12. Electronic Commerce Rev: Feb, 2013 Euiho (David) Suh, Ph.D. POSTECH Strategic Management of Information and Technology Laboratory (POSMIT: Dept. of Industrial & Management Engineering POSTECH

Contents 1Introduction of E-Commerce 2Classification of E-Commerce 3Technology & Architecture of E-Commerce 4Marketplaces of E-Commerce 5Strategies of E-Commerce 6Successful Case of E-Commerce 7Problem & Future of E-Commerce 8Case 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 commerceE-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 technologies support every step of the process Selling Marketing Developing Servicing Delivering Accepting payments E-commerce encompasses the online process of… 1. Introduction of E-Commerce

5 Scope of E-Commerce (2/2) 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 Internet Increase of E-Commerce Market Size Importance of E-Commerce 1. Introduction of E-Commerce

7 Elements of E-Commerce Institution Network Process EC Government, Producer, Retailer, Customer, Supplier… Order Processing, Marketing, Sales, Customer Service… Intranet, Extranet, Internet… 1. Introduction of E-Commerce

8 Classification of E-Commerce (1/2) ■Transaction Type C2C B2C B2B B2C B2G C2G Business-to-Consumer (B2C)Business-to-Business (B2B)Consumer-to-Consumer (C2C)  Virtual storefront  Multimedia catalogs  Interactive order processing  Electronic payments  Online customer support  Electronic business marketplaces  Direct links between businesses, auctions, and exchanges  Online auctions  Posting to newspaper sites  Personal websites  E-commerce portals 2. Classification of E-Commerce

9 Classification of E-Commerce (2/2) ■Site Connecting Method M-Commerce Cable EC Network Wireless Stationary 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-Commerce 1) B2C

11 Web Store Requirements 2. Classification of E-Commerce 1) 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-Commerce 2) B2B

13 B2B E-Commerce Web Portal 2. Classification of E-Commerce 2) B2B

14 Application Trends 2. Classification of E-Commerce 3) E-Commerce Application Trends of B2C & B2B

15 E-Commerce Technologies 3. Technology & Architecture of E-Commerce

16 Essential E-Commerce Architecture Access Control and Security Access Control Authentication Security Measures Profiling and Personalizing Profile Management Personalization Behavior Tracking Search Management Content-Based Search Parametric-Based Search Role- and Rule- Based Search Content Management Dynamic Content Generation Data Repository Catalog Management Pricing Calculation Product Configuration Catalog Generation Payment Shopping Cart Payment Method Support Payment Verification Workflow Management Buying Process Automation Document Management Rule- and Role- Based Content Routing Event Notification Event-Driven Transaction Messaging Message to Message to Boards Newsgroups Collaboration and Trading Mediation Negotiation Bidding/Auctioning Collaborative Buying Online Community 3. Technology & Architecture of E-Commerce

17 Essential E-Commerce Architecture Profiling and Personalizing Profile Management Personalization Behavior Tracking Search Management Content-Based Search Parametric-Based Search Role- and Rule- Based Search Content Management Dynamic Content Generation Data Repository Catalog Management Pricing Calculation Product Configuration Catalog Generation Payment Shopping Cart Payment Method Support Payment Verification Workflow Management Buying Process Automation Document Management Rule- and Role- Based Content Routing Event Notification Event-Driven Transaction Messaging Message to Message to Boards Newsgroups Collaboration and Trading Mediation Negotiation Bidding/Auctioning Collaborative Buying Online Community Access Control and 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 Control and Security Access Control Authentication Security Measures Search Management Content-Based Search Parametric-Based Search Role- and Rule- Based Search Content Management Dynamic Content Generation Data Repository Catalog Management Pricing Calculation Product Configuration Catalog Generation Payment Shopping Cart Payment Method Support Payment Verification Workflow Management Buying Process Automation Document Management Rule- and Role- Based Content Routing Event Notification Event-Driven Transaction Messaging Message to Message to Boards Newsgroups Collaboration and Trading Mediation Negotiation Bidding/Auctioning Collaborative Buying Online Community Profiling and Personalizing 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 Control and Security Access Control Authentication Security Measures Profiling and Personalizing Profile Management Personalization Behavior Tracking Content Management Dynamic Content Generation Data Repository Catalog Management Pricing Calculation Product Configuration Catalog Generation Payment Shopping Cart Payment Method Support Payment Verification Workflow Management Buying Process Automation Document Management Rule- and Role- Based Content Routing Event Notification Event-Driven Transaction Messaging Message to Message to Boards Newsgroups Collaboration and Trading Mediation Negotiation Bidding/Auctioning Collaborative Buying Online Community Search Management 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 Control and Security Access Control Authentication Security Measures Profiling and Personalizing Profile Management Personalization Behavior Tracking Search Management Content-Based Search Parametric-Based Search Role- and Rule- Based Search Catalog Management Pricing Calculation Product Configuration Catalog Generation Payment Shopping Cart Payment Method Support Payment Verification Workflow Management Buying Process Automation Document Management Rule- and Role- Based Content Routing Event Notification Event-Driven Transaction Messaging Message to Message to Boards Newsgroups Collaboration and Trading Mediation Negotiation Bidding/Auctioning Collaborative Buying Online Community Content Management Dynamic Content Generation Data Repository Helps develop, generate, deliver, update, and archive text and multimedia information at e-commerce websites Product configuration and mass customization 3. Technology & Architecture of E-Commerce

21 Essential E-Commerce Architecture Access Control and Security Access Control Authentication Security Measures Profiling and Personalizing Profile Management Personalization Behavior Tracking Search Management Content-Based Search Parametric-Based Search Role- and Rule- Based Search Content Management Dynamic Content Generation Data Repository Payment Shopping Cart Payment Method Support Payment Verification Workflow Management Buying Process Automation Document Management Rule- and Role- Based Content Routing Event Notification Event-Driven Transaction Messaging Message to Message to Boards Newsgroups Collaboration and Trading Mediation Negotiation Bidding/Auctioning Collaborative Buying Online Community Catalog Management Pricing Calculation Product Configuration Catalog Generation Helps generate and manage catalog content Product configuration and mass customization 3. Technology & Architecture of E-Commerce

22 Essential E-Commerce Architecture Access Control and Security Access Control Authentication Security Measures Profiling and Personalizing Profile Management Personalization Behavior Tracking Search Management Content-Based Search Parametric-Based Search Role- and Rule- Based Search Content Management Dynamic Content Generation Data Repository Catalog Management Pricing Calculation Product Configuration Catalog Generation Payment Shopping Cart Payment Method Support Payment Verification Event Notification Event-Driven Transaction Messaging Message to Message to Boards Newsgroups Collaboration and Trading Mediation Negotiation Bidding/Auctioning Collaborative Buying Online Community Workflow Management Buying Process Automation Document Management Rule- and Role- Based Content Routing  E-business & e-commerce management depends on a workflow software engine Software model of business processes  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 Control and Security Access Control Authentication Security Measures Profiling and Personalizing Profile Management Personalization Behavior Tracking Search Management Content-Based Search Parametric-Based Search Role- and Rule- Based Search Content Management Dynamic Content Generation Data Repository Catalog Management Pricing Calculation Product Configuration Catalog Generation Payment Shopping Cart Payment Method Support Payment Verification Workflow Management Buying Process Automation Document Management Rule- and Role- Based Content Routing Collaboration and Trading Mediation Negotiation Bidding/Auctioning Collaborative Buying Online Community Event Notification Event-Driven Transaction Messaging Message to Message to Boards Newsgroups  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 Control and Security Access Control Authentication Security Measures Profiling and Personalizing Profile Management Personalization Behavior Tracking Search Management Content-Based Search Parametric-Based Search Role- and Rule- Based Search Content Management Dynamic Content Generation Data Repository Catalog Management Pricing Calculation Product Configuration Catalog Generation Payment Shopping Cart Payment Method Support Payment Verification Workflow Management Buying Process Automation Document Management Rule- and Role- Based Content Routing Event Notification Event-Driven Transaction Messaging Message to Message to Boards Newsgroups Collaboration and Trading Mediation Negotiation Bidding/Auctioning Collaborative Buying 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 , chat, discussion groups Enhances customer service Builds loyalty 3. Technology & Architecture of E-Commerce

25 Essential E-Commerce Architecture Access Control and Security Access Control Authentication Security Measures Profiling and Personalizing Profile Management Personalization Behavior Tracking Search Management Content-Based Search Parametric-Based Search Role- and Rule- Based Search Content Management Dynamic Content Generation Data Repository Catalog Management Pricing Calculation Product Configuration Catalog Generation Workflow Management Buying Process Automation Document Management Rule- and Role- Based Content Routing Event Notification Event-Driven Transaction Messaging Message to Message to Boards Newsgroups Collaboration and Trading Mediation Negotiation Bidding/Auctioning Collaborative Buying Online Community Payment Shopping Cart Payment Method Support Payment Verification  Electronic Payment Example  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 3. Technology & Architecture of E-Commerce

26 E-Commerce Marketplaces One to ManyMany to OneSome to ManyMany to SomeMany to Many  Sell-side marketplaces  One supplier dictates product offerings and prices  Buy-side marketplaces  Many suppliers bid for the business of a buyer  Distribution marketplaces  Unites suppliers who combine their product catalogs to attract a larger audience  Procurement marketplaces  Unites major buyers who combine purchasing catalogs  Attracts more competition, which lowers prices  Auction marketplaces  Dynamically optimizes prices 4. Marketplaces of E-Commerce

27 Clicks and Bricks 5. Strategies of E-Commerce 1) Click and Bricks Success Internet Initiatives Traditional Operations Merging operations has trade-offs

28 Integrated vs. Separate e-Business 5. Strategies of E-Commerce 1) Click and Bricks

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-Commerce 1) Click and Bricks

30 E-Commerce Channel Choices 5. Strategies of E-Commerce 2) Channel Choices The marketing or sales channel created by a company for its e-commerce activities E-Commerce Channel No universal strategy or e-commerce channel choice Major business pros and cons in both e-commerce integration and separation Most businesses’ implementing some measure of clicks-and-bricks integration

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-Commerce 3) Checklist

32 eBay ■Concept of Cyber Auction Buyer A Buyer B Buyer C Cyber auction site ( Seller ② Bidding ④ Notifying the Bidder ⑤ Remittance ⑥ Delivery ③ Decide a bidder ④ Notifying the bidder ① Enroll products 6. Successful Case of E-Commerce

33 eBay ■C2C ■Regulation & Security System personal key public key 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 and more efficient search engine Improved encoding technology 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 expansion of internet network Improved Infrastructure 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 9O’Brien & Marakas, “Introduction to Information Systems – Sixteenth Edition”, McGraw – Hill, Chapter 9 ■Euiho Suh, “E-Commerce (PPT Slide)”Euiho Suh, “E-Commerce (PPT Slide)” ■THE FREE DICTIONARY BY FARLEX, “B2C E-Commerce financial definition”THE FREE DICTIONARY BY FARLEX, “B2C E-Commerce financial definition”