E-Commerce

BADM 435

By

Alex Johnson

Growth of E-commerce

• Tremendous exponential growth in the last 5 – 7 years.

• One of the biggest jumps –– 4th quarter Retail E-commerce sales in 2000

was $8.7b, up 67.1% from ’99 sales

• In 2003, retail sales were 17.2b up 25.1% in 2002

• 21.6b in 4th quarter ‘04

Growth Cont.

• Biggest growth is in the Travel Industry

• 2003 – 35 million Americans made travel arrangements online.– Up 17% from 2002– First significant boom in travel arrangements

online– Continues to grow each year

Growth Cont.• Reasons for growth?

– Tremendous advertising and marketing– Not only can the customer book travel online

they can also:– Make reservations at a hotel– Have a rental car waiting– Join travel groups at their destination– They can even buy tickets to sporting events in

the area in which they are traveling to

• It is Estimated that 50-70% of all travel arrangements will be made online by 2010

Growth Cont

• Other Reasons for growth– Women outnumber men

• Dominate spenders of the home, buy not only for themselves but also for the kids and often times the husband.

– Tremendous amount of information that is online that you could not find out in a brick and mortar store

• Information about the product and competitors product and price.

Advertising and Marketing

• Forms of Advertising– POP-UPS!!!!– Banners– SPAM– Permission Marketing

• Email promotions• Mailing promotions

Advertising and Marketing Cont.

• Cooked SPAM– Recent law has pretty much eliminated SPAM

emails– Must have your permission to email you

anything, or at least a notable reason• Sign ups on the internet• Purchased items from the company before

– Must have an “unsubscribe” link in the email

Advertising and Marketing Cont.

• Down with Pop-ups– Started off as a good tool for advertising– Now, they can actually hurt the companies

brand name– Also, in a recent survey, 1/3 of the people

surveyed said they had ill feelings towards the companies website on which the pop-ups occurred.

– Spending on Pop-ups increased 25% in 2003– CNN. Com and ESPN.com are the worst two

sites for Pop-ups averaging 400 million per month.

Advertising and Marketing Cont.

• Other forms– Promotional activities and email– Email people who have made purchases and

offer promotions like 20% off online only, to initiate repeat purchases.

– Promotions to sign up and register with the company to have speedy checkouts

• The registration will often ask for your billing/shipping addresses and also a credit card number so when you checkout, all you have to do is click “Pay”

Advertising and Marketing Cont.

• New Age for Retail Marketing– A new tool for some online clothing retail

stores are figure models– Enter your height, weight, and build– A figure model will try the clothes on for you,

so you have an idea of how you will look

• Has some kinks that need to be worked out, but proves to be a promising idea for the future– Ideas include scanning a picture of yourself in

and drop and dragging clothes on the scanned picture.

Advertising and Marketing Cont.

• Perhaps the most outstand statistic is one that cannot be measured.

• How many people have looked online to make purchases online?

• It is said that 3 out of 4 buyers of new cars go into the dealership knowing what make, model, features, and color they want, and often times competing dealers offers

• Other example include furniture, houses, and stock.

Security• Spyware that can be attached to Pop-ups

is a big concern– With spyware, companies can track your

every movement on the internet.• Sites visited• Shopping habits etc.

– Programs like adaware or spybot can help reduce but not eliminate spyware

– Regular scans using software will help protect you from spyware.

Security Cont.

• Bigger concern that Spyware is the safety of your personal information and credit card numbers!

• People fear ID fraud– In the banking world, a teller transaction at a

bank costs an average of $7, but the same online transaction costs only a nickel, but only 35% of people bank online, because fear ID fraud.

Security Cont.• We have all heard horror stories about ID fraud

on the internet and most likely know somebody that it has happened to.

• One of the biggest cases of fraud occurred back in 2000

• A Hacker named Maxus stole 300,000 credit card numbers from the database of CDuniverse and parent company eUniverse. – Wanted $100,000 or he was going to post all of the

numbers on the internet– Company called his bluff, he was true to his word and

posted the numbers.– The site was taken down before too much damage

was done, but the real damage was in the reputation of the company and the fear it struck in online shoppers.

Security Cont.• What's being done?

– AVS (Address Verification System)• Cross references the billing/shipping address with

the credit card address • Returns a code indicating whether or not its valid

– Rules System• Specific rules that can be tailored to each company• Example

– if there are more than three of the same items ordered with an amount exceeding five hundred dollars then you must deny the transaction and manually review it

• The rules can be endless, the company can pretty much include anything they want in their system.

Security Cont.

• Neural System– Very sophisticated system– Compares patterns in transactions with a

database which entails profiles and patterns of other known fraudulent activities

– Extremely accurate!– Main problem with this system

• System is only as good as the data that is compares with (GIGO)!

• To be accurate it must compare to a large number of transactions.

Security Cont.• Smart Cards

– Have a tiny computer chip installed in them– Even if the number is stolen, it will not do them any

good without the PIN number– Main capability is to consolidate payment functionality

with software applications • Verifies both the card and the card holder• Card verifies itself by encrypting and decrypting secret

messages in accordance to the systems software

– Passwords, personal preferences, purchasing history, and even certain reward or loyalty programs are stored on the chip that is installed within the card

– now have cards that have personal information embedded in them such as hospital or clinical information and insurance information

Security Cont.• Process of security

– Must secure all different parts of the e-commerce server

• client system• the transport protocol• the web server• the operating system

– Expensive!• In 2003, Companies spent over $15B on security• Worth it in the long run over the potential losses

Conclusion• E-commerce is no long the wave of the

future, the future is now, and e-commerce is here to stay

• Has changed the way companies do business

• Has changed the way companies compete online and offline.

• It will be interesting to see what effect is has on brick and mortar stores in the future as the potential for online sales grow.

Any Questions?? You can email me and johnsona@pluto.dsu.edu