Retail, E-commerce, and Mobile Commerce

Retail, E-commerce, and Mobile Commerce

Prepared by Dr. Derek Sedlack, South University

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Learning Objectives

Business to Consumer (B2C) E-commerce

Business to Business (B2B) E-commerce and E-procurement

Mobile Commerce

Mobile Transactions and Financial Services

Retailing Technology

Retailing Technology

Consumer Demands and Behavior

A dizzying array of new technologies are exciting and unproven.

Adoption is vital, but budgets are limited.

Consumers are demanding, price-conscious, and easily swayed by competitors.

Overly aggressive leads to financial ruin, but risk aversion loses out to competition.

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Retailing Technology

Consumer Demands and Behavior

Empowered Price Sensitivity: consumer empowerment to find the lowest price available for a product through the Web and mobile technology.

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Retailing Technology

Consumer Demands and Behavior

Nonlinear Search and Influence Patterns: consumers pursuit path through a range of new communications channels including social media, mobile ads, e-mail, search marketing, and other digital communications.

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Retailing Technology

Consumer Demands and Behavior

Channel Hopping: increased communication channels through which consumers can now purchase products (traditional retailers, online, and via mobile devices and apps) called social commerce.

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Retailing Technology

Consumer Demands and Behavior

Digital Immigrants: older consumers that fundamentally view retail channels as separate and distinct.

Digital Natives: first digital generation surrounded by digital devices and Internet connectivity.

Digital Dependents: emerging generation growing up in a world of broadband connections, constant connectivity that place greater demands on retailers to use technology.

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Retailing Technology

Need for Convenience

Economic and social factors lead to more stressful lives.

Consumers look for products and shopping channels that reduce the impact on time and financial resources.

An increasing demand to satisfy immediate gratification and desirable goods and services.

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Retailing Technology

Chapter 8

Figure 8.4 Retail strategy is evolving toward an omin-channel approach (adapted from National Retail Federation, 2011).

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Retailing Technology

Describe the factors that influence consumer shopping behavior today.

What does the concept of digital native, digital immigrant, and digital dependent help us to understand about people’s use of technology during shopping activities?

Why are retailers likely to view technology as both a blessing and a curse?

Describe how an omni-channel retailer is likely to be different from a traditional, single-channel retailer?

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Suggested Answers:

1. Empowered Price Sensitivity. Consumers have always been concerned about price. In today’s retail environment, the consumer is more empowered than ever to find the lowest price available for a product. Using the Web and mobile technology, consumers can look up information about alternative products and prices from a variety of local and online retailers using a mobile device. Retailers need clear strategies to respond to the empowered consumer by price-matching or finding ways to offer greater value.

 

Nonlinear Search and Influence Patterns. The path by which consumers pursue purchases today is often varied and unpredictable. In simpler times, consumers were largely influenced by mass media advertising that drove them to brick-and-mortar stores for purchase. While things were perhaps never quite that simple, consumers today are influenced by a range of new communications channels including social media, mobile ads, e-mail, search marketing, and other digital communications.

 

Channel Hopping. Just as consumers are influenced by a greater number of communications channels, their options for purchasing products have increased. Consumers can now purchase products through traditional retailers, online, and via mobile devices and apps. Some experts are beginning to view social media as a potential retail channel called social commerce. For instance, Dell reportedly sells millions of dollars of refurbished computer equipment each year through its @delloutlet Twitter account (Leslie, Chawla, Aaker, 2010). The manner in which consumers use each channel varies. Some consumers will use a brick-and-mortar store to gather information about a product, but purchase it online. Others will do their research online, but prefer to purchase the product through a traditional retailer. Some may plan to purchase the product at a store, but if they find the specific product wanted is not available, they will buy it from their mobile device while in the store. The many combinations of shopping channel, communications channel, and stage of the shopping process are enormous and make strategic planning a challenge. Modern retailers will increasingly rely on data analytics to distinguish patterns or trends in consumer shopping behavior across channels to identify the best ways to satisfy customer needs.

Digital Immigrants, Natives and Dependents. Retailers have long been aware of the difference between digital immigrants and digital natives. Digital natives are the first generation to have grown up surrounded by digital devices (i.e., computers, smartphones, digital cameras, video recorders, etc.) and Internet connectivity. They are comfortable using technology to move easily between various retail channels to optimize their purchasing on price, convenience, and desire for instant gratification. Digital immigrants, however, are older, and although they are increasingly comfortable with technology, they fundamentally view retail channels as separate and distinct. They are much less likely than natives to incorporate mobile technology into their shopping behavior. Digital dependents represent the emerging generation of young people who are growing up in a world of broadband connections, constant connectivity, and related technology and become uncomfortable if they do not have access to it. This generation will place even greater demands on retailers, expecting to use technology to accomplish all facets of the shopping experience. Brick-and-mortar retailers will continue to play an important role in the lives of this generation, but they will expect in-store shopping to be fully integrated with the technology they have come to depend on.

 

Need for Convenience. As economic and social factors lead to more stressful lives, consumers will be looking for products and shopping channels that reduce the impact on their time and financial resources, while satisfying their demand for immediate gratification and desirable goods and services.

 

2. Digital natives are comfortable using technology to move easily between various retail channels to optimize their purchasing on price, convenience, and desire for instant gratification.

 

Digital immigrants fundamentally view retail channels as separate and distinct. They are much less likely than natives to incorporate mobile technology into their shopping behavior.

 

Digital dependents will place even greater demands on retailers, expecting to use technology to accomplish all facets of the shopping experience. They will expect in-store shopping to be fully integrated with the technology they have come to depend on.

 

3. Answers may vary.

Countless new and innovative technology “solutions” to retailing problems are offered by a dizzying array of both established and new vendors. Many of the newest technologies promise to give retailers a competitive edge in the marketplace, but are unproven. Budgets for technology are limited, and making the wrong decision can lead to financial consequences, operational failures, and lost customers. However, because of intense competition, retailers cannot afford to be too conservative, or they risk losing out to competitors with technologies that enhance the shopping experience, reduce costs, integrate sales channels, and improve record keeping, data collection, and analysis of key performance indicators (KPIs).

 

4. Single-channel retailers only had a single “touch point” with which to connect with consumers.

 

Omni-channel retailers offer consumers multiple brand–based “touchpoints” that leverage the strengths of each channel as well as their single view of the customer to provide optimal overall experience.

10

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Learning Objectives

Business to Consumer (B2C) E-commerce

Business to Business (B2B) E-commerce and E-procurement

Mobile Commerce

Mobile Transactions and Financial Services

Retailing Technology

Business to Consumer (B2C) E-commerce

Purchasing Online

The most well-known B2C site is Amazon.com, whose IT developments received U.S. patents that keep it ahead of competition.

Broader selection, lower prices, and easy searching and ordering are featured through e-commerce.

Electronic Wallet (e-wallet ): a software application that can store encrypted information about a user’s credit cards, bank accounts, and other information necessary to complete electronic transactions, eliminating the need to re-enter the information during the transaction.

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Business to Consumer (B2C) E-commerce

Purchasing Online

Electronic fund transfer (EFT): transfer of funds from one bank account to another over a computerized network.

Transaction cost reduction is significant: banks pay $.02 for online versus $1.07 at a physical branch.

Investment options and loan rates online easily undercut those of many brick-and-mortar (conventional) banks.

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Business to Consumer (B2C) E-commerce

Amazon

Invested hundreds of millions of dollars in warehouses designed for shipping small packages to hundreds of thousands of customers.

Designed One-Click shopping, highlighted by the e-wallet, allowing order status viewing and order fulfillment modifications.

Numerous patentable e-commerce designs provide continued competitive advantage.

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Business to Consumer (B2C) E-commerce

Employment

Job openings, résumés, and applications can be transmitted or completed 24/7, 365.

Job seekers use the web directly (Dice or Monster), or through social media network contacts (LinkedIn).

Online reputation of both job seeker and employer can be researched and/or built.

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Business to Consumer (B2C) E-commerce

Channel Conflict

When regular wholesalers (on-ground) and retailers (on-line) circumvent direct online distributors.

May limit B2C efforts not to sell directly.

May force collaboration with existing distributors.

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Business to Consumer (B2C) E-commerce

Conflict Resolution

Companies may separate online from traditional divisions, but this may increase expenses and reduce synergies.

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Business to Consumer (B2C) E-commerce

Order Fulfillment and Logistics

Online sales force the need to design systems to accept and process huge volumes of small orders, physical delivery including labeling.

Reverse Logistics is the return process.

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Business to Consumer (B2C) E-commerce

Viability and Risk of Online Retailers

The dot.com era bankrupted many pure online retailers due to cash flow, customer acquisition, order fulfillment, and demand forecasting problems.

Low entry barriers intensify competition!

How long to operate while losing money?

How to finance operating losses?

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Business to Consumer (B2C) E-commerce

Identifying Appropriate Revenue Models

Early dot.com model:

Generate enough revenue from advertising to keep the business afloat until customer base critical mass is reached.

Too many advertising dollars went to a small number of well-known sites (AOL, MSN, or Yahoo)

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Business to Consumer (B2C) E-commerce

Online Business and Marketing Planning

Build the marketing plan around the customer, rather than on products.

Monitor progress toward the one-year vision for the business in order to identify when adjustments are needed, and then be agile enough to respond.

Identify all key assumptions in the marketing plan. When there is evidence that those assumptions are wrong, identify the new assumptions and adjust the plan.

Make data-driven, fact-based plans.

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Business to Consumer (B2C) E-commerce

Describe how digital content and services can lead to significantly lower costs.

Why does channel conflict sometimes occur when companies sell their products through both traditional and online channels?

How has Amazon maintained its competitive edge?

How did ING Direct attract customers to become the world’s largest online bank?

List the major issues faced by mobile bankers.

List three online marketing planning recommendations.

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Suggested Answers:

1. Describe how digital content and services can lead to significantly lower costs.

Answers may vary. Digital content and services eliminates many of the costs of physical products: selling one or many copies requires no additional storage space for the content; order fulfillment is entirely online (no warehouse shelves, no packing and shipping) and delivery logistics are minimal (delivered online, so make available to re-deliver if connection failed, etc.); and the largest business, personnel, can be minimal.

 

2. Sellers that are click-and-mortar companies, face a conflict with their regular wholesale and retail distributors when they circumvent those distributors by selling online directly to customers. Conflicts may arise in areas such as pricing of products and services, allocation of resources (e.g., advertising budget), and logistics services provided by the offline activities to the online activities (e.g., handling of returned items bought online).

 

3. Amazon has IT developments that received U.S. patents keeping it ahead of competition.

6. Answers may vary. The text lists four:

1. Build the marketing plan around the customer, rather than on products.

2. Monitor progress toward the one-year vision for the business in order to identify when adjustments are needed, and then be agile enough to respond.

3. Identify all key assumptions in the marketing plan. When there is evidence that those assumptions are wrong, identify the new assumptions and adjust the plan.

4. Make data-driven, fact-based plans.

22

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Learning Objectives

Business to Consumer (B2C) E-commerce

Business to Business (B2B) E-commerce and E-procurement

Mobile Commerce

Mobile Transactions and Financial Services

Retailing Technology

Business to Business (B2B) E-commerce and E-procurement

Sell-Side Marketplaces

Where organizations sell their products or services to other organizations from their own private website or from a third-party site.

Similar to B2C model, but the ‘C‘ is an organization.

Dell Computer auctions through eBay

Overstock.com for obsolete of excess assets

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Business to Business (B2B) E-commerce and E-procurement

E-Sourcing

Different procurement methods that make use of an electronic venue for identifying, evaluating, selecting, negotiating, and collaborating with suppliers.

Primary methods include: Online auctions, Request for Quotes (RFQ) processing, and private exchanges.

Secondary activities include: trading partner collaboration, contract negotiation, and supplier selection.

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Business to Business (B2B) E-commerce and E-procurement

E-Procurement

Corporate procurement (corporate purchasing): transactional elements of buying products and services for operational and functional needs.

Direct procurement: buying materials to produce finished goods.

Indirect procurement: buying materials for daily operations.

E-procurement: reengineered procurement using e-business technologies and strategies.

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Business to Business (B2B) E-commerce and E-procurement

E-Procurement Goals

Control Costs & Simplify Processes (streamlining)

Streamline within an organization’s value chain.

Align the organization’s procurement process with those of other trading partners, which belong to the organization’s virtual supply chain.

Analyze spending patterns in an effort to improve spending decisions and outcomes.

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Business to Business (B2B) E-commerce and E-procurement

Public and Private Exchanges

Vertical exchanges serve one industry along the entire supply chain (automotive, chemical, manufacturing, etc.).

Horizontal exchanges serve many industries using the same products or services (office supplies, cleaning materials, bearings, etc.).

Functional exchanges provide temporary help on an as-needed basis (ADP, Eease.com).

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Business to Business (B2B) E-commerce and E-procurement

Maverick Buying

Buying outside the established system due to overly complex procurement processes.

Can lead to higher vendor prices.

Can reduce corporate volume discounts that trigger new discount tiers.

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Business to Business (B2B) E-commerce and E-procurement

Procurement Objective

Demand management is knowing or predicting what to buy, when, and how much.

Best procurement cost is zero, when people are not buying what they do not need.

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Business to Business (B2B) E-commerce and E-procurement

Briefly differentiate between the sell-side marketplace and e-sourcing.

What are the two basic goals of e-procurement? How can those goals be met?

What is the role of exchanges in B2B?

Explain why maverick buying might take place and its impact on procurement costs.

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Suggested Answers:

1. In the sell-side marketplace model, organizations sell their products or services to other organizations from their own private website or from a third-party site. This model is similar to the B2C model in which the buyer is expected to come to the seller’s site, view catalogs, and place an order. In the B2B sell-side marketplace, however, the buyer is an organization. The two key mechanisms in the sell-side model are forward auctions and online catalogs, which can be customized for each buyer.

E-sourcing refers to many different procurement methods that make use of an electronic venue for identifying, evaluating, selecting, negotiating, and collaborating with suppliers. The primary methods are online auctions, RFQ (request for quote) processing, and private exchanges. E-sourcing also applies to many other secondary activities, which add to the cycle time and transaction costs when performed using traditional methods. Secondary activities include trading partner collaboration, contract negotiation, and supplier selection.

 

2. Control costs: The first goal is to control corporate spending. Organizations want to spend intelligently for procurement activities to maximize the value of their spending, that is, to ensure that money spent to procure items results in procuring the right products at the best value. Corporate e-procurement constitutes a substantial portion of an organization’s operational spending. For example, it is common for large manufacturing organizations to spend millions of U.S. dollars procuring products and services. Organizations thus design e-procurement systems to facilitate and control overall procurement spending.

 

Simplify processes: The second goal is to streamline the procurement process to make it efficient. Inefficiencies in the procurement process introduce delays in ordering and receiving items and tax internal resources.

The two goals of cost control and streamlining can be met in three ways:

Streamline the e-procurement process within an organization’s value chain. Doing so reduces the number of employees needed to process purchasing, reduces the procurement cycle time to order and receive items, and empowers an organization’s staff with enough information about the products and services to enable them to make intelligent decisions when procuring items.

Align the organization’s procurement process with those of other trading partners, which belong to the organization’s virtual supply chain. Alignment can be achieved by automating the process from end-to-end including trading partner’s systems, and simplifies the buying process. This enables suppliers to react efficiently to buyers’ needs.

Use appropriate e-procurement strategies and solutions. Organizations analyze spending patterns in an effort to improve spending decisions and outcomes.

 

3. Exchanges are sites where many buyers and sellers conduct business transactions. They may be public or private, depending on whether or not they are open to the public. Vertical exchanges serve one industry (e.g., automotive, chemical), along the entire supply chain. Horizontal exchanges serve many industries that use the same products or services (e.g., office supplies, cleaning materials).

 

4. Maverick buying is outside the established system. If the procurement process is too complicated, people will go outside the system, and buy from a local vendor. Maverick buying can prove costly not only because that vendor’s prices may be high, but it can also keep the company from achieving volume levels that could trigger a new tier of discounts.

 

31

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Learning Objectives

Business to Consumer (B2C) E-commerce

Business to Business (B2B) E-commerce and E-procurement

Mobile Commerce

Mobile Transactions and Financial Services

Retailing Technology

Mobile Commerce

Mobile Commerce, or M-Commerce:

The buying or selling of goods and services using a wireless, handheld device such as a cell phone or tablet (slate) computer.

Mobile E-Commerce

The use of a wireless handheld devices to order and/or pay for goods and services from online vendors.

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Mobile Commerce

Mobile Retailing

The use of mobile technology to promote, enhance, and add to value to the in-store shopping experience.

Mobile Marketing

A variety of activities used by organizations to engage, communicate, and interact over Wi-Fi and telecommunications networks with consumers using wireless, handheld devices.

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Mobile Commerce

Competitive Advantage in Mobile Commerce

In-Store Tracking: tracking a customer’s movement through a retail store through mobile technology to optimize shopping experiences.

Quick Response (QR) Codes

A variety of activities used by organizations to engage, communicate, and interact over Wi-Fi and telecommunications networks with consumers using wireless, handheld devices.

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Mobile Commerce

Asia Bests U.S. in QR Use

U.S. smartphone users do not know what to do with QR codes.

QR scanning is inconvenient or users are directed to pages with nothing of interest.

Alternatives include Mobile Visual Search: search engine that users an image instead of text.

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Mobile Commerce

Mobile Entertainment

Most notable are music, movies, videos, games, adult entertainment, sports, and gambling apps.

Apps can track sporting news, record workout times, record heart rates, analyze a person’s golf swing.

Mobile device improvements are predicted to increase video clips, movie, and television use on/through mobile devices toward $20 billion.

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Mobile Commerce

Hotel Services and Travel

Airline QR boarding passes and SMS flight updates.

Travel planning with roadside assistance, Wi-Fi hotspots, and recommendations.

Hotel guest reservations, bill checking, and local services.

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Mobile Commerce

Mobile Social Networking

Facebook and Twitter contribute to the 3rd most popular mobile app after games and weather.

Occurs in virtual communities, offering users to access their accounts from a smartphone or other mobile device.

Predicted as primary contributor in the growth of the mobile market.

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Mobile Commerce

Location-Based Marketing

Advertising using mobile GPS systems to determine user locations.

Structured as mobile social media games to elicit consumer information and ratings for special attention or discounts from retailers.

Augmented Reality (AR)

Apps that utilize a special technology to create computer-generated graphic superimposed images based on where/how a user points their phone or camera.

Chapter 8

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Mobile Commerce

Describe some of the ways that people are using mobile devices to shop for products and services.

What are some ways in which traditional brick-and-mortar retailers can use mobile technology to enhance a customer’s in-store shopping experience?

List the types of mobile entertainment available to consumers.

List some ways that travelers and travel-related businesses are using mobile technology.

How are companies using QR codes to promote products and services to mobile consumers? Why are QR codes not as popular in the U.S. as they are in Asia and other parts of the world?

Explain why the mobile gaming market represents such a lucrative market opportunity.

Chapter 8

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Suggested Answers:

1. Answers may vary. Some ways people use mobile devices when shopping: ordering product from online vendors; “checking in” at retail locations to obtain coupons; opting-in to receive discounts via SMS text messages; opting-in for in-store tracking/loyalty programs that offer discounts and special premiums; using QR codes or mobile visual search for additional product information; comparing product and price in-store to those found online (showcasing); managing travel arrangements for hotels and airlines; using marketing apps like Foursquare or Shopkick; using augmented reality to help make choices based upon the shoppers’ requirements.

 

2. Retailers can offer coupons or other special deals when the customer “checks in” or “checks out” at a store. They also can encourage the use of QR codes to help consumers find product information. In-store shopping experiences can be optimized through mobile technology that can track a customer’s movement through a retail store.

 

3. Most notable are music, movies, videos, games, adult entertainment, sports, and gambling apps.

 

4. Answers may vary. Most major airlines, hotel chains, and Internet travel agencies have developed mobile apps to help travelers manage their arrangements. Airlines frequently give passengers the option of receiving up-to-date information about their flights via SMS text messaging. Google Maps is perhaps one of the most popular apps used by travelers, particularly those traveling by automobile. Even AAA, the automobile club, has a mobile app that helps drivers plan their trips and an app for drivers who need roadside assistance. Other interesting mobile travel tools include apps that translate text when traveling abroad, apps for finding nearby Wi-Fi hotspots, and apps created by a number of popular travel guides.

 

Most large hotels chains, and many independent hotels and inns offer guests in-room, wireless high-speed Internet connections, although this is not always a free service. Some of these same hotels offer Wi-Fi Internet access in public areas like the lobby and meeting rooms. Larger hotel chains have apps that allow guests to make reservations, check their bills, and locate hotel services using a mobile app. Starwood, Hilton and other hotels are experimenting with mobile check-in programs whereby guests use their mobile devices to gain access to their rooms using NFC or SMS text message technology. This makes it possible to check-in to the hotel without having to stop first at the front desk. Many airlines now offer travelers the option of loading a boarding pass onto their mobile devices.

 

5. Answers may vary. When products are tagged with QR codes, consumers can scan the QR codes to access product information from a mobile device. Using a barcode scanner app and the camera feature of a mobile device, customers scan the QR code containing a link to an Internet webpage and/or directing customers to promotional videos that feature its products. The QR codes may be on in-store displays, the products themselves, and marketers may use them in print advertising and direct mail ads. Charitable organizations may use QR codes on the outside of direct mail solicitations. Scanning takes the user to a video explaining the mission of the organization, typically making a more compelling request for a donation than what is possible through print media.

 

Some experts cite studies that report many smartphone users simply do not know what to do with a QR code. Other research suggests that users think the scanning process is either inconvenient or that QR codes frequently direct users to pages that do not really contain anything of interest. For QR codes to become something American consumers use frequently, businesses will have to prove that they help mobile users find content that is interesting and valuable.

 

6. Media research firm Nielsen (2011) reports that games are the most popular mobile apps in the U.S. Reports of market size and growth rates differ on the exact amounts, but agree this category is sizable and growing rapidly. Estimates of 2013 mobile game revenue range from approximately $12 billion to $17 billion and analysts predict the market could grow to as much as $22 billion by 2015.

41

Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.

Learning Objectives

Business to Consumer (B2C) E-commerce

Business to Business (B2B) E-commerce and E-procurement

Mobile Commerce

Mobile Transactions and Financial Services

Retailing Technology

Mobile Transactions and Financial Services

Mobile Payment Systems

Mobile payment for online transaction.

Mobile payment for traditional transaction.

Charge to Phone Bill with SMS Confirmation

Uses secure PIN through SMS to validate payment (like Zong.com).

Near-Field Communications (NFC)

Pass or tap device to terminal to transfer payment (Citi Mastercard Paypass, Google Wallet).

Chapter 8

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Mobile Transactions and Financial Services

Phone-Displayed Barcode That Retailer Scans

Phone generated QR code scanned by retailer.

Credit Card 1 Webform

Mobile purchase the same as online purchase.

Transfer of Funds from Payment Account Using SMS

Phone sends SMS to transfer payment through third party (Obopay.com).

Chapter 8

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Mobile Transactions and Financial Services

Mobile Phone Card Reader

Phone attached device allows credit card swipe (Square.com, Paypal.com).

User Scan of 2D Tags Generated by Retailer

QR code or 2D tag to identify merchant or payee, allowing customer-merchant or person-person transfers.

Chapter 8

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Mobile Transactions and Financial Services

Short Codes for Online Banking

Download dedicated apps to conduct banking transactions.

Provide service through SMS using short codes from the Common Short Code Association (CSCA).

Used for American Idol and other award-related programs.

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Mobile Transactions and Financial Services

Security Issues

Mobile banking benefits seem to outweigh potential security threats.

Increasing mobile banking likely means increased targeting of mobile financial activities.

ESM Cloning: allowing transactions to be monitored.

Phishing: fraudulent communications to elicit confidential information (Smishing is over SMS, Vishing is over voice).

Lost or stolen phone.

Chapter 8

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Mobile Transactions and Financial Services

What are the two basic types of mobile payment transactions?

Why have e-wallets not been widely adopted and what will makers of e-wallets need to do to make this payment method more attractive to consumers?

What are the most common types of mobile banking activities consumers perform?

What are the most common security risks associated with mobile banking?

Describe some of the mobile payment systems currently available to merchants and consumers.

What is a micropayment and why is it beneficial to consumers and businesses that mobile payment systems can process these types of transactions?

Chapter 8

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Suggested Answers:

1. The two basic transaction types are using a mobile device for the online purchase of goods and services (e.g., ordering a book from Amazon.com), and for payment of goods and services in a traditional brick-and-mortar store.

 

2. While Google Wallet has received considerable attention in the technology press, in part because of Google’s power and influence in the industry, relatively few consumers can use this option. Only a small number of phones have the required NFC feature. Additionally, the program is only available to people with Citi MasterCard with PayPass or Google’s pre-paid credit card. To be successful, the program will have to expand beyond these limitations.

(The astute student may be aware of the recent release of iPhone 6, which has a secure NFC payment capability.)

3. Most common mobile banking: account alerts, security alerts, and reminders; account balances, updates, and history; customer service via mobile; branch or ATM location information; bill-pay (e.g., utility bills), and delivery of online payments by secure agents and mobile phone client apps; funds transfers; transaction verification.

 

4. Cloning Duplicating the electronic serial number (ESM) of one phone and using it in second phone, the clone. This allows the perpetrator to have calls and other transactions billed to the original phone.

 

Phishing Using a fraudulent communication, such as an e-mail, to trick the receiver into divulging critical information such as account numbers, passwords, or other identifying information.

 

Smishing Similar to phishing, but the fraudulent communication comes in the form of an SMS message.

 

Vishing Again, similar to phishing, but the fraudulent communication comes in the form of a voice or voicemail message encouraging the victim to divulge secure information.

 

Lost or stolen phone Lost or stolen cell phones can be used to conduct financial transactions without the owner’s permission.

 

5. Charge to Phone Bill with SMS Confirmation: This e-commerce payment solution is a lot easier than entering credit card and other information on a small mobile handheld device. It requires users to set up an account with a payment company like zong.com. When completing an online transaction, users click the “ZONG–Buy with Mobile” button and enter their phone number. They receive an SMS text message with a secure PIN number that they enter on the e-commerce website to complete the transaction. The amount of the charge is then added to the payer’s phone bill and the telecom carrier remits this amount to the payee. Telecom companies may deduct a service charge from the amount paid. (Zong was purchased by PayPal.)

 

Near-Field Communications (NFC): Another approach to mobile payment is designed for payments in traditional retail stores. At check-out, the mobile user simply passes or taps his or her phone on a merchant terminal and payment is transferred. Users receive an SMS text message confirmation. While Google Wallet has received considerable attention in the technology press, in part because of Google’s power and influence in the industry, relatively few consumers can use this option. Only a small number of phones have the required NFC feature. Additionally, the program is only available to people with Citi MasterCard with PayPass or Google’s pre-paid credit card. To be successful, the program will have to expand beyond these limitations.

Phone-Displayed Barcode That Retailer Scans: A number of companies are developing mobile payment systems that generate a QR code on the user’s phone, which is, in turn, scanned by the retailer. Starbucks uses this approach with its mobile payment system (Tsirulnik, 2011). Customers create an account with Starbucks as part of the retailer’s loyalty program and transfer money to a pre-paid account. Upon check-out, a user activates the Starbucks app, which creates a barcode that can be scanned at check-out. The funds are then deducted from the user’s account. Other companies are working on programs that could be used at a variety of retailers, much like you currently use a credit card.

 

Credit Card + Webform: Using a mobile Web browser, the buyer makes online purchases by entering his or her credit card number and other identifying information just the way that person would if using a personal computer. This process can be cumbersome given the smaller screens and keyboards on most mobile devices, but it is an option.

 

Transfer of Funds from Payment Account Using SMS: Using this approach, the user creates an account at a company like obopay.com and transfers money into it from a bank or credit card account. Using a mobile phone and SMS, the user can then transfer money to anyone else with a mobile phone number. The receiver must create an account at the payment company in order to retrieve the funds.

 

Mobile Phone Card Reader: This novel approach requires mobile phone users to insert a small card reader into the audio jack of their mobile device. The card reader, which resembles a small cube (Square) or pyramid (paypal), allows those with accounts at Square or PayPal to make or receive credit card payments without a merchant account.

 

User Scan of 2D Tags Generated by Retailer: This payment system uses QR codes or 2D tags (a barcode-like image) to identify the merchant or payee. The buyer scans the merchant’s tag using a special smartphone app and then approves a funds transfer when it shows up on the device. Person-to-person transfers are also possible since the app can generate custom QR tags that individuals may scan from one another’s mobile devices.

 

Mobile Bill Payments. In addition to paying bills through wireline banking or from ATMs, a number of companies are now providing their customers with the option of paying bills directly from a cell phone. Western Union, HDFC Bank in India, Citibank, and several other institutions worldwide currently offer mobile bill payment services. This trend is proving particularly attractive to mobile users in developing countries where many people do not have bank accounts.

 

6. Micropayments are transactions involving relatively small sums of money. The ability to make micropayments allows individuals to use their mobile devices to do things like purchase a beverage from a vending machine or make a payment to a municipal parking meter. Purchases can be spontaneous and fewer sales are lost due to not having the exact change, or even any cash on hand at all.

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