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Unit 4: Electronic Commerce and the Digital Organization

Who’s going to create the Website, what services will you offer on it, and how are you going to Notes
keep your information secure?
We don’t mean to discourage you from electronic commerce; just the opposite. Thousands of
businesses are finding new opportunities to connect to customers, suppliers, and employees.

Table 4.1: Internet Business Models
Category Example
Virtual Storefront Amazon.com
Marketplace Concentrator ShopNow.com
Information Broker Travelocity.com
Transaction Broker Ameritrade.com
Auction Clearinghouse EBay.com
Digital Product Delivery Bluemountain.com
Content Provider WSJ.com
On-line Service Provider Tuneup.com

The above table shows some ways companies use the Internet to conduct business. Even more
intriguing is the disruption new, upstart companies are causing in traditional industries. MP3.com
introduced the Rio music appliance, which uses music downloaded for free from Web sites.
Recording companies are jumping through hoops trying to respond to this threat to their business.

Notes Note that no business can afford to rest on its laurels and assume its business or
industry is safe from changes caused by the Internet.

Customer-Centered Retailing

Some of the most successful consumer E-commerce companies have found that it isn’t enough to
set up a Website to sell products: consumers want information about the products themselves
and how to integrate the products into their lives.
Amazon.com, probably the most talked-about consumer retail Web site, doesn’t just sell books
and CDs. It also offers book reviews from other customers, links to other books related to the
one they’re purchasing and the opportunity to purchase gifts for friends and relatives which are
then gift-wrapped and sent out. Amazon.com is moving into other markets such as online
auctions and now owns part of an online grocery shopping service.

Disintermediation, removing the middleman, has allowed many companies to improve profits
while reducing prices. Now we’re starting to see a phenomenon called reintermediation, the
process of creating new middlemen. Many people are concerned about selling products online
because of the possibility of fraud.
Let’s say you want to sell an antique car through your Web site. A stranger in Ohio e-mails you
with an offer of $10,000. You hesitate to seal the deal because you don’t know anything about
this individual. You can use an electronic escrow service that will hold the buyer’s funds to
ensure he receives the merchandise while you make sure you get paid. Online auction services
such as eBay.com offer a form of reintermediation through their Web sites to get buyers and
sellers connected. That’s the great thing about the Internet: One door closes and another door
opens!

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