12. Electronic Commerce Rev: Feb, 2013 Euiho (David) Suh, Ph.D. POSTECH Strategic Management of Information and Technology Laborato (POSMIT: http://posmit.postech.ac.kr) Dept. of Industrial & Management Engineering POSTECH
12. Electronic CommerceRev: Feb, 2013
Euiho (David) Suh, Ph.D.
POSTECH Strategic Management of Information and Technology Laboratory(POSMIT: http://posmit.postech.ac.kr)
Dept. of Industrial & Management EngineeringPOSTECH
Contents1 Introduction of E-Commerce
2 Classification of E-Commerce
3 Technology & Architecture of E-Commerce
4 Marketplaces of E-Commerce
5 Strategies of E-Commerce
6 Successful Case of E-Commerce
7 Problem & Future of E-Commerce
8 Case Study
3
Definition and Characteristics of E-Commerce
■ Definition– Every commercial transaction and its supporting action (buying and selling of products
or services) over electronic systems such as the Internet and other computer networks
■ Traditional Commerce vs. E-Commerce
1. Introduction of E-Commerce
Traditional commerce E-Commerce
• Capable of having a guarantee of trust• Adjust the price of goods on the spot• Instant payment for purchase
• Secure: more secure than a check • Fast: the transactions take not more
than a few seconds• Always on: the purchases can be made
24/7 • Convenient: ease of purchasing • Reduced cost price: Reduction of
Marketing and Advertising Costs
4
Scope of E-Commerce (1/2)
Internet and other information technologiessupport every step of the process
Selling
Marketing
Developing Servicing
Delivering
Acceptingpayments
E-commerce en-compasses
the online process of…
E-commerce en-compasses
the online process of…
1. Introduction of E-Commerce
6
Background of E-Commerce
■ Market Situation– America: Private organization centered EC• Government: Law, Policy, Fund, etc.• Private: Economic/technical aspect
– Japan: Government centered EC• Government: Standardization, Technical development• Private: Inducting private participation
– Korea: Private organization centered EC with government’s political support• Government: Industrial informationalization project• Private: Developing application and standard of technology
Growth of InternetIncrease of
E-Commerce Market Size
Importance ofE-Commerce
1. Introduction of E-Commerce
7
Elements of E-Commerce
Institution
Network
Process
EC
Government, Pro-ducer, Retailer, Cus-
tomer,Supplier…
Order Processing, Marketing, Sales, Customer Ser-vice…
Intranet, Extranet, Inter-net…
1. Introduction of E-Commerce
8
Classification of E-Commerce (1/2)
■ Transaction Type
C2C B2C
B2BB2C
B2G
C2G
Business-to-Consumer (B2C)
Business-to-Business (B2B)
Consumer-to-Consumer (C2C)
Virtual storefrontMultimedia catalogs Interactive order processingElectronic paymentsOnline customer support
Electronic businessmarketplaces
Direct links between busi-nesses, auctions, and ex-changes
Online auctionsPosting to newspaper sitesPersonal websitesE-commerce portals
2. Classification of E-Commerce
9
Classification of E-Commerce (2/2)
■ Site Connecting Method
M-Commerce
Cable ECNetwork
WirelessStationary
2. Classification of E-Commerce
10
B2C E-Commerce
■ Definition– A transaction conducted over the Internet between a business and a consumer• Business which sell products to a customer, ship it to him/her, and receive payment, all without
ever meeting the customer.
■ B2C E-Commerce Success Factors– Security and reliability– Performance and service– Great consumer communications– Advertising and incentives
■ Differences in Marketing
2. Classification of E-Commerce1) B2C
12
B2B E-Commerce
■ Definition– The wholesale and supply side of the commercial process• Business which buy, sell, or trade with other businesses
■ Reliance on Multiple Electronic Information Technologies– Electronic funds transfers– Data interchange– Trading systems– Catalog systems
2. Classification of E-Commerce2) B2B
16
Essential E-Commerce Architecture
Access Controland Security
Access Control
Authentication
Security Measures
Profiling and Per-sonalizing
Profile Management
Personalization
Behavior Tracking
Search Manage-ment
Content-Based Search
Parametric-Based Search
Role- and Rule- Based Search
Content Man-agement
Dynamic Content Generation
Data Repository
CatalogManagement
Pricing Calculation
Product Configura-tion
Catalog Generation
Payment
Shopping Cart
Payment Method Support
Payment Verifica-tion
Workflow Man-agement
Buying Process Automation
Document Man-agement
Rule- and Role-Based Content Routing
Event Notifica-tion
Event-Driven Transaction Mes-saging
Message to e-MailMessage to BoardsNewsgroups
Collaborationand Trading
Mediation Negoti-ation
Bidding/Auctioning Collaborative Buy-ing
Online Community
3. Technology & Architecture of E-Commerce
17
Essential E-Commerce Architecture
Profiling and Per-sonalizing
Profile Management
Personalization
Behavior Tracking
Search Manage-ment
Content-Based Search
Parametric-Based Search
Role- and Rule- Based Search
Content Man-agement
Dynamic Content Generation
Data Repository
CatalogManagement
Pricing Calculation
Product Configura-tion
Catalog Generation
Payment
Shopping Cart
Payment Method Support
Payment Verifica-tion
Workflow Man-agement
Buying Process Automation
Document Man-agement
Rule- and Role-Based Content Routing
Event Notifica-tion
Event-Driven Transaction Mes-saging
Message to e-MailMessage to BoardsNewsgroups
Collaborationand Trading
Mediation Negoti-ation
Bidding/Auctioning Collaborative Buy-ing
Online Community
Access Controland Security
Access Control
Authentication
Security Measures
EC processes must establish mutual trust, secure access between parties
User names and pass words Encryption key Digital certificates and signatures
Restricted access areas Other people’s accounts Restricted company data Webmaster administration areas
3. Technology & Architecture of E-Commerce
18
Essential E-Commerce Architecture
Access Controland Security
Access Control
Authentication
Security Measures
Search Manage-ment
Content-Based Search
Parametric-Based Search
Role- and Rule- Based Search
Content Man-agement
Dynamic Content Generation
Data Repository
CatalogManagement
Pricing Calculation
Product Configura-tion
Catalog Generation
Payment
Shopping Cart
Payment Method Support
Payment Verifica-tion
Workflow Man-agement
Buying Process Automation
Document Man-agement
Rule- and Role-Based Content Routing
Event Notifica-tion
Event-Driven Transaction Mes-saging
Message to e-MailMessage to BoardsNewsgroups
Collaborationand Trading
Mediation Negoti-ation
Bidding/Auctioning Collaborative Buy-ing
Online CommunityProfiling and Per-sonalizing
Profile Management
Personalization
Behavior Tracking
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
3. Technology & Architecture of E-Commerce
19
Essential E-Commerce Architecture
Access Controland Security
Access Control
Authentication
Security Measures
Profiling and Per-sonalizing
Profile Management
Personalization
Behavior Tracking
Content Man-agement
Dynamic Content Generation
Data Repository
CatalogManagement
Pricing Calculation
Product Configura-tion
Catalog Generation
Payment
Shopping Cart
Payment Method Support
Payment Verifica-tion
Workflow Man-agement
Buying Process Automation
Document Man-agement
Rule- and Role-Based Content Routing
Event Notifica-tion
Event-Driven Transaction Mes-saging
Message to e-MailMessage to BoardsNewsgroups
Collaborationand Trading
Mediation Negoti-ation
Bidding/Auctioning Collaborative Buy-ing
Online Community
Search Manage-ment
Content-Based Search
Parametric-Based Search
Role- and Rule- Based Search
Search processes help customers find the specific product or service they want
EC software packages often include a website search engine
Customized search engine may be acquired from companies like Google or Requisite Technology
Searches are often on content or by parameters
3. Technology & Architecture of E-Commerce
20
Essential E-Commerce Architecture
Access Controland Security
Access Control
Authentication
Security Measures
Profiling and Per-sonalizing
Profile Management
Personalization
Behavior Tracking
Search Manage-ment
Content-Based Search
Parametric-Based Search
Role- and Rule- Based Search
CatalogManagement
Pricing Calculation
Product Configura-tion
Catalog Generation
Payment
Shopping Cart
Payment Method Support
Payment Verifica-tion
Workflow Man-agement
Buying Process Automation
Document Man-agement
Rule- and Role-Based Content Routing
Event Notifica-tion
Event-Driven Transaction Mes-saging
Message to e-MailMessage to BoardsNewsgroups
Collaborationand Trading
Mediation Negoti-ation
Bidding/Auctioning Collaborative Buy-ing
Online Community
Content Man-agement
Dynamic Content Generation
Data Repository
Helps develop, generate, deliver, update, and archive text and multimedia informa-tion at e-commerce websites
Product configuration and mass customiza-tion
3. Technology & Architecture of E-Commerce
21
Essential E-Commerce Architecture
Access Controland Security
Access Control
Authentication
Security Measures
Profiling and Per-sonalizing
Profile Management
Personalization
Behavior Tracking
Search Manage-ment
Content-Based Search
Parametric-Based Search
Role- and Rule- Based Search
Content Man-agement
Dynamic Content Generation
Data Repository
Payment
Shopping Cart
Payment Method Support
Payment Verifica-tion
Workflow Man-agement
Buying Process Automation
Document Man-agement
Rule- and Role-Based Content Routing
Event Notifica-tion
Event-Driven Transaction Mes-saging
Message to e-MailMessage to BoardsNewsgroups
Collaborationand Trading
Mediation Negoti-ation
Bidding/Auctioning Collaborative Buy-ing
Online CommunityCatalogManagement
Pricing Calculation
Product Configura-tion
Catalog Generation
Helps generate and manage catalog con-tent
Product configuration and mass customiza-tion
3. Technology & Architecture of E-Commerce
22
Essential E-Commerce Architecture
Access Controland Security
Access Control
Authentication
Security Measures
Profiling and Per-sonalizing
Profile Management
Personalization
Behavior Tracking
Search Manage-ment
Content-Based Search
Parametric-Based Search
Role- and Rule- Based Search
Content Man-agement
Dynamic Content Generation
Data Repository
CatalogManagement
Pricing Calculation
Product Configura-tion
Catalog Generation
Payment
Shopping Cart
Payment Method Support
Payment Verifica-tion
Event Notifica-tion
Event-Driven Transaction Mes-saging
Message to e-MailMessage to BoardsNewsgroups
Collaborationand Trading
Mediation Negoti-ation
Bidding/Auctioning Collaborative Buy-ing
Online Community
Workflow Man-agement
Buying Process Automation
Document Man-agement
Rule- and Role-Based Content Routing
E-business & e-commerce manage-ment depends on a workflow soft-ware engine
Software model of business pro-cesses
Workflow models express predefined Sets of business rules Roles of stakeholders Authorization requirements Routing alternatives Databases used Task sequences
3. Technology & Architecture of E-Commerce
23
Essential E-Commerce Architecture
Access Controland Security
Access Control
Authentication
Security Measures
Profiling and Per-sonalizing
Profile Management
Personalization
Behavior Tracking
Search Manage-ment
Content-Based Search
Parametric-Based Search
Role- and Rule- Based Search
Content Man-agement
Dynamic Content Generation
Data Repository
CatalogManagement
Pricing Calculation
Product Configura-tion
Catalog Generation
Payment
Shopping Cart
Payment Method Support
Payment Verifica-tion
Workflow Man-agement
Buying Process Automation
Document Man-agement
Rule- and Role-Based Content Routing
Collaborationand Trading
Mediation Negoti-ation
Bidding/Auctioning Collaborative Buy-ing
Online Community
Event Notifica-tion
Event-Driven Transaction Mes-saging
Message to e-MailMessage to BoardsNewsgroups
Most e-commerce applicants are event driven
Responds to customer’s first website visit, payments, and so on
Monitors all e-commerce processes Records all relevant events, including
problem situations Notifies all involved stakeholders Works in tandem with user-profiling
software
3. Technology & Architecture of E-Commerce
24
Essential E-Commerce Architecture
Access Controland Security
Access Control
Authentication
Security Measures
Profiling and Per-sonalizing
Profile Management
Personalization
Behavior Tracking
Search Manage-ment
Content-Based Search
Parametric-Based Search
Role- and Rule- Based Search
Content Man-agement
Dynamic Content Generation
Data Repository
CatalogManagement
Pricing Calculation
Product Configura-tion
Catalog Generation
Payment
Shopping Cart
Payment Method Support
Payment Verifica-tion
Workflow Man-agement
Buying Process Automation
Document Man-agement
Rule- and Role-Based Content Routing
Event Notifica-tion
Event-Driven Transaction Mes-saging
Message to e-MailMessage to BoardsNewsgroups
Collaborationand Trading
Mediation Negoti-ation
Bidding/Auctioning Collaborative Buy-ing
Online Community
Processes support vital collaboration arrangements and trading services
Needed by customers, suppliers, and other stakeholders to accomplish e-commerce transactions
Online communities of interest E-mail, chat, discussion groups Enhances customer service Builds loyalty
3. Technology & Architecture of E-Commerce
25
Essential E-Commerce Architecture
Access Controland Security
Access Control
Authentication
Security Measures
Profiling and Per-sonalizing
Profile Management
Personalization
Behavior Tracking
Search Manage-ment
Content-Based Search
Parametric-Based Search
Role- and Rule- Based Search
Content Man-agement
Dynamic Content Generation
Data Repository
CatalogManagement
Pricing Calculation
Product Configura-tion
Catalog Generation
Workflow Man-agement
Buying Process Automation
Document Man-agement
Rule- and Role-Based Content Routing
Event Notifica-tion
Event-Driven Transaction Mes-saging
Message to e-MailMessage to BoardsNewsgroups
Collaborationand Trading
Mediation Negoti-ation
Bidding/Auctioning Collaborative Buy-ing
Online Community
Payment
Shopping Cart
Payment Method Support
Payment Verifica-tion
Electronic Payment Example
Securing Electronic Payments
Network sniffers easily recognize credit card for-mats
Encrypt data between customer and mer-chant
Encrypt data between customer and financial institution
Take sensitive information off-line
3. Technology & Architecture of E-Commerce
26
E-Commerce Marketplaces
One to Many Many to One Some to Many Many to Some Many to Many
Sell-side mar-ketplaces
One supplier dictates product offerings and prices
Buy-side mar-ketplaces
Many suppliers bid for the busi-ness of a buyer
Distribution marketplaces
Unites suppliers who combine their product catalogs to at-tract a larger audience
Procurement marketplaces
Unites major buyers who combine pur-chasing cata-logs
Attracts more competition, which lowers prices
Auction marketplaces
Dynamically optimizes prices
4. Marketplaces of E-Commerce
27
Clicks and Bricks5. Strategies of E-Commerce
1) Click and Bricks
SuccessInternetInitiatives
TraditionalOperations
Merging operations has trade-offs
29
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 with spin-off– Gained venture capital, entrepreneurial culture, flexibility– Attracted quality management– Accelerated decision making– Failed to gain market share
5. Strategies of E-Commerce1) Click and Bricks
30
E-Commerce Channel Choices5. Strategies of E-Commerce
2) Channel Choices
The marketing or sales channel created by a com-pany
for its e-commerce activities
E-CommerceChannel
No universal strategy or e-commerce channel choice
Major business pros and cons in both e-commerce integration and sep-aration
Most businesses’ implementing some measure of clicks-and-bricks in-tegration
31
E-Commerce Strategy Checklist
■ Questions to ask and answer
– What audiences are we attempting to reach?
– What action do we want 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?
5. Strategies of E-Commerce3) Checklist
32
eBay
■ Concept of Cyber Auction
Buyer A
Buyer B
Buyer C
Cyber auction site(www.ebay.com)
Seller
② Bidding
② Bidding
② Bidding
④ Notifying the Bidder
⑤ Remittance
⑥ Delivery
③ Decide a bidder
④ Notifyingthe bidder
① Enroll products
6. Successful Case of E-Commerce
33
eBay
■ C2C
■ Regulation & Security System
personal key public key
<Digital Signature>
6. Successful Case of E-Commerce
34
eBay
■ CRM (Community)– News– Chat– Information– Personal data management
6. Successful Case of E-Commerce
35
Problem of E-Commerce
Using agent andmore efficientsearch engine
Improved encodingtechnology
Security Problem
Application of one-to-one marketing
Traditional Marketing Strategy
Flood of Information
Problem
7. Problem & Future of E-Commerce
36
Future of E-Commerce
Rapid expansionof internet network
ImprovedInfrastructure
Combination of Various contents
Positive
7. Problem & Future of E-Commerce
37
Reference
■ O’Brien & Marakas, “Introduction to Information Systems – Sixteenth Edition”, McGraw – Hill, Chapter 9
■ Euiho Suh, “E-Commerce (PPT Slide)”
■ THE FREE DICTIONARY BY FARLEX, “B2C E-Commerce financial definition”