Mc Graw-Hill Irwin Copyright 2008 by The Mc Graw-Hill

Chapter 9 Electronic Commerce Systems Mc. Graw-Hill/Irwin Copyright © 2008, The Mc. Graw-Hill Companies,

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 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 4

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 5

Case 1: e. Bay, Running the Right Play • e. Bay 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 • e. Bay keeps a playbook • Several hundred pages of wisdom collected from worldwide managers 6

Case Study Questions • Why has e. Bay become such a successful and diverse online marketplace? • What do you think of e. Bay’s playbook concept? • Why do they call it a playbook? • Is e. Bay’s move into the international arena a good long-term strategy? 7

The Scope of e-Commerce 8

E-Commerce Technologies 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 10

Essential e-Commerce Architecture 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 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 • • • Personalized (one-to-one) marketing Authenticating identity Customer relationship management Marketing planning Website management 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 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 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 • • • Sets of business rules Roles of stakeholders Authorization requirements Routing alternative Databases used Task sequences 16

Example of Workflow Management 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 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 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 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 21

Electronic Payment Example 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 23

E-Commerce Application Trends 24

Case 2: Battle for e-Commerce Supremacy • e. Bay commands more than 90 percent of the online auction market • Growth is at least 40 percent per year • Craigs. List 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 25

Case Study Questions • Do you agree with Google and Microsoft that e. Bay 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 e. Bay’s development of Kijiji, acquisition of Skype, alliance with Yahoo, and other acquisitions enough to ward off the competitive assaults of Google and Microsoft? 26

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 27

Differences in Marketing 28

Web Store Requirements 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 30

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 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 31

Managing a Web Store • Manage both the business and the website • Record 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 32

B 2 B E-Commerce • B 2 B 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 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 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 35

E-Commerce Portals • B 2 B 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 36

B 2 B E-Commerce Web Portal 37

Clicks and Bricks • Success will go to those who can integrate Internet initiatives with traditional operations • Merging operations has trade-offs 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 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 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 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? 42

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 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 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? 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 46

Case 4: Today’s Web; Anything but Usual • Federated will be using Fed. Ad 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 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 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? 49