ECommerce Systems

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E-Commerce Systems
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Key Ideas

• There are several types of electronic commerce
  categories business to business (B2B), business
  to consumer (B2C), consumer to consumer (C2C),
  and government to constituent (G2C).
• Electronic commerce is having an impact on all
  levels of the economy.
• Electronic commerce affects economies,
  organizations and individuals in some positive
  and some negative ways.

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Ebiz Categories
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Business Models

• How a company generates revenue
• Architecture of the business flow of
  goods/services
• What are the benefits for entities involved?
• What are the sources of revenue?

TRADITIONAL SUPPLY / VALUE CHAIN
Raw Materials
Parts
Retail

• Assembly, manufacturing, packaging

• Distribution

Customer
1st tier suppliers 2nd tier suppliers
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Business to Business (B2B)

• The largest category by far
• EDI required large volume of transactions for
  economic application
• B2B buyer and seller both interact with exchange
• Different models
• Catalogue aggregators (I.E. e-STEEL)
• Auction model
• Market exchange model (i.e. Houston Street
  electricity)
• Affiliate Model (i.e. Amazon.com cross-listing)

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Business to Consumer (B2C)

• Electronic stores
• Traditional catalogue translated to the web
• Clicks and bricks (aka clicks and mortar)
• Different levels of integration of web and store
  activities
• On-line auctions (BidButler for min max bid)
• Electronic mall (Fashionmall.com)
• Promotion and customer service sites (Hewlett
  Packard)
• Content and advertising sites (Edmunds Car
  Search)
• Subscription models (Wall Street Journal)
• Clubs and communities (ClubTommy)

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Consumer to Consumer (C2C)

• Auctions and classifieds (eBay, Half.com)
• Need for a feedback forum
• Meetings and buddy lists, discussion groups
• Advertisement model
• Popularity

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Government to Constituent (G2C)

• Information regarding services
• Permits and licenses
• Portals and welcome mat to visitors
• Voting and governance
• Quote There is sufficient interest in G2C
  e-business that technology companies such as IBM,
  and prestigious consulting firms such as Booz
  Allen Hamilton have divisions devoted to
  electronic Government (Van Slyke Belanger)

Savings (lower costs), efficiency
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Ebiz Impacts on the Economy
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The New Economy (Digital)

• Kelly (1998)
• The new economy is global
• The new economy prefers the intangible
• Intellectual goods / services
• The tertiary economy
• The new economy is intensely interlinked

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Economic Efficiency

• Reduces cost of posting or calling for an order
• But, substitutes costs of building and
  maintaining the system

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Network Effects

• Email is more valuable if more people are using
  it
• Growth can be explosive

2 nodes, 1 connection 3 nodes 3 connections
4 nodes, 6 connections How many connections
with 5 nodes? 6 nodes? 7 nodes?
N (N-1) /2
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Globalization

• Is Geography Dead?
• I.e. Translation work performed in other
  countries
• BUT
• Customs and taxes
• Privacy and legal issues
• Cultural preferences
• Language
• I.e. translating products names in other languages

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Ebiz Impacts on Organizations
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Operational Efficiency

• Extension of Electronic Data Interchange (EDI)
• Supply chain management
• How is this different for intangible goods?

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Effects of Operational Efficiency

• Disintermediation
• Cutting out some of the steps in the supply chain
• Lowering communication costs
• May also lower inventories with just in time
  deliveries
• Enterprise resource planning (ERP) systems
• Enable efficient and integrated data management

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Example of Disintermediation
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Effects of Operational Efficiency

• Disintermediation
• Cutting out some of the steps in the supply chain
• Lowering communication costs
• May also lower inventories with just in time
  deliveries
• Enterprise resource planning (ERP) systems
• Enable efficient and integrated data management

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Electronic Business Investments

• Cost of staffing
• Skills such as Java and ASP programming, still
  somewhat scarce
• Significant technology investment often required
• May require significant capital expenditure
• May cannibalize existing products (I.e SIM
  cards)
• Difficult to accurately estimate traffic and
  capacity needs
• Dangers of over or under estimating

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Changing Market Structure

• Created day trading (really?)
• Created MP3 enabled music players (changing the
  music industry)
• E-business has different impacts based on the
  characteristics of the industry

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RELATIVE IMPACT OF ELECTRONIC COMMERCE IN VARIOUS
INDUSTRIES

• Product substitution, innovation
• Global reach
• Product fragmentation,re-bundling

LowestImpact
Nuclear Submarines
High (Differentiated)
..
Big 3 Auto Manufacturers

• UNIQUENESS
• Features
• Tailoring
• Buying experience
• Brand

Gasoline
Retail Pharmacy
Food
Low (Commodity)

• Unbundling of relationships
• Intense price competition
• New intermediaries

Highest Impact
High
Low

• CUSTOMIZATION DEGREE
• Product/service
• Buying/servicing experience

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Ebiz Impacts on Individuals
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Advantages Limitations

• Almost half of on-line shoppers cite convenience
• 24 hours a day, seven days a week (anywhere,
  anytime)
• Only 2 cite lower prices
• Informed buyer
• Limitations
• Better for products you dont need to touch
  feel
• Time delay from purchase to receipt of product
  (if tangible)

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Advantages Increased Choice

• Broader array of suppliers
• Interactive catalogues
• Consumer pull rather than merchant push
• Customer relationship management
• Building profiles of users (potentially
  anticipating needs as they arise)
• Differentiating products and prices

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Limitations Access Inequalities

• The digital divides
• Wealthy nations and poorer nations
• Development skills for those with access versus
  those without
• Different access to government services and
  protections
• Potential distinction by gender, race, age

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Potential for Fraud

• Credit card fraud
• Difficulty authenticating purchaser identity
• On-line auction fraud
• Escrow service
• Rating and commenting
• Internet access services
• International modem dialing
• Web cramming
• Not really free products

• Multilevel marketing/pyramids
• Travel and vacation
• Substandard services
• Business opportunities
• Investments
• Health care products and services

Similar to traditional fraud
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Electronic Payment Security Technologies
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Authentication

• Digital signatures
• A unique code applied to an electronically
  transmitted message that identifies the sender
• Uses hashing technology so that changing the code
  will no longer match with the document

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Digital Certificates

• An electronic document that verifies the sender
  or receivers identify
• Certificate authority
• Types and classes of digital certificate
• Site certificates
• Personal authority certificates
• Certifying authority certificates
• Software publisher certificates

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Privacy Security

• Privacy statement or policy
• Trust seals
• BBBOnLine, subsidiary of Better Business Bureau
• AICPA WebTrust, examination by CPA
• TRUSTe, administered by non-profit group

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Secure Sockets Layer (SSL)

• A protocol designed to provide a secure
  connection between the sender and receiver of
  information
• Server name of https//

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Functioning of SSL

• Three basic properties of secure channel
• The channel is private
• The channel is authenticated
• The channel is reliable

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Establishing an SSL Secure Connection

• User browses Web
• Selects payment screen
• Request sent to server

• 6. Browser picks one algorithm
• Browser creates key pair
• Browser encrypts secret key
• Browser sends encrypted key to server

Two-way encrypted transmissions can
occur
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Secure Electronic Transaction (SET)

• A security protocol designed for handling
  encrypted electronic payments online
• Specifications include
• Confidentiality of information
• Payment data integrity
• Authentication of merchants, cardholders, and
  clearinghouses
• Interoperability with other protocols
• Dual Signature

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Digital Wallet

• Software that encrypts payment information and
  stores it in a file
• Opponents suggest serious privacy and security
  issues

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Examples
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Yahoo, Inc.

• How is Yahoo doing financially right now?
• Is Yahoo making the right moves toward continuing
  e-commerce profitability?
• Will Yahoo be able to compete successfully with
  AOL and MSN as an online service and e-commerce
  portal?

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ChemConnect Heritage Services

• What are the business benefits and limitations of
  using public B2B exchanges like ChemConnect?
• What is the business value of private B2B
  exchanges for a company?
• Should a small business use public or private B2B
  exchanges, or should they use exchanges like
  eBay, that attract both consumers and small
  businesses?

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Staples, Steelcase, Countrywide, HSN

• Does the fact that customers who shop online and
  in other channels generate more sales, as Staples
  and HSN have found, mean that most companies
  should have an e-commerce website?
• Do you agree with Steelcase that it is better for
  people to get product information online than
  from a salesperson?

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eBags, Economy.com, Classmates Online

• Do you feel that eBags will be able to sustain
  its profitability?
• How else could Economy.com increase its products,
  markets, and profitability?
• How could other kinds of businesses use the
  Classmates Online business model to help
  strengthen their e-commerce success?

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Office Depot, Lands End, Others

• Which website, Office Depot or Lands End, does a
  better job of helping users find the products
  they want?
• Which website capability or feature would you
  most like to see added to e-commerce websites?