Chapter

9
Electronic Commerce Systems

McGraw-Hill/Irwin

Copyright 2008, The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives
Identify the major categories and trends of
e-commerce applications
Identify the essential processes of an
e-commerce system, and give examples of
how they are implemented in e-commerce
applications
Identify and give examples of several key factors
and Web store requirements need to succeed in
e-commerce
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Learning Objectives
Identify and explain the business value of several
types of e-commerce marketplaces
Discuss the benefits and trade-offs of several
e-commerce clicks and bricks alternatives

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Introduction to e-Commerce
Electronic commerce encompasses the entire
online process of

Developing
Marketing
Selling
Delivering
Servicing
Paying for products and services

It relies on the Internet and other information

technologies to support every step of the process
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Case 1: eBay, Running the Right Play

eBay is one of the fastest-growing companies
in history, and business is surging
31 sites around the world
$1.1 billion in international sales in 2004, and
growing twice as fast as the domestic market
Half of their 125 million registered users are
outside of the United States

eBay keeps a playbook

Several hundred pages of wisdom collected
from worldwide managers
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Case Study Questions

Why has eBay become such a successful and
diverse online marketplace?
What do you think of eBays playbook concept?
Why do they call it a playbook?

Is eBays move into the international arena a

good long-term strategy?

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The Scope of e-Commerce

9-7

E-Commerce Technologies

9-8

Categories of e-Commerce
Business-to-Consumer
Virtual storefronts, multimedia catalogs,
interactive order processing, electronic payment,
online customer support

Business-to-Business
Electronic business marketplaces, direct links
between businesses, auctions and exchanges

Consumer-to-Consumer
Online auctions, posting to newspaper sites,
personal websites, e-commerce portals
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Essential e-Commerce Architecture

9-10

Access Control and Security

E-commerce processes must establish mutual
trust and secure access between parties
User names and passwords
Encryption key
Digital certificates and signatures

Restricted access areas

Other peoples accounts
Restricted company data
Webmaster administration areas

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Profiling and Personalizing

Profiling gathers data on you and your website
behavior and choices
User registration
Cookie files and tracking software
User feedback

Profiling is used for

Personalized (one-to-one) marketing

Authenticating identity
Customer relationship management
Marketing planning
Website management
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Search Management
Search processes help customers find the
specific product or service they want
E-commerce software packages often include
a website search engine
A customized search engine may be acquired
from companies like Google or Requisite
Technology
Searches are often on content or by parameters

9-13

Content and Catalog Management

Content Management Software
Helps develop, generate, deliver, update, and
archive text and multimedia information at
e-commerce websites

Catalog Management Software

Helps generate and manage catalog content

Catalog and content management software works

with profiling tools to personalize content
Includes product configuration and
mass customization
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Workflow Management
E-business and e-commerce workflow management depends on a workflow software engine
Contains software model of business processes

Workflow models express predefined

Sets of business rules

Roles of stakeholders
Authorization requirements
Routing alternative
Databases used
Task sequences
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Example of Workflow Management

9-16

Event Notification
Most e-commerce applications are event driven
Responds to such things as customers first
website visit and payments
Monitors all e-commerce processes
Records all relevant events, including problem
situations
Notifies all involved stakeholders
Works in conjunction with user-profiling
software

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Collaboration and Trading

Processes that support vital collaboration
arrangements and trading services
Needed by customers, suppliers, and other
stakeholders

Online communities of interest

E-mail, chat, discussion groups
Enhances customer service
Builds loyalty

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Electronic Payment Processes

Complex processes
Near-anonymous and electronic nature
of transactions
Many security issues
Wide variety of debit and credit alternatives
Financial institutions may be part of the process

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Electronic Payment Processes

Web Payment Processes
Shopping cart process
Credit card payment process
Debit and other more complex processes

Electronic Funds Transfer (EFT)

Major payment system in banking, retail
Variety of information technologies capture
and process money and credit card transfers
Most point-of-sale terminals in retail stores
are networked to bank EFT systems
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Electronic Payment Example

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Securing Electronic Payments

Network sniffers easily recognize credit card
formats
Encrypt data between customer and merchant
Encrypt data between customer and financial
institution
Take sensitive information off-line

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E-Commerce Application Trends

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Case 2: Battle for e-Commerce Supremacy

eBay commands more than 90 percent of the
online auction market
Growth is at least 40 percent per year

CraigsList is an online classifieds meeting place

Buying and selling, but no payment system
Online classifieds growing faster than auctions

Google and Microsoft entering the market with

added features
Search by zip code, online maps, free listings
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Case Study Questions

Do you agree with Google and Microsoft that
eBay is now vulnerable to their assaults via
Google Base and Windows Live Expo?
What are the major advantages and limitations
of Google Base and Windows Live Expo?
Which do you prefer, or would you use both?

Are eBays development of Kijiji, acquisition

of Skype, alliance with Yahoo, and other
acquisitions enough to ward off the competitive
assaults of Google and Microsoft?
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E-Commerce Success Factors

Some of the success factors in e-commerce

Selection and value

Performance and service
Look and feel
Advertising and incentives
Personal attention (one-to-one marketing)
Community relationships
Security and reliability

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Differences in Marketing

9-27

Web Store Requirements

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Developing a Web Store

Build a website
Choose or set up web hosting
Use simple design tools and templates
Include a shopping cart and payment support

Market the website

Include Web page and e-mail advertising
and promotions
Exchange advertising with other Web stores
Register with search engines and directories
Sign up for affiliate programs
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Serving Your Customers

Convert visitors into loyal customers

Develop one-to-one relationship with customers

Create incentives to encourage registration
Use Web cookies to identify visitors
Use tracking services to record and analyze
website behavior and customer preferences
Create an attractive, friendly, efficient store
Offer fast order processing and payment
Notify when orders are processed and shipped
Provide links to related websites
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Managing a Web Store

Manage both the business and the website
Record and analyze traffic, inventory, sales
Use CRM features to help retain customers
Link sales, inventory data to accounting systems

Operate 24 hours a day, seven day a week

Protect transactions and customer records

Use security monitors and firewalls

Use redundant systems and power sources
Employ passwords and encryption
Offer 24-hour tech support
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B2B E-Commerce
B2B is the wholesale and supply side of
the commercial process
Businesses buy, sell, or trade with other
businesses

Relies on multiple electronic information

technologies

Catalog systems
Trading systems
Data interchange
Electronic funds transfers

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E-Commerce Marketplaces
One to Many
Sell-side marketplaces
One supplier dictates product offerings and prices

Many to One
Buy-side marketplaces
Many suppliers bid for the business of a buyer

Some to Many
Distribution marketplaces
Unites suppliers who combine their product
catalogs to attract a larger audience
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E-Commerce Marketplaces
Many to Some
Procurement marketplaces
Unites major buyers who combine purchasing
catalogs
Attracts more competition and thus lower prices

Many to Many
Auction marketplaces
Dynamically optimizes prices

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E-Commerce Portals
B2B e-commerce portals offer multiple
marketplaces
Catalogs
Exchanges
Auctions

Often developed and hosted by third-party

market-maker companies
Infomediaries serve as intermediaries in
e-business and e-commerce transactions

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B2B E-Commerce Web Portal

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Clicks and Bricks

Success will go to those who can integrate
Internet initiatives with traditional operations
Merging operations has trade-offs

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E-Commerce Integration
The business case for merging e-commerce
with traditional business operations
Move strategic capabilities in traditional
operations to the e-commerce business
Integrate e-commerce into the traditional
business
Sharing of established brands
Sharing of key business information
Joint buying power and distribution efficiencies

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Other Clicks and Bricks Strategies

Partial e-commerce integration
Joint ventures and strategic partnerships

Complete separation
Spin-off of an independent e-commerce company

Barnes and Nobles experience

Spun off independent e-commerce company
Gained venture capital, entrepreneurial culture,
and flexibility
Attracted quality management
Accelerated decision making
Failed to gain market share
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E-Commerce Channel Choices

An e-commerce channel is the marketing or sales
channel created by a company for its
e-commerce activities
There is no universal strategy or e-commerce
channel choice
Both e-commerce integration and separation
have major business benefits and shortcoming
Most businesses are implementing some
measure of clicks and bricks integration

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E-Commerce Strategy Checklist

Questions to ask and answer
What audiences are we attempting to reach?
What action do we want those audiences to take?
Who owns the e-commerce channel within the
organization?
Is the e-commerce channel planned alongside
other channels?
Is there a process for generating, approving,
releasing, and withdrawing content?
Will our brand translate to the new channel?
How will we market the channel itself?
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Case 3: Yahoo and Flickr

Flickr is a photo sharing site

14,000 images per hour are uploaded

There are 1.5 million users
80 percent of the 60 million photos are public
More than half have user-created labels that
make them searchable

Yahoo purchased Flickr

The user-generated content (social media)
will be used in the war against Google
It would like to apply the same concept to
web content as well
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Case 3: Yahoo and Flickr

Google takes an automated approach to searches
Armies of Ph.D.s and servers
Creates more relevant searches by using
algorithms

Yahoos strategy
Also uses algorithms, but not as well
Is gambling that the collective intelligence
of its audience will produce more relevant
search results

9-43

Case Study Questions

How does the Web foster the growth of social
media and social networking?
What business benefits does Yahoo hope to
gain from its acquisition of Flickr and drive
to Flickize its business?
How realistic are such planned benefits?

Can social media and networking serve as a

strategic competitive differentiator that enables
Yahoo to overtake Google in the multibilliondollar targeted search ads market?
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Case 4: Todays Web; Anything but Usual

Customers arent just reading these days
Theyre writing and watching as well

Community features
Interactive webcasts
Newsgroups
Online chat forums

Customer-to-customer interactions help

Microsoft learn which product features work,
and which dont
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Case 4: Todays Web; Anything but Usual

Federated will be using FedAd software to
Coordinate the efforts of 4,000 marketing
staffers in six divisions
Buy and publish the companys newspaper,
radio, and TV ads
Pay invoices
Ship ads to publications
Manage marketing expenses against the
companys budget

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Case 4: Todays Web; Anything but Usual

Dells initiatives
Redesign of its website to make it easier to use
Make IT costs smaller by being more efficient
Combine the website re-launch with an
e-commerce consolidation

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Case Study Questions

What is the primary driver behind the Web
upgrade activities of Microsoft and Dell?
What is the business value of Microsofts
Web-based, live-feedback program?
What lessons on developing successful
e-commerce projects can be gained from the
information in this case?

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