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9 e-Commerce Systems
CHAPTER OVERVIEW
Chapter 9: e-Commerce Systems introduces the basic process components of e-commerce systems, and discusses
important trends, applications, and issues in e-commerce.
LEARNING OBJECTIVES
After reading and studying this chapter, you should be able to:
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–
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–
• e-Commerce Issues. Many e-business enterprises are moving toward offering full-service B2C and B2B e–
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,
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• B2B e-Commerce. Business-to-business applications of e-commerce involve electronic catalog, exchange, and
KEY TERMS AND CONCEPTS
1. Clicks and Bricks Strategy ():
The clicks and bricks strategy outlines the relationship between an organization’s physical presence and its
presence on the Internet.
2. E-commerce Channel ():
3. E-Commerce Marketplaces ():
e-Commerce comprises high speed electronic trading platforms.
a. Auction ():
A website in which sellers place items up for sale to the highest bidder.
4. e-commerce Processes ():
The workflow governing access control and security, profiling and personalizing, search management, content
management, catalog management, payment, workflow management, event notification, and collaboration and
trading activities.
a. Access Control and Security ():
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.
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e. Event Notification ():
A workflow management feature which notifies stakeholders of any change in a transaction’s status. Such
changes might include an order, pickup, delivery, payment, or following a lapsed time interval.
5. Electronic Commerce ():
The online process of developing, marketing, selling, delivering, servicing, and paying for products and services
transacted on internetworked, global marketplaces of customers, with the support of a worldwide network of
business partners.
a. Business-to-Business ():
This category of electronic commerce involves both electronic business marketplaces and directs market
links between businesses.
6. Electronic Funds Transfer ():
The capture and processing of money and credit transfers between banks, businesses, and their customers.
7. Infomediaries ():
Companies who bring buyers and sellers together in catalog, exchange, and auction markets.
8. Search engine optimization ()
Chapter 09 – e-Commerce Systems
ANSWERS TO REVIEW QUIZ
Q.
A.
Key Term
Q.
A.
Key Term
1
Electronic commerce
13
Search engine optimization
2
Business-to-consumer
14
Portal
3
Business-to-business
15
Auction
4
Consumer-to-consumer
16
Exchange
5
e-commerce processes
17
Catalog
6
Access control and security
18
E-commerce channel
7
Profiling and personalizing
19
Electronic funds transfer
8
Content and catalog management
20
Electronic payment systems
9
Workflow management
21
Clicks-and-bricks strategy
10
Event notification
22
E-commerce marketplaces
11
Collaboration and trading
23
Search management
12
Infomediaries
ANSWERS TO DISCUSSION QUESTIONS
1. Most businesses should engage in e-commerce on the Internet. Do you agree or disagree with this
statement? Explain your position.
Agree:
The Internet is the driving force in the new economy. Businesses are engaging in e-commerce to develop,
market, sell, deliver, service, and pay for products and services which are being transacted on the
internetworked, global marketplaces of customers, and with the support of a worldwide network of business
partners.
Disagree:
E-commerce can be an expensive, time consuming distraction from vital business activities. Websites do not
2. Are you interested in investing in, owning, managing, or working for a business that is primarily engaged
in e-commerce on the Internet? Explain your position.
E-commerce remains a growing field of interest. Certainly, this field is opening new career opportunities for
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3. Consider the Real World Challenge at the beginning of the chapter. The e-commerce practices of today
would not be possible without the Internet. Did customers place new demands for products and services
on companies like Ticketmaster before the Internet appeared, and the technology allowed the companies
to satisfy them? Or are the demands a result of the technology being there in the first place? Which one
comes first?
In many cases, a demand comes first followed by the fulfillment. In this case, however, how could customers
create a demand for something that did not exist or that they know how use (since it did not exist)? The case
describes the hassle of standing in long lines to purchase tickets and the ease by which a user can place an order
4. What are the critical success factors for retail e-Business startups?
• Selection and Value
• Performance and Service
5. Do the e-commerce success factors listed in Figure 9.11 guarantee success for an e-commerce business
venture? Give a few examples of what else could go wrong and how you would confront such challenges.
No. The list may well serve to outline the factors which may cause an e-commerce business to fail if ignored.
6. If personalizing a customer’s Web site experience is a key success factor, then electronic profiling
processes to track visitor Web site behavior are necessary. Do you agree or disagree with this statement?
Explain your position.
Yes.
Personalization means knowing about the person. This requires figuring out what the visitor wants via their
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7. All corporate procurement should be accomplished in e-commerce auction marketplaces, instead of using
B2B Web sites that feature fixed-price catalogs or negotiated prices. Explain your position on this
proposal.
Pro:
Auction websites allow customers to solicit the lowest bid for their supplies. These savings flow directly to the
8. Refer to the Real World Solution in the chapter. Given that corporate clients largely cannot operate
without relying on Ticketmaster today, do you think sport teams and franchises should be concerned
about being etched out of the ticketing business by Ticketmaster in the future? What can they do to
prevent this from happening?
Ticketmaster has a somewhat checkered history and has been blamed by many as being monopolistic. Pearl
2
9. If you were starting an e-commerce Web store, which of the business requirements summarized in Figure
9.13 would you primarily do yourself, and which would you outsource to a Web development or hosting
company? Why?
A business manager is expected to know his or her business and customers. Therefore, students should select
items that are core to the business itself rather than a supporting technology or utility.
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Outsource
• Hardware
10. Refer to the Real World Case on social networks, mobile commerce, and online shopping in the chapter.
Do you think that mobile devices (not just phones anymore) are becoming the major platform for
shopping, communication, everything? What are the implications for companies?
It is quite clear, all the statistics agree, that mobile shopping is becoming bigger all the time. As more people get
ANSWERS TO ANALYSIS EXERCISES
1. Small Business e-Commerce Portals
a. Check out Small Business Center and the other e-commerce portals mentioned. Identify several benefits
and limitations for a business using these Web sites.
Note: Small Business Center and Entrabase.com are interesting sites that offer a wide variety of products and
services. For example:
Small Business Center
Small Business Center’s website offers assistance in starting a Web site, marketing businesses online, and
Entrabase.com
Entrabase offers a soup to nuts solution to get its customers off the ground and onto the web. Services include
web hosting, eCommerce hosting, management and administration tools, and consulting services. Entrabase
Chapter 09 – e-Commerce Systems
b. Which Web site is your favorite? Why?
Students should select the site that they believe will give them the easiest options to set their small businesses
c. Which site would you recommend or use to help a small business wanting to get into e-commerce? Why?
2. e-Commerce Websites for Car Buying
a. Check out several of the Web sites shown in Figure 9.19. Evaluate them based on ease of use, relevance of
information provided, and other criteria you feel are important. Don’t forget the classic: “Did they make
you want to buy?”
Many of these sites let‘s visitors look for new and used cars. Visitors can select car body style, color, options,
price, etc. and view results filtered on these criteria.
b. Which sites would you use or recommend if you or a friend actually wanted to buy a car? Why?
For visitors interested in a foreign model, the Edmunds website includes BMW, Lexus, and other foreign built
c. Check out the Consumer Federation of America’s study on anticompetitive new car-buying state laws or
similar studies online. How much does it estimate consumers would save if they could purchase cars
directly from manufacturers online?
Consumer Federation of America reports that consumers would save about $1,500 per new car or about $20
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3. Comparing e-Commerce Sites
a. Using a spreadsheet, record a set of information similar to that shown for each product. (Categories
describing the product will vary depending on the type of product you select—CDs might require the title
of the CD and the performer[s], whereas toys or similar products would require the name of the product
and its description.) See Figure 9.20 .
b. For each product, rank each company on the basis of the price charged. Give a rating of 1 for the lowest
price and 3 for the highest, and split the ratings for ties—two sites tying for the lowest price would each
receive a 1.5. If a site does not have one of the products available for sale, give that site a rating of 4 for
that product. Add the ratings across your products to produce an overall price/availability rating for
each site.
c. Based on your experience with these sites, rate them on their ease of use, completeness of information,
and order-filling and shipping options. As in Part (b), give a rating of 1 to the site you feel is best in each
category, a 2 to the second best, and a 3 to the poorest site.
Opinions will vary.
d. Prepare a set of PowerPoint slides or similar presentation materials summarizing the key results and
4. eCommerce: The Dark Side
a. Search using the terms “Ponzi Scheme” or “Pyramid Scheme.” To find current examples in action, try
searching for “plasma TV $50,” “cash matrix,” “e–books” and “matrix,” or “gifting” through a search
engine or action site.
A Ponzi Scheme, also known as a pyramid scheme, promises large, guaranteed payoffs to “investors” (victims).
As more investors participate, the scheme uses the new funds to pay off the early participants. Naturally, the
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b. Search using the terms “phishing” and “identity.” If possible, include a printout of a real-world example
that you or an acquaintance may have received via e-mail.
Phishing is simply a slang term for tricking people via e-mail to give up account information by masquerading
as a legitimate company such as eBay, AOL, or PayPal.
c. Search using the term “third–party escrow.” What legitimate function does this serve? Provide an
example of a legitimate third-party escrow service for Internet transactions. How has the third–party
escrow system been used to commit fraud on the Internet?
An escrow service holds a buyer’s money and assures the seller a payment has been received. Once received,
the seller can then ship the product. The escrow service will hold the buyer’s money until the buyer indicates
d. Prepare a one-page paper describing a type of online fraud not covered in the previous questions.
Prepare presentation materials and present your findings to the class. Be sure to include a description of
the fraud, how to detect it, and how to avoid it. Use real-world illustrations if possible.
Sadly, there’s a huge range of possible responses. They include:
• key logging
Chapter 09 – e-Commerce Systems
5. Does Google Have a Leg up on Groupon?
a) What are the pros and cons of PCI certification for brick-and-mortar stores?
Pros
• PCI certification allows vendors to qualify for lower transaction costs. This is good for high-volume
b) According to the video, what is “fun” about using Google Wallet?
Fun
• In-store coupons
c) Google has had numerous successes – and failures. Should Groupon be worried?
What, me worry?
5
• Groupon has name recognition and established credibility.
ANSWERS TO REAL WORLD CHALLENGE/SOLUTION
Real World Challenge
1. List all of the steps that purchasing a ticket entails. How can technology change the way in which each
step is carried out? What alternatives could be implemented for each step?
Steps
• wait in line
• buy ticket
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2. What kind of information would be valuable for corporate clients, such as sport franchises, arenas, or the
like? What could corporate clients do with that information?
Valuable information
• price sensitivity for each seating class
3. Beyond those features discussed here, what other features should Ticketmaster consider incorporating
into its future solution?
Future feature ideas
• provide online notifications or reminders
• provide event navigation directions
Real World Solution
1. Since ARCHTICS and the Advanced Product Suite manage so much of the operational aspects of
ticketing today, where does the value added by the independent clients – teams, franchises, and so forth –
come from?
Independent clients’ value added
2. How would the relationship between Ticketmaster and its corporate clients change if Ticketmaster were
to host and operate the applications for them outright? How would its corporate clients benefit? Should
the corporate clients have any concerns?
New relationship
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ANSWERS TO REAL WORLD CASES
RWC 1: Sony, 1-800-Flowers, Starbucks, and Others:
Case Study Questions
1. How do the companies involved benefit from the innovations discussed in the case? Is it about more
efficient transaction processing, better reaching out to customers, or both?
Benefits
• Saves time (handling paper tickets)
2. Use examples from the case to illustrate your answer.
Examples
• E-commerce coupons texted to mobile phone users
3. “Shopping online can be social again, as it was in person,” says Wade Gerten, CEO of Alvenda. Do you
think this is a stretch, or are we in the midst of a turning point in online shopping? Explain your answer.
True, shopping online can be social. Social networks have the potential to greatly enhance shopping. For
example, birthday reminders and wish-lists can make a huge impact on purchase habits. Simple point-and-click
4. Many of the applications discussed in the case are mostly used by the younger demographic, who grew up
around technology. How do online behavior patterns change as they become older, with more
responsibilities, and more challenging jobs? Do applications like those discussed in the case become less
important? More important?
The case suggests a significant behavioral difference between age groups. With increasing time pressures
associated with adulthood, individuals will want the best results for the least effort. If these technologies are
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Real World Activities
1. Consider the examples discussed in the case. Go online and research what other companies or industries
are doing in terms of the use of social networking sites and mobile commerce. What other examples can
you find? Prepare a report that compares those in your research with the ones described here,
highlighting similarities and differences. Can you spot any new trends?
Students can see for themselves how marketers are using Twitter, Facebook, MySpace, and so on. Mobile
commerce, however, is just beginning to take root. However, the advent of both 3G/4G networks and GPS
enabled mobile devices has opened up whole new possibilities.
Trends: GPS Integration
• “Top 5 Mobile Commerce Trends for 2010″
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2. How often, if ever, do you shop with your mobile phone? What do you think are some of the roadblocks
that prevent the widespread adoption of mobile shopping?
Roadblocks
• Texting charges
3. What would you suggest companies do to overcome those? Break into small groups with your classmates
to develop a few recommendations.
Recommendations
• Invest in security
• Advertise
8
Take your party pictures with your mobile device, select your favorites, select a convenient pick-up location based
on your current location, and pick them up on your way to the next party spot.
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Is your child (employee) exceeding the speed limit in your vehicle, ranging out of bounds, loitering where they
don’t belong?
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RWC 2: LinkedIn, Umbria, Mattel, and Others
Case Study Questions
1. How can companies benefit from the “cultural assessments” regularly performed by Mattel? How could
the information obtained be used to create business value for those organizations? Provide multiple
examples.
Benefits:
• Learn about what the market wants
2. The case notes that, in spite of disconfirming evidence as to the effectiveness of targeting online opinion
leaders, companies are nonetheless increasing their efforts to identify and contact them. Why do you
think this is the case?
Why?
Marketing people are keen to latch on to popular trends; it’s part of their job. It should come as no surprise that
3. One of the participants in the case states that “you want to ride the wave rather than trying to start one
of your own.” What does she mean by that? If companies are not starting these “waves,” where are they
coming from?
Real World Activities
1. A number of technological and cultural developments in recent years have resulted in the emergence of
extensive social networks and a large number of avidly followed blogs. Go online to research how
companies are tapping into these trends and what new marketing practices have arisen as a result.
Prepare a report to summarize your findings.
Suggested search terms:
2. Reflect on your own purchasing behavior. How much do you rely on blogs, feedbacks, and
recommendations from past customers to make your own purchase decisions? Why do you (or not) rely
on these sources of information? Do you believe they are largely unbiased? Break into small groups to
discuss these issues with your classmates and compare perspectives on them.
It might be interesting to survey the class and have them rate the following information sources for reliability,
ease of use, and frequency of use:
• Customer reviews
• Friends’ opinions