Electronic Commerce Systems

Chapter

9

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

• 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

Learning Objectives

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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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Case 1: KitchenAid and the Royal Bank of Canada• Companies that do business online must police

unauthorized use of their brand names, logos and other trademarks to protect their investments.

• Companies such as BrandProtect, MarkMonitor, and NameProtect are stepping in to offer companies some artillery in the fight for control of their brands and reputations.

• The challenge of brand protection, however, has grown exponentially for companies operating in the online world.

• Other type of violation is using logos without permission because it is so easy for someone to go to a company’s web site and grab a logo and put it somewhere else.

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Case Questions

1. Consider your own online shopping patterns. How much weight do you place on the presence of a name or logo or other trademark (such as the KitchenAid silhouette) on a Web site when purchasing goods or services? Do you ever stop to consider whether you may have been misled? How could you tell the difference?

2. Brian Maynard of KitchenAid notes that the development of the Internet changed the problem of brand policing. What are some of these changes? What new challenges can you think of that did not exist in the preonline world? Provide several examples.

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Case Questions

3. The companies mentioned in the case (e.g., Kitchen-Aid, RBC, Disney, and Coke) were well established and enjoyed strong brand recognition well before the advent of the Internet. Do you think online-only companies face the same problems as they do? Why or why not? Justify the rationale for your answer.

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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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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: Entellium, Digg, Peerflix, Zappos, and Jigsaw

• For many internet companies, the second-mover advantage seems even more substantial.

• Entellium is an example of a company that has successfully implemented a second mover strategy on the Web.

• The second-movers can use the same approach as first mover with better products and services at much lower cost.

• Another strategy is to use combinations of business models that are successful.

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Case Study Questions

1. Is the second-mover advantage always a good business strategy? Defend your answer with examples of the companies in this case.

2. What can a front-runner business do to foil the assaults of second movers? Defend your answer using the examples of the front-runner companies in the case.

3. Do second movers always have the advantage in Web based business success? Why or why not? Evaluate the five strategies given in the case and the companies that used them to help defend your answer.

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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: eBay versus Google and Microsoft:

• eBay enjoyed virtual monopoly in online auction for almost a decade.

• Now it is facing competition from Google & Microsoft.

• Analysts think that search and advertising will define the future of e-Commerce.

• Windows Live Expo is Microsoft’s competitive weapon in its battle with eBay and Google for the online classifieds market.

• eBay is addressing these challenges by acquiring companies like Skype, Shopping.com, and other international classified sites.

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Case Study Questions

1. Do you agree with Google and Microsoft that eBay is now vulnerable to their assaults via Google Base and Windows Live Expo? Why or why not?

2. What are the major advantages and limitations of Google Base and Windows Live Expo? Which do you prefer, or would you use both? Why? Go to their Internet Web sites and read reviews at other sites to help you answer.

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Case Study Questions

3. Are eBay’s development of Kijiji, acquisition of Skype, alliance with Yahoo, and other acquisitions as noted in this case enough to ward off the competitive assaults of Google and Microsoft? Defend your position.

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Case 4: 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

1. Why has eBay become such a successful and diverse online marketplace?

2. What do you think of eBay’s playbook concept? Why do they call it a playbook?

3. Is eBay’s move into the international arena a good long-term strategy?

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