Assumption University of Thailand

Graduate School of Business and Advanced Technology Management

(GSB-ATM)

Management Information Systems

E-commerce: Digital
Markets, Digital Goods

Dr. Poonphon Suesaowaluk

Objectives
• To describe unique features of e-commerce, digital markets,
and digital goods
• To describe the main e-commerce business and revenue
models
• To describe the role of m-commerce in business and the
important m-commerce applications
• To describe the concept of how to build an E-commerce
website.
Topics
• E-commerce, Social Media and the Internet
• E-commerce Transforms Marketing
• E-commerce has effected Business to Business (B2B)
Transactions
• E-commerce Business and Revenue Models
• Mobile Digital Platform and Mobile E-commerce
• Building an E-commerce Web Site
E-commerce Social media
and the Internet
E-commerce and the Internet
• E-commerce
– Use of the Internet and Web to transact business
– Began in 1995
• Companies that survived the dot-com bubble now thrive
• The new e-commerce: social, mobile, local
• Move from desktop to smartphone
 E-commerce and the Internet
Eight unique features of the Internet and Web as commercial medium
1. Ubiquity
– Marketspace is virtual
– Transaction costs reduced
2. Global reach
– Transactions cross cultural and
national boundaries
3. Universal standards
– One set of technology standards:
Internet standards
4. Richness
– Supports video, audio, and text
messages
5. Interactivity
6. Information density
– Greater price and cost transparency
– Enables price discrimination
7. Personalization/customization
– Technology permits modification of
messages, goods
8 Social technology
– Promotes user content generation
and social networking
The Growth of E-Commerce

Sources: Based on data from eMarketer, “US Retail Ecommerce Sales,” 2020; eMarketer, “US Digital Travel
Sales, 2018–2022,” 2020; authors’ estimates.
Effect of the Internet on The Marketplace
• Reduces information asymmetry.
• It offers greater flexibility and efficiency because of:
– Reduced search costs and transaction costs
– Lower menu costs
– Greater price discrimination
– Dynamic pricing
• May cause a delay in gratification; effects vary depending on the
product.
• Increased market segmentation
• Stronger network effects
Digital Goods
• Goods that can be delivered over a digital network, e.g., music
tracks, videos, software, newspapers, books
• The first unit costs almost the entire cost of the product.
• Internet delivery is inexpensive.
• Marketing costs remain the same; pricing is highly variable.
• Industries with digital goods are undergoing revolutionary
changes (publishers, record labels, etc.)
E-commerce Transforms
Marketing
Social Networking and the Wisdom of Crowds
• Web 2.0 service: Social networking
– Social shopping sites: Swap shopping ideas with friends.
• Wisdom of crowds
– Create new ways to market and advertise products, and to find out how customers
really feel about the products and services.
• Crowdsourcing
– Using wisdom of crowds on the web to obtain suggestions from a large number of
people, free of charge
– Large numbers of people can make better decisions about topics and products than
a single person.
• Prediction markets
– Peer-to-peer betting markets on specific outcomes (elections, sales figures, designs
for new products)
E-commerce Longterm Marketing
Internet provides new ways to identify and communicate with
customers
• Long tail marketing
– The ability to reach a large number of customers at a low cost while
also knowing what the customers want, cost reduction
• Behavioral targeting
– Tracking the online behavior of individual Internet users by
collecting information from several Websites.
• Internet advertising formats
– Search engine marketing, display ads, rich media, e-mail.
Behavior Targeting: Data collection
• The site which you come
• Where you go when leaving the current site
• Each page you viewed
• Which images you clicked
• Whether you purchased anything
• The operating system you use
• The browser you use
• Personal data you entered, e.g. e-mail, address, and credit
card data.
Web Site Visitor Tracking

• E-commerce Web sites have tools to track a shopper’s every step through an online store
• Close examination of customer behavior at a Web site selling women’s clothing shows
what the store might learn at each step and what actions it could take to increase sales.
Website Personalization

Firms can create

unique personalized
web pages that display
content or ads for
products or services of
special interest to
individual users,
improving the customer
experience and
creating additional
value.

Source: Laudon K. C. and Laudon J.P. 2022

How an Advertising Network Works

Advertising networks and their use of tracking programs have become controversial among
privacy advocates because of their ability to track individual consumers across the Internet.
Source: Laudon K. C. and Laudon J.P. 2022
E-commerce Transforms Marketing
• Social e-commerce: Based on a digital social graph
• Four features of social e-commerce driving its growth
1. Social sign-on: receiving valuable social profile and using it in their
own marketing efforts
2. Collaborative shopping: consumers share shopping experiences,
products, services with friend
3. Network notification: creating an environment for their approval and
disapproval of products, service, content, geo-location
4. Social search: asking for advice on purchase
• Social network marketing
– Seeks to leverage individuals influence over others in social graph
E-Commerce Business
and Revenue Models
Business and Revenue Models
Three major types of e-commerce
Distinguish among type of transaction that take place
• Business-to-Consumer (B2C)
– Example: BarnesandNoble.com
• Business-to-Business (B2B)
– Example: ChemConnect
• Consumer-to-Consumer (C2C)
– Example: eBay
E-commerce Business Models
Business models (1/3)
• E-tailer; • Community provider;
– Sells physical products – Create an environment in which
directly to consumers or people can communicate with
individual business one another and share common
interests and can communicate
– Example Amazons
and find useful information
– Example Facebook, Google+
E-commerce Business Models
Business models (2/3):
• Content creator
– Providing digital contents such as news, video
– Example from iTunes.com
• Transaction broker
– Processing online sales transactions for
consumers and generating a fee each time
a transaction occurs
– Example from Etrade.com and Expedia
• Portal
– Providing initial points of entry to the web along
specialized content and other services
– Example from Yahoo and Google
E-commerce Business Models
Business models (3/3)
• Market creator
– Providing a platform where
buyers and sellers can
meet, search for product,
can serve consumers or
B2B,
– Generating revenue from
transaction fees, e.g.,eBay
• Service provider
– Providing application e.g.,
photo sharing, user-
generated content as
services, online data
storage and backup
– Example from Google Apps,
Dropbox
E-commerce : Revenue Models (1/2)
• Advertising;
– Charge advertisers the right to place ads on the site
– The most method of generating revenue
• Sales;
– Sell products, information or services
• Subscription;
– Charge an ongoing fee for content or services like magazines
and newspapers that already do offline
– Providing content that users perceive as worth the cost and not
readily available elsewhere
E-commerce : Revenue Models
• Free/Freemium
– Providing basic content or services free but charge a
premium for upgrades or advanced features/special
features
• Transaction fee
– Charging a fee for enabling or executing a transaction
• Affiliate
– Receiving a referral fee or percentage of sales each time
that steer customers to affiliate sites
E-Commerce has effected
Business to Business
Transactions
B2B e-commerce
Internet-enabled technologies used in B2B
• Electronic data interchange (EDI)
• Private industrial networks (private exchanges)
• Net marketplaces
• Exchanges
Electronic Data Interchange (EDI)
• Computer-to-computer exchange of standard transactions such
as invoices, purchase orders.
• Link information systems together.
• Allow transactions to flow seamlessly between systems, making
them faster, cheaper, and less error-prone.
• Major industries have EDI standards that define the structure
and information fields of electronic documents.
• Allow for the sharing of a broader range of information.
Electronic Data Interchange (Cont.)

Companies use EDI to automate transactions for B2B e-commerce and continuous
inventory replenishment. Suppliers can automatically send the data about shipments to
purchasing firms. The purchasing firms can use EDI to provide production and inventory
requirements and payment data to suppliers

Source: Laudon K. C. and Laudon J.P. 2018

Private Industrial Network (Private Exchange)
A large corporation that uses the internet to connect with its
suppliers, distributors, and other key business partners
• Sharing of:
– Product design and development, marketing
– Production scheduling and inventory management
– Unstructured communication (graphics and e-mail)
– Example, Volkswagen group and its suppliers handle 90% of
all purchasing for the Volkswagen, including all automotive
and parts components.
A Private Industrial Network

A private industrial network, (private exchange) links a firm to its

suppliers, distributors and other key business partners for efficient
supply chain management and other collaborative commerce activities.
Source: Laudon K. C. and Laudon J.P. 2022
Net Marketplaces (e-hubs)
• Single market for many buyers and sellers
• Industry-owned or owned by independent intermediary between buyers and sellers
• Generate revenue from transaction fees, other services
• Use prices established through negotiation, auction, RFQs (request for
quotations), or fixed prices
• Exchanges:
– Independently owned third-party Net marketplaces
– Connect thousands of suppliers and buyers for spot purchasing
– Typically provide vertical markets for direct goods for single industry (food,
electronics) or industrial equipment
• E-commerce failure:
– Competitive bidding prices down
– Did not offer long-term relationships with buyers or services
A Net Marketplace

Net marketplaces are online marketplaces where multiple buyers can

purchase from multiple sellers.
Source: Laudon K. C. and Laudon J.P. 2020
 Mobile Digital
Platform and Mobile
E-commerce
Mobile Digital Platform and Mobile E-commerce
M-commerce
• M-commerce in 2020 is about 45 percent of all e-commerce
• Fastest growing form of e-commerce
– Growing at 20 percent or more per year
• Main areas of growth
– Retail sales at top Mobile (Amazon, eBay, etc.)
– Sales of digital content (music, TV, etc.)
– Local search for restaurants, museums, stores
Mobile Digital Platform and Mobile E-commerce
Location-based services and Applications
• Used by 74 percent of smartphone owners (as of 2022)
• Based on GPS map services
– Geo social services
‣ Where friends are, check in
– Geo advertising
‣ What shops are nearby
– Geo information services
‣ Prices of house you are passing
 Mobile Retail Commerce Revenues

Mobile e-commerce is the fastest-growing type of B2C e-commerce and

represented about 34 percent of all e-commerce in 2022
Source: Laudon K. C. and Laudon J.P. 2020
Mobile Commerce Services
• Financial account management apps
• Mobile advertising
– Google and Facebook are the largest markets
– Ads embedded in games, videos, and mobile apps
• Over 45 percent of top retailers have m-commerce websites
• Virtually all large traditional and online retailers have m-
commerce apps
Mobile Ad Spending

• Mobile users click ads more often and generate more revenue.
• Design how best to configure mobile experience to obtain legitimate clicks and
conversions?
Source: Using MIS, David Kroenke, Randall J. Boyle, Pearson, 2017
 Building an
E-commerce Web Site
Building an E-commerce Web Site
Two important challenges in building a successful e-commerce site;
• Business objectives
– Business decisions should drive technology, hard ware, software
and telecommunication infrastructures, site design, social and
information policies
– Customer’s demands should drive the site’s technology and
design
• System functionality
– Technology needed to achieve objective
– Example of a shopping cart or other payment systems
Building an E-commerce Web Site
Example of website analysis

Objectives System Functionality Important Requirements

Display goods Digital Catalog Dynamic and graphics catalog

Provide product Product description, stocking numbers,
Product database
information inventory levels

Site log for every customer visit: data mining

Personalize/customer
Customer on-site tracking capability to identify common customer
product
paths and appropriate responses

Execute transaction Shopping cart/payment

Secure credit card clearing; multiple options
payment system
Accumulate customer Name, address, phone, e-mail for all
Customer database
information customer, on-line registration
Building an E-commerce Presence: Issues to be addressed

• Most important management challenges

– Developing a clear understanding of business objectives
– Knowing how to choose the right technology to achieve those
objectives
• Develop an e-commerce presence map
– Four areas: websites, e-mail, social media, offline media
• Develop a timeline: milestones
– Breaking a project into discrete phases
E-commerce Presence Map

An e-commerce presence requires firms to consider the four different types of

presence, with specific platforms and activities associated with each type.
Source: Laudon K. C. and Laudon J.P. 2022
Building an E-commerce Web Site
• Information requirement
– Specific data and processes needed e.g. secure credit card
clearing, multiple payment options
• Development Phase
– Plan, Web Development, Implement, Social media plan, Social
media implement, Mobile plan
• Alternatives in building the Web site
– Completely in-house, Mixed responsibility, Completely outsourced
• Web site budgets
– 50% of budget is system maintenance and content creation
Components of a Web Site Budget

Source: Laudon K. C. and Laudon J.P. 2018

Summary
Summary
• The Internet has given digital forms the opportunity to create new business
models and increase revenues.
• There are three categories of e-commerce, B2B, B2C, C2C offer business
endless possibilities for expanding their products and service.
• The principal e-commerce business models are e-tailers, transaction brokers,
market creators, content providers, community providers, service providers, and
portals.
• The e-commerce revenue models are advertising, sales, subscription,
free/freemium, transaction fee, and affiliate.
• M-commerce is especially well-suited for location based applications; it requires
wireless portals and special digital payment systems that can handle
micropayments.
• Building an e-commerce web site requires a clear understanding of the
business objectives to be achieved.
References
• David Kroenke, & Randall J. Boyle. (2017). Using MIS (9 th ed.). Edinburgh
Gate Harlow, England: Pearson.
• Laudon, K.C., & Laudon, J.P. (2022). Management information
th
systems (17 ed.). Edinburgh Gate Harlow, London: Pearson.
• https://uxplanet.org/
• https://99designs.com/blog/tips/the-7-step-guide-to-understanding-color-
theory/
• How the blockchain is changing money and business | Don Tapscott
(utube)
References
Given the case when you want to initiate the e-Commerce business;
Demonstrate the following items:
• Describe the clear e-commerce business model and how you plan to
promote it.
• DDefine your business's major source of revenue and any possible
sources of extra revenue (website)
• Describe the purpose of your website, taking into consideration the
main service.
• Create a navigation menu for your website. (only blueprint)