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Chapter 7 Ecommerce Systems

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Title: 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
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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
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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
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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
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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
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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)
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