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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
9-4
Introduction to e-Commerce
• Electronic commerce encompasses the entire
online process of
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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
9-5
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?
9-7
The Scope of e-Commerce
9-8
E-Commerce Technologies
9-9
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
9-10
Essential e-Commerce Architecture
9-11
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
9-12
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
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Personalized (one-to-one) marketing
Authenticating identity
Customer relationship management
Marketing planning
Website management
9-13
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
9-14
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
9-15
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
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Sets of business rules
Roles of stakeholders
Authorization requirements
Routing alternative
Databases used
Task sequences
9-16
Example of Workflow Management
9-17
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
9-18
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
9-19
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
9-20
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
9-21
Electronic Payment Example
9-22
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
9-23
E-Commerce Application Trends
9-24
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
9-25
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?
9-26
E-Commerce Success Factors
• Some of the success factors in e-commerce
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Selection and value
Performance and service
Look and feel
Advertising and incentives
Personal attention (one-to-one marketing)
Community relationships
Security and reliability
9-27
Differences in Marketing
9-28
Web Store Requirements
9-29
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
9-30
Serving Your Customers
• Convert visitors into loyal customers
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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
9-31
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
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Use security monitors and firewalls
Use redundant systems and power sources
Employ passwords and encryption
Offer 24-hour tech support
9-32
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
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Catalog systems
Trading systems
Data interchange
Electronic funds transfers
9-33
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
9-34
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
9-35
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
9-36
B2B E-Commerce Web Portal
9-37
Clicks and Bricks
• Success will go to those who can integrate
Internet initiatives with traditional operations
• Merging operations has trade-offs
9-38
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
9-39
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
9-40
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
9-41
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?
9-42
Case 3: Yahoo and Flickr
• Flickr is a photo sharing site
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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
9-43
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
9-44
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?
9-45
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
9-46
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
9-47
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
9-48
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?
9-49