E-commerce
• Economy Reasons
– Growth in number of Internet Users
 Why E-commerce?
• Economy Reasons
– E-commerce Growth in Malaysia
• Revenue in the E-commerce market amounts to US$1,380m
in 2018.
• Revenue is expected to show an annual growth rate (CAGR
2018-2022) of 17.6%, resulting in a market volume of
US$2,635m by 2022.
• The market's largest segment is Electronics & Media with a
market volume of US$477m in 2018.
• User penetration is 61.6% in 2018 and is expected to hit
63.2% by 2022.
• The average revenue per user (ARPU) currently amounts to
US$69.60.
 Why E-commerce?
• Economy Reasons
 Why E-commerce
• Economy Reasons
– Reduction on costs
• Reduce Overhead e.g. sales persons
• Reduce customer costs e.g. travelling costs
• Integration of outlets i.e. one stop centre for customers
• Inventory and distribution e.g. direct delivery to
customers
 Why E-commerce?
• Blurring of Industry Boundaries
• Transformation of Social Structure and Society
 Why E-commerce?
• Transformation of Social Structure and Society
 Online and Offline
ONLINE OFF ONLINE
FULLIMENT SYSTEM CUSTOMER INTERFACE

Yahoo

Mc Donald
Egghead

bn.com

Amazon.com
 Market Infrastructure
• Divided into 2 categories:
– Network Infrastructure is basic electronic devices
and connecting circuitry designed as a system to
share information. This also refer to the hardware
and software use in communication.
– Media Infrastructure is various communication
companies and their channels of communication
such as radio, tv, newspapers and magazines, used
in mass communication with the general publics.
Media Coverage to a Digital Platform
Network Media
Infrastructure Infrastructure

• Telephone/DSL
• Cable • Print
• Broadcast Radio • Television
Digital Coverage
& TV • Radio
• Satellite • Motion Picture
• Wireless