Consumer-to-Consumer Electronic Commerce

Typically a model where consumers sells to consumer Similar to classified ads Provide mechanism for flexible pricing of products and services Ebay is the most prominent consumer-to-consumer business model implementation

The Consumer-to-consumer business model is where consumer sells products or services to other consumers. This implementation is similar to the traditional implementation of classified ads.

Consumer-to-consumer business model means the end of fixed pricing because the model is based on a willing buyer willing seller basis. Consumers determine the products and services to be sold with a recommended pricing for purchase by other consumers.

The most prominent consumer-to-consumer implementation is probably Ebay, which has over 1 million consumers trading daily.

Consumer-to-Business Electronic Commerce

New Business Model developed through the strength of Internet Precursor could be classified ads Buyer-led pricing Priceline.com Auto-By-Tel.com

The Consumer-to-Business electronic commerce model is a typical business model that has emerged strongly due to the technological advantages of the Internet and the World Wide Web. This form of electronic commerce will allow consumers to sell or determine the price of goods for purchase to businesses.

The Consumer-to-Business electronic commerce model in its most basic form would be the classifieds ads whereby sellers determine the products and the price to be sold to prospective buyers.

Typically buyer-led pricing mechanism can also fall under consumer-to-business electronic commerce. Some examples of these type of implementation are Priceline and Auto-by-Tel.

Business-to-Business Electronic Commerce

Internet is used to transmit EDI documents in three basic ways : - Company-to-Company - Hub and Spokes - EDI Service Bureau Business-to-business electronic commerce emphasis on: - Security - Payment

The Internet is being used to transmit EDI documents in three basic ways :-

• Company-to-Company
  This is where large EDI-enabled trading partners transmit EDI documents prepared using traditional EDI translation software over the Internet. Software such as Premenos Templar are used to achieve this.

• Hubs and Spokes
  A large company will set-up an EDI server at its location, which trading partners can access over the Web with proprietary software which allows both EDI via e-mail as well as using Web-based forms.

  An example of this would be Boeing (www.boeing.com) where its customers can order any of 410,000 different Boeing parts over the Web.

• EDI Service Bureau
  Client-members use a Web browser to transmit EDI documents to other client-members. Bigger service bureaus may integrate their existing VANS (used by larger companies) with their Web-only system (used by smaller companies. An example of this is GE TradeWeb (www.getradeweb.com)

In a typical business-to-business electronic commerce environment, security is important to ensure authentication of the buyer or seller, non-repudiation of the transaction and encryption.

In the areas of payment, businesses don't use credit cards for payment unless it is for small business-to-business electronic commerce e.g. Grainger Inc (www.grainger.com). Traditional business-to-business infrastructure will still be in effect. However, pilot systems are being conducted in areas like electronic cheques to cater for payment for business-to-business.

Business-to-Business Model

Primarily electronic commerce between businesses First form of business-to-business was Electronic Data Interchange EDI defined as 'a way to electronically exchange business documents' Internet-based EDI

Business-to-business electronic commerce is primarily the conduct of commerce between businesses via the electronic medium. It is expected that the most significant growth of electronic commerce will be in business-to-business sales and according to Forrestor Research of Cambridge, one of the leading research companies in the US, business-to-business sales are expected to reach US$7 billion by the year 2000. This is based on the expectation that at least 60% of current privately held electronic data interchange (EDI) business services will shift over to use of Internet technologies in the next four years.

EDI is one of the first form of business-to-business electronic commerce established in the commercial environment and is defined as 'a way to electronically exchange business documents, such as purchase orders and invoices, between companies'

EDI relies on a standard messaging structure to maintain the supply chain between a company and its trading partners. Each industry has a different standard set of rules administered by the American National Standards Institute's (ANSI) committee. EDI typically runs on a Value Added Network, which is primarily a proprietary network. In a typical EDI scenario, Company A which trades with Company B typically will sent a purchase order through an EDI standard message which will be receive and acknowledged by Company B through a EDI acknowledgement standard message. One of the fundamental disadvantages of EDI are its costly set-up due to its proprietary and complex nature making it accessible only to large companies.

The Internet has lower the barriers to business-to-business e-commerce in both the cost and complexity of the system. However, internet commerce will not replace the traditional EDI systems because companies have invested millions in the establishment of the infrastructure. Rather it will most likely give rise to hybrid Internet-EDI solutions.

One of this hybrid solution proposed by the XML/EDI Group is to extend EDI's functionality by connecting it on the Internet with the emerging Extensible Markup Language (XML) standard.

XML is a derivative of the Structured Generalised Markup Language (SGML) and is midway between SGML and HTML in complexity. XML adds to HTML the ability to create one own markup tags, and to specify how those markup tags should be handled by the XML-parsing browser. Also, a person can use XML to structure documents in a way that can be interpreted by the XML reader software.

For instance, a person could use XML to define section headings, paragraphs, and footnotes within their document and an XML-capable browser reading that document could appropriately format the elements, and automatically construct a table of contents based on them. Another example is where a purchase order in XML, defining and using , , and tags to indicate what to buy. Then, when the document is sent to the supplier, their software could automatically extract these tagged elements and feed them into their order entry system for automatic processing.

Electronic Commerce Business Models

On a broad level, electronic commerce is divided into four distinct categories:

Business-to-Business

Consumer-to-Business

Consumer-to-Consumer

Business-to-Consumer

Business-to-business electronic commerce would be companies that uses a network for ordering from its suppliers, receiving invoices and making payments. This category has been well established for several years, particularly using Electronic Data Interchange (EDI) over private or value-added networks.

The Consumer-to-Business electronic commerce model is a typical business model that has emerged strongly due to the technological advantages of the Internet and the World Wide Web. This model is typically known also as buyer-led pricing in which the buyer determines the price of a good or service to prompt sellers to meet the price.

Consumer-to-consumer electronic commerce primarily refers to the sale and purchase of goods and services between consumers e.g. classified ads and auction sites.

Business-to-Consumer electronic commerce model primarily refers to electronic retailing in which businesses sells goods and services to consumers through the World Wide Web. This has predominantly been the model that was pushed during the first phase electronic commerce.

As stated earlier, the Internet has predominantly caused new business models to emerge that can only come about due to the advantages of the Internet and the World Wide Web. In the next few sections, we will examine these Internet business models in detail.

Success Criteria of Business Models

First phase of electronic commerce involves improving existing business processes Second phase of electronic commerce involves developing new business models Successful business models involves : - Clearly defined customer, product and processes - Access to technology to support processes - Integration of internet-based information to other information - Product or service fulfillment

When electronic commerce was popularised in the mid-1990's, the emphasis was "doing business on the Internet" and the first wave of electronic commerce focused on importing existing business practices into the digital environment.

Now a second wave of electronic commerce is in progress where new business models, developed for the digital environment are emerging. These models move beyond merely doing business on the Internet, but rather they are "changing the conduct of business of the Internet".

A successful business model involving the use of Internet technologies must meet four requirements :-

• Clearly identify the customers, the business activities, the product/service, and the financial transaction

• Provide accessibility to internet technologies which will handle all aspects of the sale transaction

• Integrate Internet-based information with other information required by the customer and the business

• Ensure fulfillment of the product/service

Electronic Commerce Business Models - Overview

Objectives

At the end of this module, you will be able to

• Understand the various Electronic Commerce Business Models in existence today

• Review the websites of different business models

• Understand the concept behind these different business models

• Understand the role of Commerce Service Providers

  
  

Definition of Business Model

Description of the product, service and information flow Identifies potential benefits and sources of revenue from the various activities Work in conjunction with marketing strategy

A business model could be defined as a description of the product, services as well as the processes than flows between the various components. It primarily describes the potential benefits as well as the revenue sources from the business. However, a business model does not provide an understanding of how it will achieve a company's mission. This is primarily done through the marketing strategy of a company.

Electronic commerce can be used in all phases of a commerce transaction from marketing to product ordering to payment to product/service fulfillment. The diagram above shows a typical commerce transaction where buyers identify the need of a product or service and find the approriate seller who will then provide the required product or service. The product or service information will be determined and required at this stage for the buyer or seller to make informed decisions. Upon selection of the appropriate seller, negotiations on the terms or financial transactions will be performed upon which the fulfillment of the product or service will be made by the seller. Depending on the product or service, support may be required to be provided by the seller.