CHAPTER 9

Module 4
e-COMMERCE SYSTEMS
Chapter Highlights

Section I
e-Commerce Fundamentals
Introduction to e-Commerce
The Scope of e-Commerce
Essential e-Commerce Processes
Electronic Payment Processes

Section II
e-Commerce Applications and Issues
Business-to-Consumer e-Commerce
Web Store Requirements
Business-to-Business e-Commerce
e-Commerce Marketplaces
Clicks and Bricks in e-Commerce

Learning Objectives
1. Identify the major categories and trends of e-commerce applications.
2. Identify the essential processes of an e-commerce system, and give examples of how it is
implemented in e-commerce applications.
3. Identify and give examples of several key factors and Web store requirements needed to
succeed in e-commerce.
4. Identify and explain the business value of several types of e-commerce marketplaces.
5. Discuss the benefits and trade-offs of several e-commerce clicks-and-bricks alternatives.
SECTION I: e -Commerce Fundamentals

Introduction to e-Commerce
Electronic commerce encompasses the entire online process of
• Developing
• Marketing
• Selling
• Delivering
• Servicing
• Paying for products and services
Relies on Internet and information technologies

RWC 1: Mobile Shopping

Mobile shopping increasing
Social networking
• Web sites and e-mail too many steps
• Sales pitches on social networks increasing
• Birthday prompts ad for 1-800-Flowers
• Impulsive buyers
Cell phones
• Starbucks Mobile Card App
• Preloaded spending money
• Scannable bar code
• Last minute game tickets
  E-commerce is changing the shape of competition, the speed of action, and the
streamlining of interactions, products, and payments from customers to companies and
from companies to suppliers.

 For most companies today, electronic commerce is more than just buying and selling
products online.
 Instead, it encompasses the entire online process of developing, marketing, selling,
delivering, servicing, and paying for products and services transacted on inter-networked,
global marketplaces of customers, with the support of a worldwide network of business
partners.
 In fact, many consider the term ―e-commerce‖ to be somewhat antiquated.
 Given that many young businesspeople have grown up in a world in which online
commerce has always been available, it may soon be time to eliminate the distinction
between e-commerce and e-business and accept that it is all just ―business as usual.‖
 Until then, we will retain the term ―e-commerce‖ because it allows for a clearer picture of
the differences between online and more traditional business transactions.

 E-commerce systems rely on the resources of the Internet and many other information
technologies to support every step of this process.
 Most companies, large and small, are engaged in some form of e-commerce activities.
 Therefore, developing an e-commerce capability has become a competitive necessity for
most businesses in today’s marketplace.

The Scope of e-Commerce

 Figure 9.2 illustrates the range of business processes involved in the marketing, buying,
selling, and servicing of products and services in companies that engage in e-commerce.
 Companies involved in e-commerce as either buyers or sellers rely on Internet-based
technologies and e-commerce applications and services to accomplish marketing,
discovery, transaction processing, and product and customer service processes.
 Fig. 9.2 Scope of e-Commerce

 FIGURE 9.2: E-commerce involves accomplishing a range of business processes to

support the electronic buying and selling of goods and services.
 Figure 9.2 illustrates the range of business processes involved in the marketing, buying,
selling, and servicing of products and services in companies that engage in e-commerce.
 Companies involved in e-commerce as either buyers or sellers rely on Internet-based
technologies and e-commerce applications and services to accomplish marketing,
discovery, transaction processing, and product and customer service processes.
 Example:
e-commerce can include interactive marketing, ordering, payment, and customer support
processes at e-commerce catalog and auction sites on the World Wide Web.
 However, e-commerce also includes e-business processes such as extranet access of
inventory databases by customers and suppliers (transaction processing), intranet access
of customer relationship management systems by sales and customer service reps (service
and support), and customer collaboration in product development via e-mail exchanges
and Internet newsgroups (marketing/discovery).

 The advantages of e-commerce allow a business of virtually any size that is located
virtually anywhere on the planet to conduct business with just about anyone, anywhere.
 Imagine a small olive oil manufacturer in a remote village in Italy selling its wares to
major department stores and specialty food shops in New York, London, Tokyo, and
other large metropolitan markets.
 The power of e-commerce allows geophysical barriers to disappear, making all
consumers and businesses on earth potential customers and suppliers.

Fig. 9.3: e-Commerce Technologies

 FIGURE 9.3: The hardware, software, network, and database components and IT
architecture of B2B online auctions provider FreeMarkets Inc. are illustrated in this
example of its Internet-based QuickSource auction service.

 Which technologies are necessary for e-commerce?

  The short answer is that most information technologies and Internet technologies are, in
some form, involved in e-commerce systems.
 A more specific answer is illustrated in Figure 9.3 , which gives an example of the
technology resources required by many e-commerce systems.
 The figure illustrates some of the hardware, software, data, and network components used
by FreeMarkets Inc. to provide business-to-business (B2B) online auction e-commerce
services.

Categories of e -Commerce

 Many companies today are participating in or sponsoring four basic categories of e-

commerce applications: business-to-consumer, business-to-business, consumer-to
consumer and business-to-government e-commerce.
 Many e-commerce concepts are also used in Business-to-government (B2G) and e-
government applications.

 Business-to-Consumer (B2C) e -Commerce where businesses develop attractive

electronic marketplaces to sell products and services to consumers.
 Consumer-to-Consumer (C2C) e -Commerce where consumers can buy from and sell
to one another in an auction process at an auction.
 Business-to-Business (B2B) e -Commerce where businesses develop attractive
electronic marketplaces to sell products and services to businesses.

Business-to-Consumer (B2C) e -Commerce.

 In this form of e-commerce, businesses must develop attractive electronic marketplaces

to sell products and services to consumers.
 Example: Many companies offer e-commerce Web sites that provide virtual storefronts
and multimedia catalogs, interactive order processing, secure electronic payment systems,
and online customer support.
 The B2C marketplace is growing like a wildfire but still remains the tip of the iceberg
when compared with all online commerce.

Consumer-to-Consumer (C2C) e -Commerce.

 The huge success of online auctions like eBay, where consumers (as well as businesses)
can buy from and sell to one another in an auction process at an auction Web site, makes
this e-commerce model an important e-commerce business strategy.
 Thus, participating in or sponsoring consumer or business auctions is an important e-
commerce alternative for B2C, C2B (consumer-to-business), or B2B e-commerce.
 Electronic personal advertising of products or services to buy or sell by consumers at
electronic newspaper sites, consumer e-commerce portals, or personal Web sites is also
an important form of C2C e-commerce.

Business-to-Business (B2B) e-Commerce.

 If B2C activities are the tip of the iceberg, B2B represents the part of the iceberg that is
under the water—the biggest part.
 This category of e-commerce involves both e-business marketplaces and direct market
links between businesses.
 Example: Many companies offer secure Internet or extranet e-commerce catalog Web
sites for their business customers and suppliers.
 Also very important are B2B e-commerce portals that provide auction and exchange
marketplaces for businesses.
 Others may rely on electronic data interchange (EDI) via the Internet or extranets for
computer-to-computer exchange of e-commerce documents with their larger business
customers and suppliers.
 Fig. 9.4: Essential e-Commerce Architecture

 FIGURE 9.4: This e-commerce process architecture highlights nine essential categories
of e-commerce processes.

Essential e-Commerce Processes

 The essential e-commerce processes required for the successful operation and
management of e-commerce activities are illustrated in Figure 9.4 .
 This figure outlines the nine key components of an e-commerce process architecture that
is the foundation of the e-commerce initiatives of many companies today.
 We concentrate on the role these processes play in e-commerce systems, but you should
recognize that many of these components may also be used in internal, noncommerce e-
business applications.
 An example would be an intranet-based human resource system used by a company’s
employees, which might use all but the catalog management and product payment
processes shown in Figure 9.4.
  E-commerce processes must establish mutual trust and secure access between the parties
in an e-commerce transaction by authenticating users, authorizing access, and enforcing
security features.
Example:
These processes establish that a customer and e-commerce site are who they say they are
through user names and passwords, encryption keys, or digital certificates and signatures.
 The e-commerce site must then authorize access to only those parts of the site that an
individual user needs to accomplish his or her particular transactions.
 Thus, you usually will be given access to all resources of an e-commerce site except for
other people’s accounts, restricted company data, and Web master administration areas.
 Companies engaged in B2B e-commerce may rely on secure industry exchanges for
procuring goods and services or Web trading portals that allow only registered customers
to access trading information and applications.
 Other security processes protect the resources of e-commerce sites from threats such as
hacker attacks, theft of passwords or credit card numbers, and system failures.

Access Control and Security

E-commerce requires mutual trust and secure access

• User names and passwords
• Encryption key
• Digital certificates and signatures
Restricted access areas
• Other people’s accounts
• Restricted company data
• Webmaster administration areas
Profiling and Personalizing

Profiling captures 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
 Once you have gained access to an e-commerce site, profiling processes can occur that
gather data on you and your Web site behavior and choices, as well as build electronic
profiles of your characteristics and preferences.
 User profiles are developed using profiling tools such as user registration, cookie files,
Web site behavior tracking software, and user feedback.
 These profiles are then used to recognize you as an individual user and provide you with
a personalized view of the contents of the site, as well as product recommendations and
personalized Web advertising as part of a one-to-one marketing strategy.
 Profiling processes are also used to help authenticate your identity for account
management and payment purposes and gather data for customer relationship
management, marketing planning, and Web site management.

Search Management

Find specific product or service

• Website search engine
• Google or Requisite Technology
 • Search on content or by parameters

 Efficient and effective search processes provide a top e-commerce Web site capability
that helps customers find the specific product or service they want to evaluate or buy.
 E-commerce software packages can include a Web site search engine component, or a
company may acquire a customized e-commerce search engine from search technology
companies like Google and Requisite Technology.
 Search engines may use a combination of search techniques, including searches based on
content (e.g., a product description) or parameters (e.g., above, below, or between a range
of values for multiple properties of a product).

Content and Catalog Management

Content Management Software

• Maintain text and multimedia for e-commerce
Catalog Management Software
• Maintain catalog content
Catalog and content management software
• Works with profiling tools to personalize content
• Product configuration and mass customization

 Content management software helps e-commerce companies develop, generate, deliver,

update, and archive text data and multimedia information at e-commerce Web sites.
 Example: German media giant Bertelsmann, part owner of [Link], uses
StoryServer content manager software to generate Web page templates that enable online
editors from six international offices to easily publish and update book reviews and other
product information, which are sold (syndicated) to other e-commerce sites.

 E-commerce content frequently takes the form of multimedia catalogs of product

information.
  As such, generating and managing catalog content is a major subset of content
management, or catalog management.
 Example: W.W. Grainger & Co., a multibillion-dollar industrial parts distributor, uses
the CenterStage catalog management software suite to retrieve data from more than 2,000
supplier databases, standardize the data, translate it into HTML or XML for Web use, and
organize and enhance the data for speedy delivery as multimedia Web pages at its
[Link] Web site.

 Content and catalog management software works with the profiling tools to personalize
the content of Web pages seen by individual users.
 Example: [Link] uses On Display content manager software to push
personalized promotional information about other travel opportunities to users while they
are involved in an online travel-related transaction.

 Finally, content and catalog management may be expanded to include product

configuration processes that support Web-based customer self-service and the mass
customization of a company’s products.
 Configuration software helps online customers select the optimum feasible set of product
features that can be included in a finished product.
 Example: Both Dell Computer and Cisco Systems use configuration software to sell
built-to-order computers and network processors to their online customers.

Workflow Management
 Many of the business processes in e-commerce applications can be managed and partially
automated with the help of workflow management software.
 E-business workflow systems for enterprise collaboration help employees electronically
collaborate to accomplish structured work tasks within knowledge-based business
processes.
 Workflow management in both e-business and e-commerce depends on a workflow
software engine containing software models of the business processes to be
accomplished.
 The workflow models express the predefined sets of business rules, roles of stakeholders,
authorization requirements, routing alternatives, databases used, and sequence of tasks
required for each e-commerce process.
 Thus, workflow systems ensure that the proper transactions, decisions, and work
activities are performed, and the correct data and documents are routed to the right
employees, customers, suppliers, and other business stakeholders.
 As many of you begin your business careers, you will be charged with the responsibility
of driving cost out of existing business processes while maintaining or improving the
effectiveness of those processes.

 As you continue to acquire a greater appreciation for, and understanding of, how
technology can benefit business, you will explore workflow management as the key to
this optimization of cost and effectiveness throughout the business.
 Example: Figure 9.5 illustrates the e-commerce procurement processes of the MS
Market system of Microsoft Corp.

Fig. 9.5: Example of Work flow Management

  Fig. 9.5: The role of catalog/content management and workflow management in a Web
based procurement process: the MS Market system used by Microsoft Corp.
 Microsoft employees use its global intranet and the catalog/content management and
workflow management software engines built into MS Market to purchase electronically
more than $3 billion annually of business supplies and materials from approved suppliers
connected to the MS Market system by their corporate extranets.

Event Notification

Monitors e-commerce processes

Records relevant events
• First website
• Payments
• Problem situations
Notifies involved stakeholders
Works with user-profiling software

 Most e-commerce applications are event-driven systems that respond to a multitude of

events—from a new customer’s first Web site access, to payment and delivery processes,
to innumerable customer relationship and supply chain management activities.
 That is why event notification processes play an important role in e-commerce systems;
customers, suppliers, employees, and other stakeholders must be notified of all events
that might affect their status in a transaction.
 Event notification software works with workflow management software to monitor all e-
commerce processes and record all relevant events, including unexpected changes or
problem situations.
 Then it works with user-profiling software to notify all involved stakeholders
automatically of important transaction events using appropriate user-preferred methods of
electronic messaging, such as e-mail, newsgroup, pager, and fax communications.
  This notification includes a company’s management, who then can monitor their
employees’ responsiveness to e-commerce events and customer and supplier feedback.

Example:
 When you purchase a product at a retail e-commerce Web site like [Link] , you
automatically receive an e-mail record of your order.
 Then you may receive e-mail notifications of any change in product availability or
shipment status and, finally, an e-mail message notifying you that your order has been
shipped and is complete.

Collaboration and Trading

Processes needed by customers, suppliers, and other stakeholders

Online communities of interest
• E-mail, chat, discussion groups
• Enhances customer service
• Builds loyalty

 This major category of e-commerce processes consists of those that support the vital
collaboration arrangements and trading services needed by customers, suppliers, and
other stakeholders to accomplish e-commerce transactions.
 Thus, in Chapter 2, we discussed how a customer-focused e-business uses tools such as e-
mail, chat systems, and discussion groups to nurture online communities of interest
among employees and customers to enhance customer service and build customer loyalty
in e-commerce.
 The essential collaboration among business trading partners in e-commerce may also be
provided by Internet-based trading services.

Example:
  B2B e-commerce Web portals provided by companies like Ariba and Commerce One
support matchmaking, negotiation, and mediation processes among business buyers and
sellers.
 In addition, B2B e-commerce is heavily dependent on Internet-based trading platforms
and portals that provide online exchange and auctions for e-business enterprises.
 Therefore, the online auctions and exchanges developed by companies like FreeMarkets
are revolutionizing the procurement processes of many major corporations.

Electronic Payment Processes

Securing Electronic Payments

 Sniffers easily recognize credit card formats

 Protection
o Encrypt data
 Between customer and merchant
 Between customer and financial institution
o Take sensitive information off-line

RWC 2: Driving the “Buzz” on the Web

 Companies attempt to identify ―influentials‖ that create online ―word of mouth‖

o Increase sales
o Influence opinions
 Differing opinion
o Sales data don’t match ―influentials‖
o Influentials go with the flow, not effect change
  Payment for the products and services purchased is an obvious and vital set of processes
in e-commerce transactions.
 Payment processes, however, are not simple because of the nearly anonymous electronic
nature of transactions taking place between the networked computer systems of buyers
and sellers and the many security issues involved.
 E-commerce payment processes are also complex because of the wide variety of debit
and credit alternatives, as well as the financial institutions and intermediaries that may be
part of the process.
 Therefore, a variety of electronic payment systems have evolved over time.
 In addition, new payment systems are being developed and tested to meet the security
and technical challenges of e-commerce over the Internet.

Web Payment Processes

 Most e-commerce systems on the Web involving businesses and consumers (B2C)
depend on credit card payment processes, but many B2B e-commerce systems rely on
more complex payment processes based on the use of purchase orders, as was illustrated
in Figure 9.5 .
 However, both types of e-commerce typically use an electronic shopping cart process,
which enables customers to select products from Web site catalog displays and put them
temporarily in a virtual shopping basket for later checkout and processing.
 Figure 9.6 illustrates and summarizes a B2C electronic payment system with several
payment alternatives.
Electronic Funds Transfer

Fig 9.6: An example of a secure electronic payment system with many payment
alternatives.

 Electronic funds transfer (EFT) systems are a major form of electronic payment systems
in banking and retailing industries. EFT systems use a variety of information
technologies to capture and process money and credit transfers between banks and
businesses and their customers.
  For example, banking networks support teller terminals at all bank offices and automated
teller machines (ATMs) at locations throughout the world.
 Banks, credit card companies, and other businesses may support pay-by-phone services.
 Very popular also are Web-based payment services, such as PayPal and BillPoint for cash
transfers, and CheckFree and Paytrust for automatic bill payment, that enable the
customers of banks and other bill payment services to use the Internet to pay bills
electronically.
 In addition, most point-of-sale terminals in retail stores are networked to bank EFT
systems, which makes it possible for you to use a credit card or debit card to pay instantly
for gas, groceries, or other purchases at participating retail outlets.

Secure Electronic Payments

 When you make an online purchase on the Internet, your credit card information is
vulnerable to interception by network sniffers, software that easily recognizes credit card
number formats.
 Several basic security measures are being used to solve this security problem:
(1) encrypt (code and scramble) the data passing between the customer and merchant
(2) encrypt the data passing between the customer and the company authorizing the credit
card transaction
(3) take sensitive information offline.
 For example, many companies use the Secure Socket Layer (SSL) security method
developed by Netscape Communications that automatically encrypts data passing
between your Web browser and a merchant’s server.
 However, sensitive information is still vulnerable to misuse once it’s decrypted (decoded
and unscrambled) and stored on a merchant’s server, so a digital wallet payment system
was developed.
 In this method, you add security software add-on modules to your Web browser.
 That enables your browser to encrypt your credit card data in such a way that only the
bank that authorizes credit card transactions for the merchant gets to see it.
 All the merchant is told is whether your credit card transaction is approved or not.
 The Secure Electronic Transaction (SET) standard for electronic payment security
extends this digital wallet approach.
 In this method, software encrypts a digital envelope of digital certificates specifying the
payment details for each transaction.
 VISA, MasterCard, IBM, Microsoft, Netscape, and most other industry players have
agreed to SET.
 Therefore, a system like SET may become the standard for secure electronic payments on
the Internet. (Figure 9.7)

Fig. 9.7: VeriSign provides electronic payment, security, and many other e -commerce
services.
SECTION II: e-Commerce Applications and Issues

 E-commerce is here to stay.

 The Web and e-commerce are key industry drivers.
 It’s changed how many companies do business.
 It’s created new channels for our customers.
 Companies are at the e-commerce crossroads, and there are many ways to go.

 Thus, e-commerce is changing how companies do business both internally and externally
with their customers, suppliers, and other business partners.
 As managers confront a variety of e-commerce alternatives, the way companies apply e-
commerce to their businesses is also subject to change.
 The applications of e-commerce by many companies have gone through several major
stages as e-commerce matures in the world of business.
 For example, e-commerce between businesses and consumers (B2C) moved from merely
offering multimedia company information at corporate Web sites (brochureware) to
offering products and services at Web storefront sites via electronic catalogs and online
sales transactions.
 B2B e-commerce, in contrast, started with Web site support to help business customers
serve themselves, and then moved toward automating intranet and extranet procurement
systems.
 One of the most important things to understand about e-commerce is that by converting a
business model from bricks and mortar to an e-commerce approach, the transaction costs
( i.e., the costs of doing business with a customer or supplier) drop dramatically.
 Thus, anything that can be digital will be digital.

e-Commerce Trends
 Figure 9.9 illustrates some of the trends taking place in the e-commerce applications that
we introduced at the beginning of this section.
  Notice how B2C e-commerce moves from simple Web storefronts to interactive
marketing capabilities that provide a personalized shopping experience for customers,
and then toward a totally integrated Web store that supports a variety of customer
shopping experiences.
 B2C e-commerce is also moving toward a self-service model in which customers
configure and customize the products and services they wish to buy, aided by
configuration software and online customer support as needed.

 B2B e-commerce participants moved quickly from self-service on the Web to

configuration and customization capabilities and extranets connecting trading partners.
 As B2C e-commerce moves toward full-service and wide-selection retail Web portals,
B2B is also trending toward the use of e-commerce portals that provide catalog,
exchange, and auction markets for business customers within or across industries.
 Of course, both of these trends are enabled by e-business capabilities like customer
relationship management and supply chain management, which are the hallmarks of the
customer-focused and inter-networked supply chains of a fully e-business–enabled
company.

E-Commerce Application Trends

Fig. 9.9 Trends in B2C and B2B e -commerce, and the business strategies and value driving
these trends.
Business-to-Consumer e-Commerce
 E-commerce applications that focus on the consumer share an important goal: to attract
potential buyers, transact goods and services, and build customer loyalty through
individual courteous treatment and engaging community features.
 What does it take to create a successful B2C e-commerce business venture?
 That’s the question that many are asking in the wake of the failures of many pure B2C
dot-com companies.
 One obvious answer would be to create a Web business initiative that offers attractive
products or services of great customer value, with a business plan based on realistic
forecasts of profitability within the first year or two of operation—a condition that was
lacking in many failed dot-coms.
 Such failures, however, have not stemmed the tide of millions of businesses, both large
and small, that are moving at least part of their business to the Web.
 So let’s take a look at some essential success factors and Web site capabilities for
companies engaged in either B2C or B2B e-commerce.
 Figure 9.10 provides examples of a few top-rated retail Web companies.

Fig. 9.10: Examples of a few top-rated retail Web sites

e-Commerce Success Factors
 On the Internet, the barriers of time, distance, and form are broken down, and businesses
are able to transact the sale of goods and services 24 hours a day, 7 days a week, 365
days a year with consumers all over the world.
 In certain cases, it is even possible to convert a physical good (CDs, packaged software,
a newspaper) to a virtual good (MP3 audio, downloadable software, information in
HTML format).

 A basic fact of Internet retailing is that all retail Web sites are created equal as far as the
―location, location, location‖ imperative of success in retailing is concerned.
 No site is any closer to its Web customers, and competitors offering similar go ods and
services may be only a mouse click away.
 This scenario makes it vital that businesses find ways to build customer satisfaction,
loyalty, and relationships so that customers keep coming back to their Web stores.
 Thus, the key to e-tail (retail business conducted online) success is to optimize several
key factors, such as selection and value, performance and service efficiency, the look and
feel of the site, advertising and incentives to purchase, personal attention, community
relationships, and security and reliability.
 Let’s briefly examine each of these factors that are essential to the success of a B2C Web
business. See Figure 9.11.

E-Commerce Success Factors List

 Selection and value
 Performance and service
 Look and feel
 Advertising and incentives
 Personal attention (one-to-one marketing)
 Community relationships
 Security and reliability
 Fig. 9.11: Some of the key factors for success in e -commerce.

Selection and Value :

 Obviously, a business must offer Web shoppers a good selection of attractive products
and services at competitive prices, or the shoppers will the lowest on the Web if it builds
a reputation for high quality, guaranteed satisfaction, and top customer support while
shopping and after the sale.

 For example, top rated e-tailer [Link] helps you select quality outdoor gear for hiking
and other activities with a ―How to Choose‖ section and gives a money-back guarantee
on your purchases.

Performance and Service:

 People don’t want to be kept waiting when browsing, selecting, or paying in a Web store.
  A site must be efficiently designed for ease of support Web site traffic. Web shopping
and customer service must also be friendly and helpful, as well as quick and easy.
 In addition, products offered should be available in inventory for prompt shipment to the
customer.

Look and Feel:

 B2C sites can offer customers an attractive Web storefront, shopping areas, and
multimedia product catalogs.
 These could range from an exciting shopping experience with audio, video, and moving
graphics to a more simple and comfortable look and feel.
 Thus, most retail e-commerce sites let customers browse product sections, select
products, drop them into a virtual shopping cart, and go to a virtual checkout station
when they are ready to pay for their order.

Advertising and Incentives :

 Some Web stores may advertise in traditional media, but most advertise on the Web with
targeted and personalized banner ads and other Web page and e-mail promotions.
 Most B2C sites also offer shoppers incentives to buy and return.
 Typically, these incentives mean coupons, discounts, special offers, and vouchers for
other Web services, sometimes with other e-tailers at cross-linked Web sites.
 Many Web stores also increase their market reach by being part of Web banner
advertising exchange programs with thousands of other Web retailers.
 Figure 9.12 compares major marketing communications choices in traditional and e -
commerce marketing to support each step of the buying process.
Fig. 9.12: How traditional and Web marketing communications differ in supporting each
step of the buying process.

Differences in Marketing

Personal Attention

 Personalizing your shopping experience encourages you to buy and make return visits.
 Thus, e-commerce software can automatically record details of your visits and build user
profiles of you and other Web shoppers.
 Many sites also encourage you to register with them and fill out a personal interest
profile.
 Then, whenever you return, you are welcomed by name or with a personal Web page,
greeted with special offers, and guided to those parts of the site in which you are most
interested.
 This one-to-one marketing and relationship building power is one of the major
advantages of personalized Web retailing.

Community Relationships

 Giving online customers with special interests a feeling of belonging to a unique group of
like-minded individuals helps build customer loyalty and value.
 Thus, Web site relationship and affinity marketing programs build and promote virtual
communities of customers, suppliers, company representatives, and others via a variety of
Web-based collaboration tools.
  Examples include discussion forums or newsgroups , chat rooms, message board systems,
and cross-links to related Web site communities.

Security and Reliability

 As a customer of a successful Web store, you must feel confident that your credit card,
personal information, and details of your transactions are secure from unauthorized use.
 You must also feel that you are dealing with a trustworthy business whose products and
other Web site information you can trust to be as advertised.
 Having your orders filled and shipped as you requested, in the time frame promised, and
with good customer support are other measures of an e-tailer’s reliability.

Great Customer Communications

 As more consumers shift their habits from the traditional brick-and-mortar approach to an
online shopping experience, one thing becomes even more important than ever: the need
for constant and informative communication channels with the customer.
 Despite the conveniences associated with online shopping, consumers still have questions
that need to be answered by a human being.
 Issues ranging from product information to order status or modification are often still
handled the ―old fashioned way.‖
 Land’s End, the famous outdoor clothing retailer, provides telephone and chat space
access to customer representatives that will even help you pick out your purchases in real
time.

Web Store Requirements

 Most business-to-consumer e-commerce ventures take the form of retail business sites on
the World Wide Web.
 Whether a huge retail Web portal like [Link] or a small specialty Web retailer, the
primary focus of such e-tailers is to develop, operate, and manage their Web sites so they
become high-priority destinations for consumers who will repeatedly choose to go there
to buy products and services.
 Thus, these Web sites must be able to demonstrate the key factors for e-commerce
success.
 In this section, let’s discuss the essential Web store requirements that you would have to
implement to support a successful retail business on the Web, as summarized and
illustrated in Figure 9.13.

Fig. 9.13: Web Store Requirements

 Fig. 9.13: To develop a successful e-commerce business, these Web store requirements
must be implemented by a company or its Web site hosting service.
Developing a Web Store
 Before you can launch your own retail store on the Internet, you must build an e-
commerce Web site.
 Many companies use simple Web site design software tools and predesigned templates
provided by their Web site hosting service to construct their Web retail store.
 That includes building your Web storefront and product catalog Web pages, as well as
tools to provide shopping cart features, process orders, handle credit card payments, and
so forth.
 Of course, larger companies can use their own software developers or hire an outside
Web site development contractor to build a custom-designed e-commerce site.
 Also, like most companies, you can contract with your ISP (Internet service provider) or
a specialized Web hosting company to operate and maintain your B2C Web site.

 Once you build your Web site, it must be developed as a retail Web business by
marketing it in a variety of ways that attract visitors to your site and transform them into
loyal Web customers.
 So, your Web site should include Web page and e-mail advertising and promotions for
Web visitors and customers, as well as Web advertising exchange programs with other
Web stores.
 Also, you can register your Web business with its own domain name (e.g.,
[Link]), as well as registering your Web site with the major Web search engines
and directories to help Web surfers find your site easily.
 In addition, you might consider affiliating as a small business partner with large Web
portals like Yahoo! and Netscape, large e-tailers and auction sites like Amazon and eBay,
and small business e-commerce portals like Microsoft’s Small Business Center.

Getting Customers to Find You

 Just because your Web store has been launched does not mean customers will come
flocking to your cyber front door.
 Your Web store needs to be discovered by your customers, and this means getting listed
in the popular search engines.

 You can submit your Web site to search engines such as Yahoo, Google, Live, and
others, and each will begin looking at your Web pages and listing you when appropriate
search terms are entered.
 Waiting for your site to show up competitively ranked with all the other similar sites
could take weeks and even months.
 There is a science to search engine ranking and it is an essential element in Web store
success.

 Search engine optimation (SEO) is considered a subset of search engine marketing, and it
focuses on improving the number and/or quality of visitors to a Web site over ―natural‖ (
also called ―organic‖ or ―algorithmic‖ search engine) listings.
 The term SEO can also refer to search engine optimizers, an industry of consultants who
carry out optimization projects on behalf of clients.

 Search engines display different kinds of listings on a results page, including paid
advertising in the form of pay-per-click (PPC) advertisements and paid inclusion listings,
as well as unpaid organic search results and keywords specific listings, such as news
stories, definitions, map locations, and images.
 As an Internet marketing strategy, SEO considers how search engines work and what
people search for.

 Optimizing a Web site primarily involves editing its content and HTML coding to both
increase its relevance to specific keywords and to remove barriers to the indexing
activities of search engines.
 Because SEO requires making changes to the source code of a site, it is often most
effective when incorporated into the initial development and design of a site, leading to
the use of the term ―search engine friendly‖ to describe designs, menus, content
management systems, and shopping carts that can be optimized easily and effectively.

 A range of strategies and techniques are employed in SEO, including changes to a site’s
code (referred to as on-page factors) and getting links from other sites (referred to as off-
page factors).
  These techniques include two broad categories: techniques that search engines
recommend as part of good design, and those techniques that search engines do not
approve of and attempt to minimize the effect of, referred to as spam-dexing.
 Methods such as link farms, where a group of Web sites is set up so that all hyperlink to
every other Web site in the group, and keyword stuffing, where a Web page is loaded
with keywords in the meta tags or in content, are examples of techniques considered
―black hat‖ SEO.
 Such techniques serve only to degrade both the relevance of search results and the user
experience of search engines.

 SEO, as a marketing strategy, can often generate a good return.

 However, as the search engines are not paid for the traffic they send from organic search,
the algorithms used can and do change, and there are many factors that can cause search
engine problems when crawling or ranking a site’s pages.
 There are no guarantees of success, either in the short or long term.
 Because of the lack of guarantees and certainty, SEO is often compared to traditional
public relations (PR), with PPC advertising closer to traditional advertising.

Serving Your Customers

 Once your retail store is on the Web and receiving visitors, the Web site must help you
welcome and serve them personally and efficiently so that they become loyal customers.
 So most e-tailers use several Web site tools to create user profiles, customer files, and
personal Web pages and promotions that help them develop a one-to-one relationship
with their customers.
 This effort includes creating incentives to encourage visitors to register, developing Web
cookie files to identify returning visitors automatically, or contracting with Web site
tracking companies like DoubleClick and others for software to record and analyze the
details of the Web site behavior and preferences of Web shoppers automatically.
  Of course, your Web site should have the look and feel of an attractive, friendly, and
efficient Web store.
 That means having e-commerce features like a dynamically changing and updated
multimedia catalog, a fast catalog search engine, and a convenient shopping cart system
that is integrated with Web shopping, promotions, payment, shipping, and customer
account information.
 Your e-commerce order processing software should be fast and able to adjust to
personalized promotions and customer options like gift handling, special discounts, credit
card or other payments, and shipping and tax alternatives.
 Also, automatically sending your customers e-mail notices to document when orders are
processed and shipped is a top customer service feature of e-tail transaction processing.

 Providing customer support for your Web store is an essential Web site capability.
 Thus, many e-tail sites offer help menus, tutorials, and lists of FAQs (frequently asked
questions) to provide self-help features for Web shoppers.
 Of course, e-mail correspondence with customer service representatives of your Web
store offers more personal assistance to customers.
 Establishing Web site discussion groups and chat rooms for your customers and store
personnel to interact helps create a more personal community that can provide invaluable
support to customers, as well as build customer loyalty.
 Providing links to related Web sites from your Web store can help customers find
additional information and resources, as well as earning commission income from the
affiliate marketing programs of other Web retailers.
 For example, the [Link] affiliate program pays commissions of up to 15 percent
for purchases made by Web shoppers clicking to its Web store from your site.

Managing a Web Store

 A Web retail store must be managed as both a business and a Web site, and most e-
commerce hosting companies offer software and services to help you do just that.
  For example, companies like FreeMerchant, Prodigy Biz, and Verio provide their hosting
clients with a variety of management reports that record and analyze Web store traffic,
inventory, and sales results.
 Other services build customer lists for e-mail and Web page promotions or provide
customer relationship management features to help retain Web customers.
 Also, some e-commerce software includes links to download inventory and sales data
into accounting packages like QuickBooks for bookkeeping and preparation of financial
statements and reports.

 Of course, Web-hosting companies must enable their Web store clients to be available
online 24 hours a day and seven days a week all year.
 This availability requires them to build or contract for sufficient network capacity to
handle peak Web traffic loads and redundant network servers and power sources to
respond to system or power failures.
 Most hosting companies provide e-commerce software that uses passwords and
encryption to protect Web store transactions and customer records, as well as to employ
network firewalls and security monitors to repel hacker attacks and other security threats.
 Many hosting services also offer their clients 24-hour tech support to help them with any
technical problems that arise.

Business-to-Business e-Commerce

 Business-to-business e-commerce is the wholesale and supply side of the commercial

process, where businesses buy, sell, or trade with other businesses.
 B2B e-commerce relies on many different information technologies, most of which are
implemented at e-commerce Web sites on the World Wide Web and corporate intranets
and extranets.
 B2B applications include electronic catalog systems, electronic trading systems such as
exchange and auction portals, electronic data interchange, electronic funds transfers, and
so on.
  All of the factors for building a successful retail Web site that we discussed previously
also apply to wholesale Web sites for business-to-business e-commerce.

 In addition, many businesses are integrating their Web-based e-commerce systems with
their e-business systems for supply chain management, customer relationship
management, and online transaction processing, as well as with their traditional, or
legacy, computer-based accounting and business information systems.
 This integration ensures that all e-commerce activities are integrated with e-business
processes and supported by up-to-date corporate inventory and other databases, which in
turn are automatically updated by Web sales activities.

e-Commerce Marketplaces

 The latest e-commerce transaction systems are scaled and customized to allow buyers
and sellers to meet in a variety of high-speed trading platforms: auctions, catalogs, and
exchanges.

 Businesses of any size can now buy everything from chemicals to electronic components,
excess electrical energy, construction materials, or paper products at business-to-business
e-commerce marketplaces.
 Figure 9.14 outlines five major types of e-commerce marketplaces used by businesses
today.
 However, many B2B portals provide several types of marketplaces.
 Thus, they may offer an electronic catalog shopping and ordering site for products from
many suppliers in an industry.
 Or they may serve as an exchange for buying and selling via a bid-ask process or at
negotiated prices.
 Very popular are electronic auction Web sites for B2B auctions of products and services.
 Figure 9.15 illustrates a B2B trading system that offers exchange, auction, and reverse
auction (where sellers bid for the business of a buyer) electronic markets.
Fig. 9.14: Types of e-commerce marketplaces.

Fig. 9.15: B2B Commerce Web Portals

  Fig. 9.15: An example of a B2B e-commerce Web portal that offers exchange, auction,
and reverse auction electronic markets.

 Many of these B2B e-commerce portals are developed and hosted by third-party market-
maker companies who serve as infomediaries that bring buyers and sellers together in
catalog, exchange, and auction markets.
 Infomediaries are companies that serve as intermediaries in e-business and e-commerce
transactions.
 Examples are Ariba, Commerce One, and VerticalNet, to name a few successful
companies.
 All provide e-commerce marketplace software products and services to power business
Web portals for e-commerce transactions.

 These B2B e-commerce sites make business purchasing decisions faster, simpler, and
more cost effective because companies can use Web systems to research and transact
with many vendors.
 Business buyers get one-stop shopping and accurate purchasing information.
 They also get impartial advice from infomediaries that they can’t get from the sites
hosted by suppliers and distributors.
 Thus, companies can negotiate or bid for better prices from a larger pool of vendors.
 Of course, suppliers benefit from easy access to customers from all over the globe.

Clicks and Bricks in e-Commerce

 Companies are recognizing that success will go to those who can execute clicks -and-
mortar strategies that bridge the physical and virtual worlds.
 Different companies will need to follow very different paths when deciding how closely —
or loosely—to integrate their Internet initiatives with their traditional operations.

 Figure 9.16 illustrates the spectrum of alternatives and benefit trade-offs that e-business
enterprises face when choosing an e-commerce clicks-and-bricks strategy.
  E-business managers must answer this question: Should we integrate our e-commerce
virtual business operations with our traditional physical business operations or keep them
separate?
 As Figure 9.16 shows, companies have implemented a range of integration/separation
strategies and made key benefit trade-offs in answering that question.
 Let’s take a look at several alternatives.

Fig. 9.16: E-Commerce trade -offs

Fig. 9.16: Companies have a spectrum of alternatives and benefit trade-offs when deciding on an
integrated or separate e-commerce business.

e-Commerce Integration

 The Internet is just another channel that gets plugged into the business architecture.
 So says CIO Bill Seltzer of the office supply retailer Office Depot, which fully integrates
its [Link] e-commerce sales channel into its traditional business operations.
 Thus, Office Depot is a prime example of why many companies have chosen integrated
clicks-and-bricks strategies, where their e-commerce business is integrated in some major
ways into the traditional business operations of a company.
 The business case for such strategies rests on:
  Capitalizing on any unique strategic capabilities that may exist in a company’s
traditional business operations that could be used to support an e-commerce
business.
 Gaining several strategic benefits of integrating e-commerce into a company’s
traditional business, such as sharing established brands and key business
information, joint buying power, and distribution efficiencies.

 For example, Office Depot already had a successful catalog sales business with a
professional call center and a fleet of more than 2,000 delivery trucks.
 Its 1,825 stores and 30 warehouses were networked by a sophisticated information
system that provided complete customer, vendor, order, and product inventory data in
real time.
 These business resources made an invaluable foundation for coordinating Office Depot’s
e-commerce activities and customer services with its catalog business and physical stores.
 Thus, customers can shop at [Link] at their home or business or at in-store
kiosks.
 Then they can choose to pick up their purchases at the stores or have them delivered.
 In addition, the integration of Web-enabled e-commerce applications within Office
Depot’s traditional store and catalog operations has helped increase the traffic at their
physical stores and improved the catalog operation’s productivity and average order size.

Other Clicks-and-Bricks Strategies

 As Figure 9.16 illustrates, other clicks-and-bricks strategies range from partiale-
commerce integration using joint ventures and strategic partnerships to complete
separation via the spin-off of an independent e-commerce company.

 For example, [Link] is an e-commerce joint venture of KB Online Holdings LLC,

created by toy retailer KB Toys, and [Link], formerly an e-tailer of children’s
products.
 The company is 80 percent owned by KB Toys but has independent management teams
and separate distribution systems.
 However, [Link] has successfully capitalized on the shared brand name and buying
power of KB Toys, as well as the ability of its customers to return purchases to more than
1,300 KB Toys stores, which also heavily promote the e-commerce site.

 The strategic partnership of the Rite Aid retail drugstore chain and [Link] is a
good example of a less integrated e-commerce venture.
 Rite Aid only owns about 25 percent of [Link], which has an independent
management team and a separate business brand.
 However, both companies share the decreased costs and increased revenue benefits of
joint buying power, an integrated distribution center, cobranded pharmacy products, and
joint prescription fulfillment at Rite Aid stores.

 Finally, let’s look at an example of the benefits and challenges of a completely separate
clicks-and-bricks strategy.
 [Link] was created as an independent e-commerce company that was spun
off by the Barnes & Noble book retail chain.
 This status enabled it to gain several hundred million dollars in venture capital funding,
create an entrepreneurial culture, attract quality management, maintain a high degree of
business flexibility, and accelerate decision making.
 However, the book e-retailer has done poorly since its founding and failed to ga in market
share from [Link], its leading competitor.
 Many business analysts say that the failure of Barnes & Noble to integrate some of the
marketing and operations of [Link] within their thousands of bookstores
meant it forfeited a key strategic business opportunity.
 Fig. 9.17: Clicks and Bricks

 Fig. 9.17: Key questions for developing an e-commerce channel strategy.

e-Commerce Channel Choices

 Some of the key questions that the management of companies must answer in making a
clicks-and-bricks decision and developing the resulting e-commerce channel are outlined
in Figure 9.17.
 An e-commerce channel is the marketing or sales channel created by a company to
conduct and manage its chosen e-commerce activities.
 How this e-commerce channel is integrated with a company’s traditional sales channels
(e.g., retail/wholesale outlets, catalog sales, and direct sales) is a major consideration in
developing its e-commerce strategy.

 Thus, the examples in this section emphasize that there is no universal clicks-and bricks
e-commerce strategy or e-commerce channel choice for every company, industry, or type
of business.
  Both e-commerce integration and separation have major business benefits and
shortcomings.
 Deciding on a clicks-and-bricks strategy and e-commerce channel depends heavily on
whether a company’s unique business operations provide strategic capabilities and
resources to support a profitable business model successfully for its e-commerce channel.
 As these examples show, most companies are implementing some measure of clicks-and-
bricks integration because ―the benefits of integration are almost always too great to
abandon entirely.‖

Summary
e-Commerce.
 E-commerce encompasses the entire online process of developing, marketing, selling,
delivering, servicing, and paying for products and services.
 The Internet and related technologies and e-commerce Web sites on the World Wide
Web and corporate intranets and extranets serve as the business and technology platforms
 for e-commerce marketplaces for consumers and businesses in the basic categories of
business-to-consumer (B2C), business-to-business (B2B), and consumer-to-consumer
(C2C) e-commerce.
 The essential processes that should be implemented in all e-commerce applications—
access control and security, personalizing and profiling, search management, content
management, catalog management, payment systems, workflow management, event
notification, and collaboration and trading—are summarized in Figure 9.4.

e-Commerce Issues .
 Many e-business enterprises are moving toward offering full-service B2C and B2B e-
commerce portals supported by integrated customer focused processes and inter-
networked supply chains, as illustrated in Figure 9.9.
 In addition, companies must evaluate a variety of e-commerce integration or separation
alternatives and benefit trade-offs when choosing a clicks-and-bricks strategy and e-
commerce channel, as summarized in Figures 9.16 and 9.17.
B2C e-Commerce .
 Businesses typically sell products and services to consumers at e-commerce Web sites
that provide attractive Web pages, multimedia catalogs, interactive order processing,
secure electronic payment systems, and online customer support.
 However, successful e-tailers build customer satisfaction and loyalty by optimizing
factors outlined in Figure 9.11, such as selection and value, performance and service
efficiency, the look and feel of the site, advertising and incentives to purchase, personal
attention, community relationships, and security and reliability.
 In addition, a Web store has several key business requirements, including building and
marketing a Web business, serving and supporting customers, and managing a Web store,
as summarized in Figure 9.13.

B2B e-Commerce.
 Business-to-business applications of e-commerce involve electronic catalog, exchange,
and auction marketplaces that use Internet, intranet, and extranet Web sites and portals to
unite buyers and sellers, as summarized in Figure 9.14 and illustrated in Figure 9.15.
 Many B2B e-commerce portals are developed and operated for a variety of industries by
third-party market-maker companies called infomediaries, which may represent
consortiums of major corporations.

Key Terms and Concepts

These are the key terms and concepts of this chapter.

 1. Clicks-and-bricks strategy
 2. E-commerce channel
 3. E-commerce marketplaces
a. Auction
b. Catalog
c. Exchange
d. Portal
 4. E-commerce processes
 a. Access control and security
b. Collaboration and trading
c. Content and catalog management
d. Electronic payment systems
e. Event notification
f. Profiling and personalizing
g. Search management
h. Workflow management
 5. Electronic commerce
a. Business-to-business (B2B)
b. Business-to-consumer (B2C)
c. Consumer-to-consumer (C2C)
 6. Electronic funds transfer (EFT)
 7. Infomediaries
 8. Search engine optimization