What is E-Commerce? Section 8.1

What is E-Commerce?
Section 8.1
What is E-commerce?
E-commerce is the
exchange of goods,
services, information,
or other businesses
through electronic
Through low-cost or free
connections to the
internet, millions of
people around the
world can instantly
access information and
communicate with
each other.
Business on the Net
Not all businesses can
complete all of their
activities using the
internet, but the
internet can be used
for many activities.
For example, a
company can process
orders, bill customers,
and maintain accounts.
Bricks to Dot.Coms
A company that does almost all of its
business activities through the internet is
referred to as a dot.com business.
 Businesses that complete most of their
activities by means other than the internet
are referred to as bricks and mortar
Information Stage
Information Stage-the website provides
basic information to help prospective
customers as they gather information about
products and companies.
Interaction Stage
In addition to providing information, the
company uses its website to interact with its
 The simplest form of interaction is the use
of e-mail.
 They can check product availability,
calculate product costs and shipping
charges, and determine how long it will take
to have an order delivered.
Integration Stage
With all of the internet
tools available , an
entire business
transaction can be
completed on an
integrated site.
Customers can get
necessary product,
pricing, and shipping
information .
Companies with
integrated use of the
internet do not have to
be a dot.com business.
The Internet and Marketing
Many of the first internet businesses did not
understand the importance of marketing.
 Thousands of business thought they could
be successful in e-commerce , but a
majority was not successful because they
did not apply the marketing concept.
Advantages of E-Commerce
Businesses that use the internet have several
advantages over those who do not.
 They also have immediate access to
customers all over the world.
 They can introduce new products or update
product information instantaneously.
 With the Internet, a customer’s concern or
question can be sent to the company at any
Disadvantages of E-Commerce
Not everything about the development of
the Internet as a business tool has been
 Provides any easier way for someone to
start a business without understanding
everything that’s necessary for success.
 By using E-commerce, businesses have
found that it is harder to predict the demand
for products.
The Marketing Concept Applied
to E-Commerce
E-Commerce has
demonstrated the
importance of the
marketing concept to
successful businesses.
All parts of the marketing
mix not just promotion is
important for successful
When information
about a company's
products and services
can be viewed by
people in many
locations, it is harder
for businesses to find
their target market.
8.2 Growing Importance of
Growth of internet
 It
was first developed as a military and
research tool in the 1950’s
 In 2000, the United States had the highest
amount of internet users, which is 40% of
all users in the world
 Internet sales to consumers represent less
than 1% of all consumer purchases
Countries With the Highest % of internet users in 2000 % of users
United States
United Kingdom Canada
South Korea
3% 3%
Business usages of the internet
 Many
businesses believe that the internet is
not useful for the type of business activities
they perform
 In 1998, only $8 billion out of $45 billion of
sales came from the internet
 Businesses can use the internet to distribute
information to the customers and the
Business usages of the internet
 Small
businesses can benefit competitively
from using the internet.
 From the very beginning of the internet, the
primary way people have communicated
using internet technology is through e-mail.
 A business can use the information it
gathers to improve its marketing mix.
Business usages of the internet
 Businesses
that do not provide information
about themselves on the internet may miss
some potential customers.
 The internet has affected the ability to find
out information out about its customers
Impact of E-Commerce on
Distribution Channels
Distribution for E-Commerce
Effective distribution is an
important part of
satisfying customer needs.
Major distribution
changes in e-commerce
have been in access to
products and services,
order processing, and the
methods used to distribute
products from the
business to its customers.
Finding and Buying Products
With Internet access consumers have more choices of companies
and products.
Consumers and companies can easily find suppliers and vendors
on the Internet by using a search engine.
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 an order, make immediate payment, and submit the order
Eventually U.S. consumers will make up only a small percentage
of individuals shopping on the Internet.
Order Processing
The Internet has streamlined order
processing and reduced the amount
of paper that must be handled to
complete a sales transaction.
The customer or salesperson can
check on the status of the order at
any time it is processed, filled, and
The use of the Internet for order
processing reduces the number of
errors since the accuracy of the
order can be more easily checked.
There is also a large savings in
order processing and distribution
Airline Tickets
Product Distribution
Express packages, fresh
flowers, and gourmet
foods can be transported
on airplanes to insure
rapid shipment, so it is
not possible for those
types of products to be
distributed using the
The Internet allows many
services to be easier to
process and products less
expensive to distribute.
Companies have had to
change the form of their
products to be able to
distribute them using the
internet. Ex. Airlines and
Distribution Problems and Solutions
The key distribution problems
include the security of
transactions, expanded the
distribution requirements, and
customer service demands.
Privacy concerns have led some
users to distrust and avoid sites
that use cookies (small files that
a web server sends to your
browser when you access a site)
because the cookies can be sent
to a users computer without their
Transaction Security
One of the greatest concerns express by
customers is the security of their personal
information they must provide to the company
when placing an order.
The most important is that their credit card
number will be stolen.
There are alternatives to using a credit card to
purchasing a product on the internet for
example; pre arranged payments.
Consumers are also afraid the business will
misuse the information after the order has
been processed. To meet this concern,
companies have purchased security
Expanded Distribution and
Customer Service
Businesses found that they had to distribute their
products in different ways to many more locations
than before. For example; books can be
electronically delivered to a customer but flowers
cannot (most products can be electronically
Companies such as UPS and FedEx have expanded
their services and offer overnight shipping.
E-businesses offer complete return policies and
procedures on their websites, while some have
made arrangements to make returns at local stores.
Customer service centers have been improved by
24/7 online help centers, FAQ’s, and product
Promotion in E-Commerce
Only 2% of internet users go online with the
intention of purchasing a product
 Most people go online to research the
product they want to buy and go buy it at a
local store
 Many companies use internet advertising to
promote products and services
 Top internet advertisers include Amazon,
yahoo, eBay, E*Trade, etc.
Internet Promotion
Web site sponsorship, priority placement in
web browsers and comparison shopping
services, and providing consumer
information websites.
 Companies are competing for attention of
internet users.
Cost of E-Commerce
Its estimated the companies will spend
between 5 million and 23 million dollars.
Planning the Shopping
There are 8 steps to shopping online
 The steps deal with everything from search
engines for gathering information to
answering the questions of the customer.
Effective Promotion Methods
Important methods of promotion for E-Commerce
include the following
An easy to remember meaningful internet address
Well designed online advertisements
Advertisements and other media such as
newspapers and television
Registration with search engines to identify the
company for people gathering information related
to its products