CS453: The Business of
E-Commerce
Readings: Chap. 1-2
Why E-Commerce?
Using the Internet is a given now
Let’s reflect (back perhaps) on
what it offers companies
Better access to customers
Cost reductions for services provided
Opportunity to deliver new products
or services that would be impossible
without the network
Better Access to
Customers
Reasons?
Quantity, frequency, quality
Explain! Examples!
Quantity, Frequency
More people can visit a site than a store
Global presence
Anytime access
Better Access to
Customers (2)
Quality
Learn preferences, target advertising
Email news and information
Offer discounts, etc.
Customer service
Two-way communication
Benefits for a Traditional
Business View
Global presence not as hard
Mass distribution now easier,
cheaper
Maybe: costs shifted? Scalability?
Others pay part of costs (NWs,
access)
Up to date info and products
Searchable
Has the Net Changed the
Business World?
Of course, in many ways
Consider concentration vs.
empowerment
Think of Walmart vs. the local
small-town general store
What are some issues here?
Concentration vs. Empowerment
Big store
Many customer benefits
Takes over
How can a small store survive?
Meet some need Walmart can’t
Niche market, specialization
Discuss: examples in Ecommerce?
Your Examples
Concentration vs. Empowerment
Business on the Internet supports
both
Businesses supporting niche markets
can succeed better than without the
net
Of course large companies are
successful too
Changes in Competition
between Businesses
Traditional roles and distributions are
short-circuited
Consider what banks did 20 years ago
No other options
New combinations of loans, investing,
money management, getting financial
info
Banks, investment houses, insurance
companies, new startups,…
Creeping Costs
SW Engineering has taught us
things about system life-cycles and
costs over time
How do you think these might
apply to companies that begin to
provide services on the Web?
Discuss!
SW Engin. Lessons?
SW Engin. Lessons?
Maintenance costs over time
Success hurts
New features needed
Environment changes
Systems degrade over time
Usability matters
Scalability
Commerce Value Chain
 Chap. 2 of our textbook
1.
2.
3.
4.
5.
The commerce value chain
Identifying customers
Marketing to customers
International issues
Legal issues
1. What’s the Commerce
Value Chain?
Generally:
Value added during the process of
creating and delivering a product or
service
Commonly used to describe
manufacturing of things
Consider Value-Added Tax (VAT)
based systems
Our Book’s View
Certainly a commerce-value chain
(CVC here) for underlying
business’ products
Also one directly tied to ecommerce
Focused on customers
Chain for Internet
Systems
Attract; Interact; Act; React
Attract
Get and keep customer interest
Activities: advertising, marketing
Interact
Turn interest into orders
Content/product driven: web pages, info,
query results, etc.
Activities:
Chain for Internet
Systems (2)
Act
Process and manage orders
Activities:
Order processing -- shopping carts, taxation,
shipping charges)
Payment processing -- account, credit cards,
third-party financial companies, etc.
Fulfillment -- deliver hard goods, packing,
shipping; carry out e-service; deliver digital
goods (file, software, license)
Chain for Internet
Systems (3)
React
Service customers, order tracking,
returns, warranties, rebates, help
services
Another View
Of course it’s not linear
Not necessarily even sequential now
Attract
Interact
React
Act
Comments on This
Relatively simple ideas here
Reasonable as a framework for
partitioning the domain of ecommerce topics, components
At different points in this chain
Businesses can fail or succeed
Businesses can focus
Differentiation
Can you think of an example?
2. Defining the Customer
With the web, anyone can be
That’s good news and bad news
General public vs. specialized
companies or employees within
companies
E.g. a Motorola engineer looking for ICs for
a new cell-phone design
How that person’s need different than
you or me buying a book or song?
Is it Important to Design
for Customer Types?
Many e-commerce sites assume one
kind of customer
Examples where a mismatch is a problem?
Examples of sites that don’t?
Things to consider
Home consumer vs. corporate
Novice vs. expert
Age
3. Marketing on the
Internet
Why does this matter more now
than, say, in 2000?
Your ideas:
Why is Marketing Different
on the Internet?
Can reach many more people anywhere
More competition
Identity more easy to conceal
Who are you? Big company or not? Scam
artist or market leader?
New media and multi-media the norm
Harder or not clear how to get
placement, presence or attention
No longer just ads in print, TV or radio
Search, ad auctions, email, blogs,
YouTube,…
What’s the Same?
Customer identity, needs, wants
Clear messages
Effective presentation
Tracking and measuring success
Internet Customer
Demographics
Remember when mom and dad didn’t
surf the web? :-)
Students, university types, technologists,…
One interface, many demographics
E.g. kids and adults use search engines
Should they really be finding the same
things
Note how in the non-internet world there
are different marketing channels
Strategies
One-to-one marketing
Email
Profiles on sites like Google (“customers like
you were also interested in…”
Mass marketing (dead or not?)
Convergence
With other media sources
Targeted ads
On sites, in applications, with query results
Search and Marketing
Originally, search didn’t include
marketing
“Gaming the system” became the norm
Search sites tied ads in with user searches
Ad auctions
Specialized search
Sites by price
Sites like Priceline
Sites like Travelocity (car or hotel with that
flight?)
4. International Issues
 Global customers, content
 Making sites work for international customers
 Language; monetary conversions; taxes; shipping;
customs and other laws
 Customs, norms, conventions
 Products for international customers
 Software: internationalization
 Services: sites, games, …
 Privacy
 Laws governing info privacy etc.
 E.g. Google and Yahoo in China
5. Legal Issues
Privacy
Policies
Practical security for customer info and
company info
Authorization, digital signatures, etc.
Government regulation
Privacy
Export rules (e.g. cryptography)
Summary
Internet Commerce: a brave new
world?
Some things aren’t so different?
Quickly face global and legal issues that in
the past only large companies dealt with
Commerce Value Chain
A guide to organizing a business plan or a
system?
A framework for talking about business’
efforts
Next: Business strategies