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 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

9-3
 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

9-6
 Case Study Questions

• Why has eBay become such a successful and

diverse online marketplace?
• What do you think of eBay’s playbook concept?
• Why do they call it a playbook?
• Is eBay’s move into the international arena a
good long-term strategy?

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The Scope of e-Commerce

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E-Commerce Technologies

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 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

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 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 people’s 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

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 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 manage-

ment 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

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 Event Notification

• Most e-commerce applications are event driven

• Responds to such things as customer’s 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 eBay’s 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

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

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 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 multibillion-
dollar targeted search ads market?
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Case 4: Today’s Web; Anything but Usual

• Customers aren’t just reading these days

• They’re 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 don’t

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Case 4: Today’s 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 company’s newspaper,
radio, and TV ads
• Pay invoices
• Ship ads to publications
• Manage marketing expenses against the
company’s budget

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Case 4: Today’s Web; Anything but Usual

• Dell’s 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 Microsoft’s
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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