Chapter 9 Electronic Commerce Systems

1. Chapter 9 Electronic Commerce Systems James A. O'Brien, and George Marakas. ManagementInformation Systems with MISource 2007, 8th ed.  Boston, MA: McGraw-Hill, Inc., 2007.  ISBN: 13 9780073323091

2. 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 • 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 Chapter 9 Electronic Commerce Systems

3. 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 Chapter 9 Electronic Commerce Systems

4. 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 Chapter 9 Electronic Commerce Systems

5. 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? Chapter 9 Electronic Commerce Systems

6. The Scope of e-Commerce Chapter 9 Electronic Commerce Systems

7. E-Commerce Technologies Chapter 9 Electronic Commerce Systems

8. 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 Chapter 9 Electronic Commerce Systems

9. Essential e-Commerce Architecture Chapter 9 Electronic Commerce Systems

10. 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 Chapter 9 Electronic Commerce Systems

11. 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 Chapter 9 Electronic Commerce Systems

12. 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 Chapter 9 Electronic Commerce Systems

13. 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 Chapter 9 Electronic Commerce Systems

14. 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 Chapter 9 Electronic Commerce Systems

15. Example of Workflow Management Chapter 9 Electronic Commerce Systems

16. 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 Chapter 9 Electronic Commerce Systems

17. 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 Chapter 9 Electronic Commerce Systems

18. 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 Chapter 9 Electronic Commerce Systems

19. 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 Chapter 9 Electronic Commerce Systems

20. Electronic Payment Example Chapter 9 Electronic Commerce Systems

21. 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 Chapter 9 Electronic Commerce Systems

22. E-Commerce Application Trends Chapter 9 Electronic Commerce Systems

23. 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 Chapter 9 Electronic Commerce Systems

24. 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? Chapter 9 Electronic Commerce Systems

25. 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 Chapter 9 Electronic Commerce Systems

26. Differences in Marketing Chapter 9 Electronic Commerce Systems

27. Web Store Requirements Chapter 9 Electronic Commerce Systems

28. 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 Chapter 9 Electronic Commerce Systems

29. 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 Chapter 9 Electronic Commerce Systems

30. 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 Chapter 9 Electronic Commerce Systems

31. 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 Chapter 9 Electronic Commerce Systems

32. 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 Chapter 9 Electronic Commerce Systems

33. 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 Chapter 9 Electronic Commerce Systems

34. 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 Chapter 9 Electronic Commerce Systems

35. B2B E-Commerce Web Portal Chapter 9 Electronic Commerce Systems

36. Clicks and Bricks • Success will go to those who can integrate Internet initiatives with traditional operations • Merging operations has trade-offs • See Figure 9.18 Chapter 9 Electronic Commerce Systems

37. 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 Chapter 9 Electronic Commerce Systems

38. 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 Chapter 9 Electronic Commerce Systems

39. 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 Chapter 9 Electronic Commerce Systems

40. 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? Chapter 9 Electronic Commerce Systems

41. 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 Chapter 9 Electronic Commerce Systems

42. 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 Chapter 9 Electronic Commerce Systems

43. 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 multibillion-dollar targeted search ads market? Chapter 9 Electronic Commerce Systems

44. 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 Chapter 9 Electronic Commerce Systems

45. 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 Chapter 9 Electronic Commerce Systems

46. 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 Chapter 9 Electronic Commerce Systems

47. 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? Chapter 9 Electronic Commerce Systems