ECommerce

1
A modern business methodology ... to cut
costs while improving the quality of goods and
services and increasing the speed of service
delivery.
WhatsElectronic Commerce?
Frontiers of Electronic Commerce Ravi Kalakota,
and Andrew B. Whinston
2
Evolution of Electronic Commerce
From VANS to Internet
Electronic Commerce has, so far, meant electronic
data interchange (EDI) over Value added Networks
(VANS) used by corporate organisations. That was
computer-to-computer exchange of routine business
documents in a standard format. Now, it has the
scope to use the Internet too as the medium. The
Internet enables customers, partners and users to
access a companys EDI network, which earlier was
closed to smaller companies, simply because of
the costs involved.
3
Evolution of Electronic Commerce
From VANS to Internet

• While the Internet speeds up transaction times,
  another advantage it has over EDI transactions
  conducted over a private network is the connect
  charges applicable. Traditionally, VAN providers
  charge for EDI on a per-transaction basis.
  Organisations that use EDI therefore tend to send
  transactions in a batch to their customers once a
  day. Over the Internet where all connect charges
  are fixed, Organisations can well afford to send
  transactions at any time they want to, thus
  enabling real time commerce.

4
How can E-commerce be used?

• Community-based services Payment of utility
  bills, traffic fines, donations to charity etc.
• Shopping Buying and selling goods and services
• Communication E-mail, Net telephony products can
  be commerce-enabled and serviced via the Net.
• Biz-to-Biz applications where the purchase orders
  are generated and seamlessly integrated with EDI
  systems.

5
Electronic Trade

• A recent report by the Organisation for Economic
  Co-operation and Development (OECD) predicts
  Internet trading will grow from todays estimated
  500 million to 5 billion by 2001. In keeping
  with the trend worldwide, India has entered into
  over 50 tax treaties to follow the flow of the
  increasingly seamless worldwide electronic
  trade.With emerging payments standards such as
  the Secure Electronic Transaction (SET) protocol,
  E-Commerce practises are reportedly reaching the
  end of usefulness rapidly.

6
(No Transcript)
7
(No Transcript)
8
(No Transcript)
9
(No Transcript)
10
(No Transcript)
11
(No Transcript)
12
Trends in Electronic Commerce

• Even though fewer than one in five of the largest
  retailers in the U.S. sell their wares on the
  Internet, consumers managed to spend more than
  10 billion shopping on the Web in 1997. Over 10
  of that was spent at a single Website--NetMarket,
  an online discount service created for its
  dues-paying members by CUC International.
  NetMarket handled over 1.2 billion in sales last
  year.

13
NEW CAPABILITIES THE INTERNET BRINGS TO COMMERCE

• The Internet will augment electronic commerce
  already being conducted between businesses--at a
  much lower cost--as well as will dramatically
  increase electronic commerce conducted with
  consumers. Critical issues such as how to handle
  electronic payment, security, privacy, and fraud
  prevention are being addressed with reliable
  commercial software, and businesses are beginning
  to use information technology on the Internet to
  exploit the advantages of conducting business
  electronically. Increasingly, business people are
  discovering important bottom-line benefits on the
  Web, including

14
Speedier, more accurate transactions through
customer self-service
NEW CAPABILITIES THE INTERNET BRINGS TO COMMERCE

• The Internet can save time and money and improve
  accuracy by eliminating middlemen who offer
  little added value. We will eventually see
  complex, multiparty transactions conducted over
  the Internet with no human interaction at
  intermediate levels whatsoever. As a result of
  one click by the end-consumer, the order will be
  placed, paid for, the product depleted from
  inventory, the shipment arranged, replacement
  components ordered from suppliers, and a
  replenishment order initiated. As an example, an
  airline's Web site may perform the simplest
  duties of a travel agent--provide access to
  timetables and fares, and make single-provider
  reservations--thus removing the agent as an
  intermediary.

15
Broader reach, larger potential customer base
NEW CAPABILITIES THE INTERNET BRINGS TO COMMERCE

• Retailers who embrace the Web enjoy the
  potential--and challenge--of selling to an
  ever-growing community of well-informed shoppers.
  Geographic boundaries become all but irrelevant
  (although state taxes and import duty can still
  apply) and operating hours are limited only by
  the software and hardware behind the Web site. As
  has often been observed, the Web is a great
  equalizer for businesses just starting up and
  facing very large competitors. For example, in
  the case of an on-line bookstore like
  www.amazon.com, the vastly larger population of
  potential customers on the Web renders it
  feasible for that single "store" to house a
  physical inventory not otherwise practical for a
  startup operation, and thus offers what
  previously only the "big guys" could.

16
Better and richer information for the business,
partners, suppliers, and consumer customers
NEW CAPABILITIES THE INTERNET BRINGS TO COMMERCE

• The Web delivers text, images, voice, and video
  to WAN-and LAN-connected users, organized onto
  hyperlinked HTML pages. This wide range of
  options enable the consumer or purchasing agent
  to view and interact with the business in the
  most appropriate, polished, appealing, and
  information-rich way. For example, a
  sophisticated Web server can personalize the
  catalog a given inquirer sees. Better and more
  consistently than any user registration card can,
  a Web site can capture and analyze the buyer's
  behavior for future planning, dynamic
  personalized marketing, and loyalty schemes. It
  can involve customers, partners, and suppliers in
  ways previously thought to be difficult or
  impossible (e.g., accept customer-furnished book
  reviews, support chat and e-mail for user groups,
  dynamically and automatically launch a sale based
  on the past 24-hours' buying patterns, etc.). A
  net-connected consumer, business customer, or
  supplier can train the business' Web site to keep
  special interests in mind and proactively notify
  the buyer via e-mail of relevant business
  changes.

17
E-Commerce and India

• While some blame the high cost of implementation,
  others worry about the lack of security. The
  systems needed to transact over the Net are in
  the early stages of development and are still
  costly and complicated for Indian Businesses to
  use. But its clear that E-Commerce is in, and
  the combination of the Internet and the EDI
  (Electronic Data Interchange) is the next step in
  building competitive advantage.

18
EXAMPLES OF ELECTRONIC COMMERCE TODAY
If we consider some of the goals of businesses
with regards to electronic commerce higher
revenues through exposure to additional
customers cost reduction lower product cycle
times faster customer response and improved
service quality, we see how dramatically a
company's bottom line can be influenced with the
addition of electronic commerce. A number of
pioneering firms are implementing electronic
commerce solutions today and are finding new ways
to save and make money.
19
Success stories... Lucent TechnologiesBusiness-t
o-Consumer Electronic Commerce

• Lucent Technologies is using Oracle Universal
  Server and Oracle Web Application Server to power
  a high-traffic Internet commerce site for
  marketing and selling its business communications
  products. The site allows Lucent customers to
  browse up-to-the-minute information and images
  representing more than 1,000 Lucent products and
  place orders securely on-line.

20
Success stories... Lucent Technologies-2

• Built in only six weeks, Lucent launched the site
  in July 1996 at www.lucentdirect.com and has been
  continually upgrading the site without any
  performance hits. Lucent product managers are
  able to easily make updates on-line, such as
  price increases or product description changes,
  by simply entering the system through their
  browser, using a password, and making changes
  instantaneously to Lucent's electronic catalog in
  a word-processor format. The system's complexity
  is transparent to Lucent product managers who,
  with the proper security checks, can maintain
  their own content in a timely manner. This avoids
  involving an HTML programmer who would have to
  make those changes for the entire company.

21
Success stories... Lucent Technologies-3

• "Our customers and employees don't need to know
  the technology behind the site. The consumer
  wants to know that the information they are
  getting is correct and they don't want to wait
  for it otherwise, they will buy somewhere else.
  Because our product managers are able to maintain
  their own product content on the site, updates
  are made quickly and easily. That functionality
  helps to keep Lucent's site successful and
  directly connects us with a whole new market,
  saving us considerable time and money."
• Tom Catani, general manager of electroniccommerce
  , Lucent Technologies

22
Success stories... In FocusBusiness-to-Consumer
Electronic Commerce

• In Focus is the world-wide leader in
  manufacturing and developing multimedia
  projection products and services that make it
  easy to project the power of multimedia in
  business and sales presentations, software demos,
  education and training, and interactive workgroup
  meetings. The company uses Oracle Applications
  (Financials and Manufacturing) as the backbone of
  its business and uses the Web Customers module to
  allow its distribution partners (resellers) to
  track the progress and status of orders. In Focus
  was able to install and customize Web Customers
  in only eight weeks.

23
Success stories... Chrysler Corp.
Chrysler Corp., by linking to its suppliers
through a Web-based network, reportedly saved
more than 1billion in cost of materials in 1997.
By 2000, Chryslers estimated annual average
savings will amount to 2 billionThe Internet is
a tempting channel for a Bank which can conduct
an online transaction for five paise versus RS
1.50 through a teller.The biggest challenge for
companies involved in electronic commerce isnt
the technology-its changing the corporate
culture. It requires an organisation to be bold.
24
Success stories... Cisco
The Cisco Connection Web Site, now available in
14 languages and with 49 country pages, is
claimed to be the largest Internet Commerce
Site.John Chambers, President and CEO, Cisco
Systems Inc., predicts that E-Commerce will be
the primary means by which business will be
conducted in the next 10 years. Ciscos sale
through the Web has touched of a total of
billion.
25
Dell Computers
Success stories...

• Dell Computers made waves in industry circles
  when they announced that they sold over a billion
  dollars worth of Personal Computers directly off
  the Web in 1997.

26
Lessons learnt from theDell Experience

• Increasing margins and revenues. Dell understood
  that the web could take the place of their
  customer call center replacing sales
  representatives and technical support staff.
  Phone and material costs decreased while also
  speeding up the sales process.

27
Lessons learnt from theDell Experience

• Value-added for the customer heightened the web
  experience. The web also offered new ways to help
  people choose computers and price them without
  sending faxes of information. Pricing and
  comparing configurations became easier.

28
Lessons learnt from theDell Experience

• Synergies with current business systems. Even if
  the user doesnt buy over the web, the percentage
  of voice calls into Dell show that a very high
  percentage did their pre-sales shopping by
  visiting their web site! Customers needed to
  spend less time with representatives on the phone
  saving even more money.

29
Lessons learnt from theDell Experience

• The perfect target market for consumer sales. The
  web demographics of young professionals who
  already are computer literate and disposed to a
  computer (by being on the web) was a marketing
  match made in heaven.

30
Lessons learnt from theDell Experience

• The perfect way emerged for business sales.
  Business users can also find their way onto
  Dells site and Dell is now providing internal
  virtual web stores within large corporate
  Intranets to aid the purchasing process. This is
  a new growth segment for Dells web-based sales.

31
How do you Buy On-Line?

• World Avenue, IBMs electronic shopping mall on
  the Web, being beta tested, has been used to
  generate 5,500 orders from 200,000 online
  customers, for some 275,000 worth of caps, mugs
  and other Olympics merchandise.

32
How do you buy Online?

• As you browse through the store, that runs an
  e-commerce server, such as the HP domain
  commerce server or is part of an electronic
  mall, such as IBMs Net.Commerce, the server
  helps you select an item (say an Olympic souvenir
  mug), and place an order. Such servers carry
  software to verify transactions, perform
  accounting duties, guarantee payments, and even
  create digital money.

33
How Do you pay Online?

• Wishing to pay for the item, you send an
  enciphered request for payment to your
  bank/third-party payment provider. Your bank will
  then remit to you, a secure packet of e-cash.
  Using Cybercashs wallet application , you send
  an enciphered payment request to Cybercashs
  server. Once the credit is authorised by
  Cybercash over secure lines to your bank, money
  in Wallet is used to complete the
  purchase.(contd...)

34
How Do you pay Online?-2

• You then send the exact amount of e-cash needed
  to buy the Olympic souvenir to the virtual store.
  The server at the store then sends that packet of
  cash to its bank. The merchant bank then sends a
  request for transfer of funds to your bank, which
  the latter, after verification, performs. This is
  where actual funds are transmitted from your bank
  to the merchant bank.

35
Buying Books Online
All you do is to select the books you want to
buy, and place an order for them. You could then
either pay for them through your credit card, or
pay for the books when you receive them. Buying
books from Amazon.com is thus much like buying
items from a catalogue. Whats more you can view
the book, and maybe read part or whole of
it.This Online Bookstore has become so popular,
that not only is it the number one bookseller on
the web, but the number three bookseller
overall.As many as 2,260,000 surfers who visited
the web site bought books this quarter, an
increase of nearly 50 percent from 1,510,000
customers account at the end of the fourth
quarter 1997, and an increase of 564 percent from
340,000 customers accounts at the end of the year
ago first quarter.
36
E-Commerce How a Transaction Takes Place-1

• Here is an example of how an e-commerce
  transaction takes place. Consider the following
  case study
• Musba Book Suppliers has a large and good
  selection of computer books reference and
  computer-based training materials. Sales are
  effected through the bookstore and an on-line
  virtual bookstore at www.books.com.
• Musba Book Suppliers wants to set up a web site
  in which everything, from the moment a customer
  placed an order to shipment of that order, was
  fully automated.
• The challenging aspect was that the company ships
  some 200 books a day, and numerous transactions
  are called for

37
E-Commerce How a Transaction Takes Place-2

• A customer order triggers a MS-Access stored
  query. The customer sees real-time stock status
  on a HTML page. As new titles arrive in the
  warehouse, a Microsoft Visual Basic module loads
  incoming stock to the websites database. Another
  Visual Basic module copies the order to the
  customer service database and removes the order
  information from the web, for security reasons. A
  separate Visual Basic Module processes the order
  handles customer service needs, and exports the
  information to a system that calls the companys
  credit card. This same application also prints a
  packing slip, which goes to the warehouse.

38
E-Commerce How a Transaction Takes Place-3

• Warehouse staff pull the books ordered and type
  the reference number into the shipping system,
  which is linked by an ODBC connection directly to
  the customer database. With the reference number,
  the shipping system knows who the customer is and
  where the books are going. The warehouse staff
  attaches shipping labels which goes to the
  shipping dock. A Visual Basic-based application
  recognizes that the order has been shipped and
  creates a shipping confirmed mail message that
  is automatically sent to the customer. The cycle
  is complete

39
Consumer finds something she wants to buy at a
shop on the Net
1
6
Verification and remittance of actual funds
Shop
Consumer sends on enciphered request for payment
to her bank
2
The electronic bank sends back a secure packet of
e-cash
Consumers Bank
Consumer Public Key
3
The shop sends the packet of cash to its bank
Merchant Server
5
Consumer sends the e-cash to the shop
4
Merchant Bank
Shop
40
Agents and Intermediaries
To help organisations conduct business on the Web
without having to set up costly servers and
devote dedicated personnel to monitor orders and
deliveries and other transactions, a new breed of
Agents or Internet E-commerce Solution providers
have sprung up.
41
Agents and Intermediaries
Another similar service providers site looks
like this
42
Good News, Bad News
Like any other technology, theres good and bad
news.The good news is that E-Commerce is a round
the clock advantage for the customer. It will
eventually become standard. Whats more,
e-commerce allows fast and flexible execution and
response to market opportunities. The Web enables
a company to introduce a new product, get
immediate customer reaction, refine and perfect
it, all without incurring huge investments in a
physical distribution infrastructure. Companies
betting on E-Commerce have begun to learn about
their customers online buying habits. The bad
news is that customer reaction may actually be in
jeopardy. Led to believe theyre transacting in
real-time, they could become disillusioned and
take their business to competitors or back to the
offline world if their order is not fulfilled
quickly.
43
How safe would it be to use yourCredit Card
Online
How do you pay Online
While such a concern is shared by many users, the
risk has now been reduced. This has come about
due to the development of Secure Internet
Protocols and Payment Systems, and Server
solutions that can handle electronic
transactions.The Secure Electronic transaction
(SET) initiative that major Credit-Card issuers
Visa International and Master Card are backing is
expected to solve such security risks. The SET
project, obtaining assistance from Microsoft
Corp., IBM Corp., Netscape Communications Corp.,
SAIC, GTE, Teresa Systems and Verisign, aims to
deliver a transparent encryption system suitable
for all electronic transactions using PCs. The
use of Public Key encryption may also go a long
way in allaying users fear of safety.
44
Pay Cash over the Net
How do you pay Online
The type of solutions available today include
third-party payment organizations and credit card
payment system on the Net. Digicash, France, was
the first third party payment organization, in
1994, to implement a virtual money system, with
which clients and merchants could transact
business in relative safety. Digicash and later
third-party payment organizations developed
payment and merchant systems based on the RSA
security system for transmitting encrypted data
over the Internet. Taken in conjunction with the
development of secure internet protocols
(Netscape Secure Sockets Layer, Enterprise
Integration Technologies Secure-HTTP,
Master-Card and Visa Internationals SET and the
Joint Electronic Payment Initiative), third-party
organizations have attracted banks and Credit
Card Companies to the Internet.
45
Cyber-cash
How do you pay Online
Some of the third party payment offerings now
available are CyberCash, Ecash, First Virtual
Payment System and Clickshare.CyberCash is a
realtime secure, digital signature-based credit
card authentication service, developed by
CyberCash Inc. It acts as an intermediary between
the consumer, the merchant and the credit card
clearing house. Ecash on the other hand is
digital money that is downloaded by an Ecash
client from a participating bank and stored on a
customers local computer. Ecash can be spent at
merchant systems that accept it accepting
merchants, in turn, must deposit Ecash receipts
at a participating bank.Of the credit card
payment systems available now on the Net,
ICVERIFY, from ICVERIFY Inc. is the most popular.
ICVERIFY processes and authorises credit card
transactions online.
46
Duty Free on the Net
Last month, the World trade Organization came to
a decision to keep global electronic commerce
duty free, and agreed to evolve a programme to
deal with its development on the Internet. The
new agreement, involving trade ministers of 132
countries, bars governments from collecting any
tariffs on such transactions for atleast a year.
It ofcourse has incurred wrath from
non-governmental organizations since such an
exercise would benefit corporates of developed
countries governments, by the way, would lose
the option of a revenue earning source.The Global
Internet Project(GIP) presented the European
Union (EU) with its recommendations on e-commerce
last month. EU wants to develop a global charter
covering technical standards, illegal content,
licenses, encryption and data privacy on the
Internet and other Electronic networks.
47
Major components of E-COM
Shopping Cart (commerce server)

• An application which helps the shopper to browse
  through the product list and place an order.
  Application should be capable of maintaining the
  state information about the shopper purchase
  details and his ID.It should also be able to
  maintain the product list.(Usually this is
  implemented with the help of components(COM
  OBJECTS)). The components interact with the
  database for transaction processing.ASP provides
  support for this.(Cookies too can be used for
  this).

48
Major components of E-COM
Payment module(Payment server)

• Shoppers can make payments through credit cards.
  Credit card No. is sent to the server which can
  be stored in the database which can be verified
  against a bank manually later.
• Another method is to use payment servers which
  allows on-line verification of credit card
  numbers with the bank. It also provides
  mechanisms for checksum verification.

49
Major components of E-COM
Security issues(security server)

• Payments to the server is enabled with the help
  of a number of security mechanisms
• Browser-to-Web server data encryption and
  integrity with SSL 3.0
• Browser to database password authentication by
  use of encrypted digests (Kerberose,Identix,Cybers
  afe)
• Protection for corporate databases with
  protocol-enabled firewalls proxying and
  authenticating user connection requests (Oracle
  has supplied sqlnet proxy to all firewall
  vendors).
• Web Application Server to Browser authentication
  by use of digital signatures.
• Security Server provides a Certificate Authority
  (CA) function, including generation of public
  key/private key pairs and issuance of
  industry-standard X.509 certificates.

50
Players in E-Commerce
Netscape is not the only player to move towards
facilitating its customers in e-commerce. IBM
Corp is also gearing itself up to provide
e-business solutions. Other players such as
Hewlett-Packard Co. and Compaq-Tandem have
launched servers (hardware/software) that will
cater to electronic commerce. Cognos Inc., a
leader in business intelligence tools, has
developed Data merchant that allows corporates to
access business intelligence data from anywhere
around the globe, anytime they want it.Finally,
Microsoft and Sun Microsystems are also not far
behind, as both their technologies - ActiveX and
Java - are capable of providing solutions for
developers with security strategies to base their
products on.
51
Players in E-Commerce

• Software companies that have made a mark for
  themselves in providing E.Commerce solutions out
  of the box are
• OpenMarket (LiveCommerce, Transact, ShopSite)
• Sterling Commerce
• iCat (Commerce Publisher, E.Commerce Suite)
• Microsoft (Commerce Server)
• Netscape (

52
Is E-Business all about the Internet?

• No, the basic foundation for e-business can be
  laid without the Internet. Its all about
  connecting your offices, suppliers, retailers and
  streamlining your processes. Its about letting
  your left hand know what your right hand is doing
  and extending it to your customers. Thats it.
  Later when you feel youre ready or interested in
  reaching millions of customers, the Internet may
  be your answer.

53
But is it for me?

• Of course, Today you can buy garments, music,
  magazines, movie tickets and even vegetables on
  the net. Many companies keep their branch offices
  and employees informed of the latest developments
  whether internal or external through an intranet
  or even simple E-mail. No matter what the nature
  and size of your business, companies like IBM,
  Oracle etc.have ready solutions which will make
  it more cost effective.

54
Is it safe?

• Nobody would want to get into something that
  wasnt secure. So when you are ready for
  e-business youll find that many organisations
  have developed solutions like Real Time Intrusion
  Detection and Anti Virus software. These along
  with personal codes and passwords make sure that
  any transaction that takes place or any
  information that is shared is seen only by the
  people its meant for.

55
Will I have to change my existing setup?

• Certainly not! Theres only no problem even if
  you are using different hardware and software
  systems to do your work today. There are
  companies that will help them all work together,
  using cross-platform technologies like Java to
  build smoothly integrated, open e-business
  solutions that work with both IBM and non-IBM
  technology. Of course, it would be easier for you
  if your system is scalable. Because then you can
  add to it as your business grows.

56
What the Future Holds
Ricardo H. Dujua, general manager of EDINet
Philippines, speaking at the Supermarket Show 97
last year predicted that soon more and more
shoppers will use the Internet as the medium of
Business. The Electronic system will eliminate
the need to set up physical stores, warehouses
and carry inventory.It is also probable that not
only will the greater adoption of e-commerce
change the way retailers conduct business, it may
also bring pressure to bear on them to be more
responsive to customers needs.The World is
becoming increasingly networked, changing our
methods of working and lifestyles. Once the hypes
are cleared and the mist lifts, usage would be
fun, business easy.
57
In Future

• While E-Commerce may not completely replace other
  forms of Commerce, it is likely to be the
  dominant mode of the commercial transactions in
  the future.
• Colleges and Schools including Business Schools
  should reflect this trend in the curriculum to
  train the future generation of Managers.

58
Consumer Applications and Social Interaction

• In the long run, the e-commerce application
  winners will be those that can change the way
  consumers think and the way they do business. One
  example might be applications oriented toward
  social interaction. Lessons from history indicate
  that the most successful technologies are those
  that make their mark socially.
• The TV and the Telephone are examples.

59
In Sum

• In sum, the most successful marketplaces are
  expected to be those that cater to consumer's
  loneliness, boredom, education and career. For
  instance, look at the success of on-line chats
  and home shopping channels.
• But debates rage over whether interactive TV or
  on-line computer services will become pivotal
  medium for solving consumer loneliness.