W52 Chapter 9 Electronic Commerce

‘s A b o u t B u s i n e s s evineyard.com (page 279)

Box W9.1: Buying wines and enjoying wine expertise

Considered a pioneer Internet retailer, Virtual Vine-
yards, now part of Evineyard.com, is an example of a
successful small independent solo storefront on the In-
ternet. It sold more than $1 million of wine in its first
year of existence. Virtual Vineyards sells wines from
more than 60 small, independent vineyards whose prod-
ucts are rejected by many supermarkets and liquor stores
that prefer to carry well-known brand names. The site
offers an electronic catalog of several hundred wines and
related food products.
Created by an expert on wine and an expert on com-
puter technology, the site is well-organized, user friendly,
attractive, informative, educational, and entertaining.
Users can navigate quickly and find what they want. The
site provides serendipitous experience, introducing buy-
ers to foods such as caviar or Belgian chocolates.
Virtual Vineyards provides answers to frequently
asked questions (FAQs) as well as support for special
queries. The owners provide an unusual level of free on-
line expertise.
Virtual Vineyards received unusual publicity as an
electronic retailing pioneer, and as a result the site re-
ceives thousands of visitors daily. Sales grew by about 20
percent each month during the first year. The company
merged with evineyard.com in 2001.
Questions
1. Visit the site and try to determine why Virtual
Vineyards is so successful.
2. Would buyers who feel that wine is a commodity
buy online, paying more than at the supermarket?
Why or why not?
3. Summarize the benefits of the site to the buyers
and to the sellers.

Manager’s Checklist W9.1 Benefits Limitations (page 282)

Benefits to Job Seekers • Many people do not use the

Benefits and Limitations of the
• Ability to find information on a large Internet. This limitation is
Online Job Market
number of jobs worldwide even more serious with non-
• Ability to quickly communicate with technology-oriented jobs. In
potential employers response, companies may use
• Ability to write and post resumes for both traditional approaches
large-volume distribution and the Internet.
• Ability to search for jobs quickly from • Lack of security and privacy
any place at any time in some systems
• Ability to use many placement services at • High and expensive turnover
no cost resulting from acceleration of
• Ability to compare jobs and salaries people moving to better jobs
• Danger that current
Benefits to Employers
employer may find your
• Ability to advertise to a large number of
posted resume (privacy
job seekers
protection)
• Ability to save on advertising costs
• Lower cost of processing applications
(using electronic application forms)
• Ability to provide equal opportunity for
job seekers
• Ability to find highly skilled employees,
including those outside the area
 Chapter 9 Electronic Commerce W53

A Non-Internet Application (page 284)

The applications of e-commerce presented in the text have all been Internet-based.
Here is an example of B2C non-Internet service.

EXAMPLE
The Highway 91 project. Route 91 is a major eight-lane highway east of Los Ange-
les. Traffic is especially heavy during rush hours. California Private Transportation
Company (CPT) built six express toll lanes along a 10-mile stretch in the median of
the existing Highway 91. The express lanes system has only one entrance and one exit,
and it totally operates with e-commerce technologies. Here is how the system works:
1. Prepaid subscribers receive an automatic vehicle identification (AVI) device that is
placed on the rearview mirror or the front windshield of a car. The device, about
the size of a thick credit card, includes a microchip, an antenna, and a battery.
2. A large sign over the tollway tells drivers the current fee for cruising
the express lanes. In 2001 it varied from $0.50 in slow traffic hours to
$3.25 during rush hours. Only cars with the AVI can use the road.
3. Sensors in the pavement let the tollway computer know that a car has
entered; the car does not need to slow or stop.
4. The AVI makes radio contact with a transceiver installed above the
lane.
5. The transceiver relays the car’s identity through fiber-optic lines to
the control center, where a computer deducts the fee from the dri-
ver’s prepaid account.
6. Surveillance cameras record the license numbers of cars without AVIs. These cars Tollway commuters use
are fined. transponders inside their
cars to ease traffic and pol-
7. Video cameras along the tollway enable managers to keep tabs on traffic, for ex- lution problems on a busy
ample, sending a tow truck to help a stranded car. California highway.
The system saves commuters between 40 and 90 minutes each day, so it is in high
demand.
An interesting extension of this system is the use of the same AVIs for other pur-
poses. For example, they can be used in paid parking lots. And one day you may be
recognized when you enter the drive-through lane of McDonald’s and a voice asks
you, “Mr. Smart, do you want your usual meal today?” ●
W54 Chapter 9 Electronic Commerce

Manager’s Checklist W9.2 (page 288)

Benefits and Limitations of Internet Benefits

Advertising
• Internet advertisements can be accessed on demand 24 hours a day, 365
days a year, and costs are the same regardless of audience location.
• Ads are accessed primarily because of interest in the content, so market
segmentation opportunity is large.
• The Internet gives an opportunity to create a one-to-one direct marketing
relationship with the consumer.
• Multimedia will increasingly make ads more creative, attractive, and
appealing.
• Distribution costs are low (just technology costs), so reaching millions of
consumers costs the same as reaching just a few.
• Advertising and content can be updated, supplemented, or changed at any
time.
• Response (clickthrough) rate and results (number of pages viewed) are
immediately measurable.
• Ease of logical navigation—consumers click where and when they want, and
spend as much time as desired there.
Limitations

• There is no clear standard of measurement of advertising success.

• Measurement tools and metrics are immature.
• It is difficult for media buyers to make “apples-to-apples” comparisons
across various advertising media.
• It is difficult to measure the size of the market; therefore it is difficult to
estimate rating, share, or reach and frequency.
• The audience is still small relative to some other media (television,
especially).

Technologies
• Interactive TV
• Kiosks
• CD-ROM
• Intelligent Agents
Strategy
• Relationship Marketing
• Integrated Marketing
• 1:1 Marketing
Table W9.1 Examples of Innovative Ideas Used to Attract Visitors to Web Sites
Attraction
Giveaway games and
discount contests; sponsored
by multiple companies
Free Internet access
Personal, nonautomated
selling
Monetary payment
Sweepstakes
Chapter 9 Electronic Commerce W55
Results
Tactics
Tools/Technologies
Applications Data
• Modeling • Acquisition/Collection
• Profiling • Ownership/Privacy
• Segmentation • Usage
• Data Mining
Strategy
Vision Processes Organization
• Customer Oriented • Marketing • Skills
Figure W9.1
• Enterprisewide • Customer Service • Culture Keys to Successful
• Order Handling • Commitment Interactive Marketing.
• Billing/Collections • Champion [Source: GartnerGroup]
(page 291)
(page 291)
How IT Was Used
Yoyodyne Inc. sponsors games and contests to get users to read product information of
advertisers ranging from Major League Baseball to Sprint Communication. In one
contest, tax-preparer H&R Block paid $20,000 toward the winner’s taxes.
Netzero and others offer this in exchange for viewing of ads.
Egghead.com uses real people to help you online; Lucent.com connects a sales rep with
a customer over the phone and then pushes information and ads to your computer.
MyPoints.com, Goldmine (goldmine.com), and others connect users with advertisers who
pay them real money to read ads and explore the Web.
Netstakes runs sweepstakes that require no skills (in contrast with contests, which do
require skill). Users can randomly win prizes in different categories (see webstakes.com).
The site is divided into channels, and each channel has several sponsors. The sponsors pay
Netstakes to send traffic. Netstakes runs online ads, both on the Web and in e-mail lists
that people request to be on.
W56 Chapter 9 Electronic Commerce
Manager’s Checklist W9.3 Paper Catalogs
Comparison of Online Catalogs with Benefits
Paper Catalogs • Easy to create without high
technology
• Reader is able to look at the
catalog without a computer system
• More portable than electronic
catalogs
Limitations
• Difficult to promptly update
changed product information
• Displays only a limited number of
products
• Offers only limited product
information through photographs
and text description
Online Catalogs (page 291)
Benefits
• Easy to update product information
and offer timely product
information
• Good search and comparison
capabilities
• Able to provide information on
global range of products
• Offers possibility of adding voice
and video
• Cost savings
• Easy to customize
• Can be integrated with the
purchasing process and with order
processing, inventory processing,
and payment processing
Limitations
• Difficult to develop online catalogs;
large fixed development cost
• Customer needs skill to deal with
computers and browsers
 Chapter 9 Electronic Commerce W57

‘s A b o u t B u s i n e s s cisco.com (page 294)

Box W9.2: Cisco Systems online

Cisco Systems is the major producer of customized
routers, switches, and related network products sold to
information systems departments worldwide. It controls
about 75 percent of the world’s market. Cisco decided to
go online since virtually all its customers were regular
Web users. The company started to sell its products on-
line in 1996 via Cisco Connection Online (CCO). By
2001, more than 15,000 customers were buying about $7
billion a year at CCO.
Cisco Connection Online is delivered over an ex-
tranet, enabling customers to buy, communicate, and
collaborate regarding any issue related to their orders,
such as checking current purchase order status. Cus-
tomers can configure, price, and submit orders online
with direct access to Cisco’s pricing and configuration
database. By correctly configuring and pricing equip-
ment before submitting orders, customers eliminate re-
work, which can delay order processing. Submitted
orders are deposited directly into Cisco’s procurement
database, where they are quickly queued for production
scheduling. Built-in security features ensure that orders
cannot be changed or deleted without authorization.
Customers’ credit lines are preapproved offline, and pay-
ments are settled electronically.
Customers like Cisco’s electronic purchasing for its
up-to-the-minute price information (available 24 hours a
day) and quick replies to queries (hours, compared to
days). Further, they appreciate the ability to configure
the needed system and price it very quickly in personal-
ized Web pages; the easy order status and invoice check-
ing; easy accessibility to maintenance contracts and
accounting information; and availability of online techni-
cal support. The main benefits to Cisco of the electronic
selling system are: (1) reduced customer service cost and
improved service, (2) reduced marketing costs, and (3)
reduced order-handling administrative costs.
Questions
1. How is the customization facilitated online?
2. Why is the site so successful? Why do customers
keep coming there?
3. Cisco plans to go 100 percent online. Why would it
want to do so? Is it possible?

Manager’s Checklist W9.4 (page 298)

Potential Advantages of
E-Government
• Improves the efficiency and effectiveness of the functions of government,
including the delivery of public services.
• Enables governments to be more transparent to citizens and businesses by
giving access to more of the information generated by government.
• Facilitates fundamental changes in the relationships between citizens and
governments.
• Offers greater opportunities for citizens to provide feedback to government
agencies and to participate in democratic institutions and processes.
W58 Chapter 9 Electronic Commerce

EXAMPLE (page 298)

www.info.gov.hk Hong Kong Offers G2C Services. The Hong Kong government provides online pub-
lic services in the following areas:
Transport Department: Appointments and applications for drivers’ licenses and
vehicle licenses.
Immigration: Appointments and applications for ID cards and certificates.
Tourist Association: Maps, information, answers to queries.
Social Welfare: Applications for welfare cards, organizing fund raising, collabora-
tion schemes.
Labour Department: Registry of job openings, search for jobs, help with appli-
cants’ legal issues.
Tax (Internal Revenue): Filing of tax returns, electronic payments, interactive
Q&A.
Trade and Industry: Business licenses, information.
Rating and Valuation: Government rent programs, changes in rates.
Treasury: Electronic bill payments.
Innovation and Technology: Applications for funding for researchers and companies.
Electronic Tendering: Participation in government reverse auctions. ●
Applications of M-Commerce (page 299)
• Online banking. Mobile banking is taking off rapidly. For example, the Swedish
Postal Bank allows customers to make payments from their headsets, and Mari-
taNordabanken in Sweden allows several other types of banking transactions.
Citibank has mobile banking services in Singapore, Hong Kong, and other countries.
• Micropayments. Consumers in Japan can use their mobile phones to pay for pur-
chases in vending machines. In Scandinavian countries, consumers pay for parking
in unattended parking lots, for car washes, for gasoline, and even for soft drinks in
vending machines. Similar capabilities exist in France (Carte Bancaire) and in sev-
eral other countries worldwide. In Germany, customers pay for transportation, in-
cluding taxis, from their mobile phones.
• Online gambling. Eurobet, a large U.K. vendor, allows online gambling. In Hong
Kong you can use your cell phone to bet in horse races.
• Ordering and service. Barnes and Noble Inc. created a service to PDA devices and
cell phones that allows users to download their favorite music clips to the devices.
You can order books online as well.
• Online auctions. QXL.com, a U.K. online auction company, lets users open ac-
counts on its Web sites and bid for items using cell phones. EBay also conducts on-
line auctions that can be accessed by cell phone.
• B2B applications. Remote employees can handle tasks such as checking inventory
or submitting orders while in the field. The Internet thus becomes a repository of
corporate information, and a virtual warehouse of goods and services.
• Online stock trading. Online stock trading is done all over the world. Dagens In-
dustri of Sweden allows subscribers to trade on the Stockholm Stock Exchange and
receive financial data using a PDA. E*Trade allows trading from mobile devices in
several countries; I-MODE, discussed below, offers online stock trading plus vari-
ous other m-commerce activities.
 Chapter 9 Electronic Commerce W59

Table W9.2 E-Commerce Infrastructure (page 301)

Component Description and Issues

Networks
Web servers
Web server support
and software
Electronic catalogs
Web page design and
construction software
Transactional software
Internet access components
Others
A shift from VANS to the Internet, and increased use of
VPNs (virtual private networks) to enhance security and
capabilities over the Internet
Special Web servers are usually superior to dual-purpose
servers. Available for rent. The interface to legacy
systems may be a problem.
Web site activity tracking; database connectivity;
software for creating electronic forms; software for
creating chat rooms and discussion groups
Product description, multimedia use, customized
catalogs, inclusion in Web site design and construction,
templates for construction
Web programming languages (HTML, JAVA, VRML,
XML)
Search engines for finding, comparing products;
negotiating software; encryption and payment; ordering
(front office) inventory and back office software
TCP/IP package, Web browsers, remote access server,
client dial-in software, Internet connection device,
leased line connection, Internet kiosks
Firewalls, e-mail, HTTP (transfer protocols), smart cards

EXAMPLE (page 303)

How Takashimaya Inc. Uses Smart Cards. Takashimaya Inc. is a giant retailer
based in Japan, with stores in Asia, Europe, and the United States. The company was
the first to introduce an international smart credit card that can be used as a cash card
at any of its stores worldwide. It also can be used as a regular VISA credit card. The
card features a microchip that stores a wealth of information, ranging from a cus-
tomer’s address and age to loyalty points earned by shopping at Takashimaya stores.
Loyal cardholders can redeem these bonus points for such privileges as free parking,
free delivery, lucky draws, gifts, and gift coupons. The card also stores information
about the cardholder’s shopping habits and about target direct mail programs. Finally,
the card stores electronic cash.
The information collected about customers’ shopping preferences is transferred,
via an intranet, to the corporate databases. Mr. Chen Seong Leng, the MIS manager
at Takashimaya Singapore, explained, “In today’s competitive environment, a retailer
has to find a better means of identifying shopping trends and habits. Retailers must
know exactly who has bought what merchandise.” The collected information is also
processed by a decision-support system for pricing, designing advertisements, and
other promotional decisions, including rewards to loyal customers to encourage more
shopping. ●
W60 Chapter 9 Electronic Commerce

Table W9.3 Federal Trade Commission (FTC) Consumer Alert:
Scams Most Likely to Arrive by E-Mail
Possible Scam
Business opportunities
Bulk mail solicitors
Chain letters
Work-at-home schemes
Health and diet schemes
“Effortless income”
“Free goods”
Investment opportunities
Cable TV descrambler kits
Guaranteed loans or credit,
on easy terms
Credit repair
Vacation prize promotions
Source: www.ftc.gov/bcp/conline/pubs/alerts/doznalrt.htm, July 1998.
(page 308)
Description
These are promises of easy-to-start businesses that will earn you a fortune. Also, illegal
pyramid schemes are being offered.
These will try to sell you lists of e-mail addresses. If you use them, you usually violate
the terms of service of your ISP.
You are asked to send money to some people and your name is placed on a list to
receive money from others. This is usually illegal.
These are usually worthless and cost you money for “startup.”
You usually get worthless products with no proven benefits.
Do not believe these “easy to make money” opportunities. Most will take your money
and produce little or no income.
You pay to join a club and recruit others. It is usually an illegal pyramid scheme.
Do not believe in investments with “no risk” and “high return.” They do not exist.
There are many scams to watch out for in this category.
These usually do not work, and it is illegal to pirate a cable signal.
You usually pay application fees and then are turned down.
Again, you pay a service fee, but get no help in repairing your credit rating.
These electronics certificates are usually scrams. You will be asked to upgrade, and it
will be very expensive.

Other Legal Issues (page 310)

• What are the rules of electronic contracting, and whose jurisdiction prevails when
buyers, brokers, and sellers are in different states and/or countries?
• When are electronic documents admissible evidence in the courts of law? What is
the alternative if they are not?
• The use of multiple networks and trading partners makes the documentation of re-
sponsibility difficult. How is such a problem overcome?
• Liability for errors, malfunction of software, or theft and fraudulent use of data may
be difficult to prove. How is such liability determined?
• What is considered misrepresentation in e-commerce? Where should you take legal
action against such misrepresentation?