12. Electronic Commerce
Rev: 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 Engineering
POSTECH
Contents
1
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
Definition and Characteristics of E-Commerce
1. Introduction 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
Traditional commerce
•
•
•
Capable of having a guarantee of trust
Adjust the price of goods on the spot
Instant payment for purchase
E-Commerce
•
•
•
•
•
3
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
Scope of E-Commerce (1/2)
1. Introduction of E-Commerce
Accepting
payments
Selling
Marketing
E-commerce
encompasses
the online process of…
Delivering
Servicing
Developing
Internet and other information technologies
support every step of the process
4
Scope of E-Commerce (2/2)
1. Introduction of E-Commerce
5
Background of E-Commerce
Growth of Internet
1. Introduction of E-Commerce
Increase of
E-Commerce Market Size
Importance 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
6
Elements of E-Commerce
Government, Producer,
Retailer, Customer,
Supplier…
1. Introduction of E-Commerce
Institution
Process
EC
Intranet, Extranet, Internet…
Network
7
Order Processing,
Marketing, Sales,
Customer Service…
Classification of E-Commerce (1/2)
2. Classification of E-Commerce
■ Transaction Type
Business-to-Consumer (B2C)
 Virtual storefront
 Multimedia catalogs
 Interactive order processing
 Electronic payments
 Online customer support
Business-to-Business (B2B)
 Electronic business
marketplaces
 Direct links between businesses,
auctions, and exchanges
8
Consumer-to-Consumer (C2C)
 Online auctions
 Posting to newspaper sites
 Personal websites
 E-commerce portals
Classification of E-Commerce (2/2)
2. Classification of E-Commerce
■ Site Connecting Method
Stationary
Wireless
Network
9
2. Classification of E-Commerce
1) B2C
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
10
2. Classification of E-Commerce
1) B2C
Web Store Requirements
11
2. Classification of E-Commerce
2) B2B
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
12
2. Classification of E-Commerce
2) B2B
B2B E-Commerce Web Portal
13
2. Classification of E-Commerce
3) E-Commerce Application Trends of B2C & B2B
Application Trends
14
E-Commerce Technologies
3. Technology & Architecture of E-Commerce
15
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
3. Technology & Architecture of E-Commerce
Content
Management
Collaboration
and Trading
Dynamic Content
Generation
Workflow
Management
Data Repository
Buying Process
Automation
Document
Management
Catalog
Management
Rule- and RoleBased Content
Routing
Pricing Calculation
Product
Configuration
Catalog Generation
Event Notification
Event-Driven
Transaction
Messaging
Payment
Shopping Cart
Payment Method
Support
Message to e-Mail
Message to Boards
Newsgroups
Payment Verification
16
Mediation
Negotiation
Bidding/Auctioning
Collaborative Buying
Online Community
Essential E-Commerce Architecture
Access Control
and Security
Access Control
Authentication
Security Measures
3. Technology & Architecture of E-Commerce
Content
 EC processes
must establish mutual
Management
trust, secure access between parties
Dynamic
Content
 User
names
and pass words
Generation
 Encryption key
Data Repository
 Digital
certificates and signatures
 Restricted access areas
Profiling and
Personalizing
Profile Management
Personalization
Behavior Tracking
Search Management
Content-Based Search
Parametric-Based
Search
Role- and Rule- Based
Search
 Other people’s accounts
Catalog
 Restricted
company data
Management
 Webmaster administration areas
Pricing Calculation
Product
Configuration
Catalog Generation
Collaboration
and Trading
Workflow
Management
Buying Process
Automation
Document
Management
Rule- and RoleBased Content
Routing
Event Notification
Event-Driven
Transaction
Messaging
Payment
Shopping Cart
Payment Method
Support
Message to e-Mail
Message to Boards
Newsgroups
Payment Verification
17
Mediation
Negotiation
Bidding/Auctioning
Collaborative Buying
Online Community
Essential E-Commerce Architecture
Access Control
and Security
Access Control
Authentication
Security Measures
Profiling and
Personalizing
Profile Management
Personalization
Behavior Tracking
3. Technology & Architecture of E-Commerce
Content
Management
Collaboration
and Trading
Dynamic Content
Generation
Workflow
Management
Data Repository
Buying Process
Automation
Document
Management
Catalog
Management
Rule- and Role-
 Profiling
gathers
data on you and your
Pricing
Calculation
Based Content
website behavior and choices
Routing
Product
 User
registration
Configuration
 Cookie files and tracking software
Catalog
Generation
 User
feedback
Event Notification
 Profiling is used for
Search Management
Content-Based Search
Parametric-Based
Search
Role- and Rule- Based
Search
Event-Driven
 Personalized (one-to-one) marketingTransaction
Payment
Messaging
 Authenticating identity
Shopping relationship
Cart
 Customer
management
 Marketing
planning
Payment Method
Support management
 Website
Message to e-Mail
Message to Boards
Newsgroups
Payment Verification
18
Mediation
Negotiation
Bidding/Auctioning
Collaborative Buying
Online Community
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
3. Technology & Architecture of E-Commerce
Content
Management
Collaboration
and Trading
Dynamic Content
Generation
Workflow
Management
Data Repository
Buying Process
Automation
Document
Management
Catalog
Management
Rule- and RoleBased Content
Routing
Pricing Calculation
Product
Configuration
Catalog Generation
Event Notification
 Search processes help customers find
Event-Driven
the specific product or service they want
Transaction
 EC software
packages often include a
Payment
Messaging
website search engine
Cart
 Shopping
Customized
search engine may be
acquired from companies like Google or
Payment
Requisite Method
Technology
Message to e-Mail
Support
Message to Boards
 Searches are often on content
or by parameters
Newsgroups
Payment Verification
19
Mediation
Negotiation
Bidding/Auctioning
Collaborative Buying
Online Community
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
3. Technology & Architecture of E-Commerce
Content
Management
Collaboration
 Helps develop, generate, deliver, update, and Trading
and archiveWorkflow
text and multimedia information
Mediation
at e-commerce
websites
Management
Negotiation
 Product configuration and mass customization
Buying Process
Bidding/Auctioning
Automation
Collaborative Buying
Document
Online Community
Management
Dynamic Content
Generation
Data Repository
Catalog
Management
Rule- and RoleBased Content
Routing
Pricing Calculation
Product
Configuration
Catalog Generation
Event Notification
Event-Driven
Transaction
Messaging
Payment
Shopping Cart
Payment Method
Support
Message to e-Mail
Message to Boards
Newsgroups
Payment Verification
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
3. Technology & Architecture of E-Commerce
Content
Management
Collaboration
and Trading
Dynamic Content
Generation
Workflow
Management
Data Repository
Buying Process
Automation
Document
Management
Catalog
Management
Mediation
Negotiation
Bidding/Auctioning
Collaborative Buying
Online Community
Rule- and RoleBased Content
 HelpsRouting
generate and manage catalog content
Pricing Calculation
Product
Configuration
 Product configuration and mass customization
Catalog Generation
Event Notification
Event-Driven
Transaction
Messaging
Payment
Shopping Cart
Payment Method
Support
Message to e-Mail
Message to Boards
Newsgroups
Payment Verification
21
Essential E-Commerce Architecture
3. Technology & Architecture of E-Commerce
Access Control
and Security E-business & e-commerce
Contentmanagement
depends on a workflow
software engine
Management
Access Control
 Software model of business processes
Dynamic Content
Authentication  Workflow models express predefined
Generation
 Sets of business rules
Security Measures
Data Repository
 Roles of stakeholders
 Authorization requirements
Profiling and
Personalizing
Profile Management
Personalization
Behavior Tracking
Search Management
Content-Based Search
Parametric-Based
Search
Role- and Rule- Based
Search
Collaboration
and Trading
Workflow
Management
Buying Process
Automation
Document
Management
 Routing alternatives
Catalog
 Databases usedManagement
 Task sequences
Pricing Calculation
Rule- and RoleBased Content
Routing
Product
Configuration
Catalog Generation
Event Notification
Event-Driven
Transaction
Messaging
Payment
Shopping Cart
Payment Method
Support
Message to e-Mail
Message to Boards
Newsgroups
Payment Verification
22
Mediation
Negotiation
Bidding/Auctioning
Collaborative Buying
Online Community
Essential E-Commerce Architecture
Access Control
and Security
3. Technology & Architecture of E-Commerce
Content
Management
Access Control
Collaboration
and Trading
Dynamic Content
Generation
Authentication
Security Measures
Workflow
Management
Data Repository
Buying Process
Automation
Document
Management
Catalog
Management
Profiling and
Personalizing
Rule- and RoleBased Content
Routing
Pricing Calculation
Profile Management
Product
Configuration
Personalization
Behavior Tracking Most e-commerce applicants are event
Catalog Generation
driven
 Responds to customer’s first website
visit, payments, and so on
Search Management
Paymentprocesses
 Monitors all e-commerce
Content-Based Search
 Records allShopping
relevant events,
Cart including
problem
situations
Parametric-Based
 Notifies all Payment
involved Method
stakeholders
Search
Support
 Works in tandem with user-profiling
Role- and Rule- Based
software Payment Verification
Search
23
Event Notification
Event-Driven
Transaction
Messaging
Message to e-Mail
Message to Boards
Newsgroups
Mediation
Negotiation
Bidding/Auctioning
Collaborative Buying
Online Community
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
3. Technology & Architecture of E-Commerce
Content
 Processes support vital collaboration
Management
arrangements and trading services
suppliers, and
Dynamic Content Needed by customers,
Workflow
other stakeholders to accomplish eGeneration
Management
commerce transactions
Data Repository
Process
 Online communitiesBuying
of interest
Automation
 E-mail, chat, discussion
groups
 Enhances customer
service
Document
Catalog  Builds loyalty Management
Management
Rule- and RolePricing Calculation
Based Content
Routing
Product
Configuration
Catalog Generation
Event Notification
Event-Driven
Transaction
Messaging
Payment
Shopping Cart
Payment Method
Support
Message to e-Mail
Message to Boards
Newsgroups
Payment Verification
24
Collaboration
and Trading
Mediation
Negotiation
Bidding/Auctioning
Collaborative Buying
Online Community
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
3. Technology & Architecture of E-Commerce
Content
Management
 Electronic Payment Example
Dynamic Content
Generation
Workflow
Management
Data Repository
Buying Process
Automation
Document
Management
Catalog
Management
Collaboration
and Trading
Mediation
Negotiation
Bidding/Auctioning
Collaborative Buying
Online Community
Rule- and RoleBased Content
Routing
Pricing Calculation
Product
Configuration
Catalog Generation
Event Notification
Event-Driven
 Securing
Electronic Payments
Transaction
Network
sniffers easily recognize credit card formats
Messaging
 Encrypt data between customer and merchant
Payment
Shopping Cart
 Encrypt data between customer and financial
institution
Message
to e-Mail
 Message
Take sensitive
information off-line
to Boards
Newsgroups
Payment Method
Support
Payment Verification
25
E-Commerce Marketplaces
One to Many
Many to One
 Sell-side
marketplaces
 Buy-side
marketplaces
 One supplier
dictates product
offerings and
prices
 Many suppliers
bid for the
business of a
buyer
4. Marketplaces of E-Commerce
Some to Many
 Distribution
marketplaces
 Unites suppliers
who combine
their product
catalogs to attract
a larger audience
26
Many to Some
 Procurement
marketplaces
 Unites major
buyers who
combine
purchasing
catalogs
 Attracts more
competition,
which lowers
prices
Many to Many
 Auction
marketplaces
 Dynamically
optimizes prices
5. Strategies of E-Commerce
1) Click and Bricks
Clicks and Bricks
Internet
Initiatives
Traditional
Operations
Success
Merging operations has trade-offs
27
5. Strategies of E-Commerce
1) Click and Bricks
Integrated vs. Separate e-Business
28
5. Strategies of E-Commerce
1) Click and Bricks
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
29
5. Strategies of E-Commerce
2) Channel Choices
E-Commerce Channel Choices
E-Commerce
Channel
The marketing or sales channel created by a company
for its e-commerce activities
 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
30
5. Strategies of E-Commerce
3) Checklist
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?
31
eBay
6. Successful Case of E-Commerce
■ Concept of Cyber Auction
Cyber auction site
(www.ebay.com)
Buyer A
③ Decide
a bidder
Buyer B
④ Notifying
the bidder
① Enroll
products
Seller
Buyer C
32
eBay
6. Successful Case of E-Commerce
■ C2C
■ Regulation & Security System
personal key
public key
<Digital Signature>
33
eBay
6. Successful Case of E-Commerce
■ CRM (Community)
–
–
–
–
News
Chat
Information
Personal data management
34
Problem of E-Commerce
Security
Problem
Improved encoding
technology
7. Problem & Future of E-Commerce
Flood of
Information
Problem
Using agent and
more efficient
search engine
35
Traditional
Marketing
Strategy
Application of
one-to-one
marketing
Future of E-Commerce
Combination of
Various contents
7. Problem & Future of E-Commerce
Improved
Infrastructure
Positive
36
Rapid expansion
of internet network
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”
37