Chapter 7 Ecommerce Systems

1
Chapter 7 E-commerce Systems
2
E-commerce

• Doing business online
• The online process of developing, marketing,
  selling, delivering, servicing, and paying for
  products services transacted on internetworked,
  global marketplaces of customers, with the
  support of a worldwide network of business
  partners.
• More than on-line shopping, encompasses other
  business activities

3
E-commerce

• Three Basic Categories
• Business-to-Consumer (B2C)
• Entice and sell products and services to
  consumers
• Business-to-Business (B2B)
• Involves both electronic business marketplaces
  (Hub) and direct market between businesses
• Consumer-to-Consumer (C2C)
• Between consumers, consumer and business.

4
E-commerce Architecture
5
E-commerce Architecture

• Infrastructure or foundation
• Internet, intranets, and extranets
• Functional scopes
• Customers
• secure information, marketing, transaction
  processing, and payment
• Trading and business partners
• exchange information and accomplish secure
  transactions
• Employees
• IS professionals and end users (internal and
  remote)
• communicate and collaborate
• develop and manage the content and operations

6
e-Commerce Processes

• The processes that support the operation of
  e-commerce
• The features (functions, activities) provided on
  the website
• These processes are also seen in traditional
  business process, but implemented differently in
  the e-commerce environment.

7
e-Commerce Processes
8
e-Commerce Processes

• Access control and security
• Processes MUST establish mutual trust and secure
  access
• Authenticating users (who)
• Authorizing access (where, what, how)
• Must protect the resources of e-commerce sites
  from threats
• Hackers, theft of passwords or credit card
  numbers
• System failures

9
e-Commerce Processes

• Profiling and personalizing
• One-to-one marketing strategy
• Personalized view of the website
• Based on personal data, online behavior
  (doubleclick)

10
e-Commerce Processes

• On a Web site, personalization is the process of
  tailoring pages to individual users'
  characteristics or preferences.
• One-to-one marketing
• because the enterprise's Web page is tailored to
  specifically target each individual consumer to
  enhance customer service or e-commerce sales.
• Personalization software products
• Broadvision, ResponseLogic, and Autonomy.
• Yahoo allow site visitors to customize
• A demo on amazon.com

11
e-Commerce Processes

• Search management
• Helps find the specific product or service
• Software may include a search engine component or
  a company may acquire a customized e-commerce
  search engine

12
Search engine

• On the Internet, a search engine is a coordinated
  set of programs that includes
• A spider goes every web site that wants to be
  searchable and reads it, using hypertext links to
  discover and read other pages
• A indexer ("catalog") creates a index from the
  pages that have been read
• A searcher receives your search request,
  compares it to the entries in the index, and
  returns results to you
• A demo on http//searchenginewatch.com/

13
(No Transcript)
14
e-Commerce Processes

• Content and catalog management
• Content management software helps companies
  develop, generate, deliver, update, and archive
  text data and multimedia information
• multimedia catalogs of product information
• to personalize the content of the website
• May be expanded to include product configuration
  processes that support mass customization (see
  next)

15
e-Commerce Processes

• Mass customization
• Mass production of goods with differing
  individual specifications through the use of
  components that may be assembled in a number of
  different configurations. Mass customization is a
  cost-efficient way of offering some of the
  benefits of customization.
• A demo of landsend, dell, toyota

16
e-Commerce Processes

• Workflow management system
• a modern business concept that describes the
  tasks, procedural steps, organizations or people
  involved, required input and output information,
  and tools needed for each step in a business
  process
• a system that completely defines, manages and
  executes workflows through the execution of
  software whose order of execution is driven by a
  computer representation of the workflow logic.

17
e-Commerce Processes

• Workflow software engine
• the component in a workflow automation program
  that knows all the procedures, steps in a
  procedure, and rules for each step. The workflow
  engine determines whether the process is ready to
  move to the next step.
• Workflow systems ensure that
• Proper transactions, decisions, work activities
  are performed
• Correct data and documents are routed to the
  right employees, customers, suppliers, and other
  business stakeholders

18
(No Transcript)
19
e-Commerce Processes

• Event notification
• Most applications are event driven
• New customers first visit
• Payment and delivery processes
• Customer relationship supply chain management
  activities
• Notifies those concerned when an event occurs
  that might affect their status in a transaction

20
e-Commerce Processes

• Collaboration and training
• Supports the collaboration arrangements trading
  services needed by customers, suppliers, other
  stakeholders
• May be provided by Internet-based trading services

21
Electronic Payment Processes
22
Electronic Payment Processes

• Processes are complex
• Near anonymous nature of transactions
• Security issues
• Wide variety of debit and credit alternatives
• Wide variety of financial institutions and
  intermediaries
• Web payment processes
• Credit cards
• Purchase orders
• Electronic shopping cart

23
Electronic Payment Processes

• Electronic funds transfer (EFT)
• Uses a variety of IT to capture and process money
  and credit transfers between banks and businesses
  and their customers
• ATMs
• Pay-by-phone
• Web-based
• PayPal Bill Point (cash transfers)
• CheckFree and PayTrust (automatic bill paying
  services)
• Electronic bill payment
• Point-of-sale terminals linked to bank EFT systems

24
Electronic Payment Processes

• Secure electronic payments
• Addresses vulnerability to network sniffers
• Encrypt data passing between customer and
  merchant
• Encrypt the data passing between the customer and
  the company authorizing the credit card
  transaction
• Secure Socket Layer (SSL)
• Digital Wallet
• Secure Electronic Transaction

25
SSL

• Secure sockets layer, a commonly used protocol
  for managing the security of a message
  transmission on the internet.
• Third party security certification companies
• www.verisign.com
• Provide internet identity
• A special icon on your browser, called
  certificate.
• Some details of the certificate
• a statement verifying the identity of a person or
  the security of a Web site.

26
How to Build Consumers Trust?

• Suppose your business is going to launch an
  e-commerce website, how are you going to design
  your website so that consumers are willing to
  shop from your website?

27
Trust Building

• Disposition to trust
• the extent to which one displays a consistent
  tendency to be willing to depend on others in
  general across a broad spectrum of situations and
  persons.
• Institution-based trust
• one believes that favorable conditions are in
  place that are conducive to situational success
  in an endeavor or aspect of ones life

28
Institution-based trust

• Situational normality
• one believes that the situation in a venture is
  normal or favorable or conducive to situational
  success.
• Structural assurance
• one believes that protective structuresguarantees
  , contracts, regulations, promises, legal
  recourse, processes, or proceduresare in place
  that are conducive to situational success

29
Structural assurance

• Privacy policy
• Guarantees
• 3rd party referrals
• Customer referrals word of mouth, endorsement,
  feedback, rating, expert opinion
• Website referrals affiliations, 3rd party seals

30
Trust Building

• Four types of web seals
• www.verisign.com Provide internet identity,
  privacy
• BBBonline issued by BBB.org, to promote and
  foster the relationship between businesses and
  the public
• Webtrust issued by a licensed Certified Public
  Accountant (CPA), Chartered Accountant, or
  equivalent.
• Truste issued by TRUSTe, an independent,
  non-profit privacy initiative

31
Trust Building

• Cognitive Balance theory
• A theoretical perspective on social interaction
  that suggests that people organize their
  perceptions of people and objects into units and
  strive for some consistency in the positive and
  negative feelings among them.

32
How an Online Credit Card Transaction Works
33
SET

• Secure Electronic Transaction Protocol
  (setco.org)
• An open standard for the e-commerce industry
  developed and offered by MasterCard and Visa as a
  way to facilitate credit card transactions
• With SET
• User (three parties) are given digital
  certificates
• a transaction is conducted and verified using a
  combination of digital certificates and digital
  signatures among the purchaser, a merchant, and
  bank
• Uses a digital certificate to verify a senders
  identity

34
Electronic Payment Systems

• CA

prerequisite
certification
CARDholder
Merchant
Financial Institution
reconciliation
order
Payment info
35
How SET Transaction Work
36
(No Transcript)
37
E-Commerce Revenue Model

• How is google making money?
• How is yahoo making money?
• How is amazon.com making money?
• How is 50below.com making money?

38
(No Transcript)
39
Portal

• Providing the chance to find everything.
• General or specialized
• Horizontal portal (Search engine)
• powerful search tools
• A broad range of content and services
• Vertical portal
• A single area of interest
• Revenue Model
• Subscription
• advertising revenues
• transaction fee

40
StoreFront (E-tailer)

• Online version of traditional retailer
• Examples
• virtual merchants (online retail store only)
• clicks and mortar (online distribution channel
  for a company that also has physical stores)
• catalog merchants (online version of direct mail
  catalog)
• manufacturers selling directly over the Web
• Development Software (http//www.monstercommerce.c
  om/)

41
Online Shopping Malls

• Shopping services at Portal
• shopping cart
• Information coming from different sites.
• Comparing prices.
• Direct traffic to shopping retailers
• Convenience of payment
• Major websites
• Shopping.yahoo.com
• Froogle.google.com?

42
Shopping-Cart

• Databases
• Product catalog
• Customer information
• Credit-card data
• Contact information
• Purchase history
• Shipping information

43
Amazon.com

• Procurement and logistics
• Package of books were shipped from the publisher
  or wholesaler's warehouse to Amazon
• Amazon repacked before being shipped out to
  customers
• Store Operation
• Centralized in Seattle, WA

44
zShops
Customer
zShops
Amazon.com
Brand recognition Access to a large customer
base E-commerce package from Amazon Guarantee and
credibility Access to client database
45
Web Services

• Definition From IBM
• Software components that represent business
  functions that can be accessed by users using
  standard protocols.
• Microsoft (.net) Oracle (network services)

46
Web Services
47
Auction

• Bring buyers and sellers together
• Revenue model
• Transaction fee submission fee
• Database
• Personal identification
• Product information
• Bidding information
• Shipping information
• Payment and warranty information

48
Auction

• English Auctions
• Ascending-price auctions
• a closing time in advance
• Dutch Auctions
• Descending price auctions
• Sealed-Bid Auctions
• Bidders submit their bids independently and are
  usually prohibited from sharing information with
  each other.
• First-price, second-price
• Double Auctions
• Buyers and sellers submit bids to an auctioneer

49
Reverse auctions

• Allow buying companies to post items they want to
  buy and selling companies to compete for the best
  price they are willing to take for those items.
  Winning bidders (sellers) are obligated to sell
  items in reverse auctions.

50
eBay.com

• Founded in September 1995, eBay (Nasdaq EBAY) is
  The World's Online Marketplace for the sale of
  goods and services by a diverse community of
  individuals and small businesses.
• Today, the eBay community includes more than a
  hundred million registered members from around
  the world.
• People spend more time on eBay than any other
  online site, making it the most popular shopping
  destination on the Internet.

51
eBay.com

• How do you determine whether to transact with a
  seller?
• Information Asymmetry
• The partners in a transaction do not have the
  same information. One party has more, complete,
  and better information than the other.

52
eBays Feedback Forum

• The most popular and successful online reputation
  system.
• A traders reputation is measured by an overall
  rating which is counted and saved as a number.
• A positive comment from a unique trading partner
  adds one point to the accumulated reputation
  rating
• A negative comment reduces one point from the
  accumulated reputation rating
• A neutral comment does not affect the overall
  reputation rating.
• Different types of comments are also counted and
  provided as several summarized numbers.

53
(No Transcript)
54
Web Store Development
55
B2C

• Location is not a factor
• Must build customer satisfaction, loyalty,
  relationships
• Success factors
• Selection and value
• Offer a good selection of attractive products and
  services
• Build a reputation for high quality, guaranteed
  satisfaction, and top customer support
• Performance and service
• Site must be efficiently designed for ease of
  access, shopping, and buying
• Service must be friendly and helpful

56
B2C

• Success factors
• Look and feel
• Attractive storefront, shopping areas, and
  multimedia product catalogs
• Advertising and incentives
• Targeted, personalized ads
• Incentives include
• Coupons, Discounts, Special offers, Vouchers for
  other web services
• Personal attention
• Encourages customers to buy and make return
  visits
• Welcomed by name, Greeted with special offers
• Guided to the parts of the site that you are most
  interested in
• Relationship building

57
Animation

• Animation as a stimulus deteriorates viewer
  information seeking performance.
• As the difficulty of the task increases, viewer
  performance is less affected by animation.
• Animation that is similar but irrelevant to a
  task has more negative impact on viewer
  performance than animation that is dissimilar to
  the task.
• Animation that is brightly colored has a stronger
  negative effect on viewer performance than does
  dull colored animation.

58
B2C

• Success factors
• Community relationship
• a feeling of belonging to a unique community
• Virtual communities
• Discussion forums, Newsgroups, Chat rooms,
  Message boards
• Cross-links to related web communities
• Security and reliability
• Customers must feel confident regarding the
  security of their
• Credit card, Personal information, Transaction
  details
• Must feel that you are dealing with a trustworthy
  business.
• Reliability information asymmetry

59
Stickiness

• Use vs. Psychological attachment
• Know your target audience
• KISS
• Make your site interactive
• Change your site frequently
• Don't forget the META tags

60
B2B

• The wholesale and supply side of the commercial
  process
• Businesses buy, sell, or trade with other
  businesses
• Includes
• Electronic data interchange
• Electronic funds transfer

61
e-Commerce Marketplaces
62
B2B Infomediary
63
Clicks and Bricks
64
Clicks and Bricks

• E-Commerce Integration (officedepot.com)
• integrated into the traditional business
  operations
• Capitalizing on unique strategic capabilities
  that exist in a companys traditional business
  operations
• Gaining strategic benefits such as..
• Sharing established brands
• Sharing key business information
• Joint buying power
• Distribution efficiencies

65
Office Depot

• Successful catalog sales
• Call center, 2000 delivery trucks
• 1825 stores and 30 warehouses networked
• Integrated customer, vendor, product database

66
Clicks and Bricks

• Mixed integration
• Joint venture (kbtoys.com and brainplay.com)
• Strategic partnership
• Complete separation(bn.com)
• E-Commerce Channel Choices
• An e-commerce channel is the marketing or sales
  channel created by a company to conduct and
  manage its chosen e-commerce activities

67
E-Channel

• Additive channel sell more of traditional lines
  to new markets
• New offer channel invent a new product or
  service
• Subscription charge for access to content
• Advertising sell ad space on the site
• Portaling charge destinations for sending users
  there
• Commission a percentage of transactions

68
Internet Threats

• Internet threats
• Price transparency
• Communication flip-flop
• Customer demand for perfect choice

69
No Intermediaries Anymore?

• Disintermediation
• The process of eliminating intermediaries.
• Travelocity orbitz.
• Reintermediation
• The process of creating new intermediaries in EC.
  
• Ebay.com, etrade.com

70
Price transparency

• The capability of customers to use the web to
  learn about the prices of products from a variety
  of sellers
• Efficient searching
• Intelligent agents computer programs that can be
  trained to carry out a search over the internet
  for needed information, also called bots.
  www.botspot.com
• Auction and reverse auction
• reverse auction
• Allows buyers to set their own price and see if
  the seller will accept the price (priceline.com)
• The potential vendors compete for the buyers
  business by offering a competitive price and
  maybe some extras.
• Web sites that specialize in comparing
  prices(Mysimon.com)

71
Communication Flip-Flop

• The reversal of the seller controlling the flow
  of information through print and media
  advertising to the customer controlling the flow
  of information by first finding web sites and
  then choosing which ones to visit.
• Customer convergence
• a company must be easily found by search engines.
  
• Customer must find the exact page.

72
Perfect Choice

• The demands by customers for a wide range of
  products and choice in how to buy them at a
  variable price.
• Wide range of purchase channels
• Traditional retailers online (Home Depot)
• Online stores setting up physical store. (gateway)