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use of the Internet and Web to transact business; digitally enabled transactions

Business types

Brick-and-mortar business
Click-and-mortar business (click-and-brick)
Pure-play business (also called .com's, clicks only, or virtual


A marketplace extended beyond traditional boundaries and removed from temporal, geographic locations

Global reach

Commerce enabled across cultural and national boundaries seamlessly and without modification.

Universal standards

Lower market entry costs & consumers' search costs


the complexity and content of a message
Possible to deliver rich messages with text, audio, and video simultaneously to large numbers of people


e-commerce can provide two way communication between merchant and consumer

Information density

the total amount and quality of information available to all market participants

price transparency

the ease of finding out the cost of an item

cost transparency

the ability to find out the actual cost to the merchants

price discrimination

selling the same goods to different targeted groups at different prices


ability to target marketing messages to specific individuals by adjusting the message to a person's name, interests, and past purchases


modification of a good or service based on a user's preference

Social technology

Allows users to create and share content in the form of text, videos, music, photos

Digital markets reduce

Information asymmetry
Search costs
Transaction costs
Menu costs

Digital markets enable

Price discrimination
Dynamic pricing

Business-to-Consumer (B2C)

- businesses sell their products or services directly to consumers over the Internet

E-shop (e-tailer, e-store, on-line store)

an on-line version of a retail store


consists of a number of e-shops; serves as a gateway (portal) through which a consumer can access multiple e-shops

Menu-driven pricing

: company sets the price that consumers pay


consumer specifies the price he/she is willing to pay, the company can accept or reject it

Consumer-to-Consumer (C2C)

Involves business transactions between users; offer goods and services to assist consumers interacting with each other over the Internet

Forward auction

Sellers use the site as a selling channel to many buyers and the highest bid wins

Business-to-Business (B2B)

Purchase orders, invoices, inventory status, shipping logistics, business contracts, and other operations

Electronic data interchange (EDI)

Computer-to-computer exchange of standard transactions such as invoices, purchase orders


businesses can now use Internet to locate most low-cost supplier, search online catalogs of supplier products, negotiate with suppliers, place orders, and so on

Private industrial networks (private exchanges)

Large firm using extranet to link to its suppliers, distributors, and other key business partners

Reverse auction

- vendors provide quotes (bid) to firm on price they will sell for - buyer selects the vendor with the lowest bid or quote

Net marketplaces (e-hubs) or 3rd party Exchanges

Industry-owned or owned by independent intermediary.
Single digital market for many buyers and sellers.


involves the use of Internet technologies to transform government(s) by improving the delivery of services and enhancing the quality of interaction between the citizen-consumer and the various branches of government


use of wireless mobile devices for purchasing goods and services

E-commerce Revenue Models

Sales (sometimes called merchant)
Transaction fee (sometimes called brokerage)

E-commerce Business Models

Content provider
Transaction broker
Market creator
Service provider
Community provider


where firms offer incentives to customers for solving a problem or coming up with an idea

Wisdom of crowds

Based on concept that 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) - customer places bets or votes for or against specific outcomes

Long tail marketing

ability to reach a large audience inexpensively.

Behavioral targeting

tracking online behavior of individuals on thousands of Web sites

Search Engine Optimization

Method for improving the volume or quality of traffic to a Web site; improving the ranking of a web site in search engine listings


using a variety of deceptive techniques in an attempt to manipulate search engine rankings


provide content providers with a cost-effective method for processing high volumes of very small monetary transactions


Bandwidth capacity problems
Security issues
Potential Liability Issues
Taxation rules

information asymmetrey

when one party in a transaction has more information importat to the transaction than the other party.

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