1. 1-1
UNIT-II
Consumer-Oriented Electronic Commerce
The convergence of money, commerce, computing
and networks is laying the foundation for a global
consumer marketplace
To make Consumer-Oriented Electronic Commerce
more effective ,we need a better understanding of the
components of the business process from the initial
search and discovery of the product/services via on-
line catalogs to the management of the order-to-
delivery cycle, including the all-important
payment/settlement component
2. 1-2
Managerial Implications
• It is people and managerial talent that matter
• There is a new focus on building a productive
organizational culture, managing change and
results, building intellectual capital, creating
future leaders, managing organizational learning,
and pushing growth and innovation
• The real asset is information and how it is used to
create value for the customer
• The top challenge in managing e-business is
understanding the consumer
3. 1-3
Consumer-Oriented Electronic Commerce
Applications/Services
• Entertainment: Movies on demand, video cataloging,
interactive ads, multi-user games, on-line discussions
• Financial services and information: Home banking,
financial services and financial news
• Essential services: Home shopping, electronic
catalogs, telemedicine, remote diagnostics
• Education and training: Interactive education, multi-
user games, video conferencing and on-line
databases
4. 1-4
Mercantile models from the
consumer’s perspective
● Mercantile processes define interaction between
consumers and merchants for on-line commerce
● This is necessary because to buy and sell goods, a
buyer and seller and other parties must interact in
ways that represent some standard business
processes
● To meet the expectations and understand the
behavior of the on-line shopper, there is a need for
business process model that provides a standard
product/services purchasing process from an
interactive services and merchandising point of view
5. 1-5
Mercantile models from the
consumer’s perspective – cont’d
● The prepurchase preparation phase includes search
and discovery for a set of products in the larger
information space capable of meeting customer
requirements and product selection from the smaller set
of products based on attribute comparison
● The purchase consummation phase includes
mercantile protocols that specify the flow of information
and documents associated with purchasing and
negotiation with merchants for suitable terms such as
price, availability, delivery dates and electronic payment
mechanisms that integrate payment into the purchasing
process
● The postpurchase interaction phase includes
customer service and support to address customer
complaints, product returns and product defects
6. 1-6
Product/service search and
discovery in the information space
Comparison shopping and product
Selection based on various attributes
Negotiation of terms,
e.g., price, delivery times
Placement of order
Authorization of payment
Receipt of product
Customer service and support (if not
Satisfied in X days, return product
Purchase
determination
Purchase
consummation
Purchase
interaction
7. 1-7
Simplified on-line mercantile model
Customer
With need
merchant Payment
institution
(1) Buy
request
(2)Remittance
request
(4) Delivery (3) Approval
(5) Monthly statement
8. 1-8
Mercantile Transactions using Credit cards
Step 1: A customer presents a credit card for payment at
a retail location. The card reader(point-of-sale device)
scans the information on the card’s magnetic stripe
Step 2: The point-of-sale software directs the transaction
information to the local network access point
Step 3: Once in the network, the system verifies the
source of the transaction and routes it to the
appropriate authorization source , where the card
holder’s account is reviewed. An authorization code is
then sent back through the network for display on the
point-of-sale device
9. 1-9
Mercantile Transactions using Credit cards-
cont’d
Step4: Periodically, the retail location initiates a “close-
out” transaction that bundles completed transaction
information into a “batch”. Transaction count and
financial totals are conformed between the terminal
and network, and a series of reports can be printed
out at a retail location
Step 5: The system gathers all completed batches and
processes the data in preparation for settlement. The
process identifies for each merchant the appropriate
settlement location by card type and prepares
detailed reports and files that are routed to the
designated settlement bank for VISA and MasterCard
transactions
10. 1-10
Check clearing process
Federal bank
(Ex:RBI)
Interbank
Clearing house
Payer Payee
Bank of payer Bank of payee
Request for funds transfer
Check for
Out-clearing
Check for
in-clearing
Debit from payer
account and
Credit payee A/C
Debit
information
Check for
deposit
Credit
information
11. 1-11
Mercantile process using Digital Cash
1. Buyer obtains anonymous e-cash from issuing bank
2. Buyer contains seller to purchase product
3. Seller states price
4. Buyer sends e-cash to seller
5. Seller contains his bank or billing service to verify the
validity of the e-cash
6. Bank gives okay signal to seller after ensuring that the
e-cash hasn’t been duplicated or spent on other
products
7. Seller delivers the product to buyer
8. Seller then tells bank to mark the e-cash as “used”
currency
12. 1-12
Mercantile models from the
Merchant’s perspective
● Order Planning and order generation: The
business process begins long before an actual order
is placed by the customer. Manufacturing function
drafts a capacity plan that specifies how much
money will be spent, how many people will be hired
and how much inventory will be created. order
planning leads into order generation.
● Cost estimation and pricing: Pricing is the bridge
between customer needs and company capabilities.
pricing at the individual order level depends on
understanding the value to the customer that is
generated by each order, evaluating the cost of
filling each order; and instituting a system that
enables the company to price each order based on
its value and cost.
13. 1-13
Mercantile models from the
Merchant’s perspective – cont’d
● Order receipt and entry: After an acceptable price
quote, the customer enters the order receipt and entry
phase of OMC. Traditionally this was under the
purview of departments variously titled customer
service, order entry, the inside sales desk.
● Order selection and prioritization: Customer
service representatives are also often responsible for
choosing which orders to accept and which to decline.
● Order scheduling: During the ordering scheduling
phase the prioritized orders get slotted into an actual
production or operational sequence.
14. 1-14
Mercantile models from the
Merchant’s perspective – cont’d
● Order fulfillment and delivery : During the order
fulfillment and delivery phase the actual provision of
the product or service is the made.
● Order billing and account/payment management:
After the order has been fulfilled and deliver, billing is
typically handled by the finance staff, who view their
job as getting the bill out efficiently and collecting
quickly.
● Postsales service: This phase plays and important
role and includes such elements as physical
installation of a product, repair and maintenance,
customer training, equipment upgrading and
desposal.
15. 1-15
Order receipt and entry
Order selection and prioritization
Order scheduling
Order fulfillment and delivery
Order billing and account/
payment management
Customer service and support
Purchase
determination
Purchase
consummation
Purchase
interaction
Cost estimation and pricing
Order Planning and order generation
16. 1-16
E-commerce Business Models
• Storefront Model
• Click-and-Mortar Model
• Built to Order Merchant Model
• Service Provider Model
• Subscription-based Access
Model
• Prepaid Access Model
• Broker Model
• Advertiser Model
• Portal Site Model
• Free Access Model
• Virtual Mall Model
• Virtual Community
Model
• Infomediary Model
17. 17
How E-Commerce Helps Quick Response Retailing
Product on
Store Shelf
Consumer
Purchases
Product
Information
Automatically recorded
by Point of sale (PoS)
Device
Information
Collated by
Store
Computer
If storage space is available,
send order for restocking to
distributor or vendor
Vendor’s
Computer
Receives Order
Vendor’s manafacturing
Department is ordered to
produce more of the product
Orders the closest
warehouse to ship
the required material
Store receives the
material and
restocks the shelf
The Quick response Chain
18. 1-18
Summary
• Electronic commerce (EC) is the ability to deliver products,
services, information, or payments via networks such as the
Internet and the World Wide Web.
• Electronic business connects critical business systems
directly to key constituents
• The rise of specialized Web sites and Web logs (blogs)
generated opportunities to read and write on a vast array of
topics
• Several drivers promote EC: digital convergence
• Advantages of EC
19. 1-19
Summary (continued)
• Limitations of EC
• A value chain is a way of organizing the activities of a business so
that each activity provides added value or productivity to the total
operation of the business.
• The transaction life cycle includes three major e-commerce
applications: Business-to-Consumer (B2C), Business-to-Business
(B2B), and Business-within-Business.
• An intranet wires the company for information exchange.
• Success in the E-commerce field depends on attracting and keeping
qualified technical people and managerial talent.
• There are several types of specialized Web sites on the Internet.
Each site is based on a business model as a way of doing business
to sustain a business - generated revenue.
